The Great Transformation is a book by Karl
Polanyi, a Hungarian-American political economist.
First published in 1944 by Farrar & Rinehart,
it deals with the social and political upheavals
that took place in England during the rise
of the market economy. Polanyi contends that
the modern market economy and the modern nation-state
should be understood not as discrete elements
but as the single human invention he calls
the "Market Society".
A distinguishing characteristic of the "Market
Society" is that humanity's economic mentalities
have been changed. Prior to the great transformation,
people based their economies on reciprocity
and redistribution across personal and communal
relationships. As a consequence of industrialization
and increasing state influence, competitive
markets were created that undermined these
previous social tendencies, replacing them
with formal institutions that aimed to promote
a self-regulating market economy. The expansion
of capitalist institutions with an economically
liberal mindset not only changed laws but
also fundamentally altered humankind's economic
relations; prior to the great transformation,
markets played a very minor role in human
affairs and were not even capable of setting
prices because of their diminutive size. It
was only after industrialization and the onset
of greater state control over newly created
market institutions that the myth of human
nature's propensity toward rational free trade
became widespread. However, Polanyi asserts
instead that "man's economy, as a rule, is
submerged in his social relationships," and
he therefore proposes an alternative ethnographic
economic approach called "substantivism",
in opposition to "formalism", both terms coined
by Polanyi.
== General argument ==
Polanyi argued that the development of the
modern state went hand in hand with the development
of modern market economies and that these
two changes were inextricably linked in history.
Essential to the change from a premodern economy
to a market economy was the altering of human
economic mentalities away from their grounding
in local social relationships and institutions,
and into transactions idealized as "rational"
and set apart from their previous social context.
Prior to the great transformation, markets
had a very limited role in society and were
confined almost entirely to long distance
trade. As Polanyi wrote, "the same bias which
made Adam Smith's generation view primeval
man as bent on barter and truck induced their
successors to disavow all interest in early
man, as he was now known not to have indulged
in those laudable passions."The great transformation
was begun by the powerful modern state, which
was needed to push changes in social structure,
and in what aspects of human nature were amplified
and encouraged, which allowed for a competitive
capitalist economy to emerge. For Polanyi,
these changes implied the destruction of the
basic social order that had reigned throughout
pre-modern history. Central to the change
was that factors of production, such as land
and labor, would now be sold on the market
at market-determined prices instead of allocated
according to tradition, redistribution, or
reciprocity. He emphasized the greatness of
the transformation because it was both a change
of human institutions and human nature.
His empirical case in large part relied upon
analysis of the Speenhamland laws, which he
saw not only as the last attempt of the squirearchy
to preserve the traditional system of production
and social order but also a self-defensive
measure on the part of society that mitigated
the disruption of the most violent period
of economic change. Polanyi also remarks that
the pre-modern economies of China, the Incan
Empire, the Indian Empires, Babylon, Greece,
and the various kingdoms of Africa operated
on principles of reciprocity and redistribution
with a very limited role for markets, especially
in settling prices or allocating the factors
of production. The book also presented his
belief that market society is unsustainable
because it is fatally destructive to human
nature and the natural contexts it inhabits.
Polanyi attempted to turn the tables on the
orthodox liberal account of the rise of capitalism
by arguing that “laissez-faire was planned”,
whereas social protectionism was a spontaneous
reaction to the social dislocation imposed
by an unrestrained free market. He argues
that the construction of a "self-regulating"
market necessitates the separation of society
into economic and political realms. Polanyi
does not deny that the self-regulating market
has brought "unheard of material wealth",
but he suggests that this is too narrow a
focus. The market, once it considers land,
labor and money as fictitious commodities,
and including them "means to subordinate the
substance of society itself to the laws of
the market."This, he argues, results in massive
social dislocation, and spontaneous moves
by society to protect itself. In effect, Polanyi
argues that once the free market attempts
to separate itself from the fabric of society,
social protectionism is society's natural
response, which he calls the "double movement."
Polanyi did not see economics as a subject
closed off from other fields of enquiry, indeed
he saw economic and social problems as inherently
linked. He ended his work with a prediction
of a socialist society, noting, "after a century
of blind 'improvement', man is restoring his
'habitation.'"
== 
Before the market society ==
Based on Bronislaw Malinowski's ethnological
work on the Kula ring exchange in the Trobriand
Islands, Polanyi makes the distinction between
markets as an auxiliary tool for ease of exchange
of goods and market societies. Market societies
are those where markets are the paramount
institution for the exchange of goods through
price mechanisms. Polanyi argues that there
are three general types of economic systems
that existed before the rise of a society
based on a free market economy: redistributive,
reciprocity and householding.
Redistributive: trade and production is focused
to a central entity such as a tribal leader
or feudal lord and then redistributed to members
of their society.
Reciprocity: exchange of goods is based on
reciprocal exchanges between social entities.
On a macro level this would include the production
of goods to gift to other groups.
Householding: economies where production is
centered on individual households. Family
units produce food, textile goods, and tools
for their own use and consumption.These three
forms were not mutually exclusive, nor were
they mutually exclusive of markets for the
exchange of goods. The main distinction is
that these three forms of economic organization
were based around the social aspects of the
society they operated in and were explicitly
tied to do those social relationships. Polanyi
argued that these economic forms depended
on the social principles of centricity, symmetry,
and autarky (self-sufficiency). Markets existed
as an auxiliary avenue for the exchange of
goods that were otherwise not obtainable.
== Support ==
The sociologists Fred L. Block and Margaret
Somers argue that Karl Polanyi's analysis
could help explain why the resurgence of free
market ideas have resulted in "such manifest
failures as persistent unemployment, widening
inequality, and the severe financial crises
that have stressed Western economies over
the past forty years." They suggest that "the
ideology that free markets can replace government
is just as utopian and dangerous" as the idea
that Communism will result in the withering
away of the state.In Towards an Anthropological
Theory of Value: The False Coin of Our Own
Dreams, anthropologist David Graeber offers
compliments to Polanyi's text and theories.
Graeber attacks formalists and substantivists
alike, "those who start by looking at society
as a whole are left, like the Substantivists,
trying to explain how people are motivated
to reproduce society; those who start by looking
at individual desires, like the formalists,
unable to explain why people chose to maximize
some things and not others (or otherwise to
account for questions of meaning)." While
appreciative of Polanyi's attack on Formalism,
Graeber attempts to move beyond ethnography
and towards understanding how individuals
find meaning in their actions, synthesizing
insights of Marcel Mauss, Karl Marx, and others.
In parallel with Karl Polanyi's account of
markets being made internal to society as
a result of state intervention, Graeber argues
the transition to credit-based markets from
societies with separated "spheres of exchange"
in gift giving was likely the accidental byproduct
of state or temple bureaucracy (temple in
the case of Sumer). Graeber also notes that
the criminalization of debt supplemented the
enclosure movements in the destruction of
English communities, since credit between
community members had originally reinforced
communal ties prior to state intervention:
The criminalization of debt, then, was the
criminalization of the very basis of human
society. It cannot be overemphasized that
in a small community, everyone normally was
both lender and borrower. One can only imagine
the tensions and temptations that must have
existed in a community—and communities,
much though they are based on love, in fact,
because they are based on love, will always
also be full of hatred, rivalry and passion—when
it became clear that with sufficiently clever
scheming, manipulation, and perhaps a bit
of strategic bribery, they could arrange to
have almost anyone they hated imprisoned or
even hanged.Economist Joseph Stiglitz favors
Polanyi's account of market liberalization,
arguing that the failures of "Shock Therapy"
in Russia and the failures of IMF reform packages
echo Polanyi's arguments. Stiglitz also summarizes
the difficulties of "market liberalization"
in that it requires unrealistic "flexibility"
amongst the poor.
== Contents ==
Part One The International System
Chapter 1. The Hundred Years' Peace
Chapter 2. Conservative Twenties, Revolutionary
Thirties
Part Two Rise and Fall of Market Economy
I. Satanic Mill
Chapter 3. "Habitation versus Improvement"
Chapter 4. Societies and Economic Systems
Chapter 5. Evolution of the Market Pattern
Chapter 6. The Self-regulating Market and
the Fictitious Commodities: Labor, Land, and
Money
Chapter 7. Speenhamland, 1795
Chapter 8. Antecedents and Consequences
Chapter 9. Pauperism and Utopia
Chapter 10. Political Economy and the Discovery
of Society
II. Self-Protection of Society
Chapter 11. Man, Nature, and Productive Organization
Chapter 12. Birth of the Liberal Creed
Chapter 13. Birth of the Liberal Creed (Continued):
Class Interest and Social Change
Chapter 14. Market and Man
Chapter 15. Market and Nature
Chapter 16. Market and Productive Organization
Chapter 17. Self-Regulation Impaired
Chapter 18. Disruptive Strains
Part Three Transformation in Progress
Chapter 19. Popular Government and Market
Economy
Chapter 20. History in the Gear of Social
Change
Chapter 21. Freedom in a Complex Society
== Editions ==
The book was originally published in the United
States in 1944 and then in England in
1945 as The Origins of Our Time. It was reissued
by Beacon Press as a paperback in 1957 and
as a 2nd edition with a foreword by Nobel
Prize-winning economist Joseph Stiglitz in
2001.
Polanyi, K. (1944). The Great Transformation.
Foreword by Robert M. MacIver. New York: Farrar
& Rinehart.
Polanyi, K. (1957). The Great Transformation.
Foreword by Robert M. MacIver. Boston: Beacon
Press. ISBN 9780807056790.
Polanyi, K. (2001). The Great Transformation:
The Political and Economic Origins of Our
Time, 2nd ed. Foreword by Joseph E. Stiglitz;
introduction by Fred Block. Boston: Beacon
Press. ISBN 9780807056431.
== See also ==
Capitalism
Capitalist mode of production
Economic anthropology
Economic sociology
Political economy
The formalist vs substantivist debate
== Notes ==
== References ==
BooksBlock, F., & Somers, M. R. (2014). The
Power of Market Fundamentalism: Karl Polanyi's
Critique. Harvard University Press. ISBN 0674050711
Polanyi, K. (1977). The Livelihood of Man:
Studies in Social Discontinuity. New York:
Academic Press
David Graeber, Toward an Anthropological Theory
of Value; The False Coin of Our Own Dreams,
Palgrave, New York, 2001
David Graeber, Debt: The First 5000 Years
(Brooklyn, NY: Melville House Publishing,
2011. Pp. 534. ISBN 9781933633862 Hbk. £55/US
$32)ArticlesBlock, F., & Polanyi, K. (2003).
Karl Polanyi and the Writing of "The Great
Transformation". Theory and Society, 32, June,
3, 275-306.
Clough, S. B., & Polanyi, K. (1944). Review
of The Great Transformation. The Journal of
Modern History, 16, December, 4, 313-314.
Review of The Great Transformation from Economic
History Services
Markets and Other Allocation Systems in History:
The Challenge of Karl Polanyi
Karl Polanyi's Battle with Economic History.
Libertarianism.org
The free market is an impossible utopia (18
July 2014), The Washington Post
Something That Changed My Perspective: Karl
Polanyi’s The Great Transformation (2 January
2015), Naked Capitalism
== External links ==
Excerpt from Chapter 4, Societies and Economic
Systems, of The Great Transformation
The Karl Polanyi Archive – Concordia University,
Montreal
Karl Polanyi, The Great Transformation (1944),
at Archive.org (another copy, another copy).
