Professional Documents
Culture Documents
KARL POLANYI
by
Hüseyin Özel
Doctor of Philosophy
Department of Economics
University of Utah
August 1997
ii
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 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
society, which in turn requires the emphasis on the “species” character of human beings,
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.
vi
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 copyright owner of Karl Polanyi’s The Great Transformation (New York: 1944), for
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
2.1. 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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CONCLUSION 150
REFERENCES 156
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
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
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
In both Marx and Polanyi, the main focus of analysis is capitalism. Capitalism is
2
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,
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
3
these ideas into a general sketch of reproduction of social structures and discuss
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
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
4
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
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
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
5
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
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
6
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
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
CHAPTER 1
1.1. Introduction
of capitalism, or what he calls the “market economy.” This critique rests on the thesis
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
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
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
8
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
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
9
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
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
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
relations. In these societies, the elements of the economy, or economic transactions, are
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
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
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:
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-
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,
11
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).
labor, land, and money are essential elements of industry; they also must
be organized in markets; in fact, these markets form an absolutely vital
12
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
13
(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:
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,
14
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
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
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
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:
16
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).
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
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
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
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
was the manifestation of the fact that the entire economy is now organized around the
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
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
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;
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
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).
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
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
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
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).
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,
human life from its natural surrounding, including even the physical separation of “our
Now, in the light of this discussion, it is possible to argue that for Polanyi, what
“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
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
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
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
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
term “economic”: the formal and the substantive meanings (TMEE, 245-50; LM, 19-21).
25
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
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).
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
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).
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
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
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
surroundings. That process is the economy” (LM, 20). In other words, the main thrust of
submerged in his social relationships” (GT, 46; BED, 98). By using mainly
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
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
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
interaction between man and his environment, which results in a continuous supply of
functional movements that are embedded in social relations” (Polanyi 1960: 329), and,
30
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
human history there have been four forms of integration: namely, householding,19
reciprocity, redistribution, and exchange. Seen from the standpoint of the “movements”
31
though it does not necessarily imply a dual relationship, or an equal “exchange” between
these two forms, movements are of random character in a market economy (LM, 36-39).
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
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
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,
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.
economistic fallacy have created much debate in anthropology, even though they have
33
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,
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
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
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
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
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
generalize the substantivist account to the entire human history. Thus, Manning Nash,
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
integration” is useful, but “only to help beginning students appreciate the different
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
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
...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,
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
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
economics, the comment made about Dalton's paper by Carol F. Swartwart, who
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
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
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
the following parts of this dissertation, at this point it is possible to argue that a key to the
understanding of what the human essence or the human condition is, and this is exactly
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 :
mine).
“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,
it reduces both human beings themselves and their natural environments into
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
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
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
it is however true that there is a certain tension between Polanyi's analysis in The Great
“functionalism” especially when the relation between individual agency and social
sought.
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:
“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
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
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
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”
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:
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
“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
because in this case the whole system appears as a coldbloodedly devised, giant
which suggest that he did not hold this view. For example, in his argument that the
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
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:
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 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,
“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.
reifications, i.e., converting human properties into abstract entities, like regarding society
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
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
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
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
individuality, the two inseparable characteristics of the human condition, a unity which is
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
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
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
“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
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
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
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
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
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
CHAPTER 2
2.1. Introduction
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
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.”
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
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
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
human existence.
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
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
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
(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
However, when we consider the differences, he argues that, first, whereas Marx was right
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
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
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
“wind up in utter disagreement among themselves” (p. 41); that is, Marxists have no
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
immediately adds that “Polanyi ... often distinguished Marx from his followers”
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
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
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).
“economistic” one, but “at the same time he also involuntarily strengthened the
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
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
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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
especially Dalton,5 seem to be unaware of Polanyi's own distinction between Marx and
his followers.
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
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
Marx's historical materialism are different ways to say the same thing. For example, she
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
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
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).
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.
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
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
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”
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,
That is to say, the individual in capitalism has two distinct forms of existence: an
67
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:
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,
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.
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
his conception of human nature and his views upon the dehumanizing effects of
Historical Materialism
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
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
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:
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
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
interchange with other humans” (Hunt 1986: 99). This conception of praxis, or the free
thinking, for only through this activity can man “objectify” his essence:
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,
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
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
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).
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-
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
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
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
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
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,” 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:
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
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
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
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
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
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
Second, with respect to the role played by the actions of individuals in human
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
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
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
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process. Therefore, social relations, which both enable and constrain individual
intentional actions, are continuously created and recreated by individual actions (Hunt
1979a: 285).23
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
from the failure to distinguish between the historically specific and the general aspects of
essential feature of human life, independent of any peculiar historical conditions, the
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specific forms of organization of this activity do not remain the same throughout history.
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
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
comprehension of contemporary capitalism, argues Hunt (1984: 1), Marx first formulates
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
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
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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
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
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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
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
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
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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
Human Powers
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
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.
“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
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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
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;
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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:
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
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
process, we should examine the conditions within which this process is “completed.”
“reification.”
“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
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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
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
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
words, only with capitalism does the process of alienation “culminates” in fetishism and
reification.
commodification of labor power that underlies Marx's labor theory of value and his
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
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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for the sake of continued existence (Hunt 1979a: 309). Although the effects of alienation
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
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
“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
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
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
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
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
adequate understanding of the capitalist society in Marx. In fact, it can even be asserted
discuss the connections between Marx and Polanyi in their analyses of capitalism more
closely.
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
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
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
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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as follows:
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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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
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
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
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
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
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
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
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.
From a social theoretical point of view, the most immediate effect of the process
labor” and becomes just a “cog,” or a functional unit, whose only function is to reproduce
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
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
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
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
1959: 94), and leisure time itself is reduced to a time span within which the labor power
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
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:
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,
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
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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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
CHAPTER 3
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
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
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
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
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
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
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
“annihilated.” That is to say, since the “stage” on which the double movement operates
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
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
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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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
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
advancement of the market relations at the same time, reveals the contradictory character
to retain our humanity and therefore freedom. In other words, since the very success of
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
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
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
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
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
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
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
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 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,
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
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
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-
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
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
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
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
Furthermore, the fact that the working class, especially on the Continent, also
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,
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).
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
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:
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
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its institutions.
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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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
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
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
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
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
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
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:
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
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
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
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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Double Movement
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
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
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
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
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
“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
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
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
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).
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
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
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
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
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
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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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
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
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
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
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
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
“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
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
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
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
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
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
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
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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market, is also a process that characterizes the transition from “community” to “society,”
distinction. That is to say, even the realization of the existence of society is a product of
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
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”
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
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
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
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
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
Second, maybe even more important than the first one, is that the very category of the
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
such communities, individuals are not “species-being” in the real sense, for their very
individuality is denied.
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
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
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
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
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
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
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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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
directness of human relations, it cannot yet embrace the humanity in its “species” sense.
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
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
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,
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).
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
“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
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
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
142
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
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
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,
the industrial revolution” (Rotsein 1990: 100). Among the tendencies that the industrial
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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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
This liberal delusion is in fact quite aptly described by Marx when he talks about
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
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,
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,
capitalism. That is, in order to protect our freedom, we need a “new response to the total
itself, institutional level is only one dimension of the problem of freedom; the other level
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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,
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
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
both individuality and sociality, the two characteristics that define a human being, are
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
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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
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
resist to quote:
emphasis of the bonds within the new “clan,” “tribe,” “community,” etc., at the expense
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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.
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
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
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
CONCLUSION
In the search of an answer to the question of where we stand fifty years after the
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
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
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
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reinforced by Polanyi’s later work after The Great Transformation whose emphasis is on
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
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
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
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
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
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.
and sociality, is the same with that of Polanyi. In particular, it has been argued that
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
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
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
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
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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.”
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).
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.
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.
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.”
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
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
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
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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
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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).
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
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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.
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,
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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.
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.
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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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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
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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
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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).
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
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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).
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
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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
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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
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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:
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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).
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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).
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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
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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
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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).
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).
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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).
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).