Karl Polanyi, The Great Transformation

The central problem addressed in this essay is why the most successful model of economic and social reconstruction in world history has been ignored in Eastern Europe.footnote1 The West German postwar settlement combined the creation of a sustainable and efficient market economy, liberal-democratic institutions and parties, the development of a welfare state based on certain ideals of justice and the institutionalization of trade-union responsibilities. Why has the social-market model in general, and codetermination in particular, been ignored as a necessary part of the transition from a closed to an open society? This question is all the more puzzling as the four conscious goals of Polish transition, a) the construction of a market economy with recognized property rights; b) the establishment of legitimate democratic political institutions and parties functioning within a framework of rights enforced by law; c) the creation of social stability through the establishment of minimal standards of justice and fair public procedures; and d) the integration of the country into Western Europe, were all achieved by the Federal Republic of Germany after the Second World War. Thus the model exists in the most politically powerful and economically successful state in Europe, which is also a directly neighbouring country. The question is all the more pressing as the principal agent of Communism’s rejection, the Solidarnosc union, was based precisely upon those values of Catholic syndicalism characteristic of the West German consensus, of which the most fundamental idea was that the precondition of economic reconstruction is effective societal restoration.footnote2 It will be argued that Karl Polanyi’s concept of the market utopia described in The Great Transformation is the best available starting point for trying to explain this weird state of affairs.footnote3 Polanyi’s work provides resources for an explanation of how it came to happen that a workers’ movement became the guarantor of a reform programme that removed unions, solidarity and justice from Polish politics leading to the re-emergence of the Communist Party as the principal defender of labour. Polanyi’s two general laws of transformation will be developed and then applied in the second half of the essay.

This section has three purposes. The first is to define the basic elements of Polanyi’s system, most particularly the role of labour in the reproduction of a culture. The second is to develop his analysis of Speenhamland and the consequent introduction of a free market in labour and to show that it is of comparative relevance in understanding the transition from Bolshevism to a market society in Poland. Paternalist authoritarianism, it will be argued, is a precondition of societal commodification. The third purpose is to emphasize the importance of reason in the framing of agendas, and the fundamental role that feasibility plays as a force in mobilizing political support.

Polanyi’s work is framed by an idea that can best be summarized as ‘organic rationality’. This is the philosophy that human transformation does not begin ex novo but from existing institutions and patterns of cooperation, and further, that human thought and action can comprehend and influence these changes. It is an industrial philosophy in which solidarity and freedom are both created and sustained by human labour, and thus work and its democratic organization become its distinctive central concern. Work is the means by which reason and community are reconciled in freedom. Through this idea Polanyi tries to explain the paradox of modernity which can be summarized as the following process. As society develops in size, technological power and complexity, it tends to eliminate itself as the centralized state grows on one side, and the decentralized economy on the other. Amorphously squeezed between the individual maximizer and the collective aggregator, society as a functional moral entity disappears.

The emergence of the modern state with its national currency and uniformity of tariffs destroys the existing institutions of social organization such as cities, corporations, unions, parishes, municipalities and estates. The legal constitution replaces the ethical ties generated by shared vocational institutions. The central bureaucracy and national police replace more immediate forms of discipline and organization. The market, in its turn, undermines racketeering and rigging, the central characteristic of all stable association, thus opening up the elements of society for sale on the open market. Confronted by stable patterns of production characterized by quality control and apprenticeships with the consequent barriers to entry, the market solution is to abolish cooperation, not to democratize rackets. The state creates the conditions, the market makes the moves, the result is the emptying of the body politic. Society, understood as a stable network of self-governing institutions as well as a web of self-regulating systems, disintegrates.