Karl Polanyi Society against the Market - lecture notes PDF

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Lecture 6 - Karl Polanyi: Society against the Market lecture notes...

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Seminar questions 1. What are the distinctive features of market society according to Polanyi?  The market society is a utopian project  Labour is considered a commodity (Polanyi sees labour as a “false commodity”)  Market society is a social phenomenon >> “to safeguard social standing and social assets.”  Karket society is a phenomenon with a historical pretext  What proves that market economy is a failure is the inevitability of government intervention >> inherent to market economy is government presence o Laissez faire is failed  Max weber: state claims a monopoly to legitimize the use of force within a given territory o For Polanyi this is important as it explains how the state constantly needs to intervene.  Reciprocity formed a long term perspective - market economy is a man made phenomenon >> it is deemed to fail  We tend to think of market as natural, but actually market isn’t natural. It comes from certain political (governmental) decision. What was supposed to be “natural” was actually forced by the state o Eg: The gold standard was established by states  Market doesn’t function for society, but society functions for the market 2. According to Polanyi, what is the nature of the counter-movement to market society?  Double movement - the attempt to make the market free >> but this just leads to government intervention  Eg: the new deal that US introduced after the collapse of Wall street o This resulted in a double movement  Through market society there will be unemployment >> unemployment is a prevalent condition  The demand for political government stems from economic disturbances o The more vulnerable the economic situation, the more the people demand for a stronger government o Growth in populism  Detention of classes  Imperial rivalries  Countermovement: the state enforces the market o Enforcing markets entails the creation of certain policies o The market is there for itself and not for people’s well being o People’s well being goes down o Resistance from the people o Thus the countermovement emerges o Results in the rise of facism/populism  Protest movements in Chile, Peru, and other parts of Latin America >> examples of countermovement

3. What does Polanyi say about the nature of non-market economic relationships?  According to Polanyi, non-market relations between individuals was shaped by monetary policy of the government. o Eg: when and where two people would decide to get married would be determined by the monetary policy of the state at that given time.  3 aspects of non market relations:  Redistribution o A central authority redistributes the resources to the population  House-holding o Produce commodities for self consumption  Trade o Before “great transformation” trade used to be between communities  Like between sparta and athens USSR:   

State decided the price >> it was not on supply and demand forces as in liberal institutions Ussr was not isolated, there was trade Different communities integrate differently >> USSR still had to integrate intself into the liberal market economy

Difference between redistribution and reciprocity?  

Redistribution happens through a central authority No central authority, only general agreement needed for reciprocity

Why did the process of commodification of land, labour, and money occur after the industrial revolution?  

Government created money for the purpose of taxation The concept of “labour market” >> that labour is called a market

Brief Summary of Polanyi Was a critic of self regulating markets and a proponent of government intervention. Market economy and modern nation states are a single human invention termed by Polanyi as the “Market Society.” According to Polanyi, economics has two meanings: formal and substantive. Formal - rational decision making and self regulating market economy. Substantive - presupposes neither rational decision-making nor conditions of scarcity. It refers to how humans make a living interacting within their social and natural environments. A society's livelihood strategy is seen as an adaptation to its environment and material conditions, a process which may or may not involve utility maximisation. The substantive meaning of 'economics' is seen in the broader sense of 'provisioning.' Economics is the way society meets material needs On self regulating markets: Polanyi was very clear in illustrating that a self-regulating market is an oxymoron. It is not only that humans and our environment cannot bear the strain of being subordinated

to the market, but that the so-called free market itself can't withstand its own unregulated vicissitudes. Polanyi - 17. Self Regulation Impaired K. Polanyi, The Great Transformation (Boston: Beacon Press, 2001), Chapters 17–20, pp. 200–48 (on KEATS)  

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The creation of a market economy was not inevitable, but historically contingent. There is a distinction between economy of the past (before the great transformation) and modern economies. o Economies of the past did not need government intervention and were small, not institutionalized. o After the great transformation, industrialization and institutionalization of economic systems created the market society. The gold standard was introduced in order to make exchange of currencies easier - it was believed to be stable as it was not under the direct control of a single polity. o It was created as a result of global trade. Monetary protectionism was far more important than most other protectionist policies. o Monetary policy was constantly changing - it was not exactly stable “Freedom of money was, paradoxically, the result of restriction on trade.” “For international purposes, currency was the nation.” o The value of the currency of the nation prescribed its role in the international scheme. And nations could not exist independently of the international, so the value of the currency became extremely important. When self-regulated markets failed - or when the supposed beneficial outcomes of neoclassical market regulation failed to come through (like imports did not result in adequate exports) - this is when government intervention became necessary. o Degree of intervention depended on the degree of economic stress According to classical assumptions of self regulating markets - the losses of trade and globalization would be compensated. But in practice, this was not the case. o This repudiated the claim that the market is self regulatory. “Political instruments had to be used in order to maintain equilibrium in the world economy. Bismark advocated for all-round protectionism

Polanyi - 18. Disruptive strains 

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Symptoms of disequilibrium: o Unemployment o Tension of classes o Pressure on exchange - (balance of payment irregularities) o Imperialist rivals On imperialism o Not all empires and states are expansionists

Early stages of capitalism started with contraction and only later did it turn to imperialism o Anti-imperialism was started by Adam Smith - predicted the American Revolution and the Little England (see grand strategy lecture 6) movement Double movement o The phrase refers to the dialectical process of marketization and push for social protection against that marketization o Growing pattern of international trade was checked by protectionist institutions introduced within states. o First, the economy needs to be disembedded in order to create a “market society.” o Then, a reactionary countermovement arises wherein the state takes up protectionist measures to protect the labour and its own internal economy. o The market economy is thus taken to be self regulating my liberal reformers. o This is a utopian project for Polanyi. o Protectionist institutes were also fostered by the introduction of the gold standard  Because the gold standard was so rigid, protection was deemed necessary According to Polanyi- "false commodities": land, labor, and money National solidarity - maintaining the gold standard of the currency of a nation became paramount Gives examples of the German Reich and the US during the late 19th century and how they had protectionist measures Individuals became puppets in the grander international scheme o They could only shield themselves from unemployment through protectionist measures, customs tariffs, and other social security nets introduced by the government Even with all this, the maintenance of the gold standard was deemed paramount. Only with the dissolvement of the gold standard was the strain on the nation was released. o

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Polanyi - 19. Popular Government and Market Economy  

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Due to industrialization, private property (industrial property) had to be protected. Class struggle meant that the working class were denied both political and economic rights - they were denied the means and rights to their own economic life In a private enterprise, the worker has no security of job. 1920s - Geneva - deflationary states took primacy o Deflationary ideal was “free economy under a free government”  Free economy and government are the two pillars of liberal capitalism o Worker income and wage rates had to be subordinated to the currency

This was as opposed to inflationary measures where currency was subordinated to wage rates. o Liveral economists supported this deflationary measure  Even though in theory they were opposed to intervention, they supported this intervention to maintain the currency of the country  This was all done under the given context of a self regulating market  This deflationary ideal, however, resulted in economic turmoil. US and Britain soon abandoned the gold standard. Socialism o “Transcend the self-regulating market by consciously subordinating it to a democratic society.” o Preconditions to socialism:  Absence of industries  A literate population  Democratic traditions o These preconditions made socialism inapplicable elsewhere o Conflict of interest between employers and employees o

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Polanyi - 20. History in the gear of social change 

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Fascism o Came about because of the impasse of liberal capitalist institutions o Fascist idea was to eliminate the deadlock of capitalist by foregoing democratic institutions. o The movement usually occurs in defeated countries like Bulgaria o Entailed racialist ideas o Biggest example: nazi germany o “Fascism, like socialism, was rooted in a market society that refused to function.” o The part played by fascism was determined by the conditions of the market in that particular state o The more insecure world economy - the more fascism Counterrevolution and nationalist revisionism o These were underlying factors of fascism

Trade and Market in the early empires : The economy as instituted processes K. Polanyi, ‘The Economy as Instituted Process’, in K. Polanyi et al., eds., Trade and Market in the Early Empires (Glencoe IL: The Free Press, 1957), pp. 243–70 http://irows.ucr.edu/cd/courses/281/readings/polanyi.pdf  

Distinction between substantive and formal economics Formal economics: o Rationality  Rationalism is the relationship between means and ends. o Insufficiency  Scarcity of resources o Consumers make a rational choice given the scarcity of resources...