Born in 1886, Karl Polanyi is one of the best-known economic anthropologists of the 20th century who contributed greatly to the formation of historical-economic studies and democratic socialist thought. Polanyi, of Hungarian descent, can be said to have been a man chased by history, as he was forced to migrate several times during his life. However, he was a man who in turn chased history, as he based on it much of his research. In fact, his way of doing politics followed a politico-cultural method, that is, it was based on intellectual research. His best-known theories today are found in his most famous work, namely, The Great Transformation, in which he shows how socialism can be considered the extension of democracy from the political sphere to all spheres of society, especially to the economy.
Economic entities beyond capitalism
Our current ways of economic organization tend to be seen as universal. We cannot imagine an economy which is not entirely based on price-making markets and the pursuit of material gain. Polanyi had a unique approach to economies: he realized that since antiquity there were various types of economies and capitalism is not the only feasible system of organization.
As an anthropologist and economist, Polanyi investigated forms of organization in different periods and geographical locations, with the goal of establishing a form of analysis that can equally describe pre-industrialized and industrialized economies (1971a). In the 18th century in Dahomey, a region in Niger, kings were the center of the economic organization who reviewed economic conditions and created plans for the following periods. The citizens gave gifts and a share of their revenue in the form of taxes to the king, which was consequently redistributed in a ceremonial manner (1971c). The Trobriands’ economy, located in New Guinea, was based on reciprocal exchanges of goods in ceremonial settings. The members of the society constantly gave and received gifts, whose rules were determined by religious and social norms. In ancient Athens, the Agora was the main place of economic activity, merchants brought their self-made products and sold them mostly for silver coins. That is, market exchanges were an important characteristic of the economy, however, they were controlled by the democratic jurisdiction (1971b).
Patterns of integration: redistribution, reciprocity, market exchange
Polanyi started from the examples above to investigate more in depth how production and distribution can be assured in societies in which the main characteristics of the market, namely instrumental rationality and maximizing behavior, are absent. In The Great Transformation, Polanyi identifies two principles of behavior that are not directly economic: reciprocity and redistribution. According to this view, the economic system cannot be studied as a phenomenon in its own right, but it must be considered as a simple function of social organization.
Later, Polanyi deepens his thinking in the theoretical essay The Economy as Institutional Process. In the essay, the author identifies reciprocity, redistribution, and exchange as forms of integration, that is, institutionalized movements that connect the elements of the economic process. “Reciprocity stands for movements between related points of symmetrical groups; redistribution indicates appropriative movements in the direction of a center and subsequently coming from it; exchange here refers to bilateral movements taking place between two “hands” in a market system”. Therefore, reciprocity requires symmetrically organized groups and the presence of social obligations arising from traditional cultural values and norms; redistribution requires some form of centralization in the group (i.e., a central authority); exchange requires the operation of self-regulated markets (by prices) to give rise to integration.
It is important to note that “forms of integration do not represent ‘stages’ of development. They do not imply any temporal sequence. Several secondary ones may exist alongside the dominant form: the same dominant form may reappear after a period of temporary eclipse”. According to Polanyi, various sectors of the economy work well under different modes of organization as their basic characteristics fundamentally differ. For example, a well-functioning social sector in the market mechanisms may exclude certain members of society from services, whereas redistributive forces ensure equal access to them. At the same time, in certain innovative sectors, a market mechanism may ensure that market participants are able to react and progress at a faster pace. Polanyi stresses that a mixture of types of institutions is needed for a healthy economy and patterns can coexist. He warns against organizing an economy with only one guiding principle, for example, creating an economy where market forces dominate in all sectors.
Polanyi is, in fact, distinguished from other economists of his time by his firm stand against the free market utopia, the society created by it and the cognitive apparatus of economic science connected with it. According to the author, the error lies in “establishing an equality between the human economy in general and its market form”. He rejects the idea of defining a society from the prevailing economic institutions, insisting instead on the possible co-presence of different forms of integration between the economy and society.
The idea of embeddedness
What is interesting to point out about Polanyi’s contribution is the main difference between the institutions underlying the three forms of exchange: in the first two forms (i.e., symmetrical groups and central authorities), the institutions are presented as structures internal to society with operating criteria that are not directly economic. This means that the institutions involved do not set economic purpose as their main goal or reason for existence and economic transactions are, first and foremost, social or political relations. In market exchange, on the other hand, institutions are addressed only to the regulation of economic exchange, so that institutional needs are fulfilled by specific structures that have no other purpose than, precisely, economic. In other words, in all three forms of integration the corresponding institutions have an economic character, but in the first two they are not solely economic institutions. To better clarify this difference, Polanyi distinguishes the first two forms as “embedded,” that is, embedded in the social fabric, while market exchange as “disembedded.”
Economic theories tend to describe individuals as self-interested and explain their behavior based on this metric. Only material incentives are taken into consideration, people are regarded as actors to strive to avoid hunger and gain more, but Polanyi in his essay titled Our Obsolete Market Mentality (1947) insists that this is not the full picture. He reminds that man in nature is a social animal, with motives such as social approval, social status, private commitment, private reputation, religious observance, moral duty and political allegiance. He states that in the past man was submerged into social relations and the economy was embedded in social institutions, which ensured the mixed nature of incentives to work.
For example, it is the characteristic of our economy that hunger is translated into the need to work and produce. As Polanyi explained, our economic system demands us to work and therefore earn an income that can be spent on necessities. However, hunger itself would not necessarily translate into the need to work, given that as individuals we would not be able to sustain ourselves by working on our own. Production is a collective act, which is dependent on social circumstances, and the motivation to contribute is not evidently hunger. For example, in the Trobriand’s economy, the motivation to work more was not to accumulate possessions, but to gain social recognition by offering prestigious gifts. Moreover, even in Athen, where market exchanges were an important factor in the economy, the motive of material gain was not universal in the society, but it was a goal of merchants only. Our current way of analyzing the economy and motives puts a lot of emphasis on material needs and therefore reduces the characterization of individuals. Polanyi advocates, instead, for the reframing of behaviors, individual incentives, and the reevaluation of social interests to propose more satisfactory and complete economic theories.
Commodification of land, labor and money
In “The Great Transformation,” Karl Polanyi shows how in a self-regulating market society money, labor and land are essential elements of the economic system and thus are organized in markets. According to the scholar, however, they are not commodities, since a commodity is everything that is bought and sold as it is produced specifically for sale. Polanyi states that labor is just another name for a human activity that goes along with life itself, which in turn is not produced to be sold. This kind of activity, therefore, cannot be detached from the rest of life, be accumulated or mobilized. Land is just another name for nature that is not produced by man. Finally, money is only a symbol of purchasing power, which as a rule is not produced at all but is developed through the mechanism of the bank or state finance. None of these elements is produced for sale and therefore the description of labor, land and currency as commodities is entirely fictitious. The propensity to treat them as if they were real commodities was, according to Polanyi, a major source of contradictions and crisis tendencies in capitalist development, and the society will eventually fight back against the environmentally and socially destructive effects of such treatment.
In conclusion, what can be the usefulness for contemporary society of a model studied from the market society of the 19th and early 20th centuries? Polanyi displays in his research an empirical and pragmatic attitude that leads him to construct an effective framework, particularly in capturing some of the reasons for the rise of protective institutions in market societies. This work has some limitations as pointed out by the American economist D. C. North, mainly because of the static nature presented by the model, the failure to consider the different types of goods or services allocated, and the different qualitative and quantitative characteristics that goods can take depending on the form of integration of the economy. Despite this, Polanyi’s contribution remains of great applicative potential for contemporary social research. Indeed, he proves capable of capturing the links between economic behavior and social relations. His historical approach understands the roots of the worrisome processes of our times and gives in-depth critiques of market fundamentalism. Furthermore, he remains absolutely relevant for the formation of new economic thoughts that reevaluate the commodification of land. In fact, Polanyi’s theory can give us a deeper insight into the fight against the depletion of land and natural resources, as he helps to understand the role of these finite resources in our economy.
Polanyi, K. (1947) “Our obsolete market mentality – Karl Polanyi, Commentary Magazine,” Commentary Magazine [Preprint]. Available at: https://www.commentary.org/articles/karl-polanyi/our-obsolete-market-mentality/.
Polanyi, K. (1971a) Primitive, Archaic, and Modern Economies: Essays of Karl Polanyi. Introduction Available at: https://ci.nii.ac.jp/ncid/BB1013619X.
Polanyi, K. (1971b) Primitive, Archaic, and Modern Economies: Essays of Karl Polanyi. On the Comparative Treatment of Economic Institutions in Antiquity with Illustrations from Athens, Mycenae, and Alalakh (1960). Available at: https://ci.nii.ac.jp/ncid/BB1013619X.
Polanyi, K. (1971c) Primitive, Archaic, and Modern Economies: Essays of Karl Polanyi. Redistribution: The State Sphere in Eighteenth-Century Dahomey (1966). Available at: https://ci.nii.ac.jp/ncid/BB1013619X.
Polanyi, K. (1944) “Land, labor, and currency are not commodities” from “The Great Transformation” https://www.xn--regolaritetrasparenzanellascuolarts-92c.com/2012/03/polanyi-lavoro-terra-moneta-non-sono.html
Gian Primo Cella (April 1985) “Reciprocità, redistribuzione, scambio. Note su Karl Polanyi”. Source: “Stato e mercato”, No. 13, pp. 87-110
Colella Francesca (July 2016) “Mercificazione, individuo e società: attualità del pensiero di Karl Polanyi” https://romatrepress.uniroma3.it/wp-content/uploads/2019/05/Mercificazione-individuo-e-societ%C3%A0-attualit%C3%A0-del-pensiero-di-Karl-Polanyi.pdf
Colombo Matteo (Septembre 2022)“La grande trasformazione. Rileggere oggi Karl Polanyi” https://www.bollettinoadapt.it/wp-content/uploads/2022/09/Rileggendo-i-classici-del-lavoro-26.pdf