“Polanyi Got it all Wrong” -Uncle Milty
“The Great Transformation,” written by Karl Polanyi and published in 1944, traces the history of the free market economic system. It also criticizes its ideological foundation. Milton Friedman would use its pages either for starting a fire or to line the litter box.
The best part of the book is the history lesson he takes the reader on in the areas of sociology and economics. He returns to the 1700’s and the Industrial Revolution and continues through the philosophical underpinnings that supported the free market system in the nineteenth century. He finishes this section of the book by tracing events that led up to the first and second world wars. This is interesting history, especially relevant today because of the criticisms that are being thrown at American Capitalism. Today we hear vitriolic assessments that capitalism only makes the rich richer, and the poor poorer. Shameless greed is celebrated and gross injustice is inevitable. I have no doubt that if Polanyi were alive today, he would join in this popular chorus.
The history he traces gives the reader enough back story of how we got here (here being the 1940’s) to understand the arguments that he makes against the free market system. The lion’s share of my criticism is not against this brief history, but against his conclusions about economics and human behavior as it relates to the market system. A market is a place or a network of people who come together to transact business—to buy and sell goods and services based on price, quality, quantity, etc. Because he does not think these human networks can be self-regulating if left to their own natural functions, he argues that the state needs to control them. He argues that this limits the damage that can be done to people and the macro-economy of a nation. At the same time, state control of a limited market system holds up the greater good of the society such as justice and equality. It is an old anthem of those who disagree with Adam Smith’s Invisible Hand, and an anthem I grow tired listening to. I employed my Inspectional Reading techniques learned from Adler and Van Doren on this section of the book. I’ve heard these tired arguments many times before, and so has Clark, as attested to in his dissertation.
The book stands as a stark contrast to ideas put forth by Max Weber in his book, “The Protestant Ethic and the Spirit of Capitalism.” These are important ideas discussed with ramifications that effect the development of an entire country, for good or ill. The arc of history not only bends towards justice (MLK) but it also bends towards free market economics. Of course there needs to be intelligent regulation involved, but the core of the free-market system proves time and again the victor for unleashing the power of the creativity and capability of the individual. Since the 1940’s, when Polanyi wrote his book, former socialist/communist countries that were strictly Marxist/Engels in their economics changed their melody by employing at least some measure of free market systems. The amount of “free” that goes into a country’s market system can be debated vigorously. Government involvement with their business and industry will vary greatly but that’s OK. Even siblings can look very different from each other. Not every country has to employ an exact replica of American Capitalism. Principles are the lesson.
These big picture ideas require slow thinking, of the variety that Daniel Kahneman espouses. There is too much at stake if a government gets this wrong. But if a government gets this right, and it allows their people to work, create, and build–then freedom, justice, and economic flourishing will result.
About the Author
Troy Rappold
B.A. Communication - University of Colorado M.Div. Theology - Cincinnati Christian University Currently enrolled in D. Min. program at George Fox University8 responses to ““Polanyi Got it all Wrong” -Uncle Milty”
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Troy, I appreciate your post. It is easy to follow and sarcastic enough to keep my attention. I’m sure you assumed push back when you published your patriotic post, so here’s my question. You write, “The arc of history not only bends towards justice (MLK) but it also bends towards free market economics.” MLK Jr. was directly fighting systemic racism and oppression of black Americans, and not an esoteric, hypothetical aim toward justice. Since you evoked MLK Jr., I must ask, how do you hold justice for black Americans in tension with a free market economy that erected itself upon a foundation of slave labor?
Slavery has occurred in all varieties of macro economic systems. Slavery is an institution with roots in the darkness of human hearts, not free market economics. All economic systems must be regulated to some degree to account for the greed and competing interests of human nature. Any economic system can be twisted to incorporate slavery. So the Church must stand and shine forth against such abuses in all political and economic systems.
I agree that slavery can occur in many economic systems, but its expansion in the West since the 14th century owns much to the imperialistic Christianity. That is pretty well historically documented. Free market capitalism advantages those with capital. The trickle-down effect is the ideal cited to justify economic inequality. What issues do you see with this ideal?
Troy, you sure didn’t hold anything back this week – I appreciate that! You mention how Polanyi differs greatly from Weber’s view. What do you believe to be the implications of that difference? Do you believe it is important to embrace one view over the other? If so, how so?
Roy: I did get excited this week. I love these kind of big-picture discussions. I don’t think that one must be an overly-devoted disciple to one view. Otherwise it just degenerates into a philosophical battle that becomes less and less connected to the real world. The truth always borrows from competing viewpoints. But yet these debates must happen.
Troy, well said. Good argument and well stated.
I agree with much of what you have said, however, for me it comes again to the fall of humanity. I don’t have much (lets be honest, any) confidence in any human system. For the time being, I too am a capitalist and see the value of work, freedom, and less government (especially as it relates to our development work). We are working on a project right now, a ~7-8 million housing complex (26-units for low-income individuals), and now the “historic district” wants some say in what we build, or don’t build, and how we build it. I am fighting this for a LOT of reasons, but primarily in that: 1) they have no jurisdiction to sanction what we do or do not build; and 2) what they would have us do would not pencil out financially; and 3) I live in the community, they don’t, so why would I give ear to their whimsical desires and wishes?
Argh. You were in the property business a long time. I am sure you feel the pain.
I was in the Prop Mgmt business for 12 years and I do feel your pain. I really enjoyed it but the battle your fighting does get frustrating. Hang in there. I have minimal faith in the human systems we build; they are temporary and imperfect. But yet we have to have these type of debates in order to make the best system possible. But we have to constantly be adjusting and regulating to keep all the competing interests in check. “It is the cracks in our lives that allows the light to shine in.” That quote was meant for individuals, but it is also applicable for our society. Wherever the cracks exists in our society (the poor, the homeless…) that is where the Church’s light shines forth.
Troy, thanks for this unique twist on our reading. I have to agree with your conclusion, that people in leadership authority, especially in government need to take their time in making decisions for the good of all people. Despite having a government, at least in theory, has a “balance-of-power” most members have lost sight of their constitutes and what is good for them. I am curious to hear what you think might be necessary to create the healthy balance.