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
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
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.