The Return of Karl Polanyi


Margaret Somers and Fred Block in Dissent [Karl Polanyi teaching at the Workers' Educational Association, c. 1939. Sketch by William Townsend.]:

Karl Polanyi’s ideas took form in Vienna in the 1920s in direct opposition to the free-market orthodoxy of Ludwig von Mises, the contemporaneous avatar of market fundamentalism. Both thinkers were deeply influenced by the “Vienna experiment,” the post–First World War period of democratic, worker-led municipal socialism. While Polanyi saw in the experiment the very best that socialism had to offer, it motivated von Mises’s lifelong effort to prove that socialism and “planning” were economically disastrous and morally corrupt.

Von Mises had little success in the short term, and most thinkers on the left simply dismissed him as a reactionary apologist for big business. But a half century later, his more famous student—Friedrich von Hayek—became the inspiration for both Margaret Thatcher and Ronald Reagan, as market fundamentalism and neoliberalism became the ruling ideas of our time. Fortunately, Karl Polanyi did take von Mises’s ideas seriously. In fact, The Great Transformation is an analysis of the enormously destructive and seductive nature of the market fundamentalist worldview that has been so influential over the last three decades.

Right from the start of the book, Polanyi attacks market liberalism for what he calls its “stark Utopia.” Conservatives had long deployed the “utopianism” epithet to discredit movements of the left, but Polanyi was determined to turn the tables by showing that the vision of a global self-regulating market system was the real utopian fantasy. Polanyi’s central argument is that a self-regulating economic system is a completely imaginary construction; as such, it is completely impossible to achieve or maintain. Just as Marx and Engels had talked of the “withering away of the state,” so market liberals and libertarians imagine a world in which the realm of politics would diminish dramatically. At the same time, Polanyi recognizes why this vision of stateless autonomous market governance is so seductive. Because politics is tainted by a history of coercion, the idea that most of the important questions would be resolved through the allegedly impartial and objective mechanism of choice-driven, free-market competition has great appeal.

Polanyi’s critique is that the appeal has no basis in reality. Government action is not some kind of “interference” in the autonomous sphere of economic activity; there simply is no economy without government. It is not just that society depends on roads, schools, a justice system, and other public goods that only government can provide. It is that all of the key inputs into the economy—land, labor, and money—are only created and sustained through continuous government action.

More here.