The Great Transformation part 2a
Polanyi last leaves us with a promise at the end of section 1 that he could weave us a narrative explaining the mess of the world and what happened to bring us there. Section 2a in this regard is Polanyi giving us all the useful tools and examples necessary for this story. (Where 2b is the analysis fitting all the pieces together.) With that being said, there are a couple things Polanyi wants to focus our attentions on, and three things in particular he will examine under the microscope.
1) is the enclosure movement. Which can only be seen as a complete tragedy, this was a movement starting from the mid 1500’s and pushing all the way until the 1650’s in some regions. It involved taking land from commoners still living in a manorial system and ‘enclosing’ their land, taking it over and depriving the commoners of their rights to that land.
The enclosure movement had terrible effects, often called a revolution of the rich against the poor, the enclosure movement quite literally disrupted the fabric of society (according to Polanyi.) To quote him directly now “desolate villages and the ruins of human dwellings testified to the fierceness with which the revolution raged, endangering the defenses of the country, wasting its towns, decimating its population, turning its overburdened soil into dust, harassing its people and turning them from decent husbandmen into a mob of beggars and thieves.”
As a quick aside, with this Polanyi gives a quick analysis on these effects and provides a litmus test for when a change in society is deleterious for society.
- if the change involves some net negative, with only the promise of future positive change, then we must wait to bear out the evidence before proceeding with the change
- we must measure the time rate of change compared to the time rate of adjustment. Any new change will involve some type of adjustments. If the adjustment period takes to long, the effects could be disastrous
2) moving on, Polanyi needs to introduce what he calls fictitious commodities. In order to do this Polanyi needs to introduce the market pattern, or the market organization of society.
Unlike other economic systems, the market system singles out a specific institution based entirely around truck and barter (the market). It therefore places the market as the organizer of society. “It means no less then the running of society as an adjunct to the market”. Society for the first time became embedded into the economic system, and not the other way around.
This system is juxtaposed with previous economic patterns, for which Polanyi writes a great deal and to which I will go into small detail.
- The first of these systems is an economic pattern based around reciprocity: it became in everyone’s interest to provide for everyone, to insure a good reputation. To produce in this fashion was commonplace amongst many old communities, whose trade networks were complex beyond belief.
- Distribution: to which everyone contributes, and everyone is allowed to participate, mostly with things like feasts and other major celebrations, this pattern relied on a government to distribute the things necessary for the whole of society.
- The third is house holding, or what Polanyi calls Autarchy. Where one take care for the management of his house as priority above all else.
Within each of these systems it should be noted that there is a division of labor and elements of markets embedded in each (not the other way around like under the market pattern).
With that being said, maybe the biggest defining factor in the market system is the transformation of everything into commodities. The market system organizes everything via price (which is why all things under the system get treated as commodities). He also characterizes how people interact with the system, wherein the class structure looks something akin to this
- The rentier, which derives income from rent
- The laborer who receives wages
- And the capitalist who generate profit
During this process of regulation, the political and economic spheres become detached, for the market must comprise all elements of industry, thus as Polanyi states “a market economy can exist only in a market society”. While this point may seem unclear at first, let me walk you through the narrative Polanyi paints. Polanyi starts this story with the merchants, whom at the dawn of Capitalism were making more and more complicated machines. Machines which required long term horizons and were deemed ultimately rather risky. Merchants designed the factory system to support these machines, to host them and give them a place to operate.
As industrial production becomes complicated the assurance of the factors of production become important. The “big three” (as I call them), land, labor, and money then became of utmost importance. They needed to be safe guarded and were therefore put under the regulation of the market. Hence, Polanyi says “they would have to be organized for sale on the market—in other words, as commodities.”
Here I shall let Polanyi himself speak, as this insight of his is in my opinion of thee greatest economic analyses I have ever read.
“Therefore labor, land, and money had to be transformed into commodities in order to keep production going. They could, of course, not be really transformed into commodities, as actually they were not produced for sale on the market. But the fiction of their being so produced became the organizing principle of society. Of the three, one stands out: labor is the technical term used for human beings, insofar as they are not employers but employed; it follows that henceforth the organization of labor would change concurrently with the organization of the market system. But as the organization of labor is only another word for the forms of life of the common people, this means that the development of the market system would be accompanied by a change in the organization of society itself. All along the line, human society had become an accessory of the economic system.”
It is this what Polanyi calls fictitious commodities, commodities that aren’t produced on the market but like a noble lie are treated as such to preserve the system.
Polanyi recognizes that this move made human society an accessory of the economic system, and as such new institutions of protectionism arose to check this economic order. He calls this the double movement, because as the market system became ever bigger, the same members (both pro free market and not) created institutions to protect them from the market.
3) last but not least we come to Speenhamland, which was one of the first moves to help the new wage workers in the new society. Polanyi uses this example overwhelmingly in this section to emphasize his point.
Speenhamland was a system put in place that came alongside the Elizabethan poor laws. Speenhamland was direct income given to the poor rural class at the changing of the economic system. From Wikipedia, “The Speenhamland scale read, ‘When a gallon loaf of bread cost one shilling: every Poor and Industrious Man should have for his own Support 3s weekly, either produced by his Family’s Labor, or an Allowance from the Poor rates, and for the support of wife and every other of his Family 1s 6d…. When the Gallon loaf shall cost 1s 4d then every Poor and Industrious Man shall have 4s Weekly for his own, and 1s and 10d for the Support of every other of his Family. And so on in proportion as the price of bread rises and falls.”
Polanyi thinks this led to disaster, Speenhamland was a rate set against wages, meaning the capitalist class could lower their own wages as a mark against the Speenhamland system. If people didn’t accept their low wages they could retreat onto the “rates” which turned men into paupers and destroyed the dignity of that people. It was said “once on the rates, always on the rates” this feedback caused men to sink, and what was intended to be a guard against the economic system only pushed it farther.
These three things Polanyi puts special emphasis on because he is going to use these as evidentiary in his analysis for the next section. While section 2b is the fantastic meal you’re about to eat, section 2a is the necessary environment needed to enjoy that meal. With that being said I am delighted to have written this little summary up and I’m excited for you guys to read the next section!
The Young Econ Scholar 