“Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way” (3-4).
Polanyi begins by examining the 100 years peace in Western Europe from 1815-1914. He makes a clear point that this peace is largely based on economic organization, and that the transformation and commodification of land, labor and money/capital created a situation where society had to negatively respond to market forces. This societal response against the market, referred to as the double-movement by Polanyi (defined on 79, 136), caused for or allowed the rise of fascism in Europe and the horrors of WWII (Polanyi was writing just after WWII).
The cause of the double movement can be traced to the “Satanic mills” which ground men into masses (35). These mills, or industrialization and the commodification of land, labor and money, i.e., the self-regulating market, were created as a project to improve the aggregate material welfare of Britain, though Polanyi makes the clear case that this was not improvement for all (42).
He traces the origins of markets (and here we must make clear that he is talking about self-regulating markets working under the conditions of the commodification of land, labor and capital), and does not agree with Smith that they were organically created by the self-interest of members of a community, but by long-distance trade (61) and then further facilitated by the intervention of the state (66). This involved an explicit effort to embed society into the logic of the market, as opposed to the market being embedded in society.
This was initially attempted without the creation of a large labor class, and the Poor-laws and Speenhamland laws were enacted to protect those who had no land after the commons were enclosed. “In 1834 industrial capitalism was ready to be started, and Poor Law Reform was ushered in. The Speenhamland Law which had protected rural England, and thereby the laboring population in general, against the full force of the market mechanism was eating into the marrow of society” (106).
This was the creation of a labor class, and the first official commodification of labor in Britain. Polanyi goes on to describe the commodification of land and capital, and subsequent double-movements created by the self-regulating market interacting with society.
Polanyi concludes with a chapter entitles “Freedom in a Complex Society”. Here, he argues that a system of economics should not be based on self-interest (257). Also, that market systems should no longer be self-regulating, and that land, labor and capital should not be commodities but should be regulated (he talks about regulation earlier in the book and how markets and regulation were created in tandem). He wonders why markets do not seem to promote freedom, as they claim. He separates institutional freedom from moral/religious freedom.
Institutions must regulate the market; there must be bureaucracy. “No mere declaration of rights can suffice: institutions are required to make the rights effective” (264). Additionally, Polanyi acknowledges that this will lead to greater inefficiencies, but, in one of his more striking lines, claims that, “An industrial society can afford to be free” (264).
He concludes his final chapter by examining his other form of freedom: religious/moral. He claims that there are three truths about Western man: knowledge of death, knowledge of freedom and knowledge of society. First, man knew death and resigned himself to this. Then, man knew freedom through Christ and resigned himself to this. Now, man must know freedom through society and resign himself to this.
Great lines from the book include:
“No less a thinker than Adam Smith suggested that the division of labor in a society was dependent upon the existence of markets, or, as he put it, upon man’s ‘propensity to barter, truck and exchange one thing for another.’ This phrase was later to yield the concept of the Economic Man. In retrospect, it can be said that no misreading of the past ever proved more prophetic of the future” (45).
and
“While laissez-faire economy was the product of deliberate State action, subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned; planning was not” (147).
