Evaluating Karl Polanyi — a contradictory, but vital economic thinker

May 4, 2018
Karl Polanyi.

Reconstructing Karl Polanyi: Excavation & Critique
By Gareth Dale
Pluto, 2016
246 pp., $33.88

As a well-known British socialist activist and an academic political economist, Gareth Dale is thus ideally placed to write about Karl Polanyi, writes Derek Wall.

Polanyi was a leading 20th century critic of the free market economics that crystallised into the neoliberal system that is now threatening our planet.

Polanyi, born in Vienna in 1886, is best known for his 1944 book The Great Transformation. He is often cited by anti-capitalists from a variety of perspectives and his work provides a well developed account of the flaws of a market based approach.

Essentially, he argued that the free market approach that views humans as motivated by self interest, and that the more markets are promoted the better things will be, is deeply flawed. Polanyi used historical and anthropological sources to suggest that while markets may have existed in the past, economics is about more than markets. At the same time, economic activity in human history generally came second to collective social goals.

Polanyi suggested thus that far from being natural, markets were to a large extent artificial and were often imposed by elite interests. Polanyi, who died in 1964, never used the term neoliberalism, but the idea that markets were exploited and built by powerful regressive state interests was part of his approach.

Too often, we think of markets and states as being opposites. But with neoliberalism, far from stepping back, the state pumps cash into corporations even while it cuts spending on social services. Polanyi analysed the trajectory of this tendency that today dominates society.

In turn, Polanyi believed that the extension of the market would destroy the environment and degrade human societies. 

Polanyi is becoming better known, but it can be difficult to understand where his ideas came from and the extent to which they are useful to the 21st century left. Dale thus provides an important service in writing about Polanyi in a way that is interesting and clear, but academically strong.

Dale has written two other books on Polanyi, including a detailed biography. In Reconstructing Polanyi, Dale does what the title describes; he shows where Polanyi found his key ideas, how he developed them and how they can be criticised.

Polayni’s intellectual history is complex. Austria and much of central Europe in the first four decades of the 20th century was a place of intellectual ferment. Polanyi was a heterodox thinker, he often drew upon contradictory sources and seemed to have picked up ideas whereever he could find them.

Dale, while suggesting the power of more orthodox forms of Marxist political economy, seems to find this trait attractive. Polanyi drew upon functionalist anthropology, Christian socialism, Marxism and paradoxically perhaps some forms of Austrian free market thought.

Functionalist anthropologists such as Bronislaw Malinowski argued that economic activity was rooted in cultural and social needs, and is thus collective and rejected the notion of markets based on individualism. Despite being a critique of the market, Polanyi seemed to have accepted the pre-Keynesian assumption that government intervention in markets leads to costly mistakes.

Bizarrely, his equally well-known brother Michal Polanyi accepted a free market critique of socialism, but was a strong advocate of Keynesian economics based on using government intervention to reduce the effects of economic crisis and to sustain capitalism.

Nothing about Karl Polanyi is simple. To take one example, Dale does a good job of examining his contradictory and changing attitude to Marx’s thought and to the Soviet Union. While not a Marxist Polanyi was increasingly drawn to Marx’s thought. McCarthyism, a paranoid fear of “reds under the beds” in the US, affected him and his brother (ironic given Michael’s anti-communism).

The book is full of gems and every paragraph reads like a dense fascinating summary of big debates. There is much of interest here. I was particularly taken with the description of the class nature of ancient Sumerian religion: “When the lesser gods discovered class struggle and refused to work, their overlords — Enki, Enlil, Anu and the mother goddess (Mama) — decided to create a new race to take on the task of labour.

“They slaughtered one of the cleaver worker gods (perhaps the rebel ringleader) and, combining his divine flesh with earthly clay, brought humans into being.” 

Polanyi can often be criticised and the academic anthropology he drew upon has sometimes been revised by more recent research. But Dale shows that his work is still vital if we are to challenge neoliberalism and construct a socialist alternative that is equal, economically viable and ecologically sustainable.

[Derek Wall is a former principal speaker of the Green Party of England and Wales. He is currently writing a biography of Peruvian revolutionary and indigenous leader Hugo Blanco.]

You need Green Left, and we need you!

Green Left is funded by contributions from readers and supporters. Help us reach our funding target.

Make a One-off Donation or choose from one of our Monthly Donation options.

Become a supporter to get the digital edition for $5 per month or the print edition for $10 per month. One-time payment options are available.

You can also call 1800 634 206 to make a donation or to become a supporter. Thank you.