Modern Economics or the “Satanic Mill”
The Great Transformation: The Political and Economic Origins of Our Time by Karl Polanyi is in many respects Collateral Damage written seventy years earlier. This book for me was a huge education in basic economics that included history, politics and social theory, covering topics from the gold standard, the causes of WWII, and the transition from feudalism to capitalism over several centuries. Surprisingly, underlying this brilliant scholarly study, I found a passionate concern by the author for those who were “collateral damage” from the transformation to and implementation of modern free-market economic practices.
Polanyi argues that the economy and society are intricately linked. Originally, “man’s economy, as a rule (was) submerged in his social relationships.”[i] In earlier times, society’s central concern was the well being of the community. Societies were set up around caring for each other through reciprocity, symmetry and centricity, which provided for the communal gathering, collection, storage and redistribution of goods and service, all done without permanent record keeping. “The economic system is, in effect, a mere function of social organization.”[ii] Polanyi suggests that “the individualistic savage collecting food and hunting on his own or for his family has never existed.”[iii] Gathering was for “use” of the community and not for individual “gain.”
These long-standing practices experienced a great transformation with the introduction of international trade. “(T)he true starting point is long-distance trade…(which) often engenders markets, an institution which involves acts of barter, and, if money is used, of buying and selling….”[iv] Polanyi concludes that “this doctrine is the origins of trade in an external sphere, unrelated to the internal organization of economy.”[v] This external economic structure was a wrench thrown into the workings of the local community brought devastating results.
Here is where Polanyi is most passionate. He views the introduction of these external, unregulated markets as leaving local communities helpless to maintain social cohesion and solidarity. The production of goods “involved neither the reciprocating attitudes of mutual aid; nor the concern of the householder for those whose needs are left to his care; nor the craftsman’s pride in the exercise of his trade; nor the satisfaction of public praise—not but the plain motive of gain…”[vi] This led to further disruptions as the flood of people into towns and cities from the countryside left local communities ill equipped to deal with new crowds of paupers along with those regularly unemployed by the fluctuations of the market. All these forces were out of the control of the local community, creating unbearable hardships. The end result of was that now “human society had become an accessory an of the economic system,” and “the lives of the people were awful beyond description,”[vii] Further, Polanyi states that “now man was detached from home and kin, torn from his roots and all meaningful environment.”[viii]
This relationship between economics and society is at the heart of Polanyi’s study. I have to wonder if this study reflects his personal witness to some of more horrendous effects of economic policies throughout modern history (WWI, the rise of communism and fascism, the Great Depression, and WWII). Throughout this study is found this author’s deep empathy with those most harmed “in the ravages of this satanic mill”[ix] so evident in his powerful and flamboyant language.
Though much of Polayni’s detailed argument is difficult for the non-economist to wade through, saved only by his poetic and striking phraseology, this understanding of society and the economy as intimately joined is an important reminder. The economy, the free-market, even money are not value free concepts or independent forces (like gravity) that are just there that we have to learn to live with. Indeed, many in our Western world think the laws of the market are just that: scientific, unalterable and omnipresent. But, looking at the effects of free-trade, international markets, the creation of goods and the increase in mechanization throughout history that resulted in the destruction of the social fabric and community life, reminds us that so many of the issues and hardships brought on by these forces are still with us today. It seems that we have two possible responses to these market forces: We can see them as givens that we just have to live with and simply accept. Or, we can view them as human innovations that can be regulated; in which case being passive is not only unwise but immoral. If economics affects the quality and value of human life, as well as the cohesion of communities and societies, then we should seek to understand how to regulate and direct our economy in more humane ways. Polanyi concludes that what was lost in this great transformation was “(t)he traditional unity of a Christian society”[x] which was replaced by a new secular religion. Polanyi at his most poignant when he suggests that with the laws of market forces “that compassion was removed from the hearts, and a stoic determination to renounce human solidarity in the name of the greatest happiness of the greatest number gained the dignity of a secular religion.”[xi] Which begs the question of what religion we are supporting today? And, if not the Church, who will step in to return unity and solidarity to humanity, and compassion to the hearts? It seems a whole lot easier to ride the wave than turn back the hands of time.
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