RECLAIMING HUMANITY: THE SOCIAL THEORY OF

KARL POLANYI

by

Hüseyin Özel

A dissertation submitted to the faculty of

The University of Utah

in partial fulfillment of the requirements for the degree of

Doctor of Philosophy

Department of Economics

University of Utah

August 1997
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Copyright © Hüseyin Özel 1997

All Rights Reserved

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To Ruşen
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ABSTRACT

This dissertation examines Karl Polanyi’s social theory, which underlies his critique of

the market economy, and argues that this theory is founded on an understanding of a

human being as the unity of individuality and sociality and as a “moral” being

characterized by freedom. However, the market system, which is organized on the basis

of the three “fictitious commodities,” namely labor, land, and money, generates a

“dehumanization” process within which these characteristics are negated. This

dehumanization results from the “commodification” of life itself and signifies the

separation of human beings from their natural surroundings, from each other and even

from their own capacities and powers. The emphasis on this process, it is argued, is the

uniting element of Polanyi’s thought with that of Marx. Since the result of such a process

is the disintegration of the society, it is natural for human beings to protect the social

fabric against the market, as emphasized in Polanyi’s notion of the “double movement,”

which is formed by the extension of the market and society’s “self-protection” and which

gives the capitalist society its unstable character. However, it is argued that the success of

this protective countermovement against dehumanization depends on conscious

resistance to the “market mentality” dominating every aspects of life in a capitalist

society, which in turn requires the emphasis on the “species” character of human beings,

that is, on freedom and on the unity of individuality and sociality.

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ABBREVIATIONS

EF: “The Essence of Fascism,” in Christianity and The Social Revolution, J. Lewis, K.
Polanyi, D.K. Kitchin (eds.), London: Victor Gollancz Ltd., 1935.

GT: The Great Transformation: The Political and Economic Origins of Our Time, New
York: Rinehart & Co., 1944.

OMM: “Our Obsolete Market Mentality: Civilization Must Find a New Thought
Pattern,” Commentary, vol. III, January-June, 1947, pp. 109-117.

BED: “On Belief in Economic Determinism,” The Sociological Review, 1947, pp. 96-
102.

TMEE: Trade and Markets in the Early Empires: Economies in History and Theory,
Polanyi, Karl, Condrad M. Arensberg and Harry W. Pearson (eds.) New York:
The Free Press, 1957.

LM: The Livelihood of Man, ed. by Harry W. Pearson, New York; Academic Press, 1977.
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ACKNOWLEDGMENTS

First and foremost, I would like to express my indebtedness to E. K. Hunt for his

continuous encouragement and the most valuable guidance, to such an extent that I owe

him even the main thrust of the argument of the dissertation. Without his help, this

dissertation could have never been written. I also wish to thank to Allen Sievers who has

always been very kind to make valuable comments and constructive criticisms, even

when he does not agree with the views defended here. I am also grateful to William

Whisner for his understanding and useful comments. Also, my gratitude goes to Korkut

Ertürk for his idea of keeping a “dissertation log” and for the continuous and extremely

helpful discussions we had throughout the writing of this dissertation, which helped me a

lot to clarify the argument. In this respect I must also express my appreciation to Mümtaz

Keklik who was present in all of these discussions and who made useful comments and

suggestions. Without their help, the writing of this dissertation would not be as

pleasurable as it has been. Needless to say, none of them should be held responsible for

the errors and shortcomings of this dissertation.

Finally, I would like to express my appreciation to Holt, Rinehart and Winston,

the copyright owner of Karl Polanyi’s The Great Transformation (New York: 1944), for

granting me permission for reprinting excerpts from the book.

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TABLE OF CONTENTS

ABSTRACT iv

ABBREVIATIONS v

ACKNOWLEDGMENTS vi

INTRODUCTION 1

Chapter
1. POLANYI’S THEORETICAL SYSTEM:
FROM THE SPECIFIC TO THE GENERAL 7

1.1. Introduction 7
1.2. Capitalism and the Fictitious Commodities 9
1.2.1. Fictitious Commodities 9
1.2.2. Institutionalization of the System 14
1.2.3. Dehumanization 20
1.3. The Economistic Fallacy and the Substantivist Account 24
1.3.1. Two Definitions of Economic 24
1.3.1.1. The Formal Definition 25
1.3.1.2. The Substantive Definition 28
1.3.2. Particular or General? 32
1.4. The Human Condition in Polanyi 41
1.4.1. Voluntarism vs. Functionalism? 41
1.4.2. Individualism vs. Holism? 47
1.4.3. Human Being as a Moral Being 50

2. THE CONNECTIONS BETWEEN POLANYI AND MARX 55

2.1. Introduction 55
2.2. Are Polanyi and Marx Incompatible? 57
2.2.1. Two Opponents? 57
2.2.2. The “Civil Society” 64
2.3. Marx's Conception of Human Nature and Historical Materialism 68
2.3.1. The “Species-Being” 68
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2.3.2. Historical Materialism 74

2.4. Alienation and Fetishism: Violation of Essential Human Powers 83
2.4.1. From Alienation to Reification 83
2.4.1.1. Alienation 83
2.4.1.2. Fetishism and Reification 86
2.4.2. Reification and Social Disintegration 92
2.4.2.1. Commodity Fictions and Fetishism 92
2.4.2.2. Social “Breakdown” 97

3. THE DOUBLE MOVEMENT AND THE CAPITALIST SOCIETY 102

3.1. Introduction 102

3.2. The Double Movement and the Fascist Period 106
3.2.1. The Double Movement
and the Impairment of the System 106
3.2.2. The “Solution”: Fascism 116
3.3. The Societal Perspective: Meaning of the Double Movement 123
3.3.1. The Institutional Separation of the Economic
from the Political 123
3.3.2. “Discovery of Society” 132
3.4. Epilogue: “Freedom in a Complex Society” 141

CONCLUSION 150

REFERENCES 156

NOTES TO CHAPTER 1 168

NOTES TO CHAPTER 2 176

NOTES TO CHAPTER 3 185

 INTRODUCTION

“Polanyi’s chief contribution is a concept, a concept of what a knowledge of

society can be,” writes Allen Sievers, as the basic evaluation of his critique of Karl

Polanyi’s “new economics,” in the concluding section of his Has Market Capitalism

Collapsed? (Sievers 1949: 367) This dissertation is an attempt at understanding and

elaborating this concept: I will be dealing with Polanyi’s social theory in the following

pages. It is the basic contention of this dissertation that in order to understand this

concept, one should go back to Marx, for there is a considerable overlap between Polanyi

and Marx in their respective understandings not only of capitalism, or the market system,

but also, at a more fundamental level, of the notion of human nature, for their critiques of

this system are founded on such a notion. In particular, it will be argued that Polanyi's

notion of “fictitious commodities,” which is essential in the emergence of the

“disembedded” economy, comes very close to Marx's notion of commodity fetishism. It

is this aspect of capitalism that converts human beings into mere “things” that both

Polanyi and Marx criticize. In both, it is crucial to understand that capitalism violates our

very humanity by converting interpersonal relations into relations between “things.” Both

think that what we have to do to reclaim our own humanity is to reassert the “reality of

society” rather than to deny it. This assertion, however, requires an emphasis on the

“noneconomic nature of man.” This is the critical position that underlies both Marx's

“historical materialism” and Polanyi's “substantive definition” of the term “economic”

and upon which a conception of a humanistic socialism is built by both thinkers.

In both Marx and Polanyi, the main focus of analysis is capitalism. Capitalism is
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a “violation” of essential powers of human beings, or human nature in general; that is,

both of these thinkers thought that man's “essence” is contradicted by his “existence”

under capitalism. The reason for this is that in capitalism, the sphere of the “economic”

becomes separate and dominates individuals' lives. In other words, under capitalism, the

“totality” of man, as the unity of different aspects, has been broken down into separate

and autonomous entities, and among these entities, the economic has become dominant,

or man has become a homo oeconomicus, or a “rational” economic man. As opposed to

this, both emphasized the fact that man is essentially a “social animal”; therefore both of

these thinkers represent the “societal” approach, to use Polanyi's expression. However,

although this is the essential concern in both Marx and Polanyi, that is, both of them

insisted on the totality of human “livelihood,” again to use one of Polanyi's favorite

expressions, the two differed in some points of emphasis and terminology. Nevertheless,

using Marx's and Polanyi's own writings, I will argue that, with respect to the critique of

capitalism, these differences are of minor significance and that substantially they share

the same basic conception about human beings, society, and capitalism. Furthermore, it is

my contention that it is possible to grasp the working of capitalism and its destructive

effects on our lives adequately by using the insights provided by both Polanyi and Marx.

Such a possibility, I believe, justifies the attempt to establish links between these two

accounts. Therefore, with the belief that these two accounts are complementary rather

than rival ones, I will first outline similar aspects of Polanyi and Marx in their analyses

of capitalism, namely, commodity fictions and fetishism, and then try to incorporate
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these ideas into a general sketch of reproduction of social structures and discuss

contradictions arising in this reproduction in view of Polanyi's concept of the “double

movement.”

In the first chapter, I summarize Polanyi’s analysis of the market system and its

destructive effects on the society and argue that the creation of the commodity fictions

and its result, the separation of the economic sphere from the political, together

characterize a “dehumanization” process: it is the existence of these very fictions which

ultimately leads to the separation of human beings even from the very attributes that

characterize their own humanity, namely, from both sociality and individuality. The

reason for this is that these fictions create the conditions within which human beings are

guided by the two “economic” motives, namely, the fear of hunger and the hope of gain,

and hence lead to the breakdown of the social fabric by causing it to become subordinate

to the market. Since this argument requires an understanding of human nature, for it is

the very basis of the analysis, a discussion of Polanyi’s notion of the “substantive

economics” is also provided. It is this notion, so I will argue, which informs Polanyi’s

critique of the market system by emphasizing the general aspects of the human condition,

namely, the “noneconomic nature of man” and man as the “social animal.” In this regard,

I will argue that this conception of the human condition can only be understood if we

consider the importance of the moral aspects of human existence: since according to

Polanyi man is a moral being, the most destructive effect of the market on human society

is far from being economic. It is moral because the market deprives us of our very
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freedom by forcing us to be “individuals in the market,” or the homo oeconomicus.

Yet, I will argue in the second chapter that this moral aspect of human existence

and the importance of freedom can be understood better if one considers Marx’s analysis

of capitalism and his conception of human nature. In this regard, after arguing against the

allegation that Marx and Polanyi are incompatible, I outline Marx’s understanding of

human nature and its importance, by focusing on the process of praxis which refers to the

conscious activity of human beings in a social setting and thus presupposes the two

attributes of the human essence, namely, individuality and sociality. I then consider

Marx’s critique of capitalism which rests on this human conception and argue that

Marx’s analysis of alienation and commodity fetishism is a key to understand the

capitalist society, for it is this analysis which reveals the “dehumanizing” character of

this society. I also argue that this framework informs Polanyi’s own understanding of the

commodification process and its dissolving effects on the society through the creation of

reifications. In this regard, it can be asserted that Polanyi’s account of the “social

breakdown,” the result of the commodification process, should be seen as an elaboration

of Marx’s analysis of commodity fetishism.

In the last chapter, from the standpoint of fetishism and reification I consider

Polanyi's notion of the “double movement,” which refers to two conflicting tendencies in

the reproduction of the capitalist society. On the one hand, the market continuously

extends its sphere to include other aspects of human societies, so that the “rest” of the

society becomes subordinate to the market. However, on the other hand, against this
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movement is the self-protection of society which takes the form of the reaction of those

groups which are hurt by the extension of the market. In other words, the conflict is

between the reificatory aspect of capitalism which converts human beings and their

relations into mere “things” and the resistance of human beings by reclaiming their

humanity, i.e., sociality: while the social bond is being disintegrated by the market,

through creation of “reified” individuals, human beings still try to retain their humanity

against these dehumanizing effects of the capitalist reality by stressing those bonds. Here,

apart from the contradiction introduced by the reification of social relations, which

results in the dissolution of social institutions, another contradiction arises from the fact

that human beings try to reclaim their humanity against the system. The struggle between

these two movements can be so threatening to the system that in order for capitalism to

function and reproduce itself the demands for humanity and individual freedom may have

to be suppressed violently, as the example of fascism has shown; even if this process

does not inevitably result in fascism, The contradictions in the reproduction process

remain and assert themselves as long as capitalism survives.

Therefore, in the last chapter, I first give a brief history of the double movement

and discuss how it had led to the fascist period, as presented by Polanyi, and emphasize

the “societal” character of the framework that he uses to show it: even though the main

form of agency that carried out this movement has been the social class and the state,

conceived as an “arena” of the struggle between different classes within the society, the

double movement should not be reduced to a simple form of class struggle. In this
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respect, I argue that what the double movement shows is the contradictory character of

the capitalist society: Although every social institution, including the state as an active

participant of the double movement, is an “expression” of the human essence, it also

carries the conditions of the very process of reification. In other words, the very same

social institutions or associations can function to facilitate and disrupt the working of the

market at the same time. Then, from the moral point of view, since it is not easy to

distinguish between human expression and reification, the imperative becomes one of

consciously safeguarding our freedom against the market and the thought pattern that it

dictates, the “market mentality.” This, on the other hand, can only be possible by

accepting the “reality of society” without denying the importance of the individual. Only

by doing so can we take the first step to solve the problem of maintaining “freedom in a

complex society,” as Polanyi himself argued.

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CHAPTER 1

POLANYI'S THEORETICAL SYSTEM: FROM

THE SPECIFIC TO THE GENERAL

1.1. Introduction

The Great Transformation, Karl Polanyi's magnum opus,1 is primarily a critique

of capitalism, or what he calls the “market economy.” This critique rests on the thesis

that it is impossible to form an economic system according to the prescriptions given by

the utilitarian outlook concerning human societies, an outlook which is based upon the

“invisible hand” paradigm and its basic ingredient, the principle of laissez-faire. He

claims that “the nineteenth century attempted to establish a self-regulating economic

system on the motive of individual gain. We maintain that such a venture was in the very

nature of things impossible” (GT, 269). This self-regulating market economy was

characterized by two related features: the creation of the three “commodity fictions,”

namely, labor, land, and money, which gave rise to a separate “economic” sphere for the

first time in human history, and the reflection of this institutional separation in the minds

of people, “the market mentality,” or, more accurately, economic determinism.

Nevertheless, such a system, and its result, the subordination of the society to the market,

could not survive long precisely because it violates the essential features of humanity, for

it destroys both human and natural substance of the society. Since such an institutional

structure is ultimately bound to the “annihilation” of the society, it should not be any
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surprise for society as a whole to try to protect itself. This “double movement,” which

refers to the struggle between the extension of the market on the one hand and the “self-

protection” of the society on the other, would eventually bring an end to the nineteenth-

century market society in the form of fascism. For this reason, Polanyi contends that “in

order to comprehend German fascism, we must revert to Ricardian England” (GT, 30).

This chapter focuses on Polanyi’s analysis of the market system with special

reference to the “fictitious commodities,” which gave rise to the distinct economic sphere

and thus led to the subordination of the society to the market. Since this subordination

means that human beings are placed under the authority of the two “economic” motives,

the fear of hunger and the hope of gain, the result is, as I argue in the first section, a

“dehumanization” process: Within a market society, human beings are separated both

from their natural environment, for land itself comes to be treated as a commodity, and

from their own powers that characterize their agency, for labor power becomes a

commodity. However, seen from another angle, this only means that the very attributes of

human beings, namely, both individuality and sociality, are violated under this system. In

this regard, the most destructive effect of the market system on human lives is its

negation of the “noneconomic nature of man,” to use Polanyi’s expression, by forcing

human beings to act like homo oeconomicus. Yet, since a general outlook concerning the

“human condition” is needed in order to understand this destructive effect, the following

section considers Polanyi’s “substantivist” definition of the term “economic.” For what

this account demonstrates is exactly this “noneconomic nature of man”: among many
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forms existed throughout human history, only the market society is an “economic

society” in its full sense. Nevertheless, although the emphasis in this account is on

anthropological data, I argue in the third section that it is based on a philosophical

conviction which emphasizes two integral aspects of the human condition: that human

beings are characterized with both individuality and sociality and that human beings are

moral beings guided by their inner freedom. The conclusion to be derived from this

argument must then be clear: far from protecting it, the market system actually negates

our freedom by converting us to “individuals in the market.” Therefore, it is first

necessary to take a closer look at the commodity fictions.

1.2. Capitalism and the Fictitious Commodities

1.2.1. Fictitious Commodities

Polanyi's main thesis is that capitalism2 is a unique and peculiar economic system

in human history; never before capitalism had the economic sphere institutionally been

separated from the rest of the society, in the specific sense that the economic system

functions according to its own laws. Considering Polanyi's distinction between embedded

and disembedded conditions of the economy in relation to society, it is easy to see the

peculiarity of this nineteenth-century society. Before capitalism, the economic sphere, or

the market, is embedded in social relations; consequently it is not possible to distinguish

between the market as a self-regulating, independent institution and other social

relations. In these societies, the elements of the economy, or economic transactions, are

always subject to essentially noneconomic considerations such as social status and

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political or religious motives. In other words, the term “economic life” has no obvious

meaning in these societies (TMEE, 70). On the other hand, the disembedded, “market

economy,” is characterized by an independent economic sphere in society. This

disembedded economy of the nineteenth century

stood apart from the rest of the society, more especially from the political
and governmental system. In a market economy the production and
distribution of material goods in principle carried on through a self-
regulating system of price-making markets. It is governed by laws of its
own, the so-called laws of supply and demand, and motivated by fear of
hunger and hope of gain. Not blood-tie, legal compulsion, religious
obligation, fealty or magic creates the sociological situations which make
individuals partake in economic life but specifically economic institutions
such as private enterprise and the wage system (TMEE, 68).

Thus, in a market economy the central institution is “the market,” which actually

denotes a self-regulating system of individual markets, each of which is connected to the

other and sets its own price without any outside intervention. Hence, the whole of

economic life is to be governed by the market prices in such an economy (GT, 43). This,

however, is only another way to say that there are two distinct spheres in this economy:

“A self-regulating market demands nothing less than the institutional separation of

society into an economic and political sphere. Such a dichotomy is, in effect, merely the

restatement, from the point of view of society as a whole, of the existence of a self-

regulating market” (GT, 71).

Nevertheless, the institutional separation of the economic sphere is actually a

result, rather than the essential characteristic of capitalism: what gave rise to this distinct

sphere was, according to Polanyi, the creation of the fictitious commodities, that is, labor,
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land and money, all of which must be subjected to sale in the market for the market

economy to function, even though they are not produced in the same sense as the

production of the other, genuine commodities. The creation of the commodity fictions, in

turn, was made necessary by the requirements of the machine production. According to

Polanyi,

since elaborate machines are expensive, they do not pay unless large
amounts of goods are produced. They can be worked without a loss only
if the vent of the goods is reasonably assured and if production need not
be interrupted for want of the primary goods necessary to feed the
machines. For the merchant this means that all factors involved must be
on sale, that is, they must be available in the needed quantities to anybody
who is prepared to pay for them. Unless this condition is fulfilled,
production with the help of specialized machines is too risky to be
undertaken both from the point of view of the merchant who stakes his
money and of the community as a whole which comes to depend upon
continuous production for incomes, employment and provisions (GT, 41).

It should be emphasized that not what the merchant sells but what he buys, raw

material and labor, has important consequences for the society, because what the term

“raw materials” indicates is nothing but nature itself, whereas what one calls labor is the

whole of human life activity. In other words, in order for the market economy to function

without any intervention, both human beings and nature must be treated as commodities.

This also means that, for the sake of continuous production with complex machines, all

the transactions concerning production must be money transactions, which require the

introduction of a medium of exchange into every stage of production (GT, 41, 74-75).

The result is, therefore, the three fictitious commodities:

labor, land, and money are essential elements of industry; they also must
be organized in markets; in fact, these markets form an absolutely vital
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part of the economic system. But labor, land, and money are obviously
not commodities; the postulate that anything that is bought and sold must
have been produced for sale is emphatically untrue in regard to them. In
other words, according to the empirical definition of a commodity they
are not commodities. Labor is only another name for a human activity
which goes with the life itself, which in its turn is not produced for sale,
but for entirely different reasons, nor can that activity be detached from
the rest of life, be stored or mobilized; land is only another name for
nature, which is not produced by man; actual money, finally is merely a
token of purchasing power which, as a rule, is not produced at all, but
comes into being through the mechanism of banking or state finance.
None of them is produced for sale. The commodity description of labor,
land and money, is entirely fictitious.
Nevertheless, it is with the help of this fiction that the actual markets for
labor, land and money are organized; they are being actually bought and
sold on the market.... The commodity fiction, therefore, supplies a vital
organizing principle in regard to the whole of society affecting almost all
its institutions in the most varied way, namely, the principle according to
which no arrangement or behavior should be allowed to exist that might
prevent the actual functioning of the market mechanism on the lines of
commodity fiction (GT, 72-73).

This only means that the whole society has become subordinate to the market, for

the very livelihood of a person has become dependent upon the market. Under such a

system human beings for their own existence need to buy commodities on the market

with the incomes they earn by selling other commodities they could offer for sale,

including their own labor power and natural environment, land (BED, 97). In other

words, the desire of gain and the fear of hunger are the universal motives in a market

economy. That is to say, Polanyi argues, since no human community can exist without a

functioning productive apparatus, and in the market economy this productive apparatus is

determined by the market, the embodiment of the economic sphere in a distinct and

separate one has the effect of making the “rest” of society dependent upon that sphere
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(OMM, 111). This market society, the society which is “embedded” in or becomes

subordinate to the market economy (LM, 9),3 was an economic society in the full sense of

the term:

The sides of a triangle do not rightly speaking “influence” the angles,

they determine them. The working of a capitalistic society was not merely
“influenced” by the market mechanism, it was determined by it. The
social classes were now identical with “supply” and “demand” on the
market for labor, land, capital, and so on. Moreover, since no human
community can exist without a functioning productive apparatus, all
institutions in society must conform to the requirements of that apparatus.
Marriage and the rearing of children, the organization of science and
education, of religion and arts, the choice of profession, the forms of
habitation, the shape of settlements down even to the aesthetics of every-
day life, must be moulded according to the needs of the system. Here was
“economic society”! Here it could be truly said that society was
determined by economics. Most significant of all, our views of man and
society were violently adjusted to this most artificial of all social settings.
Within an almost incredibly short time fantastic views of the human
condition became current and gained the status of axioms (BED, 100).

Then, it is no wonder that “the delusion of economic determinism” (OMM, 114)

had to dominate our minds within the market society, which is nothing but “an accessory

of the economic system” (GT, 75). The result of this institutional setting is the dichotomy

between the “material” and the “ideal.” In this society all “economic” behavior is

conducted on the basis of only two motives, the fear of starvation and the hope of profit,

and all other motives, which are usually considered to be the typical motives affecting

everyday lives of human beings, such as honor, pride, solidarity, moral duties and

obligations, are regarded as irrelevant to the everyday activities and forced to gain a rare

and esoteric nature, summed up by the word “ideal,” since they cannot be relied on in the

production process (BED, 100-101). From this time onwards, argues Polanyi,
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man was believed to consist of two components, one more akin to hunger
and gain, the other to honor and power. the one was “material,” the other
“ideal”; the one “economic,” the other “non-economic”; the one
“rational,” the other “non-rational.” The Utilitarians went so far as to
identify the two sets of terms, thus endowing the “economic” side of
man's character with the aura of rationality. He who would have refused
to imagine that he was acting for gain alone was thus considered not only
immoral, but also mad (OMM, 114).

Yet, it is important to realize that this “dualistic fallacy” (BED, 102) is not simply

an illusion; it is nothing but the reflection of the existence of a separate and distinct

economic system founded on hunger and profit motives. That is to say, this fallacy was a

direct consequence of the fact that “under market economy human society itself was

organised on dualistic lines, everyday life being handed over to the material, with

Sundays reserved for the ideal” (BED, 101). In short, though it is quite arbitrary, this

distinction nevertheless has been institutionalized (OMM, 115) in the market society.4

1.2.2. Institutionalization of the System

Although the market was the central institution, three other institutions were also

important in this market society. Of these four institutions, two of them were economic in

nature, whereas the other two were political, a manifestation of the separation between

economic and political spheres. The economic institutions were the self-regulating

market and the gold standard. The two political institutions, on the other hand, were the

liberal state and the balance of power system. As can be seen, these institutions can also

be classified according to another distinction: national (liberal state and the market) and

international (balance of power and the gold standard) (GT, 3). The importance of this

latter distinction lies in that Polanyi treats capitalism from the very beginning as an
 15

international system, or as a “world capitalist economy.”5 Yet what is significant in this

institutional structure is that all the three remaining institutions served for the functioning

of the self-regulating market. At the international level, the balance of power system was

maintaining the peace among the Great Powers, which was necessary if the market

system was not to be disrupted; the gold standard, through its maintaining stable

exchange rates, functioned to prevent the equilibrium from being disturbed.6 At the

national level, on the other hand, the function of the liberal state was again to make the

working of the self-regulating market smooth.7

The state has always been important for the market from the very beginning. In

fact, its significance in the establishment of the market system with continuous and

conscious interventions was so prominent that the assertion that “the liberal economic

order was designed by the early English political economists and was instituted by the

power of state” (Polanyi-Lewitt 1995: 10-11) is not an excessive one. With respect to the

“institutionalization” of the market economy, three acts were of utmost importance: the

Poor Law Reform Act of 1834, in establishing the labor market for the first time; the

Bank Act of 1844, in establishing the principle of gold standard; and the repeal of the

Corn Laws in 1846, in establishing the principle of “free trade.” These acts correspond to

the “three tenets” of economic liberalism upon which the market economy was

established (OMM, 113). Yet it should not be forgotten that these three tenets formed one

whole; the achievement of one of them was useless unless the other two were secured

too:
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Thus, the Anti-Corn Law Bill of 1846 was the corollary of Peel's Bank
Act of 1844, and both assumed a laboring class, which, since the Poor
Law Amendment Act of 1834, was forced to give their best under the
threat of hunger, so that wages were regulated by the price of grain (GT,
138).

In other words, the institutionalization of capitalism was completed with these

three acts, the most important of which is, of course, the establishment of the labor

market. Such a proposition suggests that capitalism arrived too suddenly (Sievers 1949:

319).8 As a matter of fact, Polanyi himself emphasizes the abruptness of the change: “the

suddenness with which the transformation occurred ... is not a matter of degree but of

kind. A chain-reaction was induced, and the harmless institution of the market flashed

into a sociological explosion” (BED, 100). Nevertheless, Polanyi does not deny that

capitalism needed a long time to develop: “Market economy did not start in a day, nor

did three markets run a pace like a troika, nor did protectionism have parallel effects in

all markets, and so on. This, of course is true; only, it misses the point at issue” (GT, 215-

16). For him, economic liberalism created a novel system by integrating more or less

developed markets. In addition, by 1834, the separation of the land and labor was well on

the way, as were money and credit markets.

For example, both land and money were mobilized long before labor. The

commodification of land had taken place in three steps: the first step was the

commercialization of the soil, which started with the secularization of the church lands

and mobilizing the feudal revenue from the land; the second was the subordination of the

land for the needs of the urban population, that is, the forcing up the food production to
 17

meet industry's demands; and finally, the extension of such a system overseas and to

colonies, the last step to fit land for the self-regulating world market (GT, 179-80). On

the other hand, mobilization of money is a process of the integration of commodity

money, a commodity (usually gold and silver) which functions as money, with the token

money, which had emerged because of the scarcity of commodity money, for such a

system is quite compatible with industrial production under the market economy. This

fact was the reason for the establishment of the gold standard (GT, 193). Yet, from the

standpoint of the functions of money, the process within which money was commodified

must be seen as the generalization of money as a medium of exchange. In a market

economy, it is the function of money being a medium of exchange that is essential, and it

is this function of money that integrates all other functions (means of payment, unit of

account, and store of wealth). In other words, money in a market economy is an “all-

purpose” money, whose essential function is its being a medium of exchange (LM, 98-

108).

All of these developments, commodification of land, money and labor, had taken

place in a relatively long period of time.9 What was so drastic was the integration of these

more or less developed markets into one market economy. In other words, it is the

institutional structure of the society which was so abruptly transformed, with the

establishment of a self-regulating labor market, for the establishment of a labor market

was the manifestation of the fact that the entire economy is now organized around the

motives of profit and the fear of hunger. In Polanyi's own words,

 18

institutional change, such is its nature, started to operate abruptly. The

critical stage was reached with the establishment of a labor market in
England, in which workers were put under the threat of starvation if they
failed to comply with the rules of wage-labor. As soon as this drastic step
was taken, the mechanism of the self-regulating market sprang into gear.
Its impact on society was so violent that, almost instantly, and without
any prior change in opinion, powerful protective reactions set in (GT,
216).

According to him, although markets exist in all kinds of societies, and the

merchant who is guided by the motive of gain is quite familiar, isolated markets do not

link up into an economy, and the motive of gain does not become a universal one (OMM,

113). Only with the crucial steps taken, the process is completed and culminates with a

new, formerly nonexistent institutional structure:

Besides continuous growth from small beginnings, there is also a very

different pattern, that of discontinuous development from previously
unconnected elements. The “field,” in which such sudden change as the
emergence of a new, complex whole occurs, is the social group under
definite conditions. These discontinuities broadly determine both what
ideas and concepts gain currency with the members of a group and at
what rate. But once disseminated, these ideas and concepts permit change
at an enormously accelerated rate, since the patterns of individual
behavior can now simply fall into line with the new general pattern
preformed by those ideas and concepts. Formerly unconnected elements
of behavior thus link directly up in a new, complex whole, without any
transition (LM, liii-liv).

This process, once on its way, would eventually lead to the destruction of the

social fabric, for it made the entire human existence subordinate to the demands of this

“gargantuan automaton” (GT, 217), the market system. However, although the creation

of the labor market was to prove detrimental to human society, resistance to the

establishment of it had been even more harmful. Such an attempt, as revealed in the
 19

Speenhamland period between 1795 and 1834, to create a “capitalism without a labor

market” (GT, 124), a contradiction in terms, led to an immediate catastrophe. The

Speenhamland Law of 1795, an unconscious resistance of the eighteenth-century society

to becoming a mere appendage of the market, was an informal paternalistic measure

guaranteeing a minimum income to the poor irrespective of their earnings (GT, 77-78).

The result of this attempt, however, would be the opposite of what had been intended;

although it was designed to prevent the “proletarianization of the common people, or at

least slow it down,” the result was the “pauperization of the masses, who almost lost their

human shape in the process” (GT, 82). The reason for this was that the main effect of this

allowance system was to depress wages even below the subsistence level, for under this

system a man was relieved even if he was employed as long as his income was below the

scale. In other words, it became a system to subsidize employers by public means (GT,

97).10 According to Polanyi, the Speenhamland period characterizes the clash between

the two opposing tendencies working at the same time: one capitalistic, forcing the poor

to sell their labor, and other paternalistic, which deprives their labor of its market value

(GT, 80). Therefore, the abolishment of the Speenhamland system and establishment of

the labor market, by distinguishing the helpless poor whose place was the workhouse and

the laboring poor who offered his labor for sale, were to prove financially beneficial to

all (GT, 77).11 Nevertheless, as Polanyi emphasizes time and again, the real danger that

the creation of this last commodity fiction posed for the society was far from being

economic; its essential danger lied in the disruption of individuals’ lives, if not in the
 20

annihilation of the society. In other words, institutionalization of the market system

actually characterizes a “dehumanization” process.

1.2.3. Dehumanization

The most significant aspect of this abrupt overall institutional change, the

creation of the fictitious commodities, is the separation of human beings both from their

own life activities and from their natural environments within which these activities

occur. First of all, according to Polanyi, what one calls “labor” is nothing but the whole

human activity which cannot be separated from life. To put this activity under the rule of

the market, by making it subject to the fear of hunger, then, will mean no less than the

breakdown of the “totality” of life itself. As the above discussion about the separation

between the “ideal” and the “material” shows, human life activity is now broken down

into specific compartments, such as economic, political, religious, etc., and only the

“economic” motives, the fear of hunger and hope of gain, are allowed to govern

individuals' lives. In other words, the whole life activity is now “commodified.”

However, we should be careful about this commodification; what is being reduced to the

commodity status here is not really this activity, namely, labor, itself, but man's abilities

which he uses in engaging this life activity, namely, labor power. Polanyi is very clear

about this.12 Yet, this means the separation of man not only from his own life activity, but

also, even more importantly, from his own “agency,” the power that characterizes human

beings. Such a process, in turn, would immediately lead to a drastic change in the whole

existence of man:
 21

For the alleged commodity “labor power” cannot be shoved about, used
indiscriminately, or even left unused, without affecting also the human
individual who happens to be the bearer of this peculiar commodity. In
disposing of a man's labor power the system would, incidentally, dispose
of the physical, psychological, and moral entity “man” attached to that tag
(GT, 73).

The most immediate effect of the commodification of labor, according to Polanyi,

is actually the dissolution of the society into “atoms,” each of which only behaves in

accordance to the profit motive and the fear of starvation, irrespective of the other

members of the society:

To separate labor from other activities of life and to subject it to the laws
of the market was to annihilate all organic forms of existence and to
replace them by a different type of organization, an atomistic an
individualistic one.
Such a scheme of destruction was best served by the application of the
principle of freedom of contract. In practice this meant that the
noncontractual organization of kinship, neighborhood, profession, and
creed were to be liquidated since they claimed the allegiance of the
individual and thus restrained his freedom (GT, 163).

In other words, the labor contract is the manifestation of “freedom” from the

social bonds which actually protect human beings from destruction, for it is the presence

of these bonds which makes the threat of starvation in the “primitive” societies

nonexistent. In such societies, the danger of starvation is not an individual matter,

because the community will never let one of its members die from hunger, unless the

whole community is faced with this threat (GT, 46; 163-64). In this regard, argues

Polanyi, the effect of early capitalism on the society is almost identical to the effect of

colonialism on precapitalist societies:

Thus the colonists may decide to cut the breadfruit trees down in order to
 22

create an artificial food scarcity or may impose a hut tax on the native to
force him to barter away his labor. In either case the effect is similar to
that of Tudor enclosures with their wake of vagrant hordes (GT, 164).

Therefore, the first requirement to institutionalize capitalism is to destroy the old

institutions and the bonds of society, so that the threat of hunger becomes an individual

phenomenon forcing human beings to sell their labor power in the market.

This process of the disintegration of the society is also a process of the separation

of human life activity from the natural setting within which it takes place; that is to say,

within this process land also is reduced to a commodity. For Polanyi,

the economic function is but one of many vital functions of land. It

invests man's life with stability; it is the site of his habitation; it is a
condition of his physical safety; it is the landscape and the seasons. We
might as well imagine his being born without hands and feet as carrying
on his life without land. And yet to separate land from man and organize
society in such a way as to satisfy the requirements of a real-estate market
was a vital part of the utopian concept of a market economy (GT , 178).13

Therefore, “an individualized treatment of the land” (GT, 179), another

requirement in the institutionalization of capitalism, basically meant the separation of

human life from its natural surrounding, including even the physical separation of “our

habitation from nature” (BED, 97).

Now, in the light of this discussion, it is possible to argue that for Polanyi, what

these two joint steps, commodification of labor and land, characterize is a

“dehumanization” process: under capitalism, human beings are forced to live through a

“perverse” life within which they are deprived of the very qualities that make them

human, or to use Abraham Rotstein's (1990: 100) metaphor, the market system represents
 23

the artificial, externalized embodiment of the individual or the “blind and dark alter

ego.”14 The institutional structure of capitalism forces human beings to live through a

separate, fragmented life; in other words, under capitalism the “totality” of human

existence breaks down.

This breakdown of the totality of human lives can be conceived analytically

within two steps, even though it is not easy to distinguish between them in practice, for

they had taken place together following the abrupt institutional change. In the first step,

reduction of labor power to a commodity leads to the breakdown both of the totality of

human life activity into “economic” and “noneconomic” spheres and of the unity

between man and his own powers which he exerts within this life activity, whereas the

commodification of land leads to the breakdown of the unity of man with nature. In the

second, the institutional separation of the economic sphere, this “disembedded

economy,” which is the result of these two commodity fictions, leads to the

transformation of the notion of the human condition. Human beings in capitalism are now

characterized as guided by two “economic” motives: the hope of profit or the fear of

hunger. All other motives, no matter how essential they are in defining what a human

being is, are reduced to the level of insignificance in everyday life, being enveloped

under the term “ideal.” That is, “man's vital unity” has been split into a “‘real’ man, bent

on material values, and his ideal better self” (OMM, 116). This is nothing but the

manifestation of the separation of economics from politics, or actually from morality or

ethics (Lind 1994: 147).15

 24

To put it another way, this is nothing but the violation of the very sociality of

human beings. The market mechanism transformed the very substance of human

economy, by transforming “man's ultimate dependence on nature and his fellows for the

means of his survival” for it put this dependence under the rule of the market (LM, 8), or

under the rule of the promise of profit and threat of starvation, which atomizes the

individual. In other words, the disembedded market economy makes the rule of the

“changelessness of man as a social being” (GT, 46) obsolete for it inevitably leads to the

dissolution of the society by forcing man to behave like a homo oeconomicus. However,

in order to understand this I will turn my attention to Polanyi's distinction between the

“substantive” and the “formal” definitions of the term “economic.”

1.3. The Economistic Fallacy and the Substantivist Account

1.3.1. Two Definitions of Economic

As has been seen, once the fictitious commodities were created, the desire of gain

and the fear of hunger have automatically become the universal motives, and, as a

consequence of this, economic determinism has begun to dominate our minds. The most

significant sign of this phenomena, according to Polanyi, is the economistic fallacy, i.e.,

identification of “economic” phenomena with market phenomena (TMEE, 270 and LM,

20), or the extrapolation of the categories that are prevalent in capitalism to other

societies and/or other times.

According to Polanyi, we should distinguish between the two meaning of the

term “economic”: the formal and the substantive meanings (TMEE, 245-50; LM, 19-21).
 25

The formal, mainly neoclassical, definition of economic considers means-end

relationship, according to which human beings behave “rationally”; i.e., they use

“scarce” resources in an optimum way to achieve their ends, whereas the substantive

definition “points to the elemental fact that human beings, like all other living things,

cannot exist for any length of time without a physical environment that sustains them”

(LM, 19). According to the substantive definition, “so long as the wants depend for their

fulfillment on material objects the reference is economic. Economic here denotes nothing

else than 'bearing reference to the process of satisfying material wants'“ (LM, 20). Here

the term “material” refers to man's dependence for his “livelihood” upon nature in the

context of social relations. For Polanyi, these two definitions are radically distinct and

different from each other to such a degree that

The cogency that is in play in the one case and in the other differs as the
power of syllogism differs from the force of gravitation. The laws of the
one are those of the mind; the laws of the other are those of nature. The
two meanings could not be further apart; semantically they lie in opposite
directions of the compass (TMEE, 244).

1.3.1.1. The Formal Definition

The formal meaning of economic, for Polanyi, is nothing but the reflection of the

working of the market economy, as it is conceptualized in the rational choice theory with

its postulate of atomism. That is, the conceptual framework based on the notions of

“rationality” and atomism is but a distortion of the true representation of man in the

realm of thought, just like the fact that the market economy is basically a distortion of the

real life of man in the real world:

 26

On the face of it, the economistic Weltanschauung may have seemed to

contain in its twin postulates of rationalism and atomism all that was
needed to lay the foundations of a market society. The operative term was
rationalism. For what else could such a society be other than an
agglomeration of human atoms behaving according to the rules of a
definite kind of rationality? Rational action, as such, is the relating of
ends to means; economic rationality, specifically, assumes means to be
scarce. But human society involves more than that. What should be the
end of man, and how he should choose his means? Economic rationalism,
in the strictest sense, has no answer to these questions, for they imply
motivations and valuations of a moral and a practical order that go
beyond the logically irresistible, but otherwise empty, exhortation to be
“economical.” Thus hollowness was camouflaged by ambiguous
philosophical colloquialism (LM, 12-13).

Therefore, on the philosophical level, two further meanings of rational had to be

brought in to prove that all economic behavior is “rational”:

With regard to the ends, a utilitarian value scale was postulated as

rational; and with regard to the means, the testing scale for efficacy was
applied by science. The first scale made rationality the antithesis of the
esthetic, the ethical, or the philosophical; the second made it the antithesis
of magic, superstition, or plain ignorance. In the first case, it is rational to
prefer bread and butter to heroic ideals; in the second, it appears rational
for a sick man to consult his doctor in preference to a crystal-ball gazer.
Neither meaning of rational is relevant to the principle of rationalism,
though per se one may be more valid than the other. While stark
utilitarianism, with its pseudophilosophic balance of pain and pleasure,
has lost its sway over the minds of the educated, the scientific value scale
remains supreme within its limits. Thus utilitarianism, still the opiate of
the commercialized masses, has been dethroned as an ethic, while
scientific method justly holds its own (LM, 13).

According to Polanyi, this is the way in which the choice of ends and means is

claimed to lie under the supreme authority of rationality. In this regard, what rational

choice theory expresses is that reason from now on could be limited only to the scarcity

situations; hence all human behavior could be reduced to being concerned with the
 27

relation between means and ends: a purely “economistic culture” (LM, 13).

The social philosophy erected on such foundations was as radical as it

was fantastic. To atomize society and make every individual atom behave
according to the principles of economic rationalism would, in a sense,
place the whole of human existence, with all its depth and wealth, in the
frame of reference of the market. This, of course, would not really do—
individuals have personalities and society has a history. Personality
thrives on experience and education; action implies passion and risk; life
demands faith and belief; history is a struggle and defeat, victory and
redemption. To bridge the gap, economic rationalism introduced harmony
and conflicts as the modi of the individual's relations. The conflict and
alliances of such self-interested atoms, which formed nations and classes,
now accounted for social and universal history (LM, 14).

We should not forget the fact that achievement of such a conception of society,

which declares the triumph of economic rationalism and which leads to the eclipse of the

political thought, was in effect an outstanding feature of the market mentality. Once a

human being is reduced to an “individual in the market” (LM, 29), it was now easy to

argue that “economic” action “was ‘natural’ to man and was, therefore, self-

explanatory” (LM, 14). That is, from now on, the term “economic” could safely be

identified with the market activity. This, according to Polanyi,

can be inferred from the ironic fate of that most controversial of modern
mythological figures—economic man. The postulates underlying this
creation of scientific lore were contested on all conceivable grounds—
psychological, moral, and methodological, yet the meaning of the
attribute economic was never seriously doubted. Arguments clashed on
the concept of man, not on the term economic.... it was taken for granted
that economic man, that authentic representation of nineteenth-century
rationalism, dwelt in a world of discourse where brute existence and the
principle of maximization were mystically compounded. Our hero was
attacked and defended as a symbol of an ideal-material unity which, on
those grounds, would be upheld or discarded, as the case might be. At no
time was the secular debate reflected to even a passing consideration of
which of the two meanings of economic, the formal and the substantive,
 28

economic man was supposed to represent (LM, 21).

1.3.1.2. The Substantive Definition

On the other hand, as opposed to the formal, the substantive meaning “stems, in

brief, from man's patent dependence for his livelihood upon nature and his fellows. He

survives by virtue of an institutionalized interaction between himself and his natural

surroundings. That process is the economy” (LM, 20). In other words, the main thrust of

the substantive approach is Polanyi's proposition that “man's economy, as a rule, is

submerged in his social relationships” (GT, 46; BED, 98). By using mainly

anthropological data, derived especially from the works of B. Malinowski16 and R.

Thurnwald, Polanyi seeks to prove that the formalist approach is wrong in its claim that

the “economic” motives exist, as the main determinant of social life, throughout the

whole of human history. For him, in every form of society except for the market

economy economic transactions in the sense of provisioning material needs are

subordinate to social institutions no matter how essential they are for the survival of

human beings. In other words, the “human condition” is not primarily given by the

economic motives:

The economic factor, which underlies all social life, no more gives rise to
definite incentives than the equally universal law of gravitation.
Assuredly, if we do not eat, we must perish, as much as if we were
crushed under the weight of a falling rock. But the pangs of hunger are
not automatically translated into an incentive to produce. Production is
not an individual, but a collective affair. If an individual is hungry, there
is nothing definite for him to do. Made desperate, he might rob or steal,
but such an action can hardly be called productive. With man, the
political animal, everything is given not by natural, but by social
 29

circumstance. What made the 19th century think of hunger and gain as
“economic” was simply the organization of production under a market
economy (OMM, 111).

In other words, liberal thought went wrong in the nineteenth century, if not the

twentieth century, in its failure to distinguish between historically specific and general

aspects of human existence, whose consequence is a ubiquitous economic determinism.

However, here what Polanyi argues is not that the economic factor is unimportant; on the

contrary, for him, “no society, could, naturally, live for any length of time unless it

possessed an economy of some sort.”17 What he argues is that, although the market

institution was fairly common in human history, “previously to our time no economy has

ever existed that, even in principle, was controlled by markets” (GT, 43). For Polanyi, it

is not the existence of economic motives which “defines” human beings; in this respect,

he simply follows Aristotle in the latter’s proposition that human beings are political, i.e.,

social animals.18

Since the term “material” in the substantive definition refers to the process of

satisfying wants, it is important to understand how these wants are satisfied. For Polanyi

satisfaction of wants can be carried on within an “instituted process.” That is, the

economy “can be briefly (if not engagingly) defined as an instituted process of

interaction between man and his environment, which results in a continuous supply of

want satisfying material means” (TMEE, 248).

On this conception, first, economy is instituted in the sense of “a sequence of

functional movements that are embedded in social relations” (Polanyi 1960: 329), and,
 30

second, the word “process”

suggests analysis in terms of motion. The movements refer either to

changes in location, or in appropriation, or both. In other words, the
material elements may alter their position either by changing place or by
changing “hands.”... Between them, these two kinds of movements may
be said to exhaust the possibilities comprised in the economic process as
a natural and social phenomenon.
Locational movements include production, alongside of transportations,
to which the spatial shifting of objects is equally essential....
The appropriative movement governs both what is usually referred to as
circulation of goods and their administration. In the first case, the
appropriative movement results from transactions, in the second case,
from dispositions (TMEE, 248).

In short, we can see the “institutedness” as the integration of two elements:

“things in movement” from an “operational” point of view, and “persons in situations”

from a sociological one (Polanyi 1971: 19-20). Within this framework, the problem of

how empirical economies are instituted can be solved by considering various “forms of

integration,” or the “transaction modes” (Sievers 1991: 64), each of which is dominant in

one society at a time. These forms of integration refer to the ways in which the economy

is organized in a specific society, and as such they are relatively independent both of the

political structure and of the “ideals and cultures” prevalent in that society. They are

simply “the institutionalized movements through which the elements of the economic

process—from material resources and labor to the transportation, storage, and

distribution of goods—are connected” (LM, 35). According to Polanyi, throughout

human history there have been four forms of integration: namely, householding,19

reciprocity, redistribution, and exchange. Seen from the standpoint of the “movements”
 31

that characterize these forms of integration, reciprocity refers to symmetrical movements,

though it does not necessarily imply a dual relationship, or an equal “exchange” between

parties, whereas redistribution refers to the movements from a center. As opposed to

these two forms, movements are of random character in a market economy (LM, 36-39).

Nevertheless, these forms or patterns of integration are always accompanied by the

social institutions, the “supporting structures,” within which the economy is organized, a

fact that expresses what the “embeddedness” means. In this regard, the institutional

patterns corresponding to each form above are autarchy, symmetry, centricity, and

market pattern, respectively (Sievers 1991: 64). Here the important point is that these

“supporting structures, their basic organization, and their validation spring from the

societal sphere” (LM, 37). From this “sociological” point of view, it should be

emphasized that these structures which carry the forms of integrations refer to neither

individual nor aggregative behavior. It would be a mistake, as in the case of Adam

Smith's famous “propensity to truck, barter, and exchange,” to suppose that “individual

acts and attitudes simply add up to create the institutional structures that support the

forms of integration” (LM, 37). For example, redistribution is not an individual pattern at

all; it always presupposes prior existence of a center from which the distribution is

carried on. The same is true for reciprocity and exchange. Although in all cases they also

presuppose definite kinds of personal attitudes and actions, those of mutuality and barter,

none of these forms are possible on the societal plane without the prior existence of a

structural pattern which is not the result of individual actions of mutuality or barter. In
 32

this regard, Polanyi emphasizes that only in the existence of the supporting structures

will personal attitudes result in economic institutions of any importance (LM, 38). Here

the important fact is that mere aggregates of personal behaviors do not by themselves

produce such structures:

We merely insist that if, in any given case, the societal effects of
individual behavior depend on the presence of definite institutional
conditions, these conditions do not for this reason result from the personal
behavior in question. Superficially, the supporting pattern may seem to
result from accumulation of a corresponding kind of personal behavior,
but the vital elements of organization and validation are necessarily
contributed by an altogether different type of behavior (TMEE, 251-52).
In other words, institutions, which support the form of integrations, refer to “the

collective actions of persons in structured situations” (LM, 37). These four forms of

integration, with the four supporting structures corresponding to them, thus constitute the

“substantivist” approach, which can be employed to analyze “all the empirical economies

of the past and present” (TMEE, 244). Such an emphasis on overall human history,

empirical character of the inquiry notwithstanding, suggests that the substantivist

account is about the human condition, for its main focus is the general, or universal,

aspects of human existence in order to show that the market system is a violation of these

human traits. As we shall see, this is exactly the case, despite all the emphasis given to

the four “forms of integration” by the followers and the critics of Polanyi alike.

1.3.2. Particular or General?

Polanyi's formal-substantive economy distinction and especially his concept of

economistic fallacy have created much debate in anthropology, even though they have
 33

not been considered as novel or controversial by sociologists (Humphrey 1969: 178).

This distinction has immediately started the formalist-substantivist debate in economic

anthropology.

From the standpoint of “formalism,” the notion of the economistic fallacy has

been criticized on the basis of rational choice theory, and it has been argued that the

principle of rationality, in the sense of optimizing behavior, can be used to explain the

whole of history, and even it can be extended to the realm of nature (Rottenberg 1958; Le

Clair 1962; Burling 1962; Cook 1966; Rutten 1990).20 One common implication that can

be derived from all these criticisms is that Polanyi misread the entire human history,

which can safely be characterized as a collection of rational behavior, for rationality in

optimizing sense is the eternal aspect of the human condition.21 Yet, the most interesting,

and even damaging, critique of Polanyi from the point of the rational choice theory has

been given by D. North (1977), who meets Polanyi's challenge “head on” by arguing that

Polanyi's forms of integration are, far from being incompatible with it, purely explainable

by the rational choice theory. According to North, reciprocity and redistribution “are

everywhere characteristic today as in the past in resource allocation within households,

voluntary organizations, and in government,” and thus nonmarket allocation of resources

was and still is a major aspect of economic organization (p. 709). The reason for this is

that the existence of transaction costs associated with defining property rights can give

rise to these kinds of nonmarket allocations:

An essential pre-condition for price-making markets is the existence of

well-defined and enforced property rights over the goods or service to be
 34

exchanged. Such a condition does not exist today, or in the nineteenth

century, for many goods and services, and was conspicuously absent
throughout most of recorded history.
The costs of defining and enforcing property rights—transaction costs—
lead to non-price allocation of many goods and services today, because
the costs of delineation or enforcement exceed the benefits (North 1977:
710).

Therefore, to the extent that these transaction costs are high compared to

benefits, nonmarket allocations will be used within the organization of the economy, in a

way quite consistent with the rational choice theory. Admittedly, this is a powerful

critique of Polanyi's “substantivist” approach. However, although North himself

recognizes the importance of the state as a nonmarket allocator of resources, he is not

willing to recognize the role played by the state and the whole political and judicial

structure in capitalist societies in enforcing property rights and the contracts. I believe the

real problem here is that North's own reasoning is determined by the very separation of

the economic and political spheres in market economies. That is to say, the real problem

here is not whether or not transaction costs exist, but the fact that Polanyi's “pre-

analytical vision”22 is not compatible with that of neoclassical economics, or with the

very market mentality, for it is basically a “societal” approach. In other words, the

importance of Polanyi's message does not lie, as many followers of Polanyi seem to

think, in his notion of the “forms of integration,” but in his critique of capitalism itself, as

a system which violates our very humanity. Before elaborating this point, however, it is

necessary to consider briefly some other criticisms directed to the substantivist approach

for these criticisms raise the question of the distinction between the historically specific
 35

and the general aspects of human existence.

In this regard, among the criticisms concerning the adequacy of the substantivist

approach in dealing with real societies is Fernand Braudel's complaint that Polanyi's

theory “is entirely based on a distinction based (if it be said to be based at all) on a

number of heterogeneous samples” (1982: 227). In other words, it might be dangerous to

generalize the substantivist account to the entire human history. Thus, Manning Nash,

commenting on Dalton (1971a), argues that “the institutionalist analysis of Polanyi is

rather crude and ad hoc. His principles of exchange are descriptive of some societies, but

have little analytical value.... The principles lead to mechanical, schematic, and static

understanding at a superficial level” (p. 87), whereas R. F. Salisbury, in the same

commentary, believes that Polanyi's classification of economies on the basis of “forms of

integration” is useful, but “only to help beginning students appreciate the different

repertoires of superficial economic forms found in different societies” (p. 89).

Along the same lines, Maurice Godelier, a Marxist anthropologist, in his

comment on Dalton (1981) argues that Polanyi never gives an explanation about why a

particular structure prevails and why “embeddedness” occur in a certain way (p. 65).

Similarly, Godelier thinks that Polanyi “never sought to find out whether the hierarchy of

causes which determine the reproduction of a social system is the same as the hierarchy

of the institutions which obviously dominate its functioning” (p. 67). According to him,

Polanyi takes these two distinct sets of causes as identical. Godelier also thinks that

“what Polanyi calls integrative mechanisms are what the Marxists call, on the one hand,
 36

relations of production and, on the other hand, forms of circulation of the social product”

(p. 66). That is, according to Godelier, Polanyi confuses these two distinct levels.23

As a reply to this group of criticisms, namely, that the categories of the

substantivist approach are not analytically adequate to study actual economies, it is

possible to consider Humphrey’s (1969) argument that Polanyi

wanted to proceed from a substantive definition of the economy to an

empirical study of the place of the economy in society, without any
theoretical presupposition about the function of the economy. It may
therefore be a mistake to judge his substantive definition of the economic
as an attempt at a complete and exhaustive definition (Humphrey 1969:
199).

However, even though she is right in her assertion that the substantivist definition

is not intended as an exhaustive one and it must be enriched empirically, this definition

itself is a “theoretical presupposition” through which the empirical level is examined. In

this regard, in the “Introductory Note” to TMEE, we read:

...the main task of the book is conceptual: it argues that only a small
number of alternative patterns for organizing man's livelihood exist and it
provides us with tools for the examination of nonmarket economies.
These tools are applied in a series of empirical researches, although the
underlying theory transcends them (pp. xvii-xviii, emphases mine).
Again,

Technological progress is cumulative and unbounded, but economic

organization is not. There are only a few general ways in which the
economy may be organized. It is this limitation of the possible patterns of
economic organization and their effective combinations which gives to
the thoughts and data offered here some topicality (p. xviii, emphasis
mine).

In these passages, the emphasized claims are not simply empirical findings; they

are, in a sense, theoretical claims which have some independence of the empirical
 37

analyses.24 Here, one should not be misled by the emphasis on the empirical economies:

although substantive economics deals with different forms of human existence prevalent

throughout the history by using mainly anthropological data, it is necessary to stress that

the underlying concern that guides this account is actually the general, or

“transhistorical,” aspects of human existence. Therefore, this discussion brings us to a

very important point: the distinction between “general” and “particular,” or

“transhistorical” and “historical” categories in Polanyi’s work. Especially in his project

in anthropology, Polanyi seems to have emphasized the particular aspect, by focusing on

the empirical economies, at the expense of the general or universal aspect of human

societies. In this connection, despite Dalton’s (1971a: 186n) claim that Polanyi was not

arguing against generalization but against the universal applicability of conventional

economics, the comment made about Dalton's paper by Carol F. Swartwart, who

distinguishes between two questions, is worth citing:

(1) Can conceptual models developed to fit modern Western Institutional

arrangements be usefully, or validly, applied to primitive Non-Western
cultures? (2) Can a universalistic theory be developed which can
adequately deal with the variability of the phenomena cross-culturally? A
negative answer to the first question does not necessarily imply a negative
answer to the second question (p. 94).

However, the answer to such a question may not be given merely by using

anthropological data; what we also need is a philosophical argument, which specifies the

general human condition and the underlying social theory.25 For Polanyi's critique of

capitalism requires, and I believe is actually based on, such a conception of the human

condition emphasizing the sociality of human beings. The analyses of the nonmarket
 38

societies in the substantivist approach, at least in Polanyi’s own version, always

presuppose this philosophical conviction about the human condition, which is used to

validate the assertions put forward regarding those societies, as the references to Aristotle

show, even though this outlook is not elaborated much. The same is also true for the

critique of capitalism in The Great Transformation, although the emphasis here again is

given to the anthropological data in demonstrating the “noneconomic nature of man.”

Unfortunately, this point seems to have been entirely omitted in the anthropological

debate over the substantivist approach. In this debate Polanyi's message is reduced to

three forms of integration, namely, reciprocity, redistribution and exchange, without ever

mentioning his moral critique of the market system. The result of this reduction is aptly

characterized by Berthoud (1990: 171):

With such fragmentation, there are indeed two Polanyis. One is

considered a theoretician of primitive and archaic societies, as in the
Trade and Market in the Early Empires. The second Polanyi is a radical
critic of our economic modernity, as in The Great Transformation.26
This partition is unfounded. Nothing could be more detrimental to a
genuine comprehension of Polanyi's work, which must be understood as a
whole, within the same comparative approach. More precisely, there are
in Polanyi's writings three connected domains of reflection: general
theory, history, and policy....The first is equated with the search for
universal and general concepts in order to compare economies within
societies; the second is identified with the study of specific historical
periods and societies; the third addresses the most crucial problems faced
by humanity, on the basis of the first two domains of reflection.

Likewise, Polanyi's daughter, Polanyi-Lewitt, argues:

It has not been sufficiently appreciated that Polanyi's research in

economic anthropology was directly motivated by the problems that he
sought to address throughout his life: how to organize the economy of our
modern technological society in a manner that would make production
 39

subordinate to man's societal and cultural needs; how to “re-embed” the

economy in society, to use his terminology; how to institute a social and
political order in which personal responsibility of man for his fellow man,
and man for his natural environment, can supersede the dictates of
impersonal market forces and impersonal state technocracies (1990: 116-
17).
Although these problems and the way Polanyi handled them will be dealt with in

the following parts of this dissertation, at this point it is possible to argue that a key to the

solutions to all of these problems can be summed up in a general problem: necessity of an

understanding of what the human essence or the human condition is, and this is exactly

what Polanyi has done in his work, seen in its entirety.

In order to understand Polanyi's whole project, it is necessary to distinguish

between historically specific and general categories prevalent in his work. The Great

Transformation is concerned with the historically specific categories, namely, with the

categories of the market economy. Nevertheless, the argument of the whole work

depends critically upon the general, transhistorical aspects of the human condition, as

Polanyi emphasized continuously. For example, in a letter to Jacob Marshak dated 1943,

Polanyi says that The Great Transformation is concerned with “a socialism focused on

the ultimate convictions about the nature of man” (quoted in Mendell 1989: 477).

Likewise, in the closing pages of this book, when he is discussing socialism he poses the

question :

is freedom an empty word, a temptation, designed to ruin man and his

works, or can man reassert his freedom in the face of that knowledge [of
the reality of society] and strive for its fulfillment in society without
relapsing into moral illusionism?
This anxious question sums up the condition of man. The spirit and
content of this study should indicate an answer (GT, 258A; emphasis
 40

mine).

It is easy to understand why it must be so; in order to talk about the

“dehumanizing” aspect of capitalism, one should have a conception about the human

condition; otherwise Polanyi's whole critique of capitalism does not make any sense, for

if what we call human nature depends exclusively upon the social context, then it is not

very difficult to defend capitalism on the basis of human nature. For Polanyi, however,

capitalism is a “twisted” or a “perverted” existence for the humanity as a whole because

it reduces both human beings themselves and their natural environments into

commodities, a quite contrary fact to their “definitions.”

Therefore, the critique of the market society requires an understanding of the

conditions that characterize both human beings themselves and their existence, and this

is the guiding thread in Polanyi's anthropological studies. However, one important aspect

of this anthropological work seems to be overlooked in the debate over the substantivist

approach: for Polanyi, the priority had always been to understand (and to think the ways

of transcending) the market economy. For example, in the very distinction between the

formalist and substantivist definition of economic, it is not the “substantivist” definition

which determines the course of the work; on the contrary, methodologically speaking, the

“formalist” definition determines the whole endeavor in the sense that all the categories

or institutions of the formalist approach, especially trade, markets, and money, this

“catallactic triad,” which are the dominant categories in the market society, are traced

back in the history to a period or society where they are not dominant. In other words,
 41

Polanyi's work of the “primitive societies” was not made for the sake of understanding

them in their own right but for the sake of understanding the conditions that gave rise to

the emergence of the distinct and separate sphere of the market.27 Therefore, first we

have a description of the market society, with its characteristic features (i.e., commodity

fictions and the market mentality), then an argument about the dehumanizing conditions

prevalent in this society (i.e., the effects of commodity fictions on human beings), and

finally a historical-anthropological study which seeks to demonstrate that these

conditions do not exist throughout the whole of human history.28 This line of

argumentation can be seen from almost every work of Polanyi, from The Great

Transformation to his last work, The Livelihood of Man, which was published

posthumously in 1977.29

1.4. The Human Condition in Polanyi

1.4.1. Voluntarism vs. Functionalism?

Although the assumption of the existence of “two Polanyis” is an unfounded one,

it is however true that there is a certain tension between Polanyi's analysis in The Great

Transformation and his “substantivist” position, namely, between “voluntarism” and

“functionalism” especially when the relation between individual agency and social

institutions or structures is considered. In this section a resolution to this tension will be

sought.

Polanyi's substantivist approach, especially his conception of the economy as an

“instituted process,” is purely functionalist.30 On this conception, as we have seen above,

 42

forms of integration do exist by virtue of their role in provisioning material needs for the

survival of the society in general. The supporting structures or the institutional patterns,

on the other hand, are necessary for the operation of these forms of integrations. In short,

social institutions just exist for the sake of the survival of the society:

Since there is no separate economic organization and, instead, the

economic system is embedded in social relations, there has to be an
elaborate social organization to take care of such aspects of economic life
as the division of labor, disposal of land, organization of work,
inheritance, and so on. Kinship relations tend to be complicated because
they have to provide the groundwork of a social organization that
substitutes for a separate economic organization. (Incidentally,
Thurnwald remarked that kinship relations tend to become simple as soon
as separate political-economic organizations develop, since “there is no
need for complicated kinship relations any more”) (LM, 53).
Even worse than this is that this instituted process, seen from two separate angles,

“values and motives” on the one hand and “physical operations” on the other, is a very

“unfortunate model” (Berthoud 1990: 179), because it does not allow any interaction

between the two:

What matters here is that our forms of integration are relatively

independent of the aims and character of the governments, as well as of
the ideals and ways of the cultures in question. A neutral attitude in
regard to the moral and philosophical implications of governmental
policies and cultural values is, indeed, a requisite of any objective
inquiry into the shifting relations of the economic process to the political
and cultural spheres of the society as a whole. Unless our classification of
empirical economies is reasonably free of motivational and valuational
associations, our conclusions might be vitiated by unwittingly assuming
what is supposedly deduced from the evidence (LM, 36).

Such a conceptualization, as G. Berthoud rightly emphasizes, is rather surprising

for Polanyi, because it implies an “insistence on knowing exactly what is meant by the

economy, in any institutional setting” (Berthoud 1990: 180). Such an emphasis on the
 43

economic process as an objective reality independent of values clearly undermines

Polanyi's whole critique of the market economy.

On the other hand, in The Great Transformation, one has a more “voluntaristic”

approach, for in this book one gets the impression that the market economy was

established by conscious design. The market economy as a “project,” designed by the

liberals and implemented by the state interventions, is a prevalent theme throughout the

whole book. For example, “there was nothing natural about laissez-faire; free markets

could never have come into being merely by allowing things to take their course,” and

“... laissez-faire was not a method to achieve a thing, it was the thing to be achieved”

(GT, 139). An “enormous increase in continuous, centrally organized and controlled

interventionism” was necessary for the institutionalization of capitalism, because “to

make Adam Smith's ‘simple and natural liberty’ compatible with the needs of a human

society was a most complicated affair” (GT, 140). To this end, namely, for the

institutionalization of the market system and for ensuring its proper working, the most

suitable means was the state. This was actually one of the cornerstones of the liberal

doctrine itself:

Of the three things needed for economic success—inclination,

knowledge, and power—the private person possessed only inclination.
Knowledge and power, Bentham taught, can be administered much
cheaper by government than by private persons. It was the task of the
executive to collect statistics and information, to foster science and
experiment, as well as to supply the innumerable instruments of final
realization in the field of government. Benthamite liberalism meant the
replacing of Parliamentary action by action through administrative organs
(GT, 139).
 44

As can be seen from this passage, even though this conception is voluntaristic, it

also includes functionalist aspects: in order for the market economy to function properly,

not only must the fictions be created and sustained, but even the social and political

institutions (i.e., the state and the balance of power system) must be at the service of the

market; all social institutions are determined by the “needs” of the market system. Yet, in

this case, this does not necessarily mean a contradiction, because as different writers

[e.g., Little (1991: 93) and Hollis (1994: 97-98)] emphasize, functional explanations are

quite useful for artificial systems created by deliberate design which seeks to achieve

certain ends by the selected characteristics. Thus, if we accept that the market economy

was created by such a deliberate design, functionalist explanation makes sense. Yet, in

Polanyi's analysis, there is no need to invoke functional claims in order to understand the

working of the market economy. The market economy, in its working, both

produces/reproduces the commodity fictions, and itself is reproduced through the

reproduction of these fictions. Although in the process individuals are reduced to

“functional units” for this mechanism, this is only the result of the working of the system;

individuals do not exist and act for the sake of reproducing the system, but they are

forced to behave like functional units, i.e., as homo oeconomicus. In this sense, Polanyi's

analysis is a description of the working of the market economy. In other words, since it is

possible to assert that this economy functions as if it were designed intentionally,

functional questions can still be useful in understanding the system.31

Voluntarism, however, still seems a disturbing implication for Polanyi's analysis,

 45

because in this case the whole system appears as a coldbloodedly devised, giant

conspiracy against humanity. It is possible to find some passages in Polanyi's writings

which suggest that he did not hold this view. For example, in his argument that the

market economy was a “stark utopia” (GT, 3), he argues that

liberal economy gave a false direction to our ideals.... It was an illusion to

assume a society shaped by man's will and wish alone. Yet this was the
result of a market-view of society which equated economics with
contractual relationships, and contractual relations with freedom. The
radical illusion was fostered that there is nothing in human society that is
not derived from the volition of individuals and that could not, therefore,
be removed again by their volition (GT, 257-58).

The liberal vision envisaged a utopia because liberal thinkers could not foresee

the consequences of the actions they recommended: since the market economy was

inhumane in the sense that it requires the separation of human beings from their

environment and from their own agency and hence poses a threat of the destruction of the

very society, the “self-protection” of the society would inevitably be on the way. From

this argument it is possible to infer that the process within which the market economy

developed has rather been a “two way” process in the sense that both intentional actions

and their unintended consequences had played a significant role. Even Speenhamland, as

a conscious resistance to the development of the market economy, would have its own

consequences which the creators of the system had not intended: wages had decreased

even below the subsistence level, thus leading to a social catastrophe.

In other words, Polanyi's account should not be treated as a purely “voluntarist”

one, for it allows a dynamic interaction between ideas and the material conditions within
 46

which these ideas are effective. For example, in another context, Polanyi says:

Although in its quiet way England has staged a social revolution, he

would be a courageous man who would assert that any conscious process
of thought accompanied it. The English people have an almost innate
reluctance to formulating social ideas in words. Their own, time-honored
semantics have taught them that words more often divide than unite.
Thus, there is no English school of sociology. But there is an English
method of social action, which subordinates thought to life, and seeks to
find solutions in life itself. If one only tries long enough, questions may
spontaneously resolve themselves, the English seem to say—and in any
case one avoids the mistake of making them insoluble by attempting to
force a solution where none is yet possible (Polanyi 1946: 280).32

Such a notion of the “subordination of thought to life” can be conceived as lying

in the framework of what Giddens calls “double hermeneutic” On this conception, the

social world is constituted by both the actions of the actors and the “metalanguages”

invented by the social sciences (Giddens 1984: 374). In other words, social science is not

only affected by society, but at the same time it is an effective agent in shaping society;

that is, social science is internal to its “subject matter” in a way natural science is not. On

the basis of this conception, we can argue that social science, especially political

economy, had played a significant role in the development of capitalism. Political

economy in the nineteenth century, or in the twentieth for that matter, has been both a

reflection of the market relations, of the newly emerging independent economic sphere,

and an active participant of creation/recreation of these relations. Polanyi is aware of this:

Laissez faire meant to Bentham only another device in social mechanics.

Social not technical invention was the intellectual mainspring of the
Industrial revolution.... The triumphs of natural science had been
theoretical in the true sense, and could not compare in practical
importance with those of the social sciences of the day. It was to these
latter that the prestige of science as against routine and tradition was due,
 47

and unbelievable though it may seem to our generation, the standing of

natural science greatly gained by its connection with the human sciences.
The discovery of economics was an astounding revelation which hastened
greatly the transformation of the society and the establishment of the
market system, while the decisive machines had been the inventions of
uneducated artisans some of whom could hardly read or write. It was thus
both just and appropriate that not the natural but the social sciences
should rank as the intellectual parents of the mechanical revolution which
subjected the powers of the nature to man (GT, 119).

Therefore, by allowing the dynamic interaction between “science” and its

“subject matter,” it is possible to avoid “voluntarism”: although the process was a

“reflexively monitored” one, to use Giddens's term, it has also been carried out by the

social dynamics independent of the individuals and their intentions. Nevertheless, this

does not necessarily mean that Polanyi's conception of society is a “holistic” one, which

denies the individual and its actions as proper units of social science, as we shall see.

1.4.2. Individualism vs. Holism?

Although Polanyi’s overall account can be regarded as a critique of the social

theory based on individualistic foundations, it should not be seen as a “holistic” position

emphasizing the notion of “totality” either. For Polanyi it is essential to avoid

reifications, i.e., converting human properties into abstract entities, like regarding society

as something completely independent from or above the individuals. In his analysis of

fascism, Polanyi criticizes the conception of “totality” as follows:

The Mind is the chief actor in producing that other plane of existence in
which there is society which is not personal relationship. Society which is
the realm of Totality has not persons for its units. The Political, the
Economic, the Cultural, the Artistic, the Religious, etc., are the units;
persons are not related to one another except through the medium of that
sphere of Totality which comprises them both. If they exchange their
 48

goods they are fulfilling an adjustment Totality, i.e., the Whole; if they
co-operate in producing them, they are relating themselves not to one
another, but to the product. Nothing personal has here substance unless it
be objectified, i.e. has become impersonal. Even friendship is not an
immediate relationship of two persons, but a relation of both to their
common Friendship. What the individual person is supposed to contain as
a subjective experience in himself, he thus encounters as colourless semi-
translucent objectivity outside himself. Society is a vast mechanism of
intangible entities, of Mind-stuff; the substance of personal existence is
merely the shadow of a shadow. We are in a world of spectres in which
everything seems to possess life except human beings (EF, 373-74).

Escape from this world of “spectres,” i.e., reifications, is also essential in order to

save Polanyi's substantivist approach from the strong functionalist and even structuralist

tendencies that it has and that give quite a limited role for the individual agency. In this

regard, it is possible to suggest that the two claims in the substantivist account given

above, namely, that “the societal effects of individual behavior depend on the presence of

definite institutional conditions” and that the institutions should be conceived as “the

collective actions of persons in structured situations,” can be taken to imply a position

similar to Giddens's concept of the “duality of structure,” which states that “the

structured properties of social systems are simultaneously the medium and outcome of

social acts” (Giddens 1981: 19). On this conception, societies or social systems cannot

exist without human agency, but nevertheless it is not the case that actors create social

systems; they reproduce or transform them, remaking what is already made in the

continuity of praxis (Giddens 1984: 25). In other words, structures always both constrain

and enable intentional human action, yet their production and reproduction are the

“unintended consequences” of this intentional action. Even though this gives us a sketch
 49

of how the social institutions and structures are reproduced,33 it should be stressed that

this reproduction requires active practices of individuals

as neighbors, professional persons, consumers, pedestrians, commuters,

sportsmen, hikers, gardeners, patients, mothers, or lovers—and are
accordingly capable of representation by almost any type of territorial or
functional association such as churches, townships, fraternal lodges,
clubs, trade unions, or, most commonly, political parties based on broad
principles of adherence (GT, 154).

Such a conception of society, based on “positioned practices,” again to use

Giddens's term, requires an understanding of it as constituted by real individuals who are

at constant interaction with each other, as Polanyi himself put:

How is a society conceivable which is not a relationship of persons? This

implies a society which would not have the individual as its unit. But in
such a society, how can economic life be possible if neither co-operation
nor exchange—both personal relationships between individuals—can
take place in it? How can power emerge, be controlled, and directed to
useful ends, if there exists no individuals to express their wills or wishes?
And what kind of human being is supposed to populate this society if this
being is to possess no consciousness of itself and if its consciousness is
not to have the effect of relating him to his fellows? In human beings
endowed with the type of consciousness we know such a thing seems
frankly impossible (EF, 371).

Actually, it is this impossibility, impossibility of separating individuality from

sociality, that characterizes Polanyi's understanding of human nature appropriately;

human beings, for him, are defined by the unity of individuality and sociality, a fact

which is a discovery of Christianity for the first time. This “discovery of the uniqueness

of the individual and of the oneness of mankind” (GT, 258A) characterizes Christianity's

“individualism,” which is essentially the same as socialist “individualism.” This

individualism, for Polanyi,

 50

is the doctrine of the Brotherhood of Man. That man have souls is only
another way of stating that they have infinite value as individuals. To say
that they are equals is only restating that they have souls. The doctrine of
Brotherhood implies that personality is not real outside community. The
reality of community is the relationship of persons. It is the Will of God
that community shall be real.
... the discovery of the individual is the discovery of mankind. The
discovery of the individual soul is the discovery of community. The
discovery of equality is the discovery of society. Each is implied in the
other. The discovery of the person is the discovery that society is the
relationship of person (EF, 370).

In short, Polanyi's conception of the human condition, which is the basis of his

critique of capitalism, requires a conviction that human beings are social beings, even

though this never implies that they are not individuals at the same time. In fact, the two

can never be separated, as John Dewey puts aptly:

These “social” ties do not inhere in “individuals”; they inhere integrally

in human beings in their very humanity. Their connection with the traits
that mark one human being off from the other is so pervasive and intimate
that what happens to the latter cannot be either understood nor effectively
dealt with save as the former are held in full view.
...”Individual” is as truly but an adjective as is “social.” Each word is a
name for what is intrinsic in the constitution and development of human
beings (Dewey 1946: 2).

Therefore, a human being is characterized by the unity of sociality and

individuality, the two inseparable characteristics of the human condition, a unity which is

broken down in the market society.

1.4.3. Human Being as a Moral Being

According to Polanyi, this view of human essence as the unity of individuality

and sociality is derived essentially from Christianity. However, this position should not
 51

be taken as a form of mysticism,34 for the emphasis here is on humanity, and Christianity

is being credited with the discovery of this unity. Since Christianity has always been

identified with “Western civilization,” it can be inferred that Polanyi also endorses the

values that have been associated with Western civilization, from the Judaeo-Christian

tradition to the Enlightenment. Of course such an emphasis upon “the West” also poses

the question of “Orientalism” in Edward Said's (1979) sense. We can say that Polanyi is

well aware of the problematic aspects of this position, considering especially his remarks

about colonialism and, above all, about the market economy, this Western “invention,”

and its leading to fascism.35 In this regard, his daughter states that “by the ‘west’ he

meant not the power grouping of that name, which ‘has shamefully identified democracy

with capitalism and progress with colonialism, but a cultural entity dating from the

Renaissance and Humanism which gave rise equally to capitalism and socialism’”

(Polanyi-Lewitt 1964: 119). In short what Polanyi speaks for is the “Western

Universalism” (Polanyi-Lewitt 1964: 119), which can be expressed as the “unity of

mankind” as embracing the unity of both individual and universal or social aspects of the

human condition.

On the other hand, emphasis upon Christianity also indicates that according to

Polanyi man is a “moral being,” or in Rotstein's terms, “a religious being,” to be

understood in a very broad sense. According to Rotstein, Polanyi “saw it as central to

man's nature to invest the world with meaning and to locate his own person and the

import of his life within such a universe (1990: 99). Such a position clearly includes
 52

“hermeneutical” elements, which themselves require the category of interpretation, for

“institutions are embodiments of human meaning and purpose” (GT, 254).36 There is also

a second order, or “double,” hermeneutics when we consider the social science itself, as

we have seen above: social science is confronted with the problem of interpretation

regarding both the community of scientists and the actions of its “subject matter,” the

“lay” actors themselves. In other words, “critical” analysis is not an “option,” it is a

necessity in understanding societies (Giddens 1984: xxxv).37 Within this position, which

underlies Polanyi's own analysis, individuals are characterized by their inner freedom, a

theme to which I will return in the last chapter when I discuss the problem of “freedom in

a complex society.” In this regard, it can be stated that Polanyi's social theory includes a

moral philosophy within which human freedom plays an essential role. In other words,

according to this social theory, social institutions are basically “expressions” of the

human essence or freedom. In this connection, Glasman (1994: 70) argues that Polanyi's

social theory is based on the view that

human society is the transformation of external nature through human

nature, which is the realization of freedom through the moral relations
created by productive association. The relations of production are
benchmark of liberty. The institutions of work ... are thus the
organizations that protect and renew both freedom and community.

In this theory, to repeat, it should not be forgotten that although institutions are

embodiments of human freedom, they also impose constraints upon this freedom,

because they both enable and at the same time constrain intentional actions of

individuals. That is to say, action both presupposes and in a sense “shapes” social
 53

institutions and relations. In other words, purposive actions of human beings, directed to

realize their own potentialities, has to operate within the constraints that social

institutions created. Such a conception, again, is implied in Polanyi's insistence on the

impossibility of shaping the society “by man’s will and wish alone.”

The view of man as a “moral being,” we can contend, has important implications

in respect of Polanyi's critique of the market economy. On this conception, a moral being

is a “strong evaluator” in Charles Taylor's (1985a, chs. 1&2) sense, that is, man is

endowed with the capacity to evaluate his desires strongly in the sense that he is not only

concerned with the outcomes of the motivations but also with the “quality” of the

motivations. In other words, he goes “deeper,” i.e, characterizes his motivations at

greater depth (Taylor 1985a: 25). However, since an “individual in the market” must

behave only on the basis of the hope of gain or fear of hunger (or pain and pleasure for

that matter), he is forced to be reduced to an individual who lacks “depth,” as we

ordinarily use this metaphor for people:

Someone is shallow in our view when we feel that he is insensitive,

unaware or unconcerned about issues touching the quality of his life
which seem to us basic or important. He lives on the surface because he
seeks to fulfill desires being touched by the “deeper” issues, what these
desires express and sustain in the way of modes of life; or his concern
with such issues seems to us to touch on trivial or unimportant questions,
for example, he is concerned about the glamour of his life, or how it will
appear, rather than the (to us) real issues of the quality of life.
The compleat Utilitarian would be an impossibly shallow character, and
we can gauge how much self-declared Utilitarians really live their
ideology by what importance they attribute to depth (Taylor 1985a: 26).

Thus, the market economy violates our very essence,38 for it forces us to behave
 54

like those “shallow Utilitarians,” by identifying hunger and profit as the only two

motives that guide our lives. In other words, here we have a gap between the moral

universe of the individual and the contradictory demands of the market economy

(Rotstein 1990: 100-101). The effect of the existence of this gap is again brilliantly

described by Rotstein:

Since the moral individual must safeguard his inner freedom, that is,
avoid those choices and actions that violate the cardinal principles for
which he stands, he must suddenly find himself morally defenceless in the
economic sphere. The option not to make these economic choices is no
longer his, and there is anarchic outcome in their effect on his fellow
human beings. The integrity of this interpersonal element of the “person
in community” is sabotaged by an alien and external network that
channels economic life (Rotstein 1990: 105).
Accordingly, since capitalism deprives humans of their very freedom, the

imperative of protecting our freedom poses a responsibility for the humanity as a whole:

“the vital task of restoring the fullness of the life to the person, even though this may

mean a technologically less efficient society” (OMM, 116).39 This requires abolishment

of the distinction between the “ideal” and the “material,” which in turn requires

abolishment of the independent, separate economic sphere, disembedded from the society

as the result of the commodity fictions. In other words, since under the market system,

“society as a whole remained invisible” (GT, 258; OMM, 116), the task before us is to

accept the “reality of the society,” for “it is the Will of God that community shall be

real.” However, before discussing this issue at greater length in the third chapter, we

must turn our attention to the relations between Polanyi and Marx for this relation is

essential in understanding Polanyi's overall account.

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CHAPTER 2

THE CONNECTIONS BETWEEN POLANYI AND MARX

2.1. Introduction

Polanyi’s analysis of the market system, as we have just seen, characterizes a

dehumanization process: since human beings themselves and their natural environment

are reduced to fictitious commodities, human beings are separated both from their

surroundings and from their own powers that they exert in their life activity.

Furthermore, this commodification process leads to the dissolution of the society into the

atoms, for the individual in this society becomes a homo oeconomicus. In other words,

the market system violates the “noneconomic nature of man,” which in turn implies the

negation of an essential characteristic of a human being: the “individual in the market” is

no longer a social being. Therefore, according to Polanyi, the market system is a “stark

utopia” because it forces individuals to live through a perverse life contrary to their

“definitions.”

Such a conception of the market system, however, is quite similar to that of

Marx, as I argue in this chapter. Terminological differences notwithstanding, in Marx

too, the system, capitalism, is characterized by a dehumanization process: According to

Marx, labor power, the total mental and physical abilities and capacities of a human

being, becomes a commodity in capitalism. However, this means the separation of human

beings from their natural and social surroundings, from their own productive activity, in
 56

short from their own “species-being,” i.e., the conditions that characterize their humanity,

as Marx’s analysis of alienation demonstrates. For this reason, I examine some possible

connections between Marx and Polanyi in this chapter, with special reference to the

distinction between the specific and the general aspects of human existence. In the first

two sections below, after showing that the two need not necessarily be considered as

opponents, as some of the followers of Polanyi wish to think, I argue first that the general

framework that Polanyi uses to analyze the market system, namely, the institutional

separation of the economic sphere from the political, which is only a manifestation of the

“commodification” process, comes directly from Marx. Second, since understanding of

this commodification process requires an understanding of the “human condition,” for the

“dehumanizing” aspects of this process are emphasized in both Marx and Polanyi, I turn

to Marx’s notion of human essence. This notion considers the human being as a “species-

being,” or as the unity of individuality and sociality, and emphasizes the “noneconomic

nature of man,” as Polanyi once remarked. I also argue that this notion of human essence

also forms the basis of Marx’s historical materialism and therefore, contrary to the

allegation that Marx was an economic determinist, it emphasizes the noneconomic

aspects of human existence. For Marx too, only with capitalism does the economic

become central and the society come to be characterized by the separation between the

economic and the political spheres. In the last section, then, I examine Marx’s analysis of

capitalism and argue that the twin notions of alienation and fetishism are essential in

demonstrating the dehumanizing aspect of this system. This analysis shows that within
 57

the capitalist commodification process human beings, the real subjects, become

predicates of their own predicates, for labor power becomes a commodity, and therefore

social relations between them appear as relations between things. In this regard, I argue

that this “reification” process has a dissolving effect on the society and that this is the

crucial link between Marx and Polanyi because it is Polanyi who actually showed that the

extension of the market into every sphere of life will ultimately causes a social

“breakdown.” In other words, Polanyi’s analysis of the extension of the market

characterizes the process of reification caused by the commodification of the whole of

human existence.

2.2. Are Polanyi and Marx Incompatible?

2.2.1. Two Opponents?

One of the claims that most of the followers and interpreters of Polanyi, the most

prominent of whom is George Dalton, “who has made every effort to disassociate

Polanyi’s thought from that of Marx” (Halperin 1984: 247), frequently raise is that Marx

was committed to economic determinism and, therefore, to the economistic fallacy in his

framework of “historical materialism” (e.g., Dalton 1981; Dalton and Köcke 1983; Block

and Summers 1984: 48; Schroyer 1991).

Especially in economic anthropology, the differences between Marx and Polanyi

have been emphasized intensively. Yet, with respect to the debate between the

“substantivist” and the “formalist” positions, it is quite interesting to observe that Marx is

always used as a “yardstick,” or actually as a “scapegoat,” in this controversy: whereas

 58

the formalists accuse Polanyi of being a follower of Marx,1 the substantivists on the other

hand have taken great pains to distinguish Polanyi sharply from Marx. For them, Marx is

as much an economic determinist as the formalists themselves.

For example, according to Dalton, although “there are definite affinities

(agreements, similarities) between Marx and Polanyi in both paradigm and commitment

to socialism,... the differences between Marx and Polanyi are much more important than

their similarities. Marx and Polanyi definitely represent rival (alternative, disagreeing,

contradictory) paradigms or theoretical systems” (Dalton 1981: 75). With respect to the

similarities, Dalton (1981: 75-76) argues that both Marx and Polanyi regarded all

precapitalist societies and economies as comprising a single field for investigation; that

is, economic anthropology begins with early economic history; and also both differed

from “conventional economics,” representing the tradition from Ricardo to Samuelson.

However, when we consider the differences, he argues that, first, whereas Marx was right

about economic determinism of the nineteenth- and twentieth-century industrial

capitalism, he was wrong to assume that the primacy of the economic is also true for the

precapitalist societies; he was also wrong about what must inevitably follow capitalism.

Second, Polanyi has nothing to say about the deep causes of the sequential change; his

thought presupposed “no stage, no evolution, no propelling mechanisms transforming

one epoch into another” (Dalton 1981: 77), whereas Marx had such a conception. In

addition, Polanyi was not a Marxist because “there is no such thing as a Marxian

employing in his analysis a set of conceptual terms different from Marx's” (Dalton 1981:
 59

77). Finally, in Marxian analysis there is no counterpart to Polanyi's concern with early

foreign trade and early money wages (p. 78). Likewise, Dalton and Köcke (1983)

maintain that the claim that Polanyi is a member of Marxist family and his theory could

be incorporated in historical materialism is “utter nonsense” (p. 37). For them, first of all,

although for both Marx and Polanyi capitalism is a unique occurrence in the history and

Polanyi's “substantive” meaning of economic and Marx's “mode of production” appear to

be similar, “the conclusions each drew were utterly different” (Dalton and Köcke 1983:

37). Second, “Polanyi's use of much more ethnographic data distinguishes his work from

Marx's” (p. 39). Third, Marx's main focus was capitalism whereas Polanyi has a general

account for “all the empirical economies, past and present.” Fourth, in terms of the

distinction between substantivist and Marxist “paradigms,” Marxist anthropologists

“wind up in utter disagreement among themselves” (p. 41); that is, Marxists have no

shared paradigm whereas the substantivists do.2

On the other hand, opposed to this view is anthropologist Lucette Valensi's belief

that Karl Polanyi “never claimed that he was in disagreement with Marxism.... What

Polanyi explicitly rejected, however, was the unilinear schema of evolution, defended by

the Marxists of the early XX. century” (1981: 9).3 Likewise, J. R. Stanfield says, “I

would include Marx and Polanyi in the compatibility category” (1980: 594), but he

believes that Polanyi “detected a fatalistic determinism in Marxism,” although he

immediately adds that “Polanyi ... often distinguished Marx from his followers”

(Stanfield 1986: 14).

 60

The last point raised by Stanfield is important: Polanyi usually distinguishes

Marx from his followers. Unfortunately he is not very clear about Marx himself; his

treatment of Marx is always “tangential” (Sievers 1949: 307). According to Sievers, one

reason “might be found for this choice in the difficulties in engaging in Marxist polemics

while attempting constructive work along independent lines” (1949: 307), but he thinks

that Marx was “a determinist to a degree which denies the essential free character of

human nature” (Sievers 1949: 311), and “neither Owen nor Marx offer a humanistic basis

for a socialist reconstruction of society” (p. 359). Still, when he is discussing the role of

classes in Polanyi's account, he says that “Polanyi may not be as far from Marx as he

perhaps deems himself” (Sievers 1949: 341). Sievers, too, recognizes Polanyi's

distinction between Marx himself and his followers (p. 358).

On the other hand, in the Great Transformation Polanyi says, in passing, that

“...the essential philosophy of Marx centered on the totality of society and noneconomic

nature of man” (GT, 151); but he also writes:

from this time [the arrival of capitalism] onward naturalism haunted the
science of man, and the reintegration of society into the human world
became the persistently sought aim of the evolution of social thought.
Marxian economics—in this line of argument—was an essentially
unsuccessful attempt to achieve that aim, a failure due to Marx's close
adherence to Ricardo and the traditions of liberal economics (GT, 126).

Likewise, in a classnote written by himself (Dalton 1968: pp. 121-38), Polanyi

argues that Marx represents a return to the “societal” approach, as opposed to

“economistic” one, but “at the same time he also involuntarily strengthened the

economistic position” (p. 134). He says:

 61

Capitalist society, Marx argued, was economic society, and therefore it

was ruled by the laws governing the economic system, i.e., the laws of the
market. Marx, however, failed to emphasize (to put it at the least) that
such a state of affairs existed only in capitalist society. The discovery of
the importance of the “economic” under a market economy induced him
to overstress the influence of the economic factor generally, at all times
and places. This proved a grave mistake. Although Marx himself insisted
on the influence of non-economic factors in history, especially in early
history, nevertheless Marxists made a veritable creed of the economic
interpretation of history. This amounted to an assertion not only of the
predominance of economic factors, but also of economic motives. This
enormously strengthened the classics. The societal approach personified
in Marx was sapped by the economistic element inherited from the
classics (Dalton 1968: 134).

Although this and similar passages, like the very one I quote below, that can be

found in Polanyi's works constitute the basis of the allegation that Polanyi considered

Marx as a representative of economic determinism, it is not very clear from this passage

that whether Marx's “grave mistake” was that he was committed to the “economistic

fallacy”4 or that he failed to emphasize the uniqueness of capitalism, so that his followers

would not generalize what he said about capitalism to other societies. What is clear is the

distinction between Marx and his followers. Again, when he is discussing the importance

of the economic sphere in capitalism, he argues:

As regards man, we were made to accept the heresy that his motives can
be described as “material” and “ideal,” and that the incentives on which
everyday life is organized spring from the “material” motives. Both
utilitarian liberalism and popular Marxism favored such views.
As regard society, the kindred doctrine was propounded that its
institutions were “determined” by the economic system. This opinion was
even more popular with Marxists than with liberals.
Under a market economy both assertions were, of course, true. But only
 62

under such an economy (OMM, 110).

Again, the reference here is to the “popular” Marxism, rather than Marx's own

position. Thus, it seems from these quotes that Polanyi accuses what he calls “popular

Marxism,” rather than Marx himself, of holding an economic determinist view and being

committed to the economistic fallacy. Unfortunately, some of the followers of Polanyi,

especially Dalton,5 seem to be unaware of Polanyi's own distinction between Marx and

his followers.

On the other hand, representing a different position concerning relations between

Polanyi and Marx, Rhoda Halperin (1984; 1988; 1994) argues that, far from rejecting

Marx, Polanyi was actually a Marxist, but because of the political climate in the 1940s

and 1950s in the United States, he had to mask his Marxism (1984: 249).6 In effect, she

argues, Polanyi belongs to the “institutional paradigm”7 which encompasses “those

models which take institutions to be the key units of analysis,” and this paradigm was

“originated with Marx and was elaborated by Polanyi and others, most notably by Max

Weber” (Halperin 1984: 246). In this respect, as a support for Halperin's interpretation, it

can be added that Polanyi himself includes Marx (and Engels) in the “institutionalist

approach to economic history” (GT, 282).

According to Halperin, Polanyi's substantivist definition of the economy and

Marx's historical materialism are different ways to say the same thing. For example, she

quotes from Polanyi this passage:

The substantive economy must be understood as being constituted on two

levels: one is the interaction between man and his surroundings; the other
 63

is the institutionalization of that process. In actuality, the two are

inseparable; we will, however, treat of them separately (LM, 31).

She argues that the first level, the “ecological” level, corresponds exactly to the

forces of production and the second, the “institutional level,” to the relations of

production in Marx (Halperin 1988: 36; 1984: 253).

The above passage from Polanyi also suggests that none of these two levels has

any causal primacy over the other; that is, one should study both in order to get a clear

picture of the particular society at hand. As I will argue below, this position, the

inseparability of the “base” and the “superstructure” is one of the essential points of

historical materialism as well. In this regard, and again to Halperin's credit, we can cite

Polanyi's own words:

Process and institutions together form the economy. Some students stress
the material resources and equipment—the ecology and technology—
which make up the process; others, like myself, prefer to point to the
institutions through which the economy is organized. Again, in inquiring
into the institutions one can choose between values and motives on the
one hand and physical operations on the other, either of which can be
regarded as linking the social relations with the process. Perhaps because
I happen to be more familiar with the institutional and operational aspect
of man's livelihood, I prefer to deal with the economy primarily as a
matter of organization and to define organization in terms of the
operations characteristic of the working of the institutions (Polanyi 1960:
329-30).

That is, Polanyi's emphasis on institutional aspects of human “livelihood” is a

matter of choice; he decides to stress this aspect not because it is the essential one but

because he has more data dealing with this aspect. In other words, the real issue here is

not whether or not the “economic” is the primary determining factor in any society but
 64

whether or not it is possible to detach the “economic” sphere from the “rest” of the

society, even analytically.8 Such a separation, as we have seen, is achieved only in the

market society.

2.2.2. The “Civil Society”

Regarding this institutional separation of the economic sphere, it might seem

interesting to see that exactly the same position is defended by Georg Lukács, but this

time from a Marxist point of view, in the essay “Changing Function of Historical

Materialism” in his famous History and Class Consciousness (Lukács 1971). In this

essay, which is an attempt to apply historical materialism to itself, Lukács asserts that it

is “no accident” that historical materialism developed around the middle of the

nineteenth century, for historical materialism is the “self-knowledge of capitalist society”

(Lukács 1971: 229). He goes on to say:

Nor is it an accident that economics became an independent discipline

under capitalism. Thanks to its commodity and communications
arrangements capitalist society has given the whole economic life an
identity notable for its autonomy, its cohesion and its exclusive reliance
on immanent laws. This was something quite unknown in earlier forms of
society (Lukács 1971: 231-32).

According to Lukács, although particular aspects of the economic process exist

in precapitalist societies, they are independent of each other and they do not link into a

separate economic system. Only with capitalism do these aspects form a close-knitted,

insoluble unity which is independent of the rest of the society. In precapitalist societies,

“economic life did not yet possess that independence, that cohesion and immanence, nor
 65

did it have the sense of setting its own goals and being its own master that we associate

with capitalist society” (Lukács 1971: 238). For Lukács, this “self-contained autonomy

(which was what made it an economy, properly speaking)” (Lukács 1971: 251) gave rise

to the Classical political economy, for this view was nothing but a reflection of the

emergent autonomy of the economy.

For this reason, classical economics with its system of laws is closer to
the natural sciences than to any other.... It is concerned with relations that
are completely unconnected with man's humanity and indeed with any
anthropomorphisms—be they religious, ethical, aesthetic or anything
else. Man appears in it only as an abstract number, as something which
can be reduced to number or numerical relations. Its concern, as Engels
put it, is with laws that are only understood, not controlled, with a
situation in which ... the producers have lost control of the conditions of
life of their own society. As a result of the objectification, the reification
of society, their economic relations have achieved complete autonomy,
they lead an independent life, forming a closed, self-validating system.
Hence it is no accident that capitalist society became the classical terrain
for the application of historical materialism (Lukács 1971: 232).9
In short, it was Lukács, before Polanyi, who argued that economic sphere

becomes an autonomous, “reified” sphere which is separate from the society.10 Yet, this

similarity between Polanyi's and Lukács's views is hardly surprising when we bear in

mind that this framework, the separation of economic and social, was developed by Marx

himself, especially in his early writings. According to Marx, for example, Hegel's

distinction between “civil society” and “political society,” that is, the state, is nothing but

the manifestation of the fact that economic sphere becomes a separate, autonomous one

in capitalism. Marx, in his “Critique of Hegel's Doctrine of the State,” asserts that the

state is an abstraction which is the product of capitalism: “The abstraction of the state as

such was not born until the modern world because the abstraction of private life was not
 66

created until modern times. The abstraction of the political state is a modern product”

(Marx 1975: 90).

According to Marx, there was no distinction between civil society and the

“political state” in the Middle Ages; that is, “every sphere of private activity had a

political character, or was a political sphere, in other words politics was the characteristic

of the different spheres of private life” (Marx 1975: 90).11 In capitalism, on the other

hand, not only has the “political” become separated from the “private,” the private itself

has come to be defined on the basis of “private egoism,” i.e., on the basis of “economic”

motives.

According to Marx, this aspect of civil society was recognized by Hegel himself

too. In his comment on some remarks Hegel makes,12 he says that Hegel's civil society is

characterized on the basis of “private egoism” and hence as the “bellum omnium contra

omnes” (“war of all against all”) (Marx 1975: 101-2). Likewise in his essay “On the

Jewish Question,” Marx argues that in the civil society man lives an egoistic life, he

becomes an “isolated monad who is withdrawn into himself” (1975: 229). This “self-

sufficient monad” (p. 230) is characterized by his egoism, whereas in the political sphere,

he becomes an abstract “citizen.” In Marx's words,

Man in his immediate reality, in civil society, is a profane being. Here,

where he regards himself and is regarded by others as a real individual, he
is an illusory phenomenon. In the state, on the other hand, where he is
considered as a species-being, he is the imaginary member of a fictitious
sovereignty, he is divested of his real individual life and filled with an
unreal universality (Marx 1975: 220).

That is to say, the individual in capitalism has two distinct forms of existence: an
 67

“earthly” existence in the economic sphere and a “heavenly” existence characterized by

the abstract “citizen” in the political (Macmurray 1935: 226). For this reason, says Marx,

“the difference between the religious man and the citizen is the difference between the

tradesman and the citizen, between the day-labourer and the citizen, between the

landowner and the citizen, between the living individual and the citizen” (Marx 1975:

220-21). Freedom of this man is therefore only a freedom to “private property”:

In the rights of man it is not man who appears as a species-being; on the

contrary, species-life itself, society, appears as a framework extraneous to
the individuals, as a limitation of their original independence. The only
bond which holds them together is natural necessity, need and private
interest, the conservation of their property and their egoistic persons
(Marx 1975: 230).
It is easy to see the striking similarity between Polanyi's and Marx's arguments.

The dual character of human beings under capitalism, being on the one hand egoistic, or

optimizing, individuals within the “civil society,” or within the market sphere in

Polanyi's terminology, and impotent, abstract “citizens” within the political sphere,

informs Polanyi's whole critique of capitalism as developed in The Great

Transformation. Here, for both Marx and Polanyi, the issue is not simply the separation

between the civil society and the state itself but the meaning and the causes of this

separation. In other words, what this distinction shows is the institutional separation of

the economic from the social relations within which it was embedded and, as a result,

human totality is broken into separate entities, as both Marx and Polanyi argue.

Therefore, it is possible to assert that Polanyi is simply following Marx in his

interpretation of civil society-political society when he states that “Ricardo and Hegel
 68

discovered from opposite angles the existence of a society that was not subject to the

laws of the state, but, on the contrary, subjected the state to its own laws” (GT, 111). As a

matter of fact, Polanyi's own analysis of fascism in his essay “The Essence of Fascism”

(EF) relies heavily upon this interpretation. Although this analysis will be considered in

some detail in the next chapter, here it is worth noting that fascism, according to Polanyi,

is just another way to confine the individuals within the economic sphere in which they

are reduced to an automaton and excluded from the political sphere, as the “ingenious

trick” of fascism (EF, 367) shows this at the level of discourse.13 Here, the only

difference of fascism is that this separation is achieved through brute force. Other than

that, in fascism too, the individual is imprisoned within his own alienating economic

activity. In order to comprehend the full implications of this separation and its

dehumanizing effects, it is necessary to consider Marx himself in more detail, especially

his conception of human nature and his views upon the dehumanizing effects of

capitalism, which will be considered in the following two sections respectively.

2.3. Marx's Conception of Human Nature and

Historical Materialism

2.3.1. The “Species-Being”

Since the crucial link between Marx and Polanyi, the emphasis upon the

dehumanizing aspect of capitalism, stems from their conception of the human condition,

it is essential to understand Marx's conception of human nature, for Marx's own critique

of capitalism, just like Polanyi's, presupposes this conception. Therefore, in this section
 69

first I will highlight some important points in Marx's notion of human nature and then

consider the importance of this notion for his historical materialism.

We can start to examine Marx's conception of human nature by following his

distinction between “human nature in general” and “human nature as historically

modified in each epoch” (Marx 1976: 759n), a distinction he makes when he is criticizing

Bentham's understanding of the concept. Yet, although this distinction between the

general, or universal, aspect of the human condition and its historically particular form is

of crucial importance, this should not be taken to mean that human nature is something

that continuously changes throughout the history, depending on the social relations or

institutions. On the contrary, since the “essential human nature” is what makes human

beings human beings, it should remain constant. In other words, following Eric Fromm,

we can say that man's potential is given, according to Marx. Nevertheless, man

develops, transforms

himself. That is, he makes his own history, a process which characterizes man's self-

realization; in short, “he is his own product” (Fromm 1961: 26). However, this does not

imply that the essence of man always coincides with his “existence.” Marx, like

Aristotle, considers the essence of man as referring to “the inherent development

potential of every human being when that development proceeded in the natural or proper

way” (Hunt 1986: 97). If the conditions within which a being actually exists do not

permit that being to realize its own potential, then the existence of that being contradicts

the essence of it, although the essence is still a part of the being (Hunt 1986: 97). In terms
 70

of human beings, then, although the essence of man remains unmodified in the face of

changing forms of the social relations within which they live, it is quite possible that the

essence of man is contradicted by his existence. This is the key to understand Marx's

notion of alienation.

According to Marx, the condition that characterizes the essence of a human being

is that a human being is a unity of the particular, or more accurately individual, and the

general, or social. In other words, using Marx's 1844 Manuscripts' language, man is a

species-being:

Man is a species-being, not only because he practically and theoretically

makes the species—both his own and those of other things—his object,
but also—and this is simply another way of saying the same thing—
because he looks upon himself as the present, living species, because he
looks upon himself as a universal and therefore free being (Marx 1975:
327).
A person is a species-being in two senses, though these two senses are in effect

identical: a person is a species-being, first, “because of the nature of human perceptual

and conceptual faculties and human life-activity,” and, second, “because of the social

nature of human activity” (Hunt 1986: 97,98). That is, a person is a unity of individuality

and sociality, or more appropriately, the individual is the social being; even his very

existence is social activity:

I am still socially active because I am active as a man. It is not only the

material of my activity ... which I receive as a social product. My own
existence is social activity. Therefore what I create from myself I create
for society, conscious of myself as a social being.
... It is above all necessary to avoid once more establishing “society” as
an abstraction over against the individual. The individual is the social
being. His vital expression—even when it does not appear in the direct
form of a communal expression, conceived in association with other
 71

men—is therefore an expression and confirmation of social life. Man's

individual and species-life are not two distinct things, however much—
and this is necessarily so—the mode of existence of individual life is a
more particular or a more general mode of the species-life, or species-
life a more particular or more general individual life (Marx 1975: 350).
Therefore, it is the species character of human beings that differentiates them

from mere natural beings:14

But man is not only a natural being; he is a human natural being: i.e. he is
a being for himself and hence a species-being, as which he must confirm
and realize himself both in his being and in his knowing. Consequently,
human objects are not natural objects as they immediately present
themselves, nor is human sense, in its immediate and objective existence,
human sensibility and human objectivity. Neither objective nor subjective
nature is immediately present in a form adequate to the human being. And
as everything natural must come into being, so man also has his process
of origin in history. But for him history is a conscious process, and hence
one which consciously supersedes itself. History is the natural history of
man (Marx 1975: 391).
Then, human life activity, whose description is the history itself, is an interaction

with nature in a social setting: man's own activity is a social activity which is mediated

through his labor, and in this activity, or in his praxis, he transforms both nature, his

“inorganic body” (Marx 1975: 328), and himself. In other words, this activity is to be

seen as “either a society-mediated interchange with nature or a nature-mediated

interchange with other humans” (Hunt 1986: 99). This conception of praxis, or the free

purposeful activity of man to transform nature and himself, is essential in Marx's

thinking, for only through this activity can man “objectify” his essence:

It is therefore in his fashioning of the objective that man really proves

himself to be a species-being. Such production is his active species-life.
Through it nature appears as his work and his reality. The object of labour
is therefore the objectification of the species-life of man: for man
reproduces himself not only intellectually, in his consciousness, but
actively and actually, and he can therefore contemplate himself in a world
 72

he himself has created (Marx 1975: 329).

Therefore, the notion of praxis must be understood as referring to free, universal,

and self-creative activity through which man creates (transforms) his world and himself.

In other words, although human intentionality is a necessary condition for praxis, man

can be regarded as a being of praxis; he can only exist in praxis (Petrovic 1969, 1991).

On this conception, according to Joseph Margolis, “thinking” and “acting” are not

segregated facultatively: “human action is interested and purposive, and thinking is the

reflexive element of distinctly human action” (1989: 368-69). In other words, man's

consciousness is shaped through his life activity, for consciousness itself is “from the

very beginning, a social product, and remains so long as men exists at all,” as is

emphasized in The German Ideology (Marx and Engels 1970: 51). To put another way,

The production of ideas, of conceptions, of consciousness is at first

directly interwoven with the material activity and the material intercourse
of men, the language of real life.... Men are the producers of their
conceptions, ideas, etc.... consciousness can never be anything else than
conscious existence, and the existence of men is their actual life-process
(Marx and Engels 1970: 47).
Such a conception of the “production of life” (Marx and Engels 1970: 50), to be

conceived as both a natural and social relation “in such a way that the restricted relation

of men to nature determines their restricted relation to one another, and their restricted

relation to one another determines their restricted relation to nature” (Marx and Engels

1970: 51), demonstrates the importance of the category of labor in Marx. This category

is so important that it is even possible to argue that Marx's project is actually a

“philosophical reconstruction” of the concept of labor, a meaningful process through

which the species being both objectifies and recognizes itself in its own product (Ricour
 73

1986: 34). Although such a notion of labor may appear to be relevant only within the

context of Marx's early writings, the passage below from Capital shows that this

conception never lost its importance in “mature” Marx as well:

Labour is, first of all, a process between man and nature, a process by
which man, through his own actions, mediates, regulates and controls the
metabolism between himself and nature.... [In this process] he acts upon
external nature and changes it, and in this way he simultaneously changes
his own nature. He develops the potentialities slumbering within nature,
and subjects the play of its forces to his own sovereign power.... [W]hat
distinguishes the worst architect from the best of bees is that the architect
builds the cell in his mind before he constructs it in wax. At the end of
every labour process, a result emerges which already been conceived by
the worker at the beginning, hence already existed ideally. Man not only
affects a change of form in the materials of nature; he also realizes his
own purpose in those materials. And this is a purpose he is conscious of,
it determines the mode of his activity with the rigidity of a law, and he
must subordinate his will to it. This subordination is no mere momentary
act. Apart from the exertion of the working organs, a purposeful will is
required for the entire duration of the work (Marx 1976: 283-84).

Therefore, three aspects of the human condition need to be emphasized in Marx:

First, human beings are social beings, who appropriate nature in a social setting. Second,

the terms “labor” and “production” refer to a general activity; what we have here is

“production of lives” rather than merely material goods production.15 Above all, this

activity, or the “labor process” is a general condition: “It is the universal condition

characterizing the metabolic interaction between man and nature, the everlasting nature-

imposed condition of human existence” (Marx 1976: 290); therefore it is independent of

all specific forms of human existence. Labor is common to all forms of society because

it is the process through which human beings realize their own essence; it actually

characterizes what is human. If “labor” is a process within which labor power is used and
 74

“labor power” is to be defined as “the aggregate of those mental and physical

capabilities existing in the physical form, the living personality, of a human being” (Marx

1976: 270), in short if these are the conditions that characterize human agency, then it is

no wonder that labor should be understood as the “objectification” of human essence.16

Hence, far from expounding an “economistic” position regarding human beings, we have

the position well described in Polanyi's comment that “the essential philosophy of Marx

centered on the totality of society and noneconomic nature of man.” However, such a

position emphasizing noneconomic character of the human condition may appear

inconsistent with Marx's account of “historical materialism,” for it is this account which

is used to support the claim that Marx was an economic determinist. For this reason, it is

necessary to give this account a close consideration.

2.3.2. Historical Materialism

Marx's “historical materialism”17 as outlined in the Preface to his A Contribution

to the Critique of Political Economy (Marx 1970: 19-23), seems to advance three claims

which are important for our purposes: First, the “economic base,” the “relations of

production appropriate to a given stage in the development of their material forces of

production,” determines the “legal and political superstructure” and “definite forms of

social consciousness” which correspond to the “economic structure of society” (p. 20).

Second, this economic structure of the society is independent of consciousness and will

of the individuals living in this society: “It is not the consciousness of men that

determines their existence, but their social existence that determines their consciousness”
 75

(p. 21). Third, social change is to be explained by the conflict between forces and the

relations of production:

At a certain stage of development, the material productive forces of

society come into conflict with the existing relations of production or—
this merely expresses the same thing in legal terms—with the property
relations within the framework of which they have operated hitherto.
From forms of development of the productive forces these relations turn
into their fetters. Then begins an era of social revolution (p. 21).

With respect to the Polanyi connection, it seems obvious that the first claim is a

form of economistic fallacy for it generalizes the categories prevalent only in a capitalist

society (mainly the primacy of the economic) to all forms of societies, whereas the

second claim shows that Marx gives no role to individuals in his theory, for society has

its own laws quite independent of the consciousness of the individual to which the

individual has no choice but to conform. Last, the “stage” theory proposed by Marx is

inconsistent with Polanyi's “substantivist” account, for this account rejects such an

evolutionary outlook.18 Therefore, it is worth taking a closer look at these claims.

As to the first claim, it is true that Marx always emphasizes the importance of

economic factors19 and argues that “the writers of history have so far paid very little

attention to the development of material production, which is the basis of all social life,

and therefore of all real history” (Marx 1976: 286n). Along the same lines, in Capital,

volume III, he explains the social production process in general as follows. This process

is both a production process of the material conditions of existence for

human life, and a process, proceeding in specific economic and historical
relations of production, that produces and reproduces these relations of
production themselves, and with them the bearers of this process, their
material conditions of existence, and their mutual relationships, i.e. the
 76

specific economic form of their society. For the totality of these

relationships which the bearers of this production towards nature and one
another, the relationships in which they produce, is precisely society,
viewed according to its economic structure. Like all its forerunners, the
capitalist production process proceeds under specific material conditions,
which are however also the bearers of specific social relations which the
individuals enter into in the process of reproducing their life. Those
conditions, like these social relations, are on the one hand the
presuppositions of the capitalist production process, on the other its
results and creations; they are both produced by it and reproduced by it
(Marx 1981: 957).

However, what Marx is emphasizing here is the importance of the social

production process as a whole, not its specific constituents. That is, historical materialism

is concerned with the general aspects of human life activity, with the “labor process”

within which human beings realize their potentialities and express their essence. That is,

the terms “base” and “superstructure” should be taken as a metaphor instead of as the

outline of a causal account to explain the whole of history, for what we have here is the

inseparability of the “material” and the “ideal.”20 In other words, Marx's historical

materialism should be seen within the broader context of his conception of praxis which

is outlined above. In this regard, it is possible to argue that the base-superstructure

metaphor is a crude first approximation to the human life activity as embracing the

material and mental, emotional and aesthetic aspects of human existence (Hunt 1979a:

291-92). Or, to put the matter in terms of the forces and relations of production, we

should emphasize that their connection is not in the form of before and after, as Colletti

(1972: 19) argues, when he is criticizing “historical materialism” of Kautsky and

Plekhanov, two influential figures of the Second International. For Colletti, both the
 77

material and the ideological levels should be considered together; exclusion of the

material relations of production leads to the abstraction of “society in general,” whereas

exclusion of the “ideological” sphere leads to a relation between individual and nature

which is presocial or asocial (Colletti 1972: 6-7). In other words, in order to understand

the practical activity of human beings we should regard this unity of mental and material

aspects of the reality.

Second, with respect to the role played by the actions of individuals in human

societies, an important point to be stressed is that Marx's historical materialism is actually

a “fusion” between (material) causality and teleology; that is, teleology in the sense of

purposive human action is encompassed in the causal framework (Colletti 1973: 212):

Although every human being is a free creator of himself and of his world in a social

setting, at the same time he is partly unfree, passive, inert effect of his environment. For

this reason, human activity “must be understood in terms of both material causation and

conscious, purposive (or teleological) causation,” not in the sense of the “inevitable

unfolding of history” but in the sense of “the purposive action of a particular person”

(Hunt 1979b: 115). Therefore, we should regard human activity as “both causality and

finalism, material causality and ideal causality; it is ... man's action and effect on nature

and at the same time nature's action and effect on man” (Colletti 1973: 228), thus, once

again, the inseparability of the material and the ideal. Along similar lines, both Charles

Taylor (1975: 547-58; 1979: 50-51, 141-52) and Isaiah Berlin (1963: ch. 4) argue that

Marx's whole enterprise can be seen as an attempt to synthesize between two

 78

contradictory positions. The first of these positions is the radical Enlightenment thought,

which defends the view that for every question there is only one true answer and that,

guided by his knowledge of the “laws of nature,” man comes to shape nature and society

to his purposes in accordance with those laws. The second position, on the other hand, is

what Taylor and Berlin call the “expressivist” tradition, which sees human activity and

human life as man's self-expression, within which human freedom is given a primary role

as the authentic form of this expression.21 Therefore, according to Marx, although man's

purposeful behavior to realize his own potentialities comes to influence the society in

accordance with his purposes, he nevertheless is subjected to the laws which limit his

volition. Thus Polanyi's claim that it is “an illusion to assume a society shaped by man's

will and wish alone.” Also, Marx's assertion that “men make their own history, but they

do not make it just as they please; they do not make it under circumstances chosen by

themselves, but under circumstances directly encountered, given and transmitted from

the past” (Marx 1963: 15) can be understood in this connection.22 Although human

history is being continuously made by intentional actions of individuals, unintended

effects of these actions is the reproduction of social structures, independent of

individuals' purposes. In this conception, human purposive activity always presuppose

preexisting social relations for it is the existence of these relations which makes the

coordination and integration of individual acts possible and thereby makes the process a

social one. Yet, these very social relations, which are prerequisites of individual action,

are themselves the end result of the collective activities of the individuals involved in the
 79

process. Therefore, social relations, which both enable and constrain individual

intentional actions, are continuously created and recreated by individual actions (Hunt

1979a: 285).23

Third, regarding the claim that Marx's historical materialism is a general

evolutionary account to explain the entire human history, we should once again
emphasize the distinction between the general and the specific. In other words, this
account gives us a method of integrating man's historical activities, or a “skeleton” of
history: the categories of historical materialism should be used as questions, or queries to
understand the recognizable pattern in history;24 but beyond this, they should not be
taken as “canons” or strict “laws” which explain everything, irrespective of the specific
aspects (Krieger 1962: 375). That is to say, historical materialism should not be
considered as a general evolutionary account. On this problem, it is worth citing Marx
himself, in his reply to one of his critics:

[Marx’s critic] feels himself obliged to metamorphose my historical

sketch of the genesis of capitalism in Western Europe into a historico-
philosophic theory of the marche générale imposed by fate upon every
people, whatever the historic circumstances in which it finds itself, in
order that it may ultimately arrive at the form of economy which will
ensure, together with the greatest expansion of the productive powers of
social labor the most complete development of man. But I beg his pardon.
...Events strikingly analogous but taking place in different historic
surroundings led to totally different results. By studying each of these
forms of evolution separately and then comparing them one can find the
clue to this phenomenon, but one will never arrive there by the universal
passport of a general historico-philosophical theory, the supreme virtue of
which consists in being superhistorical (quoted in Manicas 1987: 115).

Therefore, the claim that Marx had a “stage” or evolutionary theory for historical

change, which asserts that this form of evolution necessarily follows the same pattern

everywhere and at all times, a “superhistorical” assertion according to Marx, derives

from the failure to distinguish between the historically specific and the general aspects of

human existence. Although the labor process as a conscious, purposive activity is an

essential feature of human life, independent of any peculiar historical conditions, the
 80

specific forms of organization of this activity do not remain the same throughout history.

On the contrary, it is the peculiarity of these forms of organizations, or “modes of

production,” which gives a particular society its historically specific characteristic. Thus,

it is essential to distinguish between the general and particular aspects of history, for, as

Marx claims in the introduction to Grundrisse, “some determinations belong to all

epochs, others only to a few” (Marx 1973: 85).

The allegation that Marx had a general evolutionary theory to explain the whole

of history forgets the fact that for Marx, capitalism was of primary importance in his

analyses. That is to say, as Hunt (1984) argues, “Marx's study of history was a study of

the historical prerequisites of capital” (p. 7). In order to provide an adequate

comprehension of contemporary capitalism, argues Hunt (1984: 1), Marx first formulates

an abstract, structural definition of capitalism as a historically specific system and then

uses this definition to ascertain the chronological facts which are significant for his

conception of capitalism. That is, the criticisms that Marx does not prove the necessity of

the transition from feudalism to capitalism, or from capitalism to socialism for that

matter, and that his examples are chosen merely to illustrate his theory, are no criticisms

of Marx at all (Hunt 1984: 7). For Marx's intention was not to show the “marche

générale” of history; on the contrary, his analysis is directed to understand the peculiarity

of capitalism as a historically specific mode of production. Likewise, Colletti (1972: 23)

argues that Marx was not searching “general laws” or truisms that would be valid for all

times. Rather, argues Colletti, “he opens a general perspective on history precisely to the
 81

extent that he develops his analysis of the present: i.e. precisely to the extent that he

seizes the extreme or essential differences by which the present defines or illuminates,

even if indirectly, to the past.” Therefore, Marx's comment below, from Capital, volume

III, must be interpreted this way:

The scientific analysis of the capitalist mode of production proves ... that
this is a mode of production of a particular kind and a specific historical
determinacy; that like any other particular mode of production it assumes
a given level of social productive forces and of their forms of
development as its historical precondition, a condition that is itself the
historical result and product of a previous process and from which the
new mode of production proceeds as its given foundation; that the
relations of production corresponding to this specific and historically
determined mode of production—relations into which men enter in their
social life process, in the production of their social life—have a specific,
historical and transitory character; and that finally the relations of
distribution are essentially identical with these relations of production, the
reverse side of the same coin, so that the two things share the same
historically transitory character (Marx 1981: 1018).
In this respect, it is quite easy to show that the particular claim that Marx is

committed to the economistic fallacy is an unfounded one. For this is indeed exactly the

same claim that Marx advances to criticize his opponents,25 be they the “crude

communists,” who still think with the categories of capitalism to such an extent that for

them “the community is simply a community of labour and equality of wages, which are

paid out by the communal capital, the community as universal capitalist” and even

women are nothing but the “prey and handmaid of the communal lust” (Marx 1975: 346-

47), or the most prominent political economists of whom Marx criticizes as follows:

Smith and Ricardo still stand with both feet on the shoulders of the
eighteenth century prophets, in whose imaginations this eighteenth
century individual—the product on the one side of the dissolution of the
feudal forms of society, on the other side of the new forces of production
 82

developed since the sixteenth century—appears as an ideal, whose

existence they project into the past. Not as a historic result but as history's
point of departure. As the Natural Individual appropriate to their notion of
human nature, not arising historically, but posited by nature. This illusion
has been common to each new epoch to this day (Marx 1973: 83).

Again, for these economists, he says, “The aim is ... to present production ... as

distinct from distribution etc., as encased in eternal natural laws independent of history,

at which opportunity bourgeois relations are then quietly smuggled in as the inviolable

natural laws on which society in the abstract is founded” (Marx 1973: 87). This is an

error according to Marx, for in Capital, he argues:

One thing ... is clear: nature does not produce on the one hand owners of
money or commodities, and on the other hand men possessing nothing but
their own labour-power. This relation has no basis in natural history, nor
does it have a social basis common to all periods of human history. It is
clearly the result of a past historical development, the product of many
economic revolutions, of the extinction of a whole series of older
formations of social production (Marx 1976: 273).

Likewise, he rejects money's being a universal relation, a passage which is again difficult

to distinguish from Polanyi's own views on money:

It may be said ... that there are very developed but nevertheless
historically less mature forms of society, in which the highest forms of
economy, e.g. cooperation, a developed division of labour, etc. are found,
even though there is no kind of money, e.g.. Peru. Among the Slav
communities also, money and the exchange which determines it play little
or no role within the individual communities, but only on their
boundaries, in traffic with others; it is simply wrong to place exchange at
the centre of communal society as the original, constituent element....
And even in the most advanced parts of the ancient world, among the
Greeks and Romans, the full development of money, which is
presupposed in modern bourgeois society, appears only in the period of
their dissolution (Marx 1973: 102-03).

In other words, the claim that Marx was generalizing the categories of capitalism
 83

to other societies is, to say the least, an unfortunate one, a claim which is due to, I

believe, the failure to appreciate the importance of the distinction between general and

particular aspects of human societies in Marx.

2.4. Alienation and Fetishism: Violation of Essential

Human Powers

2.4.1. From Alienation to Reification

2.4.1.1. Alienation

In the above discussion, I showed that historical materialism at the most abstract

level develops the framework conceptualized as the association between the social

relations and relations with nature, thus forming the most general and abstract categories

of human existence. Yet, such a framework, though necessary, is not by itself sufficient

to understand private property and commodity production, and, more importantly, the

capital-wage relation as the differentia specifica of capitalism [cf. Hunt (1984: 5)]. Since

for both Marx and Polanyi the primary issue is to demonstrate the dehumanizing effects

of capitalism, it is necessary now to examine these historically specific forms. Such an

analysis, in turn, requires an understanding of Marx's notion of “alienation” because it is

the existence of alienation as a specific social relation which is both the manifestation

and the cause of the fact that human “totality” is broken in capitalist mode of production.

Although the object that labor produces should be considered as the

“objectification” of labor, under specific social relations this process also becomes a form

of alienation. In the 1844 Manuscripts, when he talks about political economy as the
 84

manifestation of the “present-day economic fact,” Marx's description of alienation is as

follows:

This fact simply means that the object of that labour produces, its
product, stands opposed to it as something alien, as a power independent
of the producer. The product of labour is labor embodies and made
material in an object, it is the objectification of labour. The realization of
labour is its objectification. In the sphere of political economy this
realization of labour appears as a loss of reality for the worker,
objectification as loss of and bondage to the object, and appropriation as
estrangement, as alienation (Marx 1975: 324).

Marx sees alienation from four “vantage points” (Hunt 1979a, 304): (1) the

relation of man to the product he produces, (2) the relation of man to his own productive

activity, (3) the relation of a man to his own “species-being,” and (4) the relation of man

to other men. Seen from the first vantage point, the relation between man and his product,

according to Marx, is similar to the relation between man and God: “The more man puts

into God, the less he retains within himself. The worker places his life in the object; but

now it no longer belongs to him, but to the object.” Therefore,

externalization of the worker in his product means not only that his
labour becomes an object, an external existence, but that it exists outside
him, independently of him and alien to him, and begins to confront him as
an autonomous power; that the life which he has bestowed on the object
confronts him as hostile and alien (Marx 1975: 324).

Second, this means nothing but alienation of man from the very activity that

characterizes production, for the product is simply the “résumé” of the production

activity. Thus, “if the product of labor is alienation, production must itself be active

alienation, the alienation of activity, the activity of alienation” (Marx 1975: 326). Third,

alienated labor also estranges nature from man and at the same time man from himself;
 85

that is to say, it characterizes the estrangement of the “species-life” itself. Since man has

to maintain “a continuing dialogue” with nature in order to live, man's physical and

mental life is linked to nature itself and hence man is a part of nature, or nature is his

“inorganic body” (Marx 1975: 328). However, with estrangement, man's species-life

becomes a means for his individual life. That is to say, estranged labor firstly “estranges

species-life and individual life, and secondly it turns the latter, in its abstract form, into

the purpose of the former, also in its abstract and estranged form” (Marx 1975: 328). In

other words, estranged labor reverses the relation between man's being and his free

activity:

Conscious life activity directly distinguishes man from animal life

activity. Only because of that he is a species-being. Or rather, he is a
conscious being, i.e. his own life is an object for him, only because he is a
species-being. Estranged labor reverses the relationship so that man, just
because he is a conscious being, makes his life activity, his being
[Wesen], a mere means for his existence (Marx 1975: 328).
The reduction of man's spontaneous and free activity, his species-life, into a

means for his bare individual physical existence therefore means that man's species-

being, his nature and intellectual powers, become alien to him; estranged labor therefore

alienates man both “from his own body, from nature as it exists outside him” and “from

his spiritual essence [Wesen], his human essence” (Marx 1975: 329), hence,

dehumanization.26

Seen from the fourth vantage point, however, this means nothing but the

separation of man from his fellow men:

An immediate consequence of man's estrangement from the product of his

labour, his life activity, his species-being, is the estrangement of man
 86

from man. When man confronts himself, he also confronts other man.
What is true of man's relationship to his labour, to the product of his
labour and to himself, is also true of his relationship to other men, and to
the labour and the object of the labour of other men.
In general, the proposition that man is estranged from his species-being
means that each man is estranged from the others and that all are
estranged from man's essence.
Man's estrangement, like all relationships of man to himself, is realized
and expressed only in man's relationship to other men (Marx 1975: 329-
30).
In short, the process of alienation, seen from all four vantage points, characterizes

a ‘dehumanization’ process within which an individual loses all the qualities that make

him a human being. In order to understand the importance of this dehumanization

process, we should examine the conditions within which this process is “completed.”

That is to say, it is necessary to consider Marx’s twin notions of “fetishism” and

“reification.”

2.4.1.2. Fetishism and Reification

According to Marx, alienation is associated with private property; in effect,

private property is the necessary consequence of alienated labor. He argues that

“although private property appears as the basis and cause of alienated labour, it is in fact

its consequence, just as the gods were originally not the cause but the effect of the

confusion in men's minds. Later, however, this relationship becomes reciprocal” (Marx

1975: 332). Then, the question of how does man come to be alienated from his labor

should be transformed to the question of the origin of private property (Marx 1975: 333).

However, instead of tracing back to the origins of private property, it suffices for our

purposes to indicate that private property represents the disintegration of the totality of
 87

human essence: instead of our “total” essence, we have a “one-sided essence” with

private property (Ricour 1986: 62-63). According to Marx, although “man appropriates

his integral essence27 in an integral way, as a total man” (1975: 351),

private property made us so stupid and one-sided that an object is only

ours when we have it, when it exists for us as capital or when we directly
possess, eat, drink, wear, inhabit it, etc., in short, when we use it.
Although private property conceives all these immediate realizations of
possession only as means of life; and the life they serve is the life of
private property, labour and capitalization (1973: 351-52).
In other words, it can be contended that with the emergence of private property, a

consequence of alienation which seen as a historical process, man cannot realize his total

essence and an abstract, “one-sided” essence which emphasizes the “economic” motives

in Polanyi's sense, i.e., the hope of gain and fear of hunger, starts to develop.28

Nevertheless, in order to avoid a confusion we should emphasize the fact that

although private property is not to be equated with capitalism, alienation as a process

reaches its “peak” only in capitalism. The reason for this is that in this system, not only

does man's own product but also his own labor power, total mental and physical abilities

characterizing his agency, becomes a commodity as an independent alien entity. In other

words, only with capitalism does the process of alienation “culminates” in fetishism and

reification.

For Marx, capitalism is characterized by labor-power's becoming a commodity,

which requires the category of “free” labor as a precondition. In effect, it is this

commodification of labor power that underlies Marx's labor theory of value and his

whole analysis. What this commodification process characterizes is actually commodity

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fetishism in the sense that the commodity form and the value-relation of the products of

labor is a definite social relation between men themselves which seems to be a relation

between things. This fetishism attaches itself to the products of labor as soon as they are

produced as commodities and is therefore inseparable from the production of

commodities. Yet, not the production of commodities per se but the peculiar social,

abstract character of the labor which produces them gives rise to the fetishism of the

world of commodities (Marx 1976: 165). That is to say, labor as an abstract category

comes to be completely separated from its “bearer,” human beings, and it becomes a

“thing.” Put another way, commodity fetishism characterizes the process of the inversion

of the “subject” into its “predicate” and the “predicate” into the “subject”: Human labor-

power, a predicate, becomes an alien entity which transforms real subjects, human

beings, into “things.” Therefore, we have a twofold process here: on the one hand things

seem to acquire human attributes while on the other human relations take on the

character of things and thus have a “phantom objectivity,” that is, these relations are

“reified” (Lukács 1971: 83). Human relations, however, appear as relations between

things only when both the products of labor and labor power itself become alienated. In

other words, whereas the objects produced by man appear as the bearers of social

relations, i.e., fetishism, the social relations between real people appear as the relations

between things, i.e., reification. Hence both the terms fetishism and reification refer to

the same process, which is itself the result of alienation (Schaff 1980: 80-82). Here, it

should be stressed that capitalism needs to function as though abstractions are real; in
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capitalism, individuals see each other as commodities, purely as means to be exchanged

for the sake of continued existence (Hunt 1979a: 309). Although the effects of alienation

seem to be restricted to the worker, in fact it is an all-pervasive social relation in

capitalism. For example, not only does the fertility of soil seem to be an attribute of the

landlord (Marx 1975: 311), but the powers of labor, of human beings, appear as the

powers of capital, since “what is lost by the specialized workers is concentrated in the

capital which confronts them” (Marx 1976: 482). Moreover, even the capitalist himself

is “only capital personified. His soul is the soul of capital” (Marx 1976: 342). Then, in

Marx's own words, the “trinity” that capital-profit (interest), land-ground rent, labor-

wages

completes the mystification of the capitalist mode of production, the

reification of social relations, and the immediate coalescence of the
material relations of production with their historical and social
specificity: the bewitched, distorted and upside-down world haunted by
Monsieur le Capital and Madame la Terre, who are at the same time
social characters and mere things (Marx 1981: 969).
Actually, one of the best characterizations of this process is given by Polanyi himself:

In a developed market society distribution of labor intervenes. Human

relationships become indirect; instead of immediate co-operation there is
indirect co-operation by the medium of exchange of commodities. The
reality of the relationships persists; the producers continue to produce for
one another. But this relationship is now hidden behind the exchange of
goods; it is impersonal: it expresses itself in the objective guise of the
exchange value of commodities; it is objective, thing-like. Commodities,
on the other hand, take on a semblance of life. They follow their own
laws; rush in and out of the market; change places; seem to be masters of
their own destiny. We are in a spectral world, but in a world in which
spectres are real. For the pseudo-life of the commodity, the objective
character of exchange value, are not illusion (EF, 375).
In short, the process of commodity fetishism/reification has the disintegrating
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effect on the social bond through the expansion of the market sphere. However, with

capitalism, not only does the old bond within society, which is based upon the directness

of relations between individuals, dissolve, but it is replaced by a new kind of bond: the

bond of exchange, or, more accurately, of money:

The reciprocal and all-sided dependence of individuals who are

indifferent to one another forms their social connection. This social bond
is expressed in exchange value, by means of which alone each
individual's own activity or his product becomes an activity and a product
for him; he must produce a general product exchange value, or, the latter
for isolated for itself and individualized, money. The individual carries his
social power, as well as his bond with society, in his pocket. Activity,
regardless of its individual manifestation, and the product of activity,
regardless of its particular make-up, are always exchange value and
exchange value is a generality, in which all individuality and peculiarity
are negated and extinguished (Marx 1973: 157).
Therefore, in capitalism, instead of direct, personal relationships, money, this

“alienated capacity of mankind,” becomes the “true agent of separation and the true

cementing agent,... the chemical power of society” (Marx 1975: 377). For money, in

capitalism, would turn

imagination into reality and reality into mere imagination, similarly turns
real human and natural powers into purely abstract representations, and
therefore imperfections and tormenting phantoms, just as it turns real
imperfections and phantoms—truly impotent powers which exist only in
the individual's fantasy—into real essential powers and abilities. Thus
characterized, money is the universal inversion of individualities, which it
turns into their opposites and to whose qualities it attaches contradictory
qualities (Marx 1975: 378).
This discussion shows that according to Marx the very social reality itself is

“inverted” in capitalism. In fact, Marx's criticism of both Hegel and classical political

economists rests on the same argument: the process in which real subjects become the

predicates of their predicates characterizes the way how capitalism works. For example,
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as it was mentioned above, Marx argues that the state itself is an abstraction which

became real with the advance of capitalism. For Marx, not only is Hegel's representation

of the state upside down and “standing on its head” but, so is the actual reality generated

by the state (Colletti 1972: 232). Thus Marx argues that

Hegel should not be blamed for describing the essence of the modern
state as it is, but for identifying what is with the essence of the state. That
the rational is real is contradicted by the irrational reality which at every
point shows itself to be the opposite of what it asserts, and to assert the
opposite of what it is” (Marx 1975: 127).

In other words, behind the separation of the state and the “civil society,” itself specific to

capitalism, is the process of fetishism in which human beings become predicates of their

very predicates. For this reason, in capitalism, “what should be a starting-point becomes

a mystical result and what should be a rational result becomes a mystical starting-point”

(Marx 1975: 100), and this is the result of the fact that human beings are reduced to the

category of “abstract labor,” or to the “personifications” of social relations which

themselves are reified. In this regard, it is possible to argue that the split of society into

mutually independent and separate spheres, like political and economic spheres, and the

primacy of the “economic” in capitalism are the manifestations of alienation (Petrovic

1967: 152). For alienation characterizes the very process of separation of man from his

own product, from his productive activity, from the society, and thus from his own

humanity, a fact which reaches at its peak with the commodification of labor power,

man's own powers that characterize human agency. In other words, labor power's

becoming a “fictitious commodity” occupies the central place in the attempt at an

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adequate understanding of the capitalist society in Marx. In fact, it can even be asserted

that Polanyi's analysis of capitalism is based upon Marx's analysis of commodity

fetishism. Since this might be seen as a ridiculous assertion, it will be illuminating to

discuss the connections between Marx and Polanyi in their analyses of capitalism more

closely.

2.4.2. Reification and Social Disintegration

2.4.2.1. Commodity Fictions and Fetishism

Polanyi's attitude towards Marx, as we have seen above, is complicated and

displays some changes throughout his life.29 For example, in a letter to Lukács in 1908,

he writes that

it's true that I've devoted minimal effort to classical philosophy; I should
say, I know only Hegel. But I know Marx and Engels well and I am
acquainted with their philosophical critics. What I consider most
important is the fact that I know the theoretical implications and can
evaluate them from the viewpoint of contemporary theory of knowledge,
etc. (Lukács 1986: 61).

Yet, during these years he is highly critical of historical materialism. For example, in

1913, Polanyi rejects the “fatalism” of historical materialism because it gives no role to

human purposeful activity: “To be sure, scientific knowledge could aid in diagnosing

social and political problems, but it could not project goals, much less guarantee their

realization. In order to transform society, men must establish moral goals and employ

political means in the service of their attainment” (quoted in Congdon 1976: 175).

Likewise, he argues (in 1919) “that the bird soars despite rather than because of the law

of gravity” and “that society soars to stages embodying ever loftier ideals despite rather
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than because of material interest” (quoted in Congdon 1976: 179). In these criticisms,

Polanyi emphasizes free will and moral individual responsibility. Yet as we have just

seen, these issues, far from being criticisms of Marx, constitute an integral part of

historical materialism as well. Later, in the 1920s, according to Polanyi-Lewitt and

Mendell (1987: 27-28) he returns to Marx, this time to his commodity fetishism in

Capital, and says : “The theory of the fetish character of commodities is rightly regarded

as the key to Marx's analysis of capitalist society” (quoted in Polanyi-Lewitt and Mendell

1987: 27). This would be at the center of Polanyi's critique of capitalism: Marx's “fetish

theory of commodity values is but an application of the principle of self-estrangement to

economic phenomena under capitalism” (quoted in Polanyi-Lewitt and Mendell 1987:

27-28). Yet, the most significant of these encounters with Marx would be the third one,

after the publication of Marx's 1844 Manuscripts, the result of which can be seen from

his analysis of fascism (EF), in 1935. For example, the comment given above about

commodity fetishism which emphasizes the fact that “spectres are real” in capitalism,

comes from this essay. So do the other ones about human nature given in the first chapter

above, which emphasize the fact that man is a social being. Of course, the very

framework that is used to analyze fascism in this essay, the separation of the politic and

economic spheres again comes from Marx's early writings, as we have seen. In this

regard Polanyi-Lewitt and Mendell (1987: 28), state that Polanyi rejects the distinction

between the “early” and the “mature” Marx:

There is only one Marx he insisted. But in the Economic and Philosophic
Manuscripts of 1844 Marx elaborated precisely those aspects of
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commodity fetishism, objectification and alienation which Polanyi had

long considered to be central, and which he later explored in their
historical dimension in the Great Transformation .... his abhorrence to
capitalism—which he shared with Marx—was not primarily due to the
fact that workers were exploited, but rather because they were
dehumanized, degraded, decultured, reduced to toilers in William Blake's
“dark satanic mills.”
Likewise, they summarize a paper by Polanyi entitled “Christianity and Economic Life”

as follows:

... “According to Marx, the history of human society is a process of the

self-realization of the true nature of man. In our present society, the urge
of our nature towards direct, personal, i.e., human relationships is being
thwarted,” and thus society does not conform to its essence. Man depends
upon these human relations for survival. He also depends upon nature:
thus, the importance of the material organization of society. Man's
interaction with man is the basis for Christian community, which must not
be seen as synonymous with society. This is a distinction important to the
Christian definition of community, which regards society as a functional
set of institutions. It is the dialectic between community and society that
becomes significant. This is well expressed in the early writings of Marx,
says Polanyi... (Polanyi-Lewitt and Mendell 1987; 27).30

Although these comments suggest that Polanyi's notion of “fictitious

commodities” is similar to Marx’s notion of “commodity fetishism,” in the Great

Transformation Polanyi claims that “Marx's assertion of the fetish character of the value

of commodities refers to the exchange value of genuine commodities and has nothing in

common with the fictitious commodities” (GT, 72n). Here Polanyi uses the term

“commodity” in its “empirical” sense; that is, a commodity is a thing which is bought and

sold on the market. Then, the term “fictitious commodity” emphasizes the fact that labor,

land, and money are not real commodities; they are just treated as if they were

commodities, contrary to their “definitions.” However, he seems to ignore the fact that
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according to Marx, a commodity is not simply a “thing” to be bought and sold; it is a

social relation. That is to say, in Marx, the reduction of labor power to a commodity, to a

“thing,” characterizes the very process of fetishism through which human relations are

reified to the extent that even human beings themselves are treated as “exchange values.”

For Marx labor power is not a “commodity,” as was mentioned above, it is the “power”

that characterizes human agency, the aggregate mental and physical capabilities existing

in a human being. If these capabilities are subject to exchange, this simply means that

human beings themselves are separated from their own powers in a very real way and

become only bearers of “exchange values.” On the other hand, the treatment of land, or

nature in general, as a commodity simply means the separation of man from his

“inorganic body.” Last, but not the least, money is only the “alienated capacity” of

human beings and the “bond” of individual to the society in capitalism. In short, Marx

never considers these three as “genuine” commodities, on the contrary, it is the

commodification of these which characterizes capitalism.31 In this regard, it should be

emphasized that the concept of alienation is the direct link between commodity fetishism

and Marx's labor theory of value (Hunt 1986; Colletti 1972: 77-92).

Nevertheless, Polanyi does not seem to infer this conclusion; on the contrary, he

never seems willing to discuss the problem of value. According to Humphrey (1969: 200)

his “failure to discuss value may be connected with his reluctance to recognize the

existence of economic competition in primitive societies,” whereas Stanfield (1980: 601)

believes that “for Polanyi the most important issue was not the orthodox question of
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analyzing how prices are determined, but the Aristotelian question of deciding at what

levels.” However, both of these comments seem to me somewhat irrelevant. Polanyi-

Lewitt's comment on the other hand seems closer to the truth: Polanyi “favored the

Vienna school over the more mechanistic labor theory of value because it introduced

volition in the form of choices by consumers and producers” (Polanyi-Lewit: 1994: 116).

That is, Polanyi's critique of Marx is, once again, that Marx has overlooked the

importance of free will and hence purposeful behavior of the individual. In the Great

Transformation, for example, with respect to the labor theory of value, he comments that

“... Adam Smith followed Locke's false start on the labor origins of value” (p. 124),

whereas Ricardo

...completed what Locke and Smith had begun, the humanization of

economic value.... In a mistaken theorem of tremendous scope he
invested labor with the sole capacity of constituting value, thereby
reducing all conceivable transactions in economic society to the principle
of equal exchange in a society of free men (p. 126).

Although these comments are not about Marx himself and he recognizes it as an

attempt to reclaim for man what the Physiocrats had credited to nature, the capacity to

create value, his dislike of the labor theory of value is clear. Yet, it should be emphasized

that the labor theory of value in Marx is based upon his theory of commodity fetishism

which describes the process within which the individual loses his “power of will” and

becomes the “personification” of the reified social relations. That is, it is actually the

neoclassical value and price theory which is “mechanistic” for what this theory merely

does is to reflect this reduction of the individual to homo oeconomicus.

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Polanyi's endorsement of the neoclassical theory of price formation, and

implicitly of value, theory can be attributed to the fact that he seems to believe that in

capitalism this theory works well because under capitalism man is reduced to be an

“optimizer”; that is, in capitalism human beings are forced to behave “rationally,” in the

neoclassical sense. In other words, Polanyi's critique is directed toward capitalism, not to

the theory which “mirrors” this very reality. However, if this interpretation correct, this is

a serious flaw in Polanyi's theory. It is also puzzling because the argument already exists

in his own understanding of Marx's position; what it is needed is only to push the

argument one step further: that is, in capitalism, to use Polanyi's own words, we live in a

“spectral world, but in a world in which spectres are real”; that is, the very reality itself

is “upside down” in capitalism. In other words, if the “reference criterion—reality—is

already itself a counterfeit standard” as Colletti (1972: 233) aptly puts it, then the theory

that only “reflects” this reality will be a form of “ideology.” If this is the case, not this

form, but instead the analysis of commodity fetishism is a better tool that can be used in

“demystifying” this reality and to understand the very process of social disintegration

caused by commodification. In fact, it can be contended, Marx's notion of commodity

fetishism is exactly the same with Polanyi's fictitious commodities with respect to its

effects: the dissolution of the social bond and hence the “annihilation” of the society. In

both, the capitalist “commodification” process will ultimately leads to the “breakdown”

of the society, even though Polanyi is more explicit about this than Marx.

2.4.2.2. Social “Breakdown”

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From a social theoretical point of view, the most immediate effect of the process

of fetishism is the atomization of the individual: the individual is reduced to “abstract

labor” and becomes just a “cog,” or a functional unit, whose only function is to reproduce

capitalist relations of production. This reification, reinforced by the mechanization and

“rationalization” of production process which reduces individuals into mere

“appendages” of machines, increasingly dominates even their consciousness (Lukács's

1971: 93). The result of this process is the emergence of the “reified mind,” which sees

commodity form and its “laws” as natural and eternal (Lukács 1971: 98). That is, the

abstraction of the (neoclassical) “rational economic man,” homo oeconomicus, becomes a

reality: the individual is transformed into a functioning component of a system, and

therefore as such must be equipped with essential features indispensable for running the

system. Here, as Karel Kosík (1976: 52) argues, it is essential to understand that

not theory but reality itself reduces man to an abstraction. Economics is a

system and set of laws governing relations in which man is constantly
being transformed into the “economic man.” Entering the realm of
economics, man is transformed. The moment he enters into economic
relations, he is drawn, —irrespective of his will and consciousness—into
situations and lawlike relations in which he functions as the homo
oeconomicus, in which he exists and realizes himself only to the extent to
which he fulfills the role of the economic man. Thus economics is a
sphere of life that has the tendency to transform man into the economic
man and that draws him into an objective mechanism which subjugates
and adapts him.
The implications of such a process with respect to human lives are profound. For

example, the very distinction between “labor time” and “leisure time” is a product of

capitalism in the sense that it presupposes the category of wage labor.32 Nevertheless,

what the term leisure refers to is nothing but the whole life activity of human beings
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other than working. Within their life activities human beings are expected to affirm their

own humanity; i.e., these activities are directed to the realization of their own

potentialities. However, under capitalism, in which the “objectification” generally takes

the form of alienation, all the activities human beings engage in do not count if they are

not useful for them to make their livelihood, no matter how fulfilling they are for a

human being. In other words, in capitalism, the skills, abilities, and creative capacities of

human beings or in general the human qualities on which work is based become detached

from their persons, a condition for labor's functioning as a commodity (Pappenheim

1959: 94), and leisure time itself is reduced to a time span within which the labor power

expanded in production is continuously reproduced. That is to say, leisure time too is to

be characterized by its function: the reproduction of labor power (Neumann 1944: 428).

This is true, despite the tendency that technological developments continuously increase

“leisure” time.

On the other hand, we have seen above that the other distinction, the distinction

between “civil society” and “political state,” is indeed the manifestation of the fact that

the spheres of the economic and the politic have been separated and the individual has

been reduced to a “self-sufficient monad”: the individual is only acknowledged in the

form of the “egoistic” individual, whereas in the political sphere he is just an abstract

“citizen.” This dual character of human beings, to repeat, is only another way of stating

the breakdown of human beings into distinct entities and the development of a “one-

sided” individual, to an extent that the totality of the “self” that characterizes the
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individual will be lost. Although the notion of the “self,” as the “self-defining subject” as

opposed to the one who should be defined in relation to a “cosmic order” (Taylor 1975:

6), or in relation to the “community,” is a product of modern times, i.e., is associated

with the rise of capitalism, the reduction of the individual to homo oeconomicus means

even the annihilation of the self. According to Eric Fromm, for example, “the ‘self’ in the

interest of which modern man acts is the social self, a self which is essentially constituted

by the role the individual is supposed to play and which in reality is merely the subjective

guise for the objective social function of man in society” (1941: 116-17). However, this,

argues Fromm, is the manifestation of a contradiction: “While modern man seems to be

characterized by utmost assertion of the self, actually his self has been weakened and

reduced to a segment of the total self—intellect and willpower—to the exclusion of all

other parts of the total personality” (p. 117).

Therefore, by reducing the individual to a “one-dimensional man,” to use Herbert

Marcuse's (1964) metaphor,33 the extension of the market sphere, i.e., the

commodification process, disintegrates the social bond which is based upon the

directness of relations between individuals and replaces it with another one, the bond of

exchange, or of money, this “cementing agent.” In this “mystical” world in which the

subject is transformed into its own predicate, abstract labor, not only does the individual

confront with “alien,” reified social relations, but far from realizing his own essence, he

loses very control over his own life, for he is reduced to a “functional” unit, or to the

“personification” of the reified social relations. This occurs because his immediate
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environment and even he himself is reduced to a “commodity.” In other words, both

Marx's and Polanyi's visions of the “market society” are identical: the individual is

deprived of his very humanity in the same way. However, since this is a “violation” of

the “definition” of human beings, it should be no wonder that they would rebel against

this dehumanization by all means. Hence Polanyi's notion of the “double movement,” to

which we now turn our attention.

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CHAPTER 3

THE DOUBLE MOVEMENT AND THE CAPITALIST SOCIETY

3.1. Introduction

In the first two chapters, it has been argued that Polanyi, just like Marx, centered

his critique of capitalism around the dehumanizing aspect of this system, in the sense that

it is a “violation” of essential powers of human beings. Nevertheless, it would be an error

to suppose that Polanyi's critique of capitalism is limited only to its dehumanizing

aspects, for he also provides a mechanism to explain the “collapse” of the market society.

Polanyi's argument is that since the creation of commodity fictions and its result,

subordination of the society to the market, is in contradiction with the human essence, it

is quite natural for people to protect the social fabric against the market, for otherwise it

will disintegrate. As has been argued, continuous extension of market relations into every

aspects of human existence, so as to include the three fictitious commodities, namely,

labor, land, and money, means no less than the commodification of life itself, for what

these fictions together represent is the totality of human essence. However, this

commodification could not take place without the “self-protection” of the society against

the danger of being “annihilated” by the market, in the form of social interventions into

the individual markets for these three “commodities.” In other words, the market society

is characterized by a “double movement,” which has been at work from the very start:
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Against the social “breakdown” caused by the extension of the market relations into

every sphere of life is a protective countermovement regarding the fictitious

commodities. However, it is the existence of these two conflicting tendencies operating

in the capitalist society which makes this society inherently unstable. The reason for this

is that the protective countermovement eventually impairs the working of the self-

regulating market, which, in turn, creates political tensions, especially between classes,

further obstructing the functioning of the market. The protectionist movement, being a

direct, and necessarily political, intervention into the working of the self-regulating

market, makes it increasingly difficult to maintain the institutional separation of the

economic and the political spheres upon which the market system is founded. Since this

difficulty further intensifies the tensions already existing in the society, the result would

be instability, or even the “collapse” of the society, if not the whole civilization, as the

fascist period has shown. For it can be argued that fascism was merely a “solution” for

capitalism to function by reestablishing the economic-political separation with blatant

force. In other words, Polanyi’s critique is directed to the invisible hand paradigm of the

social order: market society is inherently unstable because of the antagonistic elements in

the organization of the market system, which manifest themselves as the conflicts

between social classes or groups.

In this chapter, I will consider this instability prevalent in the capitalist society

on the basis of Polanyi’s notion of double movement and argue that this conception can

provide a “societal” perspective for understanding the capitalist society. Such a

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perspective is necessary because Polanyi presents the protective countermovement as the

“response” of the society as a whole to the market system in order not to be

“annihilated.” That is to say, since the “stage” on which the double movement operates

is the whole institutional structure of the society, it is unavoidable to consider the

interaction between different agents that are capable of carrying out this “response” in

both economic and political spheres, above all social classes and the state. In other

words, two related issues form the axis of this societal perspective: the role of the classes

in the double movement, for the entire process can be seen as a form of class struggle,

and the institutional separation between economic and political spheres, which

characterizes the market society, for the events that led to fascism operated against the

background of this very separation; because of its class character, the double movement

necessarily transcended the economic-political dichotomy, for it was “fought” on every

sphere of the society, be it economic or political.

On the basis of this conceptual framework, then, in the first section I give a brief

history of the double movement and its result, fascism, which was a “solution” for the

market system to function, as presented by Polanyi. In this section, I emphasize the

importance of class struggle as a mechanism which convey the double movement back

and forth between the economic and the political spheres. Nevertheless, since the double

movement may seem to degenerate to a simple, reductionist form of class struggle, the

specific emphasis of the following section will be the “societal” character of this

conceptual framework, for only from such a societal perspective can the meaning of the
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double movement be appreciated. In this regard, I argue specifically that such a

framework can be helpful for an adequate understanding of the contradictory nature of

the capitalist society. That is to say, following Polanyi’s societal lead, I examine the

meaning of the double movement as both the carrier and the obstructing force of

capitalist relations. The argument here is that the protective countermovement necessarily

serves to affirm the humanity of people, for it is directed mainly to limit the

dehumanizing effects of the market relations. That is, social institutions or some

associations that could deliberately be formed to counteract the destructive effects of the

market relations can function to affirm both individuality and sociality. Nevertheless, to

the extent that commodity fetishism and reification dominate every aspect of life,

including the way the modern individual thinks, these very same institutions or

associations will become conveyors of the capitalist relations themselves, a tendency

which undermines the resistance to capitalism. Since such a contradiction can be seen,

among other institutions, in the contemporary “capitalist” state, a brief discussion of the

role of the state in a capitalist society is inevitable.

However, since it is my contention that this process, impairment and the

advancement of the market relations at the same time, reveals the contradictory character

of the contemporary capitalist society, conscious use of the protective movement,

especially as a way to achieve our “species-consciousness,” becomes essential if we are

to retain our humanity and therefore freedom. In other words, since the very success of

the protective countermovement was responsible for fascism as a “solution” which

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denied the category of individual and his freedom altogether, I argue in the last section

that we still have the same problem that haunted Polanyi in his Great Transformation: to

accept the “reality of the society” while at the same time to find ways to achieve

“freedom in a complex society.” That is to say, although capitalism and more generally

the industrial civilization undermines human freedom, they also create new possibilities

regarding the problem of reclaiming our humanity. However, realization of these

possibilities depends on the acceptance of “the uniqueness of individual and the oneness

of mankind,” which in turn implies the abolition of the separation between the economic

and the political spheres and therefore of the “market mentality.”

3.2. The Double Movement and the Fascist Period

3.2.1. The Double Movement and the Impairment of the System

According to Polanyi, a “double movement” characterized the history of the

market system: “the extension of the market organization in respect to genuine

commodities was accompanied by its restriction in respect to fictitious ones” (GT, 76).

Therefore, two simultaneous tendencies that exist in the capitalist society constitute this

double movement: the process of commodification, i.e., extension of exchange relations

to the fictitious commodities, on the one hand, and society’s “response,” i.e., the

resistance carried out by different classes and organizations within the society to the

extension of the market on the other. In fact, these two contradictory movements give

the capitalist society an unstable character: the protective countermovement as an attempt

at restricting or at least slowing down the extension of the market will eventually impairs
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the working of the self-regulating market. Since the system is organized on the basis of

these commodity fictions, any intervention from the part of the social classes or state, or

both, into the markets, for these fictitious commodities create impairments in these three

markets. These impairments will in turn intensify the tensions already inherent in the

society which will obstruct the working of the market as a whole. Therefore, the double

movement, the extension of the market and society’s “response” to it, actually signifies a

circular process. Since the social classes themselves and their conflicts emanate from the

economic sphere in a capitalist society and since this society is subordinate to the market,

conflicts between these classes will necessarily have social dimensions even when they

are purely economic in character, and this in turn will cause further disruptive effects on

the economic sphere whose impairment will intensify the tensions existing in the society

(GT, 201). In other words, since the protectionist countermovement is a direct

intervention to the working of the self-regulating market, which inevitably has political

consequences, the process of double movement will tend to break the institutional

separation of the economic and the political upon which the market system is built. The

result of such a process would be the disintegration of the society, for the attempt to

reestablish this institutional separation requires eradication of every form of social

opposition against the market by any means, including the use of overt force as the

fascist period has shown. In other words, Polanyi’s critique is directed to the invisible

hand paradigm of the social order: market society is inherently unstable because of the

antagonistic elements in the organization of the market system, which manifest

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themselves as the conflicts between social classes or groups.1

According to Polanyi, the double movement characterizing the extension of the

market and the “self-protection of society”2 should be conceived at two distinct yet

related levels: the class level, for the social classes, above all the working class, were the

causal agents who actually carried out the protective countermovement, and the

institutional level, for the protectionist countermovement created strains in the

institutional structure of the market system, which eventually led to the catastrophe (GT,

134). At the institutional level, Polanyi identifies two sources of the disruptive strains

that had arisen in the organization of the market system. These sources were the

institutional separation of the economic sphere from the political one and the conflict

between the international and the national spheres within the system. On the one hand,

although the system required this institutional separation between the economic and the

political spheres, the tensions between social classes created in the market sphere sooner

or later had to be transferred to the political sphere, which in turn produced further

problems in the market. On the other hand, the functioning of the system required the

gold standard and the balance of power at the international level, both of which demand

that the domestic economy and politics must be at their service. However, such a demand

requiring the negation of popular and nationalist considerations could not be met because

these considerations played a significant role in the domestic sphere from the very

beginning of the market society. Polanyi argues that the resulting disruptive strains are,

according to the institutional spheres they belong, “unemployment” (domestic economy),

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“tension of classes” (domestic politics), “pressures on exchange rates” (gold standard),

and the “imperialist rivalries” (balance of power system) (GT, 209). All of these

conditions characterize the crisis of the capitalist “world order,” the result of which

would be disintegration of the system out of which fascism came as a “solution.”

However, according to Polanyi, it must be emphasized that “these conditions

themselves were set by the ‘double movement’” (GT, 214). In other words, the protective

movement which had immediately begun as soon as the market system was instituted,

and within which class struggle played an essential role, caused these strains. Then, the

double movement

can be personified as the action of two organizing principles in society,

each of them setting itself specific institutional aims, having the support
of definite social forces and using its own distinctive methods. The one
was the principle of economic liberalism, aiming at the establishment of a
self-regulating market, relying on the support of the trading classes, and
using largely laissez-faire and free trade as its methods; the other was the
principle of social protection aiming at the conservation of man and
nature as well as productive organization, relying on the varying support
of those most immediately affected by the deleterious action of the
market—primarily, but not exclusively, the working and the landed
classes—and using protective legislation, restrictive associations, and
other instruments of intervention as its methods.
The emphasis on class is important. The services to society performed by
the landed, the middle, and the working classes shaped the whole social
history of the nineteenth century (GT, 132-33)

Regarding the specific forms of protection for each of these fictitious

commodities, Polanyi remarks that the protective movement in England regarding land

goes hand in hand with the commodification of land, starting as early as the sixteenth

century. When against the enclosure movement initiated by the lords and the nobles, the
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task to defend the welfare of the community and the “human and natural substance of the

society,” had fallen to “The King and His council, the Chancellors, and the Bishops”

(GT, P. 35). On the other hand, after the institutionalization of capitalism, following the

period between 1830 and 1860 when freedom of contract was extended to the land, the

protective movement had to be carried out mainly by the landed aristocracy, for it was

this class who represented the general interest of the community at the time (GT, 182-

84).3 After the 1870s, when the “collectivist” period had begun, the form of protection

changed its form mostly to legislation, especially with the efforts of the “Tory-

Democrats” (GT, 182).4 As to the labor, protective movement had immediately

begun with the establishment of the labor market, mainly in two forms: “factory laws and

social legislation, and a political and industrial working class movement” (GT, 83). The

social legislation after the abolishment of Speenhamland, again carried out mainly by the

landed aristocracy, had been directed against the dehumanizing aspects of the principle

of freedom of the labor contract.5 On the other hand, the working class, whose

appearance coincided with the emergence of the market economy and “whose immediate

self-interest destined them to become the protectors of society against the intrinsic

dangers of a machine civilization” (GT, 101), had not been effective in this legislative

activity in the beginning, for it was denied from the political sphere altogether; workers

had not had even the right to vote.6 Yet it would not take long before the working class

had to start carrying the banner of the protective movement, beginning with the Owenite

and the Chartist movements, both of which “served to prove how inevitable from the
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first the necessity was of protecting man against the market” (GT, 167). Although this

protective countermovement had used both “compulsory and voluntary methods of

protection—legislation versus unionism” (GT, 176), especially after the 1870s, when

trade unions had become legal, the working class movement in the form of trade

unionism and working class parties would have been the main agency carrying out the

protective movement. Through this protective movement not only had the working class

reached “class consciousness” but also, probably owing to this fact, it had been

successful in counteracting against the destructive effects of the market economy in both

England and the Continental Europe.7

Nevertheless, precisely for this reason, a disruptive strain in the working of the

labor market and hence of the market system as a whole would appear and prove fatal for

the system. For the working class movement has both economic and political, if not

moral, dimensions.8 Besides the fact that the working class parties and trade unions can

provide opportunities to affirm workers’ humanity by emphasizing solidarity and

connectedness, their unique position in the market economy, being capable of

intervening into the sphere of the market directly by political means and thereby

transcending the institutional separation of the economic and the political, made them

representatives of the general interest of the society. However, argues Polanyi, “...clearly

any method of intervention that offers protection to the workers must obstruct the

mechanism of the self-regulating market, and eventually diminish the very fund of

consumers’ goods that provides them with wages” (GT, 231).9

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Furthermore, the fact that the working class, especially on the Continent, also

played an important role in the establishment of national identity and nation-state as a

result of their strength as a political power had posed another threat for the working of

the system. For example, the adoption of the principle of universal suffrage tended to

increase national identity in England, whereas on the Continent it gave rise to popular

government which would be a danger to the economic system because the demand for

popular government was the political source of the tension between the classes from the

beginning, since it was not compatible with the working of the system.10 Such a popular

government, emphasizing the principle of national identity, rather than protection of the

international “order,” would undermine the very market system for it poses a

contradiction between international and national spheres. The reason for this should be

sought in the fact that the working of the gold standard should not be interfered in order

for the market economy to function smoothly. For this reason, the liberals ridiculed the

nation-sate, sovereignty, and war, even though the “problem of autarchy haunted the

market economy from the start” (GT, 189). For the liberal, the attribute “international”

regarding the gold standard “was meaningless, since for the economist, no nations

existed; transactions were carried on not between nations but between individuals, whose

political allegiance was as irrelevant as the color of their hair” (GT, 196).

The discussion of the gold standard raises the issue of the last form of protection:

protection regarding money, the other fictitious commodity. “Even capitalist business

itself” argues Polanyi, “had to be sheltered from the unrestricted working of the market
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mechanism” (GT, 193). For the working of the gold standard calls for domestic price

changes when a change in the exchange rates occurs. Such a system requires the

existence of commodity money, gold, which was essential for foreign trade. On the other

hand, however, since the amount of gold could not be increased at will, token money

becomes essential for the domestic business, for token money is the basis of the credit

system. Since the functioning of the gold standard requires changes in the domestic price

level whenever there are pressures on exchange rates and since changes in the price level

affect the credit system directly, domestic business should be safeguarded against the

possibility that interference of the working of commodity money into the working of the

credit system could pose a threat for the domestic business (GT, 194). The developed

solution to this problem would be the modern Central Banking, which controls the

domestic money supply, so that the price changes caused by the changes in the exchange

rates could not have destructive effects for the productive activity. Actually, at the start,

the central bank’s currency management was supported by the ruling classes, for it was

seen as “the part of the rule of the game under which the gold standard was supposed to

function. Since maintenance of the gold standard was axiomatic and the central banking

mechanism was never allowed to act in such a way as to make a country go off gold, but

on the contrary, the supreme directive of the bank was always and under all conditions to

stay on gold, no question of principle seemed to be involved” (GT, 197). This would not

be a problem as long as the price changes could be kept at small rates. However, if the

necessary price movements are so drastic and at high rates that they could create a danger
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for the domestic business, the attempt of the central bank to keep price movement at

certain levels would be a direct interference to the working of the gold standard.11

However, in this case central banking became a political issue, transcending the

economic-political distinction, for the price movements would directly affect the real

incomes of the people. For this reason, in the 1920s and 1930s, “currency had become the

pivot of national politics” (GT, 24). Although currency directly affects people’s real

incomes through price changes, because of the gold standard its basis and hence its

control depend on the political factors outside the country. Such a situation, in turn,

created a nationalistic emphasis in domestic politics, which gave protectionism a

nationalist stamp, as different from its nineteenth-century counterpart, an “easy-going”

conception of the nation. The identity of this “new crustacean type of nation” is

expressed through national token currencies, which are safeguarded by a more strict type

of sovereignty than anything known before (GT, 202): “Politically, the nation’s identity

was established by the government; economically it was vested in the central bank” (GT,

205).

As can be seen from this brief history of the protectionist countermovement, in

each form of protection the result had always been the same: First, impairment of the

market because of the protectionist intervention, then tensions between classes which

requires political means and struggle, and then further impairment:

the strain sprang from the zone of the market; from there it spread to the
political sphere, thus comprising the whole of society. But within the
single nations the tension remained latent as long as the world economy
continued to function. Only when the last of the surviving institutions, the
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gold standard, dissolved was the stress within the nation released (GT,
219).12

This would immediately spread to the international level and thus threaten the

international political order and peace. Beginning with the Wall Street slump, Britain and

then the United States went off gold, and then the three powers, Germany, Italy and

Japan, rebelled against the international status quo, a situation which is associated with

the fact that the organization of the world economy was not functioning anymore: “The

political and the economic system of the planet disintegrated conjointly” (GT, 244).

Nevertheless, it must be emphasized that the real cause of the collapse stemmed from the

market institution:

Protectionism helped to transform competitive markets into monopolistic

ones. Less and less could markets be described as autonomous and
automatic mechanisms of competing atoms. More and more were
individual replaced by associations, men and capital united to non-
competing groups. Economic adjustment became slow and difficult. The
self-regulation of markets was gravely hampered. Eventually, unadjusted
price and cost structures prolonged depressions, unadjusted equipment
retarded the liquidation of unprofitable investments, unadjusted price and
income levels caused social tension. And whatever the market in
question— labor, land, or money—the strain would transcend the
economic zone and the balance would have to be restored by political
means. Nevertheless, the institutional separation of the political from the
economic sphere was constitutive to market society and had to be
maintained whatever the tension involved. This was the other source of
disruptive strain (GT, 218).

In short, what the double movement describes is an entire social process within

which the disruptive strains already inherent in the organization of the market system

manifest themselves in the form of class struggle and lead not only to the impairment of

the self-regulating market but even to the “collapse” of the whole market system with all
 116

its institutions.

3.2.2. The “Solution”: Fascism

This brief history of the double movement shows that this process is a quite

complicated one, which transgresses the boundaries between the economic and the

political spheres in the society, even though the main form of agency that carried it out is

class conduct, since the social classes could convey the struggle back and forth between

these two spheres. Such a tension, however, had to create strains not only in the

economic sphere but in the whole society including the state, for the state itself had been

an “arena” of class struggle as well. Polanyi argues that, by the turn of the twentieth

century, the working class had become an influential factor in the state, whereas the

trading classes, whose authority in the legislative process was no longer challenged by

the landed aristocracy, had become conscious of the political power involved in their

leadership in industry. As a result, the struggle between these two classes has been

intensified. As long as the market system continued to function without great stress and

strain, such a localization of power would not create problems, but when this was no

longer the case, because of the institutional strains and the tensions between classes, “a

perilous deadlock” out of which the fascist crisis sprang would arise (GT, 133-34).

According to Polanyi,

The spread of the market was thus both advanced and obstructed by the
action of class forces. Given the need of the machine production for the
establishment of a market system, the trading classes alone were in the
position to take the lead in that early transformation. A new class of
entrepreneurs came into being out of the remnants of older classes, in
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order to take charge of development which was consonant with the

interests of the community as a whole. But if the rise of industrialists,
entrepreneurs, and capitalists was the result of their leading role in the
expansionist movement, the defense fell to the traditional landed classes
and the nascent working class. And if among the trading community it
was the capitalists’ lot to stand for the structural principles of the market
system, the role of the die-hard defender of the social fabric was the
portion of the feudal aristocracy on the one hand, the rising industrial
proletariat on the other. But while the landed classes would naturally seek
the solution for all evils in the maintenance of the past, the workers were,
up to a point, in the position to transcend the limits of a market society
and to borrow solutions from the future. This does not imply that the
return to feudalism or the proclamation of socialism was amongst the
possible line of action; but it does indicate the entirely different directions
in which agrarians and urban working class forces tended to seek for
relief in an emergency. If market economy broke down, as in every major
crises it threatened to do, the landed classes might attempt to a return to a
military or feudal regime of paternalism, while the factory workers would
see the need for the establishment of a co-operative commonwealth of
labor. In a crisis “responses” might point towards mutually exclusive
solutions. A mere clash of class interests, which otherwise would have
been met by compromise, was invested with a fatal significance (GT,
155).

In fact, it is this clash between those mutually exclusive solutions for the crisis of

the market system, offered by the different classes, which is responsible for fascism.

From the point of the ruling class, fascism can be seen as a “solution” for the market

system to function without “frictions,” that is, without a social opposition. Since the

interaction between economic and political factors carried out by the social classes

caused the breakdown of the dichotomy between the economic and the political spheres

which was required for the market system to function, fascism should be seen as a way to

reestablish this institutional separation, albeit with brutal force. In fascism too individuals

could be recognized only within the economic sphere in which they are imprisoned, with
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the only difference that this time even their status as abstract “citizens” in the political

sphere was eradicated and they were denied from the political sphere altogether. Such a

“solution,” however, could be reached at the expense of the annihilation of all democratic

institutions, a fact that shows the degenerative character of fascism. According to

Polanyi, fascism offered an escape from the institutional deadlock that had arisen in the

capitalist world economy. This escape, which envisages a reform of market economy that

could be achieved at the price of the extirpation of all democratic institutions, “would

everywhere produce sickness onto death” (GT, 237). Such a solution required a

“reeducation” of the people which is “designed to naturalize the individual and make him

unable to function as the responsible unit of the body politic.” This reeducation denied

the idea of “brotherhood of man” in all its forms, and it “was achieved through an act of

mass conversion enforced against recalcitrants by scientific methods of torture” (GT,

237).

Such a solution was necessary because the capacity of the working class to

disregard “the rules of the game” in an emergency created a fear of the destruction of the

market system, a fear which was reinforced by the Bolshevist revolution.13 According to

Polanyi, in the 1920s, when the social structure in Central Europe disintegrated under

the strain of war and its destructive effects, “the working class alone was available for the

task of keeping things going. Everywhere power was thrust upon the trade unions and

Social Democratic parties” (GT, 187).14 Yet there was no danger of “communism,” for

the working class parties were committed to reform of capitalism instead of overthrowing
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it; for Polanyi, neither in Germany nor in Italy had Bolshevism any chance of success in

the immediate postwar period. Nevertheless, this period also shows that there is a

possibility that in an emergency, when the normal methods were not sufficient, a working

class party might disregard freedom of contract and property rights, which is likely to

start a universal panic in the business, to paralyze capitalist enterprises and hence to

prevent capital accumulation (GT, 190, 235). Such a possibility, according to Polanyi,

can explain the remarkable shift in some countries from “a supposedly imminent

dictatorship of the industrial workers to the actual dictatorship of the peasantry” (GT,

187).15

However, Polanyi stresses that fascism should not be restricted to Germany and

Italy, for it appeared more or less in all industrial countries of the globe, and that it

should not be explained by local causes, national mentalities, or historical backgrounds

alone (GT, 237). Although a country which was approaching to the fascist phase showed

some similar symptoms,16 there were no accepted criteria of it; nor did it have any

conventional tenets, except the fact that “one significant feature of all its organized forms

was the abruptness with which they appeared and faded out again, only to burst forth

with violence after an indefinite period of latency” (GT, 239).17 In fact, although the

causes that led to fascism are quite complex, the condition of the market system played

the essential role (GT, 242): “Fascism, like socialism, was rooted in a market society

that refused to function” (GT, 239).

Polanyi’s conclusion that the fascist “solution” was nothing but a means of
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eradicating the social opposition which was led by the working class movement in itself

is not novel;18 his analysis of fascism iterates the themes that appear in the other,

especially Marxist, accounts of fascism.19 Most of these accounts emphasize that fascism

characterizes the “limit conditions” of capitalism which is distinguished by the

atomization and impotence of the individual, and thus by the absence of any form of

opposition which might be a threat to the working of the system. For example, in his

monumental study of National Socialism, Behemoth, Franz Neumann (1944) argues that

the essence of National Socialism lies in the atomization of human beings. According to

him, this trend that already exists in modern industrial capitalism and mass democracy

was carried to its extreme, or, more accurately, it was completed by National Socialism

(Neumann 1944: 367-8). The process that National Socialism must necessarily carry to

an extreme is the process of “bureaucratization”: a process characterizing the structure of

modern society, which “means that human relations lose their directness and become

mediated relations in which third parties, public or private functionaries seated more or

less securely in power, authoritatively prescribe the behavior of man” (Neumann 1944:

368). Since bureaucratization of the economy leads to complete depersonalization of all

property relations, with it, the “utmost of formal rationality is reached. Human relations

are now fully abstract and anonymous.” The result of this process is the destruction of the

direct human relations that even remains in existence in a market economy with mass

democracy; “It is the essence of National Socialism to have destroyed those that

remained” (Neumann 1944: 386).20 The completion of this process of atomization

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through propaganda (and terror,21 for the two were not independent of each other in

fascism) finally creates the type of humans who cannot think even for themselves and

who act automatically without thinking. In other words, human beings lose not only their

individuality but also the very quality of agency that every human being has. That is to

say, “National Socialist propaganda is thus the expression of the same two phenomena

that appear in every aspect of the regime: the destruction of whatever remnants of

spontaneity are left and the incorporation of the population into a super-machine”

(Neumann 1944: 439).22 Or, again, in Polanyi's own words, “... Fascist philosophy is an

effort to produce a vision of the world in which society is not a relationship of persons. A

society, in fact, in which there are either no conscious human beings or their

consciousness has no reference to the existence and functioning of society” (EF, 370-

71).23

Given Polanyi’s position that fascism is the “completion” of the process of

atomization, it can be asserted that the most important aspect of Polanyi’s analysis of

fascism is the framework that he uses, namely, the institutional separation of the

economic and the political spheres: Considering that both capitalism and fascism produce

the same effect, namely, the creation of “reified individuals,” it is easy to see fascism as a

“social,” not economic, “solution” for the functioning of capitalism, which needs to deny

individual freedom and almost every kind of human spontaneity. In short, the economic

system which is prevalent under fascism is still capitalism, with all its fetishistic aspects.

However, an important conclusion that can be derived from this analysis is that
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capitalism does not necessarily presuppose democracy; on the contrary, it might well be

inconsistent with democracy, for according to Polanyi,

it is the common conviction of “Interventionist” and of “Liberal” Fascists

that Democracy leads to Socialism. Marxian Socialists may differ from
them on the reasons but not on the fact that Capitalism and Democracy
have become mutually incompatible; and socialists of all creeds denounce
the Fascist onslaught on Democracy as an attempt to save the present
economic system by force.
Basically there are two solutions: the extension of the democratic
principle from politics to economics, or the abolition of the Democratic
“political sphere” altogether.
The extension of the democratic principle to economics implies the
abolition of private property of the means of production, and hence the
disappearance of a separate autonomous economic sphere: the democratic
political sphere becomes the whole of society. This, essentially is
Socialism.
After abolition of the democratic political sphere only economic life
remains; Capitalism as organised in the different branches of industry
becomes the whole of society. This is the Fascist solution. (EF, 392)

The fascist “solution” actually characterizes the “collapse” of the society with all

institutions that are both expressions and means for the affirmation of freedom and hence

humanity. In fact, it even signifies the collapse of the whole Western civilization, for it is

the denial of the very values that characterize this civilization, namely, the “Christian

discovery of the uniqueness of the individual and of the oneness of mankind” (GT,

258A).24 The only way to restore these values, which indicate the two inseparable

characteristics that define humanity, is, for Polanyi, socialism. However, since this in

turn is linked to the problem of freedom and its protection in an industrial society, we

have to deal with this issue, which will consist the main focus of the following section.
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3.3. The Societal Perspective: The Meaning of the

Double Movement

3.3.1. The Institutional Separation of the Economic

from the Political

Polanyi’s notion of the double movement provides an important conceptual

framework in understanding the capitalist society and its contradictory character. In this

regard, two aspect of this framework can be stressed: First of all, the capitalist society,

characterized by the institutional separation between the economic and the political

spheres, is unstable because the institutional strains inherent in the organization of the

market system are further aggravated by the tensions between social classes which arise

out of these strains and which make it difficult to maintain the economic-political

separation for these tensions are constantly carried back and forth between the two

spheres. Such a perspective within which the different agents in the society interact with

each other, thus making the whole process a dynamic one, should warn us against seeing

the double movement as a simple form of class struggle. According to Polanyi, classes

should not be taken as the ultimate explanatory categories, for what is of crucial

importance in explaining the double movement is the fact that “it is the relation of a class

to a society as a whole which maps out its part in the drama; and its success is

determined by the breadth and variety of interests, other than its own, which it is able to

serve” (GT, 156).25 In other words, the notion of the double movement indicates a

“societal” perspective: a dynamic process within which various interactions between

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different classes take place and each of these classes stands for, “even unconsciously, for

interests wider than its own” (GT, 133). On this conception social classes are seen as

parts of the “drama” rather than ultimate explanatory categories because insistence on a

class-reductionist perspective which rests upon “sectional” interests, rather than general

ones, is inadequate to appreciate “the breadth and comprehensiveness of the protectionist

movement” (GT, 154).

According to Polanyi, classes should not be defined merely in economic terms,

on the basis of their economic interests, for they are essentially social categories whose

interests are determined by social factors such as “standing and rank” and “status and

security” (GT, 153). A reductionist conception of class, based on economic interests,

therefore, cannot provide an adequate understanding of the society as a whole.26 Such a

theory can only work for a definite, given structure of society; it cannot explain structural

and long-term changes, even though “the essential role played by class interests in social

change is in the very nature of things” (GT, 152). The use of economic interests of a

given class in explaining history would tacitly imply the “givenness” of these classes,

and hence an “indestructible society” (GT, 155). For it is the long-term process in

question which ultimately decides even about the existence of these classes. Furthermore,

such a conception, whose main category would be class “interest,” cannot explain the

possibility that the members of one class may support other classes, “an everyday

occurrence” (GT, 152-53). For Polanyi,

all too narrow conception of class interest must in effect lead to a warped
vision of social and political history, and no purely monetary definition of
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interests can leave room for that vital need for social protection; the
representation of which commonly falls to the persons in charge of the
general interests of the community—under modern conditions,
governments of the day. Precisely because not the economic but the
social interests of different cross sections of the population were
threatened by the market, persons belonging to various economic strata
unconsciously joined forces to meet the danger (GT, 154-55).27

In a sense, then, the double movement is a continuous struggle between the

“economic” interests of one stratus of the society, embodied as the extension of the

market, and the general interest of the society as a whole, embodied as the protective

countermovement. More accurately, the double movement, seen from a “societal”

perspective, refers to the struggle between those forces that represent the “disembedded”

economy and those that represent the attempt to “reembed” it into the society. That is to

say, the protective countermovement refers to a social, or institutional, tendency to resist

to, or to rebel against, the inhumane, i.e., fetishistic, conditions of capitalism. Since, as I

have argued, the extension of the market, the commodification process, violates the

“human” aspect of human existence, it should not be surprising that human beings in the

society have to resist this violation irrespective of their class origin. In this regard, right

after the discussion of the reification in capitalism in his essay on fascism, when he

argues that the “spectres” are real in capitalism, Polanyi declares:

But the true nature of man rebels against Capitalism. Human relationships
are the reality of society. In spite of the division of labour they must be
immediate, ie., personal. The means of production must be controlled by
the community. The human society will be real, for it will be humane: a
relationship of persons (EF, 375).

Thus the “breadth” of the protective countermovement.

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Nevertheless, as the second point to be stressed, since classes are the main

agencies that are capable of carrying out this double movement, the whole process

inevitably takes the form of a class struggle, which gives the capitalist society its

unstable character. Although the creation of the fictitious commodities and its corollary,

the institutional separation between the economic and the political spheres, is to be

maintained at all cost in order for the market system to function, the protective

countermovement tends to break this institutional separation and thus pose a

contradiction in the working of the system. Such a situation in fact shows the

contradictory character of the reproduction process of the capitalist society, which can be

observed, among other institutions, from the working of the “capitalist state.” It can be

asserted that the capitalist state is a convenient way to protect and enforce the

institutional separation of the economic from the political. Yet the same state in a

capitalist society also has to protect the very society from the destructive effects of

capitalism, as the history of the double movement shows. Then, the state itself becomes

embodiment of a contradiction, although it is by no means the only institution that has

the same contradiction: it both promotes and obstructs capitalist relations at the same

time.

In a capitalist society, the state plays a dual role: while it is the governing organ

of the ruling classes, it also claims to represent the whole society. Then, on the one hand,

since the state, or the bureaucracy, represents the whole society,28 it functions to protect

the “interest” of the society as a whole, that is, it takes measures to protect the society
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from the destructive effects of the market mainly through its redistributive role, but, on

the other hand, since even the very existence of the state depends upon capital

accumulation in a capitalist society, it is no mystery that the state would promote

capitalist relations by all means.29 In this regard, it should be noted that state’s

centralized power, which actually is a result of the fact that the state has the monopoly

over the means of violence in capitalist societies, gives it a unique position in both

enforcing and protecting property rights and the formation of money and the credit

system (Giddens 1986: 152-54). As we have already seen, the state had participated not

only in the creation of the market, but also in the protective movement, through

legislation, and, even more importantly, in the process of nation-building. Such a position

that the state occupies also gives it the power to intervene directly into the economic

sphere by political means. That is to say, although on the one hand the state has the

function to maintain the separation between the economic and the political spheres, it

also becomes an agent that carry out the “protective countermovement,” for otherwise the

social fabric will disintegrate under the dominance of the market, which will eventually

tend to jeopardize the very separation between economic and political. One way of

maintaining this separation, as we have seen, was fascism, through the negation of

democracy, and hence eradication of social resistance. Of course, this is not the only way

of achieving this end: It can be asserted that the modern “welfare state” is a more

“peaceful” way to maintain this separation. It would not be an extreme position to argue

that this postwar institution, the “social contract” with the workers in the form of full
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employment and comprehensive welfare (Kapstein 1996: 16-17),30 has been devised as

an “economic” solution in order for the social tensions between classes not to develop

and take the form of opposition to the market system itself.31 However, since the welfare

state itself has to operate within the economic-political separation and since it carries the

protective movement in part, the contradiction within the state still continues and tends to

disturb this very separation.

Therefore, the process of double movement, as Gregory Baum characterizes, can

be understood as a conception of the “the self-organization of the society, sometimes

with the help of the government and sometimes in spite of it, to protect people and land

against the disintegrating forces of the market system” (Baum 1996: 10, also 55).32 Yet,

this dual role that the capitalist state plays is actually an expression of the fact that the

state in a capitalist society is itself the embodiment of a contradiction between freedom

as expressed in its structure and the negation of this very freedom, as John Macmurray

(1935) argues with respect to Marx’s understanding of the state. According to this

argument, contemporary capitalist societies are only formally, not really, democratic

because the state is actually a bureaucracy which identifies its ends, which are in effect

purely formal or political ends, with the common good of the community which it

governs, whereas a really democratic society requires that the form of cooperation

between its members in their ordinary life, the social production process, must be

democratic. In this regard, the bourgeois state is by no means democratic; that is, there is

a contradiction between the actual life of society and its representation in the state, a
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contradiction that signifies two forms of existence of the individuals, an “earthly”

existence in the economic sphere characterized by the “self-sufficient monad” and a

“heavenly” existence characterized by the abstract “citizen” (Macmurray 1935: 226).

However, another aspect of contemporary capitalist societies is that they have a

democratic idea of themselves, and this idea is reflected in the formal structure of their

political organization, even though this organization only formally expresses the ideas of

equality and freedom. Since institutions are in part “expressions” of human nature, or in

Polanyi’s words, they are “embodiments of human meaning and purpose” (GT, 254), to

be characterized by freedom, it is quite normal for the state to reflect those ideas; but at

the same time, since the capitalist reality is “upside down,” it negates the very freedom

which is expressed in the institutions.33 Therefore, as Macmurray argues, when these

societies write the principles of equality and freedom in their political constitutions,

they are expressing the truth, they are apprehending their own essence of
human societies. Democracy is, in fact, the essence and truth of all forms
of human society. But this truth contradicts the living structure of the
societies which have discovered it. Their assertion of democracy is the
recognition of their destiny, not of their present actuality. It is the
realisation in idea of what they are to become in fact (1935: 223-24).34

Nevertheless, this contradiction is by no means limited to the state itself; it can be

argued that in a capitalist society almost all social institutions, including family and even

religion, have this contradiction: that is, they, at the same time, both carry the conditions

of capitalism and, as expressions of freedom and meaning, affirm humanity of

individuals and therefore also function to resist the very market relations.

For Polanyi, as we have seen, human beings are “humanized” by the plurality of
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institutions, like church, family, work, through which they can both express their essence

and acquire an identity based on those “human” traits. Since the social institutions are

embodiments of human essence, even in a capitalist society, those institutions that are not

exclusively characterized by economic factors can function for individuals to affirm their

connectedness with other individuals through having personal, direct relationships. In

other words, these institutions, together with deliberately created associations or

communities, aggregates, etc., including political parties and the trade unions, can

function as “safe havens” to escape from the destructive, i.e., alienating, reificatory,

effects of capitalism. Although this is for the most part an individual act, it nevertheless

presupposes some form of collectivity, for the function of these institutions are to affirm

sociality, direct, personal relationships.35 To the extent that these institutional structures

have the power to transcend the economic-political separation, like the working class

organizations, they can be successful in counteracting to the destructive effects of the

extension of the market.

Nevertheless, because of the reification process which even dominates the mode

of thinking in a capitalist society, i.e., because of the “market mentality,” it is not very

easy, if not impossible, to distinguish between the two conflicting tendencies in the

double movement, extension of the market and resistance to it, for even the very human

properties can be so distorted in discourse, through the reproduction of capitalist

“ideology,” that they can be used in reproduction of capitalist relations. For example,

Daniel Fusfeld (1993: 8) criticizes the Republican conservatives who glorify both the
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free market and what they call “family values” that they cannot see the destructive effect

of the free market on the family values. Still, considering the Marxian concept of

ideology, one can argue that although this is a contradiction, it is necessary in the sense

that it is effective in reproducing “false,” “upside-down” social relations that reflects the

subject-predicate inversion.36 To the extent that individuals’ minds are reified enough to

sustain capitalist relations, this obviously would not work, for in this case these

institutions themselves would become vehicles of reproducing capitalist relations. Then

the very same institution, whether it is the state, family, church,37 or even the trade union,

will both convey the conditions of the reproduction of capitalist social relations and be an

embodiment of the resistance, even in an unconscious way, to these relations, for they

provide the opportunity to affirm sociality. Then it should be no surprise that although

these institutions or associations are in part reflections of the conditions of sociality, they

are at the same time bases of the very same social relations that destroys those

conditions.38 Therefore, in the contemporary capitalist society, the protective movement

seems to have been undermined to the extent that reification dominates every sphere of

life, including the mode of thinking of the modern individual; to the degree that this

reificatory aspect of capitalism deepens, the chance of success of the protective

movement decreases. That is, double movement will be paralyzed to the extent that it is

“suppressed by the power of international capital on the one hand and inhibited by the

incapacity of increasingly divided, fragmented, and individualized societies to organize

themselves to act in the interests of society as a whole” (Bienefeld 1991: 26).39

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Therefore, the double movement represents two contradictory features of the

capitalist reproduction process: in this process, although a social institution is an

expression or objectification of human essence, because of fetishism it also becomes a

means to reproduce capitalist relations. This contradictory nature of the capitalist society

has some important implications about the notion of freedom and its protection in an

industrial society, as we are about to see.

3.3.2. “Discovery of Society”

As we have seen above, the process of commodification or the creation of the

fictitious commodities, which gives rise to a distinct economic sphere, the market, from

the “rest” of the society and thus makes the society dependent on the market for its

existence, eventually leads to social breakdown, for it characterizes the process within

which the individual is increasingly being isolated through being reduced to homo

oeconomicus. Nevertheless, although this process of fetishism and reification has a

dissolving effect on the social bond, it is also true that the individual becomes more and

more dependent on other human beings at the same time because of the increasing social

character of production. In other words, “the knowledge of society,” as Polanyi argued,

“came to us through living in an industrial society” and it is “the constitutive element in

modern man's consciousness” (GT, 258A). That is, in the capitalist society, there is a

contradiction between the “discovery of society” and the atomization of the individual.40

In Marx's words,

the more deeply we go back into history, the more does the individual,
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and hence also the producing individual, appear as dependent, as

belonging to a greater whole.... Only in the eighteenth century, in “civil
society,” do the various forms of social connectedness confront the
individual as a mere means toward his private purposes, as external
necessity. But the epoch which produces this standpoint, that of the
isolated individual, is also precisely that of the hitherto most developed
social (from this standpoint, general) relations. The human being is in the
most literal sense a ζώov πoλιτιχόv [political animal], not merely a
gregarious animal, but an animal which can individuate itself only in the
midst of society (Marx 1973: 84).

In other words, historical process of commodification, ie., the expansion of the

market, is also a process that characterizes the transition from “community” to “society,”

or transition from “Gemeinschaft” to “Gesellschaft,” to borrow Tönnies's famous

distinction. That is to say, even the realization of the existence of society is a product of

capitalism, for, again according to Marx,

the very necessity of first transforming individual products or activities

into exchange value, into money, so that they obtain and demonstrate their
social power in this objective [sachlichen] form, proves two things: (1)
That individuals now produce only for society and in society; (2) that
production is not directly social, is not the offspring of association, which
distributes labour internally. Individuals are subsumed under social
production; social production exists outside them as their fate; but social
production is not subsumed under individuals, manageable by them as
their common wealth (Marx 1973: 158).

With respect to this last point, that the “discovery” of society reflects the newly

emerging distinction between society and community with capitalism, we can use

Tönnies’s framework, for this framework is an important one in understanding Marx’s

notion of alienation and fetishism, as Fritz Pappenheim (1959) had convincingly

argued.41 For Tönnies, there is a sharp distinction between “community”

(“Gemeinschaft”) and “society” (“Gesellschaft”): Gemeinschaft, whose purest form

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prevails within the family, characterized by the unity of individuals whereas Gesellschaft

is characterized by the separation between them (Tönnies 1988: 64-65). On the other

hand, regarding minds of individuals living in these two forms of human aggregates,

closely associated with this distinction is another one between “natural will”

(Wesenwille), which carries the conditions of Gemeinschaft, and “rational will”

(Kürwille), which develops Gesellschaft. Natural will (or sometimes translated as

“integral will”), as the natural disposition of human beings, is characterized by the

spontaneous expression of their drives and desires, whereas “rational will,” which does

not have the spontaneity and impulsiveness of the natural will, basically expresses

rational calculation (Tönnies 1988: 103-5). In other words, rational will, as the very name

suggests, reflects the will of the self-interested individual, or the homo oeconomicus who

tries to reach his end by employing the available ends. Here the significance of rational

will is that it divorces means and ends, both in personal relations and in works. It even

makes human beings as means for each other (Pappenheim 1959: 73).

Although Tönnies uses these four categories as “ideal types,” or, in his own

characterization, as “normal types” (1988: 274),42 he also makes it clear that on

essential points Gesellschaft, with its main ingredient, rational will, is identical to the

capitalist or “bourgeois society” (p. 76). In this regard, his analysis is also a historical

one that characterizes a real opposition between capitalist and precapitalist societies.43

For Gesellschaft is characterized essentially with the dominance of exchange relations. In

fact, it is the generality of exchange or commodity relations that gives rise to the
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atomistic individual, but above all, it is the existence of labor power as commodity which

distinguishes Gesellschaft: For Tönnies, the three acts that describe Gesellschaft are (1)

the purchase of labor, (2) the employment of labor, (3) the sale of labor in the form of

value elements of the products. Consequently, Gesellschaft is constituted mainly by two

classes: the capitalist and the working class (Tönnies 1988: 100-1). Such a dualistic

structure, according to him, only “follows from the premise of commerce. That holds,

however, only on condition that commerce is limited to that purely fictitious, unnatural

commodity created by human will, which is labor power” (Tönnies 1988: 101; emphasis

mine).44 In short, Gesellschaft presupposes wage labor, or labor power as commodity.

It appears that there are two significant characteristics of Gesellschaft, or the

capitalist society proper: First, as the result of the development of the “rational,” self-

interested individual, who is nothing but an atom in the society and for whom other

individuals appear as particular ends, the bonds between human beings are supplanted by

useful associations, formed by particularized individuals (Pappenheim 1959: 81).

Second, maybe even more important than the first one, is that the very category of the

individual in the modern sense appears with Gesellschaft. A person in Gemeinschaft

belongs to a whole, which makes his life meaningful, or in Marx's words, “the individual

has as little torn himself free from the umbilical cord of his tribe or community as a bee

has from his hive” (Marx 1976: 452). Such a community is characterized, as we can see

in Eric Fromm's description of the Medieval society (1941: 40-41), by the sense of

security, solidarity, the subordination of economic to human needs, the directness and
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concreteness of human relations. Though the individual is not alone and isolated, this

community is also characterized by the lack of individual freedom. In other words, in

such communities, individuals are not “species-being” in the real sense, for their very

individuality is denied.

On the other hand, in Gesellschaft, individual freedom and individuality seem to

become dominant. According to Tönnies, the transition to Gesellschaft implies “a

dissolution of all those ties which bind the individual through his natural will and apart

from his rational will. For these ties restrict his personal freedom of movement, the

salableness of his property, the change of his attitudes, and their adaptation to the

findings of science” (1988: 234). Hence, despite its destructive effects upon the social

connectedness in a Gemeinschaft-like society, capitalism also creates the preconditions

of “free” human beings, or the possibility of realizing their own potentialities. What

makes this possible is actually the development of the industry, with the increasing social

character of production, which came with the “machine age” and which makes it possible

to restrict “the realm of necessity.”45 At the same time, social production, through

cooperation and also exchange, though strips humans of their individuality, also develops

their species-consciousness (Tönnies 1921: 90). In other words, through making the

individual realize his dependence on other individuals, that process makes individuals

aware of the “reality of society.”

In sum, regarding the “fate” of the individual, we have two contradictory

tendencies in capitalism: while emancipation from the ties that bind the individual makes
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him more and more independent, self-reliant, and critical, increasing alienation makes

him more isolated, alone, and afraid (Fromm 1941: 104). One implication that can be

derived from this discussion is that the integration of the characteristics of Gemeinschaft,

like the sense of connectedness, of being a part of the whole, direct and personal

character of the relations between individuals, and those of Gesellschaft, like the

realization of the individual and of sociality, might be a hope to overcome this alienation,

as Tönnies himself had entertained this hope for a society in the distant future

(Pappenheim 1959: 117).

In this regard, it can be argued that Polanyi's own conceptual framework, both his

“substantive” conception of the economy and his critique of capitalism is almost identical

to that of Tönnies. Polanyi himself is aware of this close affinity. In fact, his own

distinction between “embedded” and “disembedded” economies presupposes both Sir

Henry Maine’s distinction between “status” and “contractus”46 and Tönnies's distinction

between Gemeinschaft and Gesellschaft, for in fact all these are identical (TMEE, 68-70;

LM, 48-50). For Polanyi, “the distinction is fundamental to the understanding of modern

society” (TMEE, 68).47 This contrast between “Gemeinschaft” and “Gesellschaft” is

actually the most significant aspect of Polanyi's critique of the “market society.” In the

quote below, from a manuscript written in 1935, Polanyi aptly describes the distinction

between “community” and “society”:

The teaching of Jesus, as well as the doctrines of the Church are ... merely
reassertions and clarifications of the basic relationship between
individuals. The doctrine of love, of brotherhood, of the fatherhood of
God, are parts of a definition of this kind of relationship between human
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beings which belongs to the essence of society.—No word in the English

language seems to designate unambiguously this aspect of social
existence. The nearest approach to it is community in the sense of an
affirmative personal relationship of human individuals, i.e., of a relation
which is direct, unmediated, significant for its own sake, “a personal
response to a demand of persons.” Community is, therefore, for us, not
synonymous with society... (quoted in Nagy 1994: 96).

On the other hand, since market society is an industrial society, it has become

largely “opaque” and lost its “transparency” with the increasing complexity and

socialization of the division of labor, that is, human relations lost their direct character.48

Such a process, as we have seen, is reinforced by the increasing commodification of life

itself. Nevertheless, although “community” affirms connectedness because of the

directness of human relations, it cannot yet embrace the humanity in its “species” sense.

The reason for this is given by Polanyi himself:

Of all the basic principles governing the development of early economic

institutions, the need for the maintenance of communal solidarity
deserves pride of place. Domestic and foreign relations are in stark
contrast: solidarity here, enmity there, rule the day. "They" are the objects
of hostility, degradation, and enslavement, "we" belong together and our
communal life is governed by the principles of reciprocity, redistribution,
and the exchange of equivalents (LM, 59).

The species-consciousness, then, is to be reached with the “discovery of society,”

a fact that coincides with the market society. In this regard, Polanyi seems to endorse

Tönnies’s own solution: a society, yet to come in the distant future, which integrates the

characteristics of Gemeinschaft and Gesellschaft, or “the person in community,” to use

Rotsein's (1990: 104) apt metaphor. According to Polanyi,

Tönnies’ ideal was the restoration of community—not, however, by

returning to the preindustrial stage of society, but by advancing to a
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higher form of community that would follow upon our present

civilization. He thought of it as a kind of cooperative phase of civilization
that would retain the advantages of technological progress and individual
freedom while restoring the wholeness of life. His position resembled, to
some extent, that of Robert Owen or, among modern thinkers, that of
Lewis Mumford. In Walt Whitman's Democratic Vistas (1871) one may
discover prophetic analogies to this outlook (LM, 49).49

Therefore, Polanyi seems to share Tönnies’s, and Marx's, vision about the double

tendency within the capitalist society: although capitalism destroys the very sociality of

the human beings by depriving them of the direct, personal relationships with other

individuals, unmediated by exchange or money, another “fictitious commodity,” which

reduces them into abstract, functional units, with capitalism the possibilities of realizing

and developing the potentialities of the individual have also increased. In this regard,

following Baum, it is possible to argue that

the discovery of society in the full sense of, Polanyi holds, took place
only in modern times when people become critical of the existing orders
and recognized that they could be transformed. Understanding society
also means becoming aware that the market and the state are not the only
realities and that the subjectivity at the base— in the form of people’s
multiple interactions—is the most powerful source for social
transformation (1996: 36).

Then, Polanyi’s endorsement of Owen, and other “utopian socialists,” such as

Saint Simon and Fourier, who could, according to Polanyi, “anticipate the menace of a

cultural development which a century later became familiar to all the world as the

fragmentation of man, the standardization of effort, the supremacy of mechanism over

organism and of organization over spontaneity” is quite understandable, for instead of

“the tough realists,” these “childlike prophets were closer to the truth” (LM, xlix), even
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as early as in the Speenhamland period.50 In other words, with capitalism, the reality of

society is both recognized for the first time, and denied because of the perverse existence

of human beings under capitalism which contradicts their very essence. For the problem

of this society is that it was only an “economic” society:

The circumstances under which the existence of this human aggregate—

a complex society—became apparent were of the utmost importance for
the history of the nineteenth century thought. Since the emerging society
was no other than the market system, human society was now in danger
of being shifted to foundations utterly foreign to the moral world of
which the body politic hitherto had formed part (GT, 115-16).

The development that “economic society had emerged as distinct from the

political state” (GT, 115) was to be reflected by the political economy, the science of the

market system,51 which was, for this reason, haunted by “naturalism” in the sense that the

foundations of the newly emerging society would be seen in purely naturalistic terms

(GT, 112-13).52 Such a naturalistic foundation, as reflected in Malthus’s law of

population and Ricardo’s law of diminishing returns, implied that “economic society was

subjected to laws which were not human laws” (GT, 125). Therefore, the market society,

though coincides with the emergence of society, actually amounts to a denial of it,

because it omits the human basis of society. In other words, “under the market system,

society as a whole remained invisible.” Then, argues Polanyi, “the discarding of the

market utopia brings us face to face with the reality of the society” (GT, 258). That is to

say, regaining our humanity requires us to accept the reality of society. Yet, since the

capitalist society is a “complex society,” accepting the reality of this society raises the

issue of protecting freedom in such a society, a problem to which we are turning now.
141
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3.4. Epilogue: “Freedom in a Complex Society”

The overall argument of Polanyi’s The Great Transformation is that the

nineteenth-century civilization disintegrated not as the result of some external causes,

like invasion or revolution, but as the result of “the measures which society adopted in

order not to be, in its turn, annihilated by the action of the self-regulating market” (GT,

249). That is, the disintegration of this civilization, in the form of fascism, is due to the

double movement, as we have seen.53 Nevertheless, the problems that this civilization

brought about will remain even if the market system collapses, for the market economy

was only a first “response” to the challenge of the machine.

According to Polanyi, the nineteenth century gave rise to two distinct events: “the

machine age, a development of millennial range; and the market system, an initial

adjustment to that development” (LM, xlviii). For him, the “machine age,” or “industrial

civilization,” started sometime in the eighteenth century and its first phase, which “has

been called by many names, such as liberal capitalism, or market-economy” (BED, 96),

ended in the 1930s. Here, the important point for Polanyi is “to distinguish between the

technological aspect which comprises the whole of the machine age or industrial

civilization, and the sociological, which is already behind us from the phase which is still

to come” (BED, 96). Such a notion suggests that there could have been other adjustments

to the challenge of the machine other than capitalism; in other words, the same level of

technology, or the forces of production in the Marxian parlance, can sustain different, if

not opposite, social relations of production. For according to Polanyi the problem with
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the nineteenth century society “was not that it was industrial but that it was a market

society” (GT, 250). According to Polanyi,

the machine created a new civilization. If plough agriculture is credited

with giving rise to the first civilization, the machine gave rise to the
second, the industrial. It spread over the planet, creating the perspective
of the ages to come. Such an event transcends by far the economic field;
only time will unfold its powers and perils and spell out its implications
for the existence of man. Machine civilization has invested the frail frame
of man with the effectiveness of lightning and earthquake; it has moved
the center of his being from the internal to external; it has added hitherto
unknown dimensions to the scope, structure, and frequency of
communication; it has changed the feel of our contacts with nature; and,
more important than all else, it has created novel interpersonal relations
reflecting forces, physical and mental, that still may cause the self-
destruction of the human race (LM, xlviii).

The most important challenge that the machine age poses is the necessity of

living in a “complex society,” that is, the society which has to live side by side with the

machine. Such a society, irrespective of its specific institutional format, should contain

“an extended bureaucratic network to fulfil the purposes of the state and of the society,

and is bound to encompass a complex division of labor—the necessary consequence of

the industrial revolution” (Rotsein 1990: 100). Among the tendencies that the industrial

civilization creates are, according to Polanyi, “its paralyzing division of labor,

standardization of life, supremacy of mechanism over organism, and organization over

spontaneity” (OMM, 109).54 These tendencies therefore raise the problem of the

protection of human spontaneity and freedom. Nevertheless, the capitalist society could

not sustain such a freedom because it was based on the purpose of creating profit and

welfare, not peace and freedom (GT, 255). According to Polanyi, the result of this
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market-view of society which equated economics with contractual relationships, and

contractual relations with freedom, hid the reality of the society for this vision only

allows a “fragmented” life for human beings (GT, 257-58). For this reason, the liberal

vision denied not only that “no complex society can exist without organized power at the

center”55 but also that “no human society is possible in which power and compulsion are

absent, nor is a world in which force has no function” (OMM, 116). For the liberal, “the

power of the State was of no account, since the less its power, the smoother the market

mechanism would function” (GT, 258). In other words, the liberal’s vision of freedom is

limited only to the market sphere, in the form of “free enterprise,” without ever

considering the state and power as important factors in the society. For Polanyi, such a

limited notion of freedom, and the argument that abandoning free market will destroy this

freedom, is a direct result of economic determinism:

Much of the freedom we cherish—the civic liberties, the freedom of

speech and so-on, were by-products of capitalism. Need they disappear
with capitalism? Not at all. To imagine this is simply an illusion of
economic determinism—which is valid only in a market society. Hayek’s
fear of serfdom is the illogic application of economic determinism of a
non-market economy. We can have more civic liberties—indeed extend
civic liberties into the industrial sphere (BED, 102).

This liberal delusion is in fact quite aptly described by Marx when he talks about

freedom as defined in market; in Capital, Marx wrote:

The sphere of circulation or commodity exchange, within whose

boundaries the sale and purchase of labour-power goes on, is in fact a
very Eden of the innate rights of man. It is the exclusive realm of
Freedom, Equality, Property and Bentham. Freedom, because both buyer
and seller of a commodity, let us say of labour-power, are determined
only by their free will. They contract as free persons, who are equal
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before the law. Their contract is the final result in which their joint will
finds a common legal expression. Equality, because each enters into
relation with the other, as with a simple owner of commodities, and they
exchange equivalent for equivalent. Property, because each disposes only
of what is his own. And Bentham, because each looks only to his own
advantage (Marx 1976: 280).
However, such a conception, as we have seen, led to the illusion of the market

society, which is subordinate to the market and within which, therefore, “the reality of

society” is denied. According to Polanyi,

Freedom’s utter frustration in fascism is, indeed, the inevitable result of

the liberal philosophy, which claims that power and compulsion are evil,
that freedom demands their absence from a human community. No such
thing is possible; in a complex society this becomes apparent. This leaves
no alternative but either to remain faithful to an illusory idea of freedom
and deny the reality of society, or to accept that reality and reject the idea
of freedom. The first is the liberal’s conclusion; the latter the fascist’s. No
other seems possible (GT, 257).56

Therefore, the real problem is to accept the reality of the society in an industrial

civilization and try to find ways to protect our freedom in such a society. In this regard,

Polanyi’s argument is that freedom should be extended to the whole society by

reembedding the economic sphere into the society again; that is, the institutional

separation between the economic and the political must be abandoned. Only by doing so,

could individuals be emancipated from the alienating, dehumanizing effects of

capitalism. That is, in order to protect our freedom, we need a “new response to the total

challenge of the machine” (OMM, 109).

Nevertheless, since this challenge of the machine requires a new institutional

adjustment, the problem of freedom inevitably becomes an institutional problem. Yet, by

itself, institutional level is only one dimension of the problem of freedom; the other level
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of the problem is moral or religious. Since, for Polanyi, institutional guarantees of

freedom are compatible with any economic system and technological apparatus (OMM,

117), on the institutional level the issue is one of balancing increased against diminished

freedoms; hence no radically new questions arise. On the more fundamental, moral level,

however, the very possibility of freedom is at stake, for in a complex society, “the means

of maintaining freedom are themselves adulterating and destroying it” (GT, 254).57 For in

such a society not only do the technology and the resulting division of labor tend to limit

human freedom, but also “the comfortable classes enjoy the freedom provided by leisure

in security; they are naturally less anxious to extend freedom in society than those who

for lack of income must rest content with a minimum of it” (GT, p. 254). For this reason,

argues Polanyi,

in an established society, the right to nonconformity must be

institutionally protected. The individual must be free to follow his
conscience without fear of the powers that happen to be entrusted with
administrative tasks in some of the fields of social life. Science and the
arts should always under the guardianship of the republic of letters.
Compulsion should never be absolute; the “objector” should be offered a
niche to which he can retire, the choice of a “second-best” that leaves him
a life to live. Thus will be secured the right to nonconformity as the
hallmark of a free society (GT, 255).

Still, in order to establish such a complex society within which freedom is

protected institutionally, we should never forget the three facts that shaped the

consciousness of Western man: the knowledge of death, the knowledge of freedom, and

the knowledge of society (GT, 258A). According to Polanyi, it is essential to resign to

these three facts, for

 147

resignation was ever the fount of man’s strength and new hope. Man
accepted the reality of death and built the meaning of his bodily life upon
it. He resigned himself to the truth that he had a soul to lose and that there
as worse than death, and founded his freedom upon it. He resigns himself,
in our time, to the reality of society which means the end of that freedom.
But, again, life springs from ultimate resignation. Uncomplaining
acceptance of the reality of society gives man indomitable courage and
strength to remove all removable injustice and freedom. As long as he is
true to his task of creating more abundant freedom for all, he need not
fear that either power or planning will turn against him and destroy the
freedom he is building by their instrumentality. This is the meaning of
freedom in a complex society; it gives us all the certainty that we need.
(GT, 258B)

In other words, the solution that Polanyi suggests seems to be the one that

Tönnies, if not Marx, proposed: integration of the characteristics of “society” and

“community,” or forming the conditions of “the person in community.” In this solution,

both individuality and sociality, the two characteristics that define a human being, are

emphasized. A “solution” which only emphasizes sociality or connectedness, as in the

rhetoric of the return to the “lost community,” is not only impossible, for it is only as

viable as the attempt “to elevate primitism to a morality and seek shelter from the

machine age in the Neolithic cave” (LM, xlvii), given the irreversibility of technological

progress,58 but dangerous as the fascist period itself has shown. In fact, as Neumann

(1944) indicates in many places, National Socialism had frequently been presented as the

“return” to the Gemeinschaft, as a revolt against the fetish character of money and

capitalism by emphasizing the “whole.”59 For example, Bernhard Köhler, one time

chairman of the economic committee of the National Socialist Party, once said: “From

the very beginning, National Socialism was a revolt of the living feelings of the people
 148

against the fact that the whole life of the people was determined by economics, by

material existence” (quoted in Neumann 1944: 232).60 However, despite the rhetoric,

according to Polanyi, “the fascist tactics were invariably those of a sham rebellion

arranged with the tacit approval of the authorities who pretended to have been

overwhelmed by force” (GT, 238). Of course the result was the creation of extremely

impersonal social relations, creation of insignificant atoms, destruction of human

spontaneity. In this regard, it is no accident that, despite all the rhetoric, National

Socialism “has annihilated every institution that under democratic conditions still

preserves remnants of human spontaneity: the privacy of the individual and of the family,

the trade union, the political party, the church, the free leisure organization” (Neumann

1944: 367). Nevertheless, the real danger of the rhetoric of “lost community” lies in its

negation of the understanding of human beings as “species-beings,” for return to the

“community” would amount to annihilation not only of individuality, but also of

“oneness of mankind.” This danger is so aptly characterized by Hobsbawm that I cannot

resist to quote:

Increasingly one’s identity had to be constructed by insisting on the non-

identity of others. How otherwise could the neo-Nazi skinheads in
Germany, wearing the uniforms, hair-styles and musical tastes of the
cosmopolitan youth culture, establish their essential Germanness, except
by beating up local Turks and Albanians? How, except by eliminating
those who did not “belong” could the “essentially” Croat or Serb
character of some region be established in which, for most of history, a
variety of ethnicities and religions have lived as neighbors? (1994: 429)

In other words, the rhetoric of “lost community” eventually amounts to the

emphasis of the bonds within the new “clan,” “tribe,” “community,” etc., at the expense
 149

of the development of the species-consciousness. Then, what is needed is to emphasize

the conditions of “species-being”: protecting both our individuality and sociality. Such an

attempt in turn requires the solution, as has already been mentioned, of the extension of

the democratic principle into economic sphere by abolishing this separate, autonomous

economic sphere.

The attempt to achieve and maintain freedom requires active participation of

individuals in their struggle to resist dehumanizing aspects of capitalism; the double

movement, as we have seen, is nothing but the description of this struggle on the social

plane. Resistance to the extension of the sphere of “fictitious commodities” has been

carried out essentially by the working class in the first half of the twentieth century, for

this movement was capable of both affirming the sociality of individuals and at the same

time of intervening into the sphere of the market directly. In fact, it is the success of this

form of opposition, to the extent that it could hamper the working of the self-regulating

market, that led to fascism as a “solution.” In this regard, working class movement can be

seen as essentially an attempt to extend democracy to the whole society, by channeling

resistance to capitalism into political struggle.

Therefore, given the effectiveness of the mode of thinking that capitalism

dictates, namely, the “market mentality,” a conscious resistance to capitalism by

affirming our very humanity, that is, both individuality and sociality, becomes a moral

responsibility if we are to protect our freedom. In this regard, we should remember the

fact that, according to his daughter, Polanyi’s lifelong commitment to social thought is to
 150

be explained “by a quasi-religious sense of responsibility for the fate of man” (Polanyi-

Lewitt 1990: 119). The “fate of man,” it seems, depends on the conscious use of the

double movement, even irrespective of the stratus of the society to which we belong, for

such a move could give a hope to escape from the mode of thinking that capitalism

dictates so that eventually transcending of capitalism would be possible. This might be

the only possible alternative, as the very period of fascism, a period within which people

were subjected to a “reeducation” designed to naturalize the individual and deny him the

political sphere altogether had shown. Against this, conscious use of the double

movement is more urgent today because the commodification process and its reflection,

the “market mentality,” are much more effective than they were in the past and together

they destroy the idea of the “brotherhood of man,” but this time through “peaceful”

means, not through the use of brute force. For this reason, it is more urgent today that our

“civilization must find a new thought pattern,” as Polanyi himself suggested as the

subtitle of one of his articles (OMM). This, I believe, is the main lesson that can be

learned from Polanyi.

 151

CONCLUSION

In the search of an answer to the question of where we stand fifty years after the

publication of The Great Transformation, it seems possible to read Polanyi in two

different ways. First, we can read the book in a “literal” way according to which the

market system collapsed in the 1930s and therefore we no longer have a “self-regulating”

market which presupposes labor, land, and money as fictitious commodities because the

institutionalization of state interventions and the prevalence of monopolistic tendencies

in every individual market have made it impossible to speak of a self-regulating market.

In other words, this reading either presupposes a Neoclassical framework within which

the existence of “frictions” in the markets in the form of outside intervention hampers the

working of the market by destroying competition, or at best it takes Polanyi’s

contribution as a form of the “monopoly capitalism” argument which asserts that the

phase of capitalism within which we live is drastically different from the earlier one,

“liberal capitalism.” In this reading, state intervention, which is for the most part

responsible for the demise of the self-regulating market, is to be seen as the embodiment

of the “self-protection of society,” either again in its literal sense, as if the society has

some form of consciousness independent of the individuals that constitute it and uses the

state for its own purposes, or, if we want to avoid such a form of reification, as the form

of agency which is capable of carrying out the “collectivist” movement, since its role is

to protect the society against the menace that the market causes. On the other hand, with

respect to the difference of the market institution from other forms of economic
 152

institutions prevalent in nonmarket societies, a popular interpretation, which has been

reinforced by Polanyi’s later work after The Great Transformation whose emphasis is on

economic anthropology, takes his argument as consisting of the “substantivist” approach

to economic with its three forms of integration, namely, reciprocity, redistribution, and

market. This argument, too, is in tune with the “literal” reading of Polanyi, for it usually

emphasizes the importance of the state in the market society as the institution that could

be used against the market, because in this argument, the essential role of the state is

characterized by its redistributive role. Although this overall interpretation is not

necessarily wrong, I believe it has the strange effect of eroding the importance of

Polanyi’s argument: Apart from maintaining the untenable position that we no longer

have fictitious commodities, such an interpretation either presupposes the same

framework conditioned by the very “market mentality” that Polanyi himself criticizes, for

the essence of the double movement is seen as the state intervention and, therefore,

reduces the argument for the necessity of the protective countermovement to a defense

of the “welfare state,” or it confines Polanyi’s contribution only within the three forms of

integration, thus separating Polanyi’s moral critique of the market society from his

anthropological account and ignoring the ethical aspects of his work seen in its entirety.

In other words, as has been argued in this dissertation, such an argument fails to

emphasize the main problematic that guides Polanyi’s work: the importance of freedom

as the characteristic trait of human beings.

Therefore, as an alternative to this first type of reading, a second type, which

 153

forms the basis of this dissertation, emphasizes moral aspects of human existence as

adopted by both Polanyi and Marx. In this reading, Polanyi’s message is taken to lie in

his emphasis upon the dehumanizing aspect of the market system, with its creation of the

fictitious commodities which leads to the separation of human beings from their own

surroundings, from fellow human beings, and even from their own powers to shape their

own lives. The reason for this is that the system places human attributes under the

dominance of the market and thus creates the reified, “rational” individuals behaving in

accordance with the market mentality. Therefore, even though the market system with its

complex division of labor resulting from the “machine age” is also a phase that coincides

with the “discovery of the society,” this dehumanization process actually characterizes

the denial of the “reality of society.” This denial in the form of the separation of the

economic from the political sphere, or from the “rest” of the society, had to lead to the

denial also of individual freedom, in the form of fascism. That is to say, what this denial

amounts to is no less than the “collapse” of the entire Western civilization with its moral

foundations, for both the “uniqueness of individual and the oneness of the mankind” is

denied. In this regard, Polanyi’s message should be taken as the reclamation of humanity,

which, as the basic argument of this dissertation, unites him with Marx.

On the basis of this interpretation, I have argued in the first chapter that Polanyi’s

analysis of capitalism should be seen with reference to his conception of the human

condition, for it is this conception which underlies his critique of the market society by

emphasizing the inseparability of human beings from both nature and society. In this
 154

regard, two of the most important aspects of Polanyi’s conception are that a human being

is as much an individual as he or she is a social being, which was according to Polanyi

expressed in the Christian doctrine of the “uniqueness of the individual and the oneness

of the mankind,” and, closely related to this, that human beings are “moral” beings who

do not act by material, or “economic,” motives, the fear of hunger and the hope of gain,

but by their freedom which is, far from being protected, actually annihilated by the

market for it makes the society dependent to the market for even its very survival.

However, somewhat paradoxically, what this process causes is nothing but the

disintegration of the social bond.

It is this understanding of human beings which is the basis of the critique of the

market society as the uniting element of Polanyi with Marx, as has been argued in the

second chapter. In Marx, too, the moral aspects of human existence is crucial, contrary to

the allegation that Marx is an economic determinist whose account is conditioned by the

same market mentality to which Polanyi opposes. In this regard, it has been emphasized

that Marx’s historical materialism refers to the conscious, intentional activity of human

beings who constantly interact with nature and with each other within the society.

Therefore, Marx’s conception of man as a “species-being,” as the unity of individuality

and sociality, is the same with that of Polanyi. In particular, it has been argued that

Marx’s notion of commodity fetishism and reification, as the manifestation of alienation

created by capitalism, is almost identical with Polanyi’s notion of the “fictitious

commodities” with respect to the effects of the market upon the individual and the
 155

society. For it is this “commodification” process which reduces human beings, with their

capacities and natural environment, into mere things and thus deprives them of their very

humanity.

Nevertheless, it is one of the greatest merits of Polanyi to have shown that human

beings whose very existence is threatened by the market will reclaim their humanity by

resisting it through all means, in his notion of the “double movement” which is the main

focus of the third chapter. Since human beings are not guided solely by economic

motives, they will resist to confinement within the economic sphere as the “individual in

the market” who would act by the fear of hunger and the hope of gain and thus will

transcend the separation between the economic and the political by all means. Here, it is

important to emphasize that this countermovement spreads to the whole society and thus

necessitates a “societal” approach which emphasizes overall repercussions of this

resistance. That is to say, this countermovement should be reduced neither to the simple

form of class struggle nor state intervention alone. Although social classes and

organizations representing these classes, including the state as an arena within which the

class struggle also takes place, are the main forms of agency that carry it out, the real

meaning of the double movement is the resistance of human beings, even sometimes

unconsciously, to the separation of their own attributes from themselves. Yet, as has been

argued, this poses an interesting contradiction for the reproduction of the capitalist

society as a whole: while social institutions, including the state, are in part to be seen as

expressions of human freedom, they also carry the conditions that facilitates the
 156

reproduction of the same capitalist or the market relations that threatens freedom. This is

essential to understand the importance of the double movement because only with the

knowledge of these contradictory aspects of capitalism might the protection of freedom

in such a complex society be possible. For although the market system creates the

tendencies that undermine the very social fabric, it also creates new opportunities for

human beings to realize their own potentialities. In this respect, both for the creation of

individuals as capable of being guided by their free will and for their recognition of and

resignation to the reality of society, the conditions created by the industrial civilization

and its product, the market society, are indispensable. Yet, since these same conditions

also threaten the very freedom, resistance to it and search for the ways to protect our

freedom in such a complex society become a moral responsibility, which requires, at

least as a first step, resisting the influence of the “market mentality” and emphasizing the

“species” character of human beings, that is, both individuality and sociality. In other

words, if we return to the question that we asked above, Polanyi’s message is as lively as

ever, if not more.

 157

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 169

NOTES TO CHAPTER 1

1. For the life and works of Polanyi, see Bohannan and Dalton (1965); Polanyi-Lewitt
(1964; 1990); Polanyi-Lewitt and Mendell (1987); Congdon (1976; 1991: 220-33);
Humphrey (1978) and Drucker (1978: 123-40).

2. Although Polanyi refrains from using the term “capitalism” and prefers “market
economy,” I believe that the use of the term “capitalism” is justified with the reasons to
be given below, namely, that commodity fictions and fetishism still prevail in today's
economic system. With respect to these characteristics, there is no difference between the
nineteenth-century capitalism and “late” capitalism.

3. Cf. Sievers (1949: 81-85), for an interesting discussion of the concepts “market
system,” “market economy,” and “market society.”

4. Corresponding to the distinction between the “economic” and the “non-economic” is

another distinction between the “interests” and the “passions,” which had emerged
sometime in the eighteenth century, as Albert O. Hirschman (1977) demonstrates.
According to Hirschman, in this distinction, the interests, as referring to “economic”
motives, had come to be associated with the ideas of order, predictability, clarity,
harmlessness, effectiveness whereas the inconsistent, erratic and hence harmful nature of
passions had frequently been emphasized. This distinction too implies the institutional
separation between the economic and the noneconomic spheres.

5. The influence of Polanyi on the “world system” theorizing has been noted by various
commentators, e.g., Block and Summers (1984: 73). For a recent work within this
tradition which uses Polanyi's analysis of the system at an international level, see Arrighi
(1994).

6. The main link between political and economic order at the international level was a
peculiar institution existing in the last third of the nineteenth and the first third of the
twentieth centuries, namely, the “haute finance.” The primary function of this institution
was to ensure the protection of the peace by way of economic transactions (GT, 10).

7. Although we will return to these issues, including the importance of the state and the
gold standard for the working of the system, in the third chapter, here with respect to the
institutional structure it might be helpful to mention the three levels of analysis in
Polanyi, according to Block and Summers (1984: 74-75): the world economy, actions of
the (national) states and class (and other group) conflicts within society; and these three
levels are integrated with two “opportunity structures”: a global opportunity structure
which shapes what is possible for states (like the one which allowed Germany, Italy, and
Japan to break with the nineteenth century “order”), and a national opportunity structure
 170

which determines the options for social groups to affect state policies.

8.Thus, Fernand Braudel, challenging Polanyi’s assertion, argues that the market
economy was built “step by step” (1982: 228-29).

9. In this connection, it is possible to mention Polanyi's crediting the Physiocrats with the
discovery of this newly emergent sphere, the sphere of the economy, as an independent
one, even though they mysticized it by associating this sphere with the “Order of
Nature.” On the other hand, Adam Smith, who learned the “hidden hand” from them,
recognized this as the outcome of the competitive markets (LM, 7-8). Both the
Physiocrats and Adam Smith belonged to a period preceding the market system, in
Polanyi's sense.

10. “It was therefore quite logical for the English factory owners, before the Amendment
Bill of 1834, to deduct from the worker’s wages the public aims which he received from
the Poor Rate, and to consider these alms as an integral part of those wages.” (Marx
1975: 335-36)

11. Yet, the Speenhamland period had a grave consequence for the economic theory
itself: according to Polanyi, classical economists’ conception of the “iron law of wages”
was actually a result of the Speenhamland, not of the working of the labor market itself.
The prevalence of pauperism during this period created the vision that “poverty seemed
to go with plenty”; otherwise, it is hard to explain the irony that Malthus's claim of “the
limitedness of food and the unlimitedness of men” had to come at a time when the
possibility of a boundless increase of wealth came to existence. Such a vision, at least in
Ricardo and Malthus, reinforced economic determinism, for it emphasized the
inexorability of economic laws (GT, 84-85).

12. Cf. BED, 98: “the price of the use of labor power is called wages...”; GT, 162: “The
competitive labor market hit the bearer of labor power, namely, man”; GT, 176: “They
[methods of social protection] achieved what had been intended: the disruption of the
market for that factor of production known as labor power.”

13. Again, according to Polanyi the process of the separation of man from the land is a
basic requirement also in colonization (GT, 178-79).

14. According to Rotstein,

the moral crisis of the twentieth century was wrought in the tension
between the internal (moral) and the divergent forms of the external
(institutional) matrix of his life. Two different embodiments of the
individual, two collective alter egos—one genuine and one artificial—
were locked in a great struggle and produced a chaotic stalemate.
 171

The Great Transformation recounts this titanic struggle of society

(conceived as a community of persons) with the artificial, externalized
embodiment, which the self-regulating market system represents. Society
itself was treated as a genuine protagonist in this contest of surrogate
titans, while the market system was the blind and dark alter ego (Rotstein
1990: 99-100).
As we will see in the third chapter, this is the essence of Polanyi's notion of the
“double movement”: resistance to the dehumanizing aspects of capitalism.

15. In this regard, it might be interesting to note that two of his critics, Rottenberg
(1958), an economist, and Cook (1966), an anthropologist, employ Milton Friedman's
“positive economics” argument to criticize Polanyi. On the other hand, Scott Cook
distinguishes between the “Formalists” and the “Romanticists,” and places Polanyi into
the Romanticist camp. His definition of Romanticism, in this respect, is quite instructive,
for it shows the reflection of the market mentality on the methodological level: For him,
the Romanticists are
those who focus on situations limited in time and space, and who are
prone to retrospection or are diachronically oriented; they are humanistic
in outlook and non-mathematical in inclination, favor the inductive mode
of inquiry, and are basically synthetic in methodology (i.e., lean toward
the belief that the whole determines its parts),
whereas the Formalists are
those who focus on abstractions unlimited by time and place; and who are
prone to introspection or are synchronically oriented; they are scientific in
outlook and mathematical in inclination, favor the deductive mode of
inquiry, and are basically analytic in methodology (i.e., lean toward the
belief that parts determine the whole). (Cook 1966: 327)

16. Cf. Hann (1992), for the importance of Malinowski in Polanyi's account and a
comparison between their (functionalist) positions.

17. Although an economy of some kind or other is essential to every society,

it may be linked with the rest of that society in very different ways. Under
the same technology, such far-reaching changes in economic organization
may be encountered as transitions from capitalism to socialism. Again,
the same organization of the economy seems compatible with sharp
changes in the political system, e.g., when a market-organized society
changes from a liberal democracy to fascism and vice versa.... Yet even
though the economy may take only second or third place, it can never fail
to complicate the issues in unforeseeable ways (LM, xlv, emphasis mine).
 172

18.”Aristotle was right: man is not an economic, but a social being. He does not aim at
safeguarding his individual interest in the acquisition of material possessions, but rather
at ensuring social good-will, social status, social assets” (OMM, 112); “Given the right
institutions, such as oikos and polis, and the traditional understanding of the good life,
Aristotle saw no room for the scarcity factor in the human economy” (LM, 30-31);
“Aristotle had taught that only gods or beasts could live outside society, and man was
neither” (GT, 114). In fact, according to Maurice Glasman (1994: 67n), the influence of
Aristotle on Polanyi goes deeper, for “both identify self-sufficiency with self-
determination and conceive the unit of freedom as the collectivity.” Likewise, Margaret
Lewis (1991) argues that Polanyi follows Aristotle in the latter’s rhetoric too: Polanyi’s
opposition to the deductive, abstract reasoning that has dominated economic thought
induced him to use a critical and investigative rhetoric, whose ends would be justice and
action, like the Aristotelian one. For Polanyi's own position upon Aristotle's “economic”
understanding, see his “Aristotle Discovers The Economy” in TMEE, pp. 64-94.

19. However, whereas GT (p. 54) includes householding as a form of integration, whose
essence is characterized by production for use rather than production for gain, and by the
principle of self-sufficiency, TMEE (p. 250) mentions only the other three and excludes
householding. He later asserts that householding “is actually redistribution on a smaller
scale” (Polanyi 1960: 330). However, for my purposes, this is not of considerable
importance, for as will be argued below, the significance of the substantivist account
should be sought in its emphasis on the general aspects of human existence as opposed to
the form it takes in the market system, rather than in its emphasis on the forms of
integrations.

20. Interestingly, Polanyi's brother, prominent philosopher of science Michael Polanyi

seems to have joined this criticism in a letter to Karl; for him, “...the logic of choice is
deeply imbedded in all manifestations of rationality down to the level of the amoeba”
[quoted in Nagy (1994: 105)]. Likewise, M. Polanyi, in an article named “The Republic
of Science: Its Political and Economic Theory” (1969), explicitly uses the “invisible
hand” argument to explain the working of science as an institution.

21. In this regard, McCloskey’s (1994) comment about Polanyi seems very typical.
According to McCloskey,
in economic history dependent on Marx, such as Max Weber's General
Economic History or Karl Polanyi's The Great Transformation, the
market is seen as a novelty.... From this Marxist historical mistake arose
the fairy tales of lost paradises for aristocrats or peasants and a reason for
ignoring the bourgeois virtues.
It has taken a century of professional history to correct the mistake....
 173

Medieval men bought and sold everything from grain to bishoprics. The
Vikings were traders too. Greece and Rome were business empires. The
city of Jericho dates to 8,000 B.C. The emerging truth is that we have
lived in a world market for centuries, a market run by the bourgeoisie.
Time to recognize the fact and to cultivate a bourgeois virtue (p. 191).
According to McCloskey, among these bourgeois virtues, as opposed to aristocrat
and peasant virtues, are pride of action, integrity, honesty, trustworthiness, humor,
respect, modesty, responsibility, affection. (p. 179) That is to say, Polanyi is also wrong
in his assertion that capitalism deprives human beings of their very virtues that
characterize them.

22. For the notion of “pre-analytical vision,” a term introduced by Schumpeter, and the
vision adopted by the neoclassical economics, see Hunt (1983: 333-36).

23. Another Marxist critic, Claude Meillassoux (1972) criticizes Polanyi’s analysis for
being “restricted to the phenomenon of circulation, without ever entering the sphere of
production” (p. 96). However, this is a superficial criticism both for Polanyi's The Great
Transformation and for his anthropological views. One difficulty in Meillassoux’s
approach, with respect to his interpretation of Marx, is his belief that primitive
formations “rely less on the control of the means of material production than on the
means of human reproduction, subsistence and women. Their end is reproduction of life
as a precondition to production” (Meillassoux 1972: 101). For such a crude
“materialistic” outlook in which human beings are seen as “means” for production, I
believe, has nothing to do with Marx, as it will be argued below.

24. As a matter of fact, Polanyi himself regarded those forms of integration as “ideal
types.” In a letter written in 1950, he regards those concepts as laying the basis of a
comparative economic history. He says: “Herbert Spencer’s descriptive sociology (some
part of it) had the same aim. Max Weber’s posthumous work would have achieved it if it
hadn’t used types which were too complicated. But fundamentally neither in Spencer’s or
in Weber’s time could the limits of the market economy which predominated in the 20s
and 30s be seen” (quoted in Litvan 1991: 266-67).

25. Thus, Sievers (1949: 339-40) argues: “Polanyi is not sufficiently explicit or complete
in his elaboration of the philosophical position he maintains, and ... he resorts more to
anthropological illustration than philosophical demonstration.” For Sievers, Polanyi
attacks the philosophical doctrines of the liberals “not on the philosophical level, but on
the pragmatic and scientific levels.... [Yet] Polanyi's scientific account is inadequate in its
coverage of human societies, and in the evidence brought in support of his
generalizations; moreover, the scientific approach of comparative anthropology can
never be an adequate substitute for the philosophic method in the solution of essentially
philosophic problems” (pp. 332-33).
 174

26. Thus, Dalton (1981: 89, n.1) states: “Polanyi's earlier writings in English, German,
and Hungarian were not on the topics which we now associate with his name.”

27. With respect to Marx, Hunt (1984) argues that “Marx's study of history was a study
of the historical prerequisites of capital” (p. 7). I think the same can be said for Polanyi as
well: his historical and anthropological studies are directed to an understanding of
prerequisites of the market economy.

28. Therefore, Braudel's criticism that “the motion of the ‘self-regulating market’
proposed in this research—which ‘is’ this or that, ‘is not’ the other, ‘cannot
accommodate’ such and such a deformation—seems to be the product of an almost
theological taste for definition. This market ... is a figment of the imagination” (Braudel
1982: 227) seems to miss the point: even though the self-regulating market is the primary
concern, an adequate understanding of it requires a reference to the conditions in which it
does not exist. That is to say, “this” can be understood better against the background of
the “other.”

29. Of course, final argument attempts at describing social “breakdown” to which

capitalism leads and to give some thoughts about how it should be transcended. This, too,
in varying degrees, exists in all works, with the possible exception of The Livelihood of
Man.

30. A. Giddens takes functionalism as the “doctrine which holds, first, that societies or
social systems have ‘needs’, and second, that identifying the ways in which they meet
these needs constitutes an explanation of why particular, given social processes are as
they are” (Giddens 1981: 16). More generally, Little (1991: 91) defines functionalism as
follows: “Functional explanations seek to explain a feature of society in terms of the
beneficial consequences it has for the larger system.” According to this conception, a
social institution/practice P persists in a social system S because it has the disposition to
produce B which has some benefit for S, with the background assumption that features
that do not have a causal explanation will tend to disappear through the random process
of social development (Little 1991: 94-95). By both of these definitions, Polanyi's
substantivism has strong functionalist tendencies. For a critique of functionalist thought
in the social theory, see Giddens (1984: 293-97).

31. Polanyi's use of a functionalist argument can be explained with the prestige that
functionalism enjoyed in the academic sociology during the 1940s and 1950s, especially
under the influence of Parsons and Merton. Thus, in the TMEE volume, Hopkins (1957)
defends the substantivist approach on the basis of its compatibility with (Merton’s
version of) functionalism, whereas Pearson (1957) emphasizes Parsons’ importance for
substantivist approach. For a brief discussion of the developments in sociology since the
1930s, see “Introduction” of Giddens (1984); for a description and a critique of Parson's
 175

“evolutionism,” see appendix to ch. 5 in Giddens (1984).

32. Note that the tone of this last sentence, if not the whole paragraph, is quite similar to
that of Marx, when he asserts, in his famous Preface to A Contribution to the Critique of
Political Economy, that “mankind thus inevitably sets itself only such tasks as it is able to
solve, since closer examination will always show that the problem itself arises only when
the material conditions for its solution are already present or at least in the course of
formation” (Marx 1970: 21), with the only difference that Polanyi sees this principle as
the “English way,” whereas Marx generalizes it to the whole of humanity. As I argue in
the following chapter, Marx’s historical materialism too should be interpreted in the same
spirit, as emphasizing the “subordination of thought to life.”

33. Although this raises further question of the distinction between “institutions” and
“structures,” given especially the ambiguity of Polanyi's use of the term “institutions”; it
seems possible to follow Giddens in his definition of the institutions as “those practices
which have the greatest time-space extension within [societal] totalities,” and structures
as those “properties which make it possible for discernibly similar social practices to
exist across varying spans of time and space and which lend them ‘systemic’ form”
(1984: 17).

34. In this respect, it appears that Polanyi's and Dewey's understandings of religion are
somewhat different. According to Dewey,
no mistake is greater than to overlook the substantial moral support given
to Individualism in its laissez-faire Liberal career by the heritage
bequeathed from certain religious traditions. These taught that men as
inherently singular or individual souls have intrinsic connection only with
a supernatural being, while they have connection with one another only
through the extraneous medium of this supernatural relationship (Dewey
1946: 3-4).
Yet, for Polanyi, this is simply mysticism:
mysticism is the communion of God and Man; thus it is also the
separation of man from man by God. Mystic man has God at hand; he is
separated by Eternity from his fellow. Mystic experience encompasses
the whole Universe except my neighbor; the mystic Ego has no human
Thou to correspond (EF, 384).

35. He once wrote: “My work is for Asia and Africa, for the new peoples. The West
should bring them spiritual and intellectual assistance; instead the West is destroying the
tradition in the nineteenth century and is even demolishing its Victorian ideals...” (quoted
in Polanyi-Lewitt 1990: 112).
 176

36. Nevertheless, Polanyi's account, is not a purely hermeneuticist one which denies the
category of “causality” altogether in the human sciences. For brief expositions of
hermeneuticist view, see Hollis (1994: 17-19) and Little (1991: 68-69). One of the best
formulations of hermeneuticist position is given by Taylor (1985b: ch. 1).

37. Cf. Sievers (1991) for an emphasis on the critical character of economics with
reference to Polanyi’s work.

38. Taylor's conception of the human being as the strong evaluator is one of the
characteristics that together constitute the “self interpreting animal.” Man as the self-
interpreting animal also implies that individual is essentially a social being. For Taylor,
what the early atomism of the seventeenth century
hides from the view is the way in which an individual is constituted by
the language and culture which can only be maintained and renewed in
the communities he is part of. The community is not simply an
aggregation of the individuals; nor is there simply a causal interaction
between the two. The community is also constitutive of the individual, in
the sense that the self-interpretations which define him are drawn from
the interchange which the community carries on. A human being alone is
an impossibility, not just de facto, but as it were de jure.... On our own, as
Aristotle says, we would be either beasts or Gods (Taylor 1985a: 8).

39. This emphasis upon protecting our freedom attaches a moral meaning to the activity
of living itself in another though related sense, as Polanyi once stated in his review of
Hamlet:
“Hamlet” is about the human condition. We all live, insofar as we refuse
to die. But we are not resolved to live in all the essential respects in which
life invites us. We are postponing happiness, because we hesitate to
commit ourselves to live. This is what makes Hamlet's delay so symbolic.
Life is man's missed opportunity. Yet in the end our beloved hero
retrieves some of life's fulfilment. The curtain leaves us not only
reconciled, but with an accountable sense of gratitude towards him, as his
sufferings had not been quite in vain (Polanyi 1954: 350).

NOTES TO CHAPTER 2

1. For example, in Cook's (1966) classification (mentioned above in note 15 to Chapter

1), both Polanyi and Marx can be placed within the “Romanticist” camp. Likewise,
McCloskey's (1994) comment about Polanyi (mentioned in note 21 to Chapter 1)
 177

emphasizes Polanyi’s “Marxist historical mistake.”

2. Dalton seems to be fascinated with the concept of “paradigm” (Dalton 1981: 88;
1990). For him, for example, in order to understand Polanyi, one must definitely read
Kuhn, for Kuhn shows that “the scientific community's assent is obtained by
demonstrating the explanatory power of paradigm” (Dalton 1975: 69); together with
Popper, to understand “why Marxism is not science (if we mean by science, subjects like
physics and chemistry)” (Dalton 1990: 254); and Wittgenstein, whose “Philosophical
Investigations helps us to unravel the semantic-conceptual strand in the knot of
controversy between Polanyi and his rivals” (Dalton 1990: 254). According to Dalton,
these three writings clarify Polanyi; in this respect, the differences between them do not
matter; for example, he asserts: that “Popper's utter dismissal of Wittgenstein is due
precisely to Popper being concerned exclusively with physical science” (Dalton 1990:
260n).

3. Valensi also quotes this passage from Marx's Grundrisse : “The ancient conception, in
which the human being appears as the aim of production,... seems to be very lofty when
contrasted to the modern world where production appears as the aim of mankind and
wealth as the aim of production”, and asks: “who could tell whether this passage was
written by Karl Polanyi or by Karl Marx?” (Valensi 1981: 9)

4. As we will see shortly, the claim that Polanyi accuses Marx of being committed to the
economistic fallacy is an unfounded one, for Polanyi is aware of the fact that the very
conception which emphasizes the insulation of the economic in capitalism was developed
by Marx himself.

5. Dalton's criticism of Marx is typical in that he never engages into a textual analysis of
Marx's writings, with only one exception, in order to show that Marx was an economic
determinist. The exception is Dalton and Köcke (1983), where Marx's famous “Preface”
to A Contribution to the Critique of Political Economy, the piece which introduces the
terminology of “economic base” and “superstructure,” is used. It is amazing to observe
that most criticisms of Marx rest upon this Preface, which is itself only five pages long,
and almost the entire corpus of Marx's works is ignored. Ironically, a good description of
such an attitude towards Marx is given by Dalton's own words, though he obviously did
not intend to do so: “When we read our opponents we sometimes perform an instant
translation in our heads, a transformation of their words into our own categorical
grooves. The result is to attribute positions to our opponents rather different from the
ones they are actually arguing, and by so doing, to create straw men” (Dalton 1971a: 98).

6. Still, Halperin acknowledges that this might be a little too simplistic. Later she says:
The relationship between Marx and Polanyi is complex. In some ways
Polanyi's work is an interpretation of Marx; in some ways it is an
 178

elaboration, or at least a significant departure; in some ways it is a

critique. A reading of Polanyi enables us to read Marx differently, and
vice versa. The issue is not, simply, whether or not Polanyi was a Marxist
(1984: 268).
I believe this last point, that is, reading of one would enable us reading the other
differently is of greater importance than whether or not Polanyi was a Marxist.

7. Halperin's classification of the “paradigms” prevailing in economic anthropology is

somewhat different from that of Dalton. For Dalton there are three essential paradigms in
economic anthropology: formalist, substantivist and Marxist (Dalton 1975: 73-74),
though Marxism has not achieved a “paradigm” status yet. For Halperin (1988; 1994), on
the other hand, these three are just “schools of thought”; the “paradigms” are “formalist”
and “institutionalist” paradigms. Marx and Polanyi, or the substantivist and Marxist
schools for that matter, belongs to the institutionalist paradigm.

8. Yet, as we have seen above, this passage also suggests that it is possible to separate
“values and motives” and “physical operations” from each other; hence it is possible to
conceive the economic as a separate sphere, a position which is not consistent with
Polanyi's own analysis.

9. But this does not mean that historical materialism cannot be applied to precapitalist
societies; it only means that it “cannot be applied in quite the same manner to
precapitalist social formations as to capitalism. Here we need much more complex and
subtle analyses...” (p. 238), for in precapitalist societies economic laws cannot function
“without the aid of non-economic factors” (p. 231). Still, according to Lukács,
as far as method is concerned, historical materialism was an epoch-
making achievement precisely because it was able to see that these
apparently quite independent, hermetic and autonomous systems were
really aspects of a comprehensive whole and that their apparent
independence could be transcended (p. 230).

10. Besides the position on the place of the “economy,” the views of Polanyi and Lukács
seem similar in other aspects as well. In this regard, two possible connections between
them are the importance of the notion of “totality,” the importance of which for Polanyi
we have already seen, and, though less visible, Lukács's theory of “reification,” the
importance of which will be discussed in the following chapter. Nevertheless, although
this similarity between Polanyi's and Lukács's positions has been noted by different
commentators (e.g., Halperin 1984: 269-70; Block and Summers 1984: 76-77) and there
are some personal correspondences between them in their youth (Lukács 1986: 39, 44-
45, 60, 61, 193), Polanyi himself never mentions Lukács, except that in the Introduction
of their Pluogh and the Pen, Polanyi's wife Ilona Duczyńska praises Lukács for his
 179

“Marxist liberalism” which emphasizes the “humanist component in Karl Marx'

philosophy” (Polanyi and Duczyńska 1963: 25). The similarity between them, I believe,
can be attributed to the fact that both were influenced by Marx (and Hegel).

11. To be sure, this separation [between political and civil society] really
does exist in the modern state. The identity of the civil and political
classes in the Middle Ages was the expression of the identity of civil and
political society. This identity has disappeared. Hegel presupposes its
disappearances (Marx 1975: 137).

12. Hegel's words, as given by Marx, are as follows:

Just as civil society is the battlefield where everyone's individual private
interest wars against everyone else's, so here we have the struggle (a) of
private interests against particular matters of common concern and (b) of
both of these together against the organization of the state and its higher
outlook... (Marx 1975: 101).

13. This “trick” is performed as follows: First, both socialism and capitalism alike are
denounced “as the common offspring of individualism” and then it is turned
effectively against Socialism without any reflection on Capitalism in its
non-Liberal, i.e., corporative forms. Though unconsciously performed,
the trick is highly ingenious. First Liberalism is identified with
Capitalism; then Liberalism is made to walk the plank; But capitalism is
no worse for the dip, and continues its existence unscathed a new alias (p.
367).

14. “‘Man,’ the agent of Marxist narratives, is not the equivalent of Homo Sapiens,
though that agent is biologically enabled to emerge (uniquely) by the species-wide
uniformities of Homo Sapiens” (Margolis 1989: 385).

15. According to Hannah Arendt, “production of life” in Marx should be taken literally;
in other words, labor as the “metabolism” between man and nature is not a metaphor
(1959: 86). That is to say, the category of labor refers to the biological activity of human
beings. Arendt's argument here rests upon her distinction among “labor,” as the
biological attributes of the human body, “work,” as the activity which occurs in the
world of artificial things as distinct from natural surrounding, and “action,” which is the
activity occurring between men without the intermediary of things or nature, the three
activities that constitute the “human condition.” Although it is true that Marx does not
distinguish between these three activities, the concept of labor does not refer merely to
the biological activity; it includes all the three: in Marx labor is what characterizes the
“human condition.” Also, although Arendt distinguishes between the “human nature” and
 180

the “human condition,” I use both terms interchangeably because the notion of praxis, as
the objectification of the human essence, also captures the meaning of the human
condition in Arendt's sense; that is, human beings “are conditioned beings because
everything they come in contact with turns immediately into a condition of their
existence” (1959: 11). I believe such a conception of praxis also implies Taylor's
definition of human beings as the “self-interpreting animals.”

16. Thus, Marcuse (1973) considers labor as the process of objectification, where
objectification is considered “only what is other than the self.”

17. Marx himself never used the term historical materialism; both the terms “historical
materialism” and “materialist conception of history” are not found in Marx's writings at
all. Engels first used the latter expression in 1859 and the former in 1892 (Manicas 1987:
100). Nevertheless, the term can be used as a convenient shorthand for Marx's account.

18. Nevertheless, there is a disagreement among Polanyi's followers about Polanyi's

position on evolution. We have already seen Dalton's claim that Polanyi rejects an
evolutionary account based on a “stage” theory. On the other hand, according to Stanfield
(1986: 29), Polanyi's social theory follows evolutionary lines, and in this respect Polanyi
shares a common conception with both American institutionalism and Marx, whereas
Fusfeld believes that “Polanyi's general economic history ... contested the evolutionary
bias of mainstream economic theory” (1988: 266). Yet, Sievers (1988: 262), as an
attempt to reconcile this disagreement, claims that evolution “may be discontinuous, and
it may be catastrophic.” That is, Polanyi's evolution can be conceived as a kind of
“punctuated equilibrium.” In this regard we can cite Polanyi's own words: “It is mere
prejudice to assume that in every development the smaller-sized specimen was
necessarily anterior to the larger-sized. To postulate such a sequence in history is no
more than an uncritical extension of the law of organic evolution” (LM, liii). Such an
account of “unconscious growth and organic continuity,” according to Polanyi,
would necessarily obscure some aspects of economic development vital
to men in the present phase of transition. For the dogma of organic
continuity must, in the last resort, weaken man's power of shaping his
own history. Discounting the role of deliberate change in human institu-
tions must enfeeble his reliance on the forces of the mind and spirit just as
a mystic belief in the wisdom of unconscious growth must sap his
confidence in his powers to reembody the ideals of justice, law, and
freedom in his changing institutions (LM, liv).

19. For example, in Capital, referring to the Preface to the Critique, we read:
In the opinion of the German-American publication this is all very true
for our own times, in which material interests are preponderant, but not
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for the Middle Ages, dominated by Catholicism, nor for the Athens and
Rome, dominated by politics. In the first place, it strikes us odd that
anyone should suppose that these well-worn phrases about the Middle
Ages and the ancient world were unknown to anyone else. One thing is
clear: the Middle Ages could not live on Catholicism, nor could the
ancient world on politics. On the contrary, it is the manner in which they
gained their livelihood which explains why in one case politics, in the
other case Catholicism, played the chief part. For the rest, one needs no
more than a slight acquaintance with, for example, the history of the
Roman Republic, to be aware that its secret history is the history of
landed property. And then there is Don Quixote, who long ago paid the
penalty for wrongly imagining that knight errantry was compatible with
all economic forms of society (Marx 1976: 176n).

20. In this regard, Tönnies (1974), whose importance for both Polanyi and Marx will be
discussed in the next chapter, argues (in 1894) that “...it must be remembered that Marx
himself never publicly stated that those sentences in the preface constituted a theory” (p.
76). According to Tönnies,
all those groups of the phenomena Marx referred to as "ideological
forms" have their own intrinsic history and causality. Had Marx meant to
deny this, he would hardly have spent such a tremendous research effort
on the history of political economy, a comparatively minor form of
scientific consciousness. There is also no reason to assume that he was so
foolish as to ignore that political action may be determined by scientific
theories, or that it may be a determinant in social life with at least a
modifying effect on it (p. 79).
Yet, for Tönnies, what this “architectonic analogy” (p. 79), which implies that
“the upper level is the upper by virtue of the fact that it is supported by the lower level”
(p. 80), in fact says is that “the higher activities of life need the lower ones, but the lower
ones do not need the higher ones” (p. 70). Still, the assertion that for Marx “the material
side has no mental quality, and that the mental side has no material quality” is a “gross
error” (p. 80). The Preface, says Tönnies, should be taken to mean that the way the
“higher things” such as the arts and the sciences, and the “nobler cultural pursuits” are
accomplished are conditioned by the manner and extent of doing the “mundane things,”
i.e., production of food, clothing and shelter (p. 81).

21. According to Taylor, expressivism has four demands: the unity of man as forming an
indivisible whole so that the separation of different levels (like life as against thought,
sentience as against rationality, knowledge as against will) is rejected; freedom;
communion with man and nature. It can be demonstrated that these four demands occupy
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a crucial place in Marx s work as well. Nevertheless, consistent with his hermeneuticist
position, Taylor believes that Marx's synthesis between these expressivist aspirations and
Enlightenment thought, especially with its emphasis on the laws of nature and
perfectibility of society, or his conception of teleology encompassed within causality we
may add, is not viable, for these two are incompatible. Yet, it seems that Marx takes this
contradiction between causality and teleology as the part and parcel of being human.

22. Yet, this passage can also be interpreted in another way: it shows the “alienation of
tradition,” as A. Schaff (1980: 136) argues. In other words, this is a form of reification. In
this case, as Marx argues with respect to the role played by money in capitalism,
a social relation of production appears as something existing apart from
individual human beings, and the distinctive relations into which they
enter in the course of production in society appear as the specific
properties of a thing—it is this perverted appearance, this prosaically real,
and by no means imaginary, mystification that is characteristic of all
social forms of labour positing exchange-value (Marx 1970: 49)
We will return to this issue in the next section.

23. Interestingly, in this regard what Karl Popper, in his Open Society and Its Enemies,
says is as follows: “I owe the suggestion that it was Marx who first conceived social
theory as the study of unwanted social repercussions of nearly all our actions to K.
Polanyi who emphasized this aspect of Marxism in private discussions (1924)” (Popper
1950: 668, n. 11). He also says it was Polanyi again who argued (in 1925) that physical
sciences are based on “methodological nominalism” whereas “social sciences must adopt
essentialist ('realistic') methods” (p. 485n). Although Popper at that time is critical about
“methodological realism,” later in his Unended Quest, where he acknowledges that
Polanyi was right in his insistence on the methodology of social sciences as realistic, he
says that “I stood closer to ‘realism’ than to nominalism” (Popper 1976: 20-21). Yet, we
should stress that the hypothesis of unintended consequences by itself is not a
distinguishing feature of Marx's (or of Polanyi's for that matter) account, as Popper's
attitude towards this hypothesis shows. At least since Mandeville, this hypothesis has
been an integral part of social theory. For an interesting discussion of how different and
often contradictory claims about capitalism are founded on the mechanism of unintended
consequences, see Hirschman (1982).

24. In this connection, we can also mention what Macmurray (1935: 216-17) says about
Marx. According to him, Marx’s quest is to find an answer to Rousseau’s problem in the
opening chapter of the Social Contract: “‘Man is born free, but everywhere he is in
chains.’ Marx asserts the same antithesis. But whereas Rousseau goes on to say, ‘How
this come about, I cannot tell,’ Marx demands an account of how it came about.” That is,
 183

says Macmurray, the crucial question for Marx can be framed as follows: “How does it
come about that man, who is in the essence of his nature free and self-determined,
becomes in the process of his history unfree and determined by the material forces of his
environment?” According to Macmurray, the economic interpretation of history is
Marx’s answer to this question.

25. Actually, this is a very common strategy to criticize Marx. A recent, “contemporary”
critique of Marx by Giddens (1981; 1985), for example, uses exactly the same strategy,
albeit with a different terminology. For Giddens, in his historical materialism (of the
Preface) Marx emphasizes the importance of “allocative resources” (broadly speaking
material resources of production, actually a category of neoclassical economics) but he
omits the “authoritative resources” (“non-material resources” concerning power relations
and capacities of human beings). According to Giddens, in “class societies,” i.e.,
capitalism and “socialism,” allocative resources are dominant whereas in class-divided
and tribal societies (“precapitalist” societies) authoritative resources are more important.
Despite the terminology, this critique does not seem to be as “contemporary” as it is
claimed at least in this respect; this is, for example, exactly the same argument as the one
that Dalton, among others, uses to criticize Marx: Marx is generalizing the categories of
the market societies to nonmarket societies; in this respect there is no difference between
Marx and, say, neoclassical economics.

26. For this reason, Marx argues that “true”

communism, as fully developed naturalism, equals humanism, and as

fully developed humanism equals naturalism; it is genuine resolution of
the conflict between man and nature, and between man and man, the true
resolution of the conflict between existence and being, between
objectification and self-affirmation, between freedom and necessity,
between individual and species. It is the solution of the riddle of history
and knows itself to be the solution (Marx 1975: 348).

27. Instead of “integral essence,” Ricour uses the term “total essence”: He says: “the
German for ‘total essence’ is Allseitiges Wesen, therefore an all-sided essence. It is the
all-sided as opposed to the one-sided” (1986: 62).

28. Yet, it should be said that the concept of “totality” is a highly loaded term and has
been used in quite different ways, as can be seen from Jay’s (1984) discussion of the
“adventures” of the notion within Western Marxism. Here, without having a detailed
discussion of the term, I simply use it in the sense of the “totality” of human essence:
human beings are inseparable from both nature and society, and as such, they are not to
be characterized by “economic” motives as distinct and opposed to other motives. I
believe it is this sense of the notion that Polanyi shares with Marx.
 184

29. In my opinion, the best characterization of Polanyi’s attitude towards Marxism is

given by György Litvan: “This ambiguous relationship—sharp criticism of the
communists coupled with a magnetic attraction to the movement (especially during crisis
situations—stayed with Polanyi all his life” (1990: 34).

30. It is interesting to observe that Polanyi usually considers Marx, especially his early
writings, in connection with Christianity. For example, in another comment on Marx's
Manuscripts he asserts that “for the theologian Marxism is essentially an effort to
determine the actual relationship of mankind to God. Its preoccupation is with the
definition of that which Christians call ‘the fullness of time.’ It is an attempt to relate
human time to eternal time” (quoted in Nagy 1994: 95-96). We also see that almost the
whole volume which includes Polanyi's essay EF, one of the editors of which was
Polanyi himself, seems to be a response to the publication of the Manuscripts from a
“Christian” point of view. For example, in that volume, John Macmurray, whose
“Christian socialist” views were to influence Polanyi to a great extent, examines Marx's
critique of religion on the basis of his early writings, especially the Manuscripts
(Macmurray 1935). Also in this respect, we can mention Erich Fromm's interpretation of
Marx's concept of man, for he emphasizes the continuity of the concept of man from the
Judaeo-Christian tradition to Marx (e.g., Fromm 1961; 1962). Perhaps Polanyi's
comment, in a letter written to Fromm in 1962, that “by reclaiming Marxism for the
‘West’ you have infused a life-saving ingredient into both” (quoted in Polanyi-Lewitt and
Mendell 1987: 12) might be considered within this context. That is to say, as was
mentioned in the first chapter, it seems that Christianity, especially with its emphasis on
the connectedness of man to his fellow men, symbolizes for Polanyi the positive aspects
of the “Western” civilization and, we might add, Marx too should be considered as an
important representative of this civilization.

31. In fact, Marx's analysis of money fits much better into Polanyi's framework than his
own comments in the Great Transformation. Here Polanyi uses the “fictitious” character
of money as an analogy: In terms of their effects, commodification of both land and labor
created a threat for society, whereas money poses a threat to “productive enterprise, the
existence of which was imperiled by any fall in the price level caused by use of
commodity money” (GT, 195). That is, money's role is characterized by its importance in
maintaining price stability. In this sense, whereas the creation of the fictions of labor and
land would have disastrous effects on the society directly, for they are violations of
humanity, money does not appear in this connection. In other words, money and the
other two are not at the same level of abstraction. On the other hand, in Marx, money is
just like nature and labor power: it is, being the “alienated capacity of mankind,” an
abstraction, a pure “fiction” that has the dissolving effect of the social bond. In other
words, adopting this interpretation, money can be given an important role in the “double
movement,” to which we will return in the next chapter. By now, we can indicate the
interesting fact that Polanyi includes money among the fictitious commodities only in the
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Great Transformation; in his later works, he never mentions money as a fictitious

commodity. For example, in LM, his last work, he speaks of commodity fictions only “as
applied to labor and land” (p. 9); again, in OMM, we read: “The crucial step was this:
labor and land were made into commodities, that is, they were treated as if produced for
sale” (p. 110). Yet, these remarks do not reduce the importance of money in Polanyi,
especially its significance for the production itself and, even more crucial, for the
definition of nation-states and its role in the crisis. I will discuss these in the next chapter.

32. Of course, both the distinction between labor and leisure time and, even more
important than this, “consciousness” of time itself presuppose wage labor, and hence they
are both products of capitalism. For example, according to Fromm, towards the end of
the Middle Ages,
the concept of time in the modern sense began to develop. Minutes
become valuable; a symptom of this sense of time is the fact that in
Nürmberg the clocks have been striking the quarter hours since the
sixteenth century.... Time was so valuable that one felt one should never
spend it for any purpose which was not useful. (1941: 58)
Along the same lines, Giddens (1981: ch. 6) describes the increasing “commodification”
of time with the development of capitalism.

33. A. Rotstein (1990: 108) says: “I suspect that in the Marcuse metaphors there is
something of Polanyi's diagnosis: the integral freedom and central promise that
constituted Western personality has been lost.” Yet, for him, although the diagnosis is
similar, the cures given by Polanyi and Marcuse differ considerably because of the
differences between their vantage points.

NOTES TO CHAPTER 3

1. According to Michael Hechter (1981), Polanyi’s thesis is that since the market
operates on the basis of the principle of self-interest, not on solidarity, “the group cannot
long survive intact” (p. 411). However, Hechter does not consider this a critique of
utilitarianism because he argues that invisible hand argument is not consistent with
utilitarianism; according to him, utilitarianism based on the idea of self-interest,
necessarily leads to conflict between individuals in the society and to the intervention of
 186

state as “the only institution capable of preventing social unrest by intervening in the
market place” (Hechter 1981: 414).

2. Although Polanyi usually talks about the “self-protection of the society,” which makes
the double movement appear as a struggle between two abstract entities, “market” on the
one side and “society” on the other, as Block and Sommers (1984, pp. 71-72) suggest,
this should be considered as a “metaphor,” operating as a “heuristic” but carrying no
specific causal argument by itself, rather than implying that society has its own
“consciousness” independent of the individuals that constitute it.

3. Between the sixteenth and the nineteenth centuries, argues Polanyi, the common law in
England shifted its role from protecting the owner’s right to improve the profitability of
the land to opposing to such a use and thereby was effective in protecting “the habitations
and occupations of the rural classes against the effects of the freedom of contract” (GT,
182).

4. The protective countermovement regarding land was far more successful in the
Continent, where the military and the higher clergy were the allies of the landed classes,
for it succeeded in stabilizing the European countryside (GT, 185). Nevertheless, the
reactionary solution offered by these classes against the perils of the market economy and
“its corollary, constitutional government,” would prove fatal for the Continent in the
1920s, for this solution excludes the “public liberties and parliamentary rule” (GT, 185).

5. According to Polanyi, “The Ten Hours Bill of 1847, which Karl Marx hailed as the
first victory of socialism, was the work of enlightened reactionaries” (GT, 166). This
view seems to be shared by Tönnies as well. When he commented upon Marx’s position
on the English factory legislation in the nineteenth century, Tönnies argues that “the
legislation for the protection of the worker had been the first conscious reaction of
society (the 'Gesellschaft') against the tendencies of the capitalistic mode of production”
(Tönnies 1921: 127).

6. “Politically, the British working class was defined by the Parliamentary Reform Act of
1832, which refused them the vote; economically, by the Poor Law Reform Act of 1834,
which excluded them from relief and distinguished from the pauper” (GT, 166).

7. However, in this regard, there is a difference between the working class movements in
England and the Continent:
Since 1830, if not since 1789, it was part of the Continental tradition that
the working class would help to fight the battles of the bourgeoisie
against feudalism, if only— as the saying ran—to be cheated by the
middle class of the fruits of victory. But whether the working class won
or lost, its experience was enhanced, and its aims raised to a political
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level. This was what was meant by becoming class conscious. Marxian
ideologies crystallized the outlook of the urban worker, who had been
taught by circumstances to use his industrial and political strength as a
weapon of high policy. While the British workers developed an
incomparable experience in the personal and social problems of
unionism, including the tactics and strategy of industrial action, and left
national politics to their betters, the Central European worker become a
political socialist, used to handle problems of statecraft—primarily, it is
true, those which concerned his own interests, such as factory laws and
social legislation (GT, 174-75).
Owing to this effective role in the legislation process, the Continental laborer had
not passed the Speenhamland or the Poor Law Reform phases, thus managing to escape
the cultural catastrophe similar to the one in England just before the industrial revolution
(GT, 175). He achieved the protection he needed mostly by legislative action while his
counterpart in England relied more on “voluntary association—trade unions—and their
power to monopolize labor” (GT, 176). For this reason, says Polanyi, “on the Continent
trade unions were a creation of the political party of the working class; in England
political party was a creation of the trade unions. While on the Continent unionism
became more or less socialist, in England even political socialism remain essentially
trade unionist” (GT, 176).

8. Trade unions, according to Polanyi, are not simply organizations which only affect the
determination of the price of labor power; they also play a cultural and moral role in
maintaining workers’ minimum standards, be they economic or moral (GT, 231). In an
earlier writing, Polanyi characterized the trade union also as an organization that could
sustain “the modality of addressing the problem of the inner, subjective assessment of
organized workers concerning Arbeitsleid” (quoted in Polanyi-Lewitt, 1994: 128).

9. For example, strike, “this normal bargaining weapon of industrial action, was more
and more frequently felt to be a wanton interruption of socially useful work, which, at the
same time, diminished the social dividend out of which, ultimately, wages must come”
(GT, 230).

10. For this reason, Polanyi argues that in England, “it became the unwritten law of the
Constitution that the working class must be denied the vote.... Inside and outside
England, from Macaulay to Mises, from Spencer to Sumner, there was not a militant
liberal who did not express his conviction that popular democracy was a danger to
capitalism” (GT, 226). Here, there is a contradiction between “legitimacy” and
“accumulation”; although popular democracy would ensure the legitimacy of the political
system in its claim that it represents all sections of the society, it would pose a danger of
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disrupting the working of the system and therefore of threatening capital accumulation.
Since this is actually a contradiction of the capitalist state in general, we will return to
this issue in the following section. On the other hand, regarding the importance of the
popular democracy, we can mention Polanyi’s emphasis on the fact that the right to vote
by itself is not sufficient to transcend the institutional separation between the economic
and the political, as the American Constitution itself shows. According to Polanyi, the
American Constitution from the very beginning,
isolated the economic sphere entirely from the jurisdiction of the
Constitution, put private property thereby under the highest conceivable
protection, and created the only legally grounded market society in the
world. In spite of universal suffrage, American voters were powerless
against owners (GT, 225-26).

11. It is this incompatibility of the central banking with the gold standard, according to
Polanyi, which led the liberals (e.g., Mises) to propose that Central Banking must be
relinquished, in order for the international gold standard to be self-regulative (GT, 195).

12. Sievers (1949: 344-47) characterizes the history of the market capitalism with the
following turning points: strain, which begins in 1879, marking the date at which the
protectionist movement started to inhibit the self-regulating character of the market
mechanism; collapse, which refers to the collapse of the Concert of Europe, thus
triggering the events that led to the war; rejuvenation, which refers to the attempt to
reestablish the international political order and the gold standard; almost immediately
followed by the fourth phase, strain, which is characterized by the crisis and the rise of
the popular government; and finally, collapse and abrupt transformation in the form of
fascism, Russian five-year period, and the New Deal.

13. At the international level, this fear is so great that fascist Germany’s “greatest asset ...
lay in her ability to compel the countries of the world into an alignment against
Bolshevism” (GT, 246).

14. In this regard, Polanyi gives utmost importance to the working class government in
the “Red Vienna,” within a fifteen-year period following the World War I, during which
Polanyi himself had lived there. This period is characterized by a massive public
spending program to support the working class. In a comparison of this period with that
of Speenhamland, Polanyi argues:
While Speenhamland caused a veritable disaster of the common people,
Vienna achieved one of the most spectacular cultural triumphs of Western
history. The year 1795 led to an unprecedented debasement of the
laboring classes, which were prevented from attaining the new status of
industrial workers; 1918 initiated an equally unexampled moral and
 189

intellectual rise in the condition of a highly developed industrial working

class which, protected by the Vienna system, withstood the degrading
effects of grave economic dislocation and achieved a level never
surpassed by the masses of the people in any industrial society (GT, 288).

15. Peasantry was used against the working class movement for the protection of the
market system, because according to Polanyi the fear of Bolshevism “made their political
position impregnable.” However, the fear “was not fear of a working class dictatorship—
nothing faintly similar was on the horizon—but rather the dread of a paralysis of market
economy, unless all forces eliminated from the political scene that under duress, might
set aside the rules of the market game” (GT, 188). As long as the peasants were the only
class that could be used against these forces, their prestige was high, but
as soon as the consolidation of the power of the state and—even before
that—the forming of the urban lower middle class into storm troops of the
fascists, freed the bourgeoisie from dependence upon the peasantry, the
latter’s prestige was quickly defeated. Once the “internal enemy” in town
and factory had been neutralized or subdued, the peasantry was relegated
to its former modest position in industrial society (GT, 188).

16. Such as “the spread of irrationalistic philosophies, racialist esthetics, anticapitalist

demagogy, heterodox currency views, criticism of the party system, widespread
disparagement of the ‘regime’ or whatever was the name given to the existing democratic
set-up” (GT, 238).

17. Yet, fascism cannot be seen as a “revolution” either:

If a ‘revolutionary’ situation is characterized by the psychological and
moral disintegration of all forces of resistance to the point where a
handful of scantily armed rebels were enabled to storm the supposedly
impregnable strongholds of reaction, then the “fascist situation” was its
complete parallel except for the fact that here the bulwarks of democracy
and constitutional liberties were stormed and their defenses found
wanting in the same spectacular fashion (GT, 239).

18. For a brief comparison of Polanyi's analysis of fascism and other liberal and Marxist
theories of fascism, see W.L. Goldfrank (1990). For the author, “Polanyi's analysis is
more complementary than antithetical to these better known and often useful approaches”
(p. 89).

19. For example, Neumann (1944), Fromm (1941), Lowenthall (1945), Horkheimer
(1973), among others, can be mentioned in this connection. All of these analyses, being
 190

complementary to each other, more or less focus on similar themes. For a recent account
along similar lines, see Hobsbawm (1994: ch. 4).

20. The devices that were used to achieve this end, the creation of atomistic individual
who is nothing but an automaton, were propaganda and terror. For Neumann, violence,
through terrorizing, and at the same time attracting, is the very basis upon which the
National Socialist society is based, a device which was used
to create a uniformly sado-masochistic character, a type of human being
determined by his isolation and insignificance, who is driven by this very
fact into a collective body where he shares in the power and glory of the
medium of which he has become a part (Neumann 1944: 402).
For a detailed account of the sado-masochistic character, who forms the “human-
basis” of fascism, see Fromm (1941).

21. For the importance of terror in creating “atoms,” see Lowenthall (1945).

22. In the National Socialist propaganda, “Things happen—they are not done. Fate,
providence, objective natural forces produce things: German victories. The loss of man's
active role in society is expressed by a language that negates activity and stresses the
impersonality of the noun and of the ‘it’” (Neumann 1944: 439).

23. Although Polanyi criticizes fascist philosophy, as exemplified in the writings of

Othmar Spann, who defended corporatism and the social “whole” which is “an
independent reality existing prior to the individual...” (quoted in Neumann 1944: 231),
between the time of the writing of Polanyi's analysis on fascism (1935) and 1940, Spann
theories were rejected by National Socialists themselves; even the director of the institute
for estate organization which promotes Spann's theories was sent into a concentration
camp (Neumann 1944: 232). However, this does not invalidate Polanyi's analysis, for the
burden of the argument does not lie on the critique of Spann; what Polanyi was
describing, using the framework developed by Marx, was a real process which is
pervasive in capitalism.

24. For this reason, Polanyi argues in the opening page of his essay on fascism written in
1935: “At the present juncture ... the Churches, though predominantly reactionary, are
unconsciously bearing witness to that Christian content which they have in common with
Socialism. Thus, not in spite of its antagonism to Marxian Socialism, but in consequence
of it, is National-Socialism attacking them. This, however, is precisely our contention”
(EF, 361). For Polanyi, “the common attack of German Fascism on both the
organisations of the working class movement and the Churches is not a mere
coincidence. It is a symbolic expression of that hidden philosophical essence of Fascism
which makes it the common enemy of Socialism and Christianity alike. This is our main
 191

contention” (EF, 359).

25. In this regard, Brown asserts that this is one aspect of Polanyi’s theory that does not
exist in Marx: “Marx’s paradigm, or at least that of orthodox Marxism, abstracted from
reality and framed the analysis of capitalism within only one of Polanyi’s two
movements” (1990: 47). That is, Marx is limited only to the extension of the market in
capitalism and ignored the protective countermovement. According to Brown, Marx’s
analysis is confined within a class reductionist framework which is defined by the
antagonism between the two classes, whereas Polanyi’s double movement precludes such
a binary opposition, for state interventions prevented capitalism from being a dualistic
society. However, although it is true that Marx does not specifically mention the
countermovement in his analysis of the capitalist mode of production in Capital, the
double movement is quite compatible with the framework that Marx developed for the
analysis of the capitalist society. On the other hand, even a cursory reading of Capital
would suffice to see the allegation that Marx’s analysis is class reductionist, in the sense
that it is based on a binary opposition, thus ignoring the society is an unfortunate claim.

26. Nevertheless, in The Livelihood of Man, when Polanyi was discussing ancient
Greece, he uses class struggle as a framework. For example, he says:
The class struggle between the democrats and the oligarchs, which plays
so prominent a role in Athenian history, may perhaps best be understood
in a relation to those three institutional patterns [i.e., redistribution,
reciprocity and market]. The primacy of the principles underlying
redistribution was beyond argument, as it had been with the tribe; the
market—a later development—was never more than an accessory (p.
166);
Likewise, “oligarchy, Aristotle says, is the rule of the wealthy on account of their wealth,
while democracy is the rule of the poor” (p. 172). Again,
The conflict between Cimon and Pericles is pointedly expressed in terms
of the contrast between the two centers of redistribution: manorial oikos
and democratic polis. Pericles—the democratic leader—was kept from
power by Cimon's wealth, redistributed through the conservative leader's
household and by his generous performance of leiturgies (p. 178).
These remarks suggest that even in ancient Greece, class struggle did have an
economic origin.

27. In this connection, another aspect of the protectionist countermovement which needs
to be emphasized, is the spontaneous character of this movement. In other words,
contrary to the beliefs of the liberals, there was no “collectivist” conspiracy which aimed
at destroying the market by intervening into it: “While laissez faire economy was the
 192

product of deliberate state action, subsequent restrictions on laissez faire started in a

spontaneous way. Laissez faire was planned; planning was not” (GT, 141).

28. There has always been a close association between the nation-states, themselves
products of capitalism, and “societies,” even to the extent that the “‘capitalist society’ is a
‘society’ only because it is also a nation-state” (Giddens 1986: 141). That is to say, the
term “society” has come to be identified with the people living within the boundaries of a
nation-state and thus the “discovery” of the society goes hand in hand with the
establishment of the nation-state. For a discussion of the ambiguities of the term
“society” and its relation to nation-states, see Giddens (1984: 163-68; 1986: 135-36).

29. The contradiction between these two functions of the capitalist state, ie., between
“legitimization” and “accumulation,” has been examined by a number of authors, such as
O’Connor (1973) and Wolfe (1977). According to this framework, the state must fulfill
these two contradictory demands, that is, it must create the conditions for both
accumulation and social harmony. However, the state’s use of its coercive force openly
to help one class to ensure capital accumulation at the expense of the others would
undermine its legitimacy (O’Connor 1973: 6). In this regard, we can mention an
interesting solution that has been offered by Tönnies, in a passage predicting the National
Socialist “solution” as early as 1887. In this passage Tönnies states that under capitalism
“the state is itself Gesellschaft or the social reason which is implied in the concept of a
reasonable thinking agent of Gesellschaft.” The necessity of this “thinking agent” for the
Gesellschaft to have and express a common will require that the state invests some of the
individuals in the society with its powers, that is, the bureaucracy is this agent, which is
able to delegate further. “In the end,” goes on Tönnies,
every person should participate in the will of the state by being thus
indirectly dependent on it. This idea is, within limits, realized in the
system of administration. If generalized, the entire production of goods
would become part of the administration and this would constitute in its
concept a possible form of (seeming) socialism. Such socialism can be
conceived of without the corollary of an elimination of the fundamental
social class structure. The state would represent a monopolistic coalition
of capitalists; production would continue to be undertaken for their
benefit (Tönnies 1988: 217).

30. According to Kapstein, the nation-state is abandoning the working people exactly at a
time when they need the state most as a buffer from the world economy in its
globalization phase, and he argues that in order for the political support for the
globalization phenomenon continue, this social contract should not be broken (1996: 17)

31. For example, Giddens (1994: 136-37) identifies three structural sources of welfare
 193

state: 1) enforcing labor contracts; 2) creation of national solidarity in the nation-state

building process; 3) management of risk, especially in the form of Keynesian policies.
These three aspects seem to function to protect capitalist production process, displaying
the “economic” character of the capitalist society once again. On the other hand, with
respect to the risk management function, we can mention Stanfield’s argument that the
modern corporation too can be seen as a part of the protective movement, for the
“principal animus behind the corporate revolution is to urge stabilize and control the
exigencies of the corporate environment, and these exigencies are largely the
uncertainties concomitant to the operation of the market mechanism” (1986:119).

32. Unfortunately, this aspect of the double movement and the dual role that the state
plays in it seems to be overlooked by many commentators of Polanyi. For them the
protectionist countermovement essentially takes place as state interventions. For
example, according to Mendell (1990: 76), “... the double movement of private
accumulation and state intervention necessary to counteract the devastation heaped on
society by the very process of accumulation.” Likewise, although Stanfield (1986: 118-
19) acknowledges that the “protective response is by no means limited to action through
the state apparata,” MacClintock and Stanfield (1991: 58) still consider the protective
response as consisting of state intervention exclusively. Here they see the role of the state
in Polanyi’s double movement as lying within the general framework that Daniel Bell
(1976) proposes. According to this framework, the three realms characterizing the
contemporary society, with the “axial principles” that govern these realms, are the
techno-economic structure, with efficiency, the polity, with equality, and the culture,
with “self-realization” (or “self-gratification”) (Bell 1976: 10). Bell proposes, as a liberal
conception, that the state, being an institution capable of bridging over these three
realms, represents a public household embracing both the domestic household and the
market economy, and seeks to utilize market mechanism “within the explicit framework
of social goals” (1976: 26). On this conception the state would function to affirm the
civitas, “the spontaneous willingness to make sacrifices for some public good” and it
would be based on a “political philosophy that justifies the normative rules of priorities
and allocations in the society,” two essential elements which the Western society lacks
(Bell 1976: 25). On the other hand, almost the same threefold separation, with their
corresponding moral values, is adopted by Wolfe (1991), but Wolfe defends the view that
the realm of the civil society with its moral code emphasizing personal freedom, derived
from the thinkers representing the Scottish Enlightenment thought, should be safeguarded
both against the market and against the state.

33. For an important discussion of the state as an abstraction, or the form of alienation,
see Schaff (1980: 106-36).

34. For Macmurray, this aspect also provides a key to understand fascism:
 194

The undialectical effort to negate the formal democracy of the bourgeois

State must deny the truth of democracy as Idea. It therefore sees merely
the empirical antithesis and seeks to create a political structure which
reflects the actual inequality and lack of freedom in the contemporary
structure of the private life of society. Such an effort produces the Fascist
society, which takes the form of an effort to stabilise the existing social
order, and so to bring the dialectical process of the self-realisation of
democracy to a stop. The fascist State is the contradictory of the Liberal
State. As the latter is purely ideal, so the former is purely empirical. But
the reality is both at once in their antithesis and opposition. Therefore, the
Fascist no more than the Lliberal can achieve his intentions, and must
achieve, against his will, the professed intention of the Liberal. The
simple reason for this is that democracy is the essence and truth of all
political constitution, and that humanity, whether we like it or not, is
developing towards the realisation of its own essence. The Fascist could
not realise his intention if he could put a stop to the process of human
evolution. In fact, he can only produce a particular stage in that revolution
(1935: 228).

35. Of course, this should not be taken to mean that only or the most important function
of these institutions that can explain the existence of them is to affirm individuals’
sociality. The same institution can serve more than one function at the same time. Even it
can be said that, according to Polanyi, “no institution ever survives its function—when it
appears to do so, it is because it serves in some other function, or functions, which need
not include the original one” (GT, 183).

36. It can be argued that the basis of ideology as “false consciousness” is formed by the
fact that the very reality itself in capitalism is inverted or “false”; that is, ideology is just
a “reflection” of this inverted reality which forms the “common denomination” (Kosík
1963: 43) in the society that unites, say, a capitalist and a worker in their vision of the
reality. On the other hand, from a functional point of view, this vision also implies a
class-dependent position: even though it is created by the reality, mystified social
relations are not only reflected uncritically, but they are also idealized, naturalized and
eternalized through the reproduction of ideology. In this regard, however, it should be
emphasized that although they have the potential not to fall under the influence of it,
individuals participate in the reproduction of ideology in an active way, through the
attempts (of self-deception, wishful thinking, or wilful ignorance) which are for the most
part intentional. For an interesting discussion of this individual reproduction of the
ideology, see Whisner (1991, 1989).

37. For Marx’s critique of religion, this “heart of a heartless world,” on the basis of
alienation, see Marx (1975: 243-57) and Macmurray (1935).
 195

38. Thus, Eric Hobsbawm’s (1994) criticism that “Polanyi exaggerated the logic of
capitalism” by emphasizing economic motives. According to Hobsbawm,
capitalism had succeeded because it was not just capitalist. Profit
maximization and accumulation were necessary conditions for its success
but not sufficient ones. It was the cultural revolution of the last third of
the century which began to erode the inherited historical assets of
capitalism and to demonstrate the difficulties of operating without them
(1994: 343).
Yet, the fact that capitalism needs those social and cultural values to operate, as is
argued above, does not itself constitute a critique of Polanyi, for Polanyi’s notion of
double movement, within the framework of fetishism, also embraces this phenomenon
too.

39. Such a society, in which “the concept of a ‘perfect market for babies’ as the
‘solution’ to the abortion debate may be deemed perfectly acceptable,” argues Bienefeld,
“was deemed ‘impossible’ by Polanyi and defined as ‘barbaric’ by Marx many years
before, but it will not be regarded in this way by those who have come to accept it as the
best that is humanly available” (1991: 27).

40. This contradiction is aptly described by Einstein. For him, the essence of the crisis of
our time “concerns the relationship of the individual to society. The individual has
become more conscious than ever of his dependence upon society. But he does not
experience this dependence as a positive asset, as an organic tie, as a protective force, but
rather as a threat to his natural rights, or even to his economic existence” (1949: 5).

41. Pappenheim's claim that “[the] social framework of modern industrialized nations
described by Marx is in many ways the archetype of Tönnies's Gesellschaft” (1959: 81)
was acknowledged by Tönnies himself, in the preface of the first edition of Gemeinschaft
und Gesellschaft, where he mentions the three outstanding authors that have influenced
his own thinking most: Sir Henry Maine, Otto Gierke and “most profound social
philosopher, Karl Marx.” He also says that what he attempted was to express the same
idea with his own conceptualization (Tönnies 1921: xv). On another occasion (in 1894),
Tönnies asserts: “It will not take much longer before the smashing impact Marx has made
on economic theory will be conceded as readily as the impact made by Kant on the
theory of knowledge and by Darwin on zoology has become a matter of general
agreement” (Tönnies 1974: 74-75).

42. For example, in a section titled “Normal Concepts and Deviations Therefrom,” he
remarks that “no natural will can ever occur empirically without rational will by which it
finds expression, and no rational will without natural will on which it is based” (p. 141).
 196

43. This historical character of Tönnies's theory has sometimes been overlooked in the
sociological literature. For example, Durkheim, in his review of Gemeinschaft und
Gesellschaft, argues that though these two groups are different from each other, “there is
no difference in nature between these two varieties of the same genus” (Durkheim 1989:
147). For an important discussion of the historical character of Tönnies’s framework and
its relations to Marx’s analysis of capitalism, see Pappenheim (1959:76-87). In this
regard, one can argue that Giddens (1981, 1984) too fails to recognize the importance of
the historical aspect of this distinction, when he seems to think that his own conception
of “society” is valid for all times. Such a failure is, I believe, due to his underestimation
of the importance of alienation and reification which, in turn, can be attributed to his
failure to emphasize the distinction between the historically specific and the general
aspects of human societies.

44. As we can see, even the term “fictitious commodity,” as referring to labor power, was
first used by Tönnies himself. Such a use is actually intended by Tönnies as a critique of
Marx's labor theory of value. For him, labor power has no value because it “has not been
produced, it is no commodity, but like many other exchangeable objects it is treated as if
it were a commodity and as if it had value” (Tönnies 1974: 154). This is, as we have seen
in the second chapter, exactly Polanyi's critique of Marx. The problem here is that both
Polanyi and Tönnies use the term “commodity” in its “empirical” sense; that is, a
commodity is a thing which is bought and sold at the market. Therefore, both seems to
forget the fact that a commodity, being a social relation, is not simply a thing. The
reduction of the labor power to a thing characterize the very process of reification.

45. According to Marx, “the realm of freedom begins only where labor is determined by
necessity and external expediency ends” (Marx 1981: 958-59). In this sphere, freedom
consists in that socialized man, the associated producers bring the interaction between
man and nature under their collective control instead of being dominated by it as a blind
power. But “the true realm of freedom, the development of human powers as an end
itself, begins beyond it, though it can only flourish with this realm of necessity as its
basis” (Marx 1981: 959).

46. Tönnies's own distinction too was inspired by Maine's distinction. For example, the
section in Tönnies's book titled “Status and Contract” directly refers to Maine’s
distinction. Below is a table showing the differences between Gemeinschaft and
Gesellschaft, which is reproduced from the first page of this section (Tönnies 1988: 181):
Gemeinschaft Gesellschaft
Natural Will Rational Will
Self Person
Possession Wealth
Land Money
 197

Family Law Law of Contracts

47. According to Polanyi, the sociological background of the distinction was first
mooted by Hegel and developed by Marx in the 1840s. Its empirical discovery in terms
of history was made by Sir Henry Sumner Maine, who found a disciple in Tönnies
(TMEE, 69-70). For him, “Maine, Toennies and Marx exerted a deep influence on
Continental sociology through Max Weber, who consistently used the terms
Gemeinschaft and Gesellschaft in the Toenniesian sense, Gesellschaft for contract-type
society, Gemeinschaft for status-type society” (LM, 48). Polanyi also explains that
Richard Thurnwald himself, though praised as an anthropologist, was a pupil of Max
Weber (LM, 50), thus linking himself to that tradition, for Thurnwald’s work influenced
Polanyi’s substantive approach to a great extent.

48. In an earlier manuscript summarized by Baum (1996: 24-29), Polanyi argues that this
fact, increasing complexity of the society, poses a responsibility upon us; since the
society becomes “opaque,” we have to consider the unintended consequences of our
actions:
We realize that our actions have an impact on other people, but most of
the time we do not know what this impact is. We are aware that our
participation in society makes us co-responsible for the good and the evil
done by society, but we do not know with any precision what these good
and evil actions are (quoted in Baum 1996: 26).

49. Yet, according to Mitzman (1987), that Tönnies never desired to return to
Gemeinschaft is an illusion; for a brief period between 1892 and 1895, he participated to
the attempt at the formation of Gemeinschaft-like communities by the “Society for
Ethical Culture” (Mitzman 1987: 117-19).

50. But Owen “did not, at this time, foresee that the self-protection of society for which
he was calling would prove incompatible with the functioning of the economic system
itself” (GT, 129). Nevertheless, according to Polanyi, Owen would have preferred an
imaginary status of the people, “instead of facing the awful revelation that transcend the
New Testament, of man’s condition in a complex society” (GT, 171). We will return to
this issue in the last section. For the moment, however, we can mention Sievers’s (1949)
critique of Polanyi’s sympathy for Owen, who argues that Owenism has four
fundamental errors: “excessive reliance on agriculture, utopian dismissal of the need for
force, deterministic reliance upon external conditions to shape the human individual, and
stultifying social unity—agrarianism, utopianims, determinism, totalitarianism” (1949:
358). And therefore, the views of Owen are not compatible with those of Polanyi.

51. According to Hannah Arendt, the birth of the modern science of economics
 198

coincided with the rise of society, and ... together with its chief technical
tool, statistics, become the social science par excellence. Economics—
until the modern age a not too important part of ethics and politics and
based on the assumption that men act with respect to their economic
activities as they act in every other respect—could achieve a scientific
character only when men had become social beings and unanimously
followed certain patterns of behavior, so that those who did not keep the
rules could be considered to be asocial or abnormal (1958: 39).

52. Contrary to Adam Smith who argued that “Political economy should be a human
science; it should deal with that which was natural to man, not to Nature,” Townsend,
when he defended the Reform of the Poor Law on the basis of the purely fictitious
example of “the island of Juan Fernandez” where the number of dogs and goats are
supposedly always in balance, argued that “Hunger ... will teach decency and civility,
obedience and subjection, to the most perverse. In general it is only hunger which can
spur and goad them [the poor] on to labor; yet our laws have said they shall never
hunger...” (quoted in GT, 113). According to Polanyi,
here was a new starting point for political science. By approaching human
community from the animal side, Townsend by-passed the supposedly
unavoidable question as to the foundation of government; and in doing so
introduced a new concept of law into the human affairs, that of the laws
of Nature.
Instead of early uses of Natural laws (like Hume, Hobbes etc.) which are
metaphorical, Townsend’s use of it was literal for he argued that human beings
were actually beasts and that, precisely for that reason, only a minimum
of a government was required. From this novel point of view, a free
society could be regarded as consisting of two races: property owners and
laborers. The number of the latter was limited by the amount of food; and
as long as property was safe; hunger would drive them to work (GT, 114).
Such a naturalistic foundation, then, “closely fitted to the society that was
emerging,” for the “biological nature of man appeared as the given foundation of a
society that was not of a political order. Thus it came to pass that economists presently
relinquished Adam Smith’s humanistic foundation, and incorporated those of Townsend”
(GT, 115).

53. Nevertheless, this “disintegration” or “collapse” should be taken as a metaphor, for

this “collapse” is signified by fascism; fascism characterizes a period within which the
western civilization denied even its very own values, especially the “uniqueness of
individual” and the “oneness of mankind.” Otherwise, Polanyi’s argument degenerates to
some variant of the “monopoly capitalism” argument: continuous interventions to the
 199

market as the embodiment of the protective countermovement destroyed the self-

regulative character of the market by creating “frictions” in the working of it. Such a
framework seems to imply an understanding of competition as a from of “perfect
competition” in the Neoclassical sense. Although Polanyi himself believed that the
market system had come to an end for “the market system will no longer be self-
regulating, even in principle, since it will not comprise labor, land, and money” (GT,
251), when he argued that the competitive character of the system was no longer valid
(e.g. GT, 251-52; OMM, 109; BED, 96), his posthumously published work Livelihood of
Man (1977) never mentions the end of the market system.

54. According to Marcuse (1964: xv-xvi), in an advanced industrial society, the

assumption of the neutrality of technology cannot be maintained because it creates
totalitarian tendencies. For him, in such a society,
the productive apparatus tends to become totalitarian to the extent to
which it determines not only the socially needed occupations, skills, and
attitudes, but also individual needs and aspirations. ... [also] Technology
serves to institute new, more effective and more pleasant forms of social
control and cohesion (1964: xv).

55. In this regard, Polanyi argues that communist”s vision of the “withering away of the
State” is actually “to combine elements of liberal utopianism with practical indifference
to institutional freedoms” (OMM, 116), which is tantamount to the denial of the necessity
of protecting freedom institutionally in a complex society.

56. In this connection, what John Dewey (1946: 4-5) says is quite significant:
A volume, not few paragraphs, would be needed to tell in adequate detail
how the one-sided “individualistic” passed over into an equally one-sided
“socialistic” movement. I have learned more on this matter from
Polanyi’s The Great Transformation than from any other source. It shows
in detail how policies that had been justified by the prevailing doctrines
of “individualism” created, one by one, evils that demanded special
legislative and administrative measures to ensure defense and protection
of human interests threatened with destruction. The cumulative effect of
these “social” measures was all the greater because they were undertaken
piecemeal. Each one was regarded as if it stood alone as a mere specific
remedy for some danger or evil also regarded as if it stood alone.
According to Dewey, “placing the socialistic in stark opposition to the
individualistic was not the creation of Fascism and Totalitarianism. It was a direct
inheritance from the laissez-faire “Liberalism” which arrogated to itself the protection of
human “individuals” from oppression by organized society” (Dewey 1946: 5).
 200

57. Polanyi’s concern with the moral aspect of the problem can be seen from the
following quote:
What appears to our generation as the problem of capitalism is, in reality,
the far greater problem of an industrial civilization. The economic liberal
is blind to this fact. In defending capitalism as an economic system, he
ignores the challenge of the Machine Age. Yet the dangers that make the
bravest quake today transcend the economy. The idyllic concerns of trust-
busting and Taylorization have been superseded by Hiroshima. Scientific
barbarism is dogging our footsteps. The Germans were planning a
contrivance to make the sun emanate death rays. We, in fact, produced a
burst of death rays that blotted out the sun. Yet the Germans had an evil
philosophy, and we had a humane philosophy. In this we should learn to
see the symbol of our peril (OMM, 117).

58. “Never was the word ‘community’ used more indiscriminately and emptily” says Eric
Hobsbawm (1994: 428), “than in the decades when communities in the sociological sense
became hard to find in real life— ‘the intelligence community’, ‘the public relations
community,’ ....” Therefore, it is possible to argue that the “extraordinary dissolution of
traditional social norms, textures and values” in especially the last three decades of the
twentieth century that Hobsbawm complains about, led to the attempts to form
Gemeinschaft-like associations, but in effect, these were merely “pseudo-
Gemeinschafts,” to use a term by Robert Merton (Pappenheim 1959: 68).

59. For example, Baum claims that

writing against fascism in the 1930s, Polanyi had recognized that the
fascist movement was a violent reaction not only against unemployment
and material poverty but also against the social disintegration and loss of
identity produced by the free market system. Fascism was the return of
the “repressed” in perverted form, the forging of the social bond
dissolved by liberalism and Marxism. (1996: 50)

60. The pseudo-Marxist rhetoric of the Nazis, like the adoption of red flag, “proletarian
war” against imperialists, etc., is exemplified in detail in Neumann (1944: 192-93).