Since this is a very long review – Short and sweet: Polanyi knows the answer. It doesn’t really matter much what the question is, as the answer he knows is the answer to everything. All the great erudition on display is just that – a display. He happens to know a great deal about English history over the 18th and 19th centuries, and a bit about an obscure set of pacific islanders, but by the end of the book, it’s obvious that this expertise is irrelevant to his thesis. He could start from basket weaving and wheat as a theme in Art Deco, and he’d end up at the same place: what the world needs now, what it has always needed, what History has been striving for, is Communism, sweet Communism.
In the Great Transformation, Polanyi describes the mechanism by which the commoditization of land, labor and currency and the implementation of the Gold Standard reveal the contradictory and self destructive nature of Capitalism and the impossibility of any free market being long maintained. He asserts that not only are free markets not natural in any sense, but they can only come into existence and continue by means of constant political and social intervention.
Using England’s industrialization as the case study, Polanyi argues that there’s nothing natural about free markets, that the very idea of free markets is a mythology used to justify the reduction of land, currency and people to commodities. A market in labor reduces people to mere human resources, something to be managed like any other resource and a cost to be controlled. Land will simply be consumed, not husbanded across generations. And currency, with which the book is mostly concerned, will be standardized across the world in order that international trade can take place. This standardization, under the rubric of the Gold Standard, is the engine driving political and social change, almost entirely for the worse.
The idea that people might take advantage of a market for labor by decommoditizing themselves – learning skills or moving someplace where their skills are in demand in order to better their prospects – is not considered. That people did not in fact stay illiterate laborers for very long once the market provided opportunities unavailable for rural laborers is not discussed. That the workers of the world today are vastly better off than the rural laborers prior to the industrial revolution is barely mentioned. Rather, Polanyi dwells on all the evil effects of the social displacement caused by industrialization and the political steps meant to mitigate them, and well as the steps taken to facilitate market creation and trade. He sees, not individual decisions both good and bad being made in an uncertain environment (i.e., the real world), but the forces of History working themselves out according to inevitable laws.
Similar filters are applied to the commoditization of land and currency. In 1944, when Polanyi published this tome, it was perhaps reasonable to believe that land was being recklessly consumed by industry – FDR did promise that the skies would soon again be ‘blackened by industry’ once the New Deal kicked in. (Of course, his cousin Teddy had begun the process of setting aside land from too much human use a generation earlier.) Subsequent small ‘h’ history has shown that free people with a little material security tend very much to want to keep the world tidy and clean – nobody wants to live in a dump. A continually better cared for world is not what theory predicts, even if it is what history seems to be showing.
Currency, by which Polanyi means international banking and the trade it facilitates, does tend strongly toward standardization, because international trade, like all trade, is built on trust. You pay me in standard Spanish pieces of eight or silver U.S. trade dollars, and I’m good, because everybody agrees on the value of such currency. We trust each other, at least that far. Once transactions become too large and too frequent for physical silver or gold to change hands, I need some other mechanism I can trust – the Bank of England, for example. Their notes are as good as gold! My trust is built on stability: the claim that our notes are worth X amount of gold or silver, which you can trade your note in for if you want, is good as long as you back it up. Floating fiat currencies require a level of trust that people who knew their history were not able to muster, in past eras.
This view, which is based on the logical and historical playing out of personal trust between trading partners and banks, is built on the observation that our world is uncertain and involves many discrete and often unpredictable human decisions. Polanyi wants vast forces to push History to an end already known, and so must reject what people actually do as a basis for reality.Continue reading “Book Review: Polanyi’s Great Transformation”