Written by: gfesadmin on January 31, 2013

Karl Polanyi’s The Great Transformation presses the idea that market economy is reliant upon the social dynamics of politics, religion, and social relations.  In fact, he contends that if the market economy were really free that labor and indeed humans would become commodiities and would self destruct.  The book takes these basic ideas and sets them into the context of the 19th century and the development of the Industrial Revolution, WWI, and WWII.

In the process of fleshing out his economic theory and research, he points out the important historical role of the Gold Standard.  The Gold Standard was put into place to provide a climate of economic steadiness thru stable currency and free trade.  I found it interesting that both the socialists and orthodox economists embraced the Gold Standard.  They supported it for different reasons, nevertheless, from Marx to Coolidge to Trotsky, from Hoover to Lenin to Churchill to Mussolini they all supported it.  They all got behind it because of their mutual desire for economic (power) gain.  This is very near the saying that “politics makes strange bedfellows!”

I never realized how important the Gold Standard was to the global dynamics of the 19th century.  Many of the early international conferences and even the League of Nations took actions to facilitate the viability of the Gold Standard.  However, the more actions that were taken to press the Standard, the worse the economic situations for individuals and countries became.  Currencies were out of sync and free trade became impossible.  The resulting economic turmoil allowed fascism to exert power and then WWII took place.  

This is the way I make sense of the Gold Standard.  It claimed to provide a level playing field, but that was a false assumption.  Every participating country had to make different and more dire sacrifices for the benefit of other countries.  When the local currencies exhausted the gold, other countries were called to help until they too were at risk.  When it became apparent that the Gold Standard limited economic appetites it was abandoned!  This is raw capitalism devoid of Biblical ethics at work!  

My takeaways from this book:

• economic gain is a reflection of the lost nature when it becomes a unifying principle in one’s life
• capitalism apart from Biblical ethics is most cruel and creates more poverty than beneficiaries
• the Gold Standard could not bear the weight of the greed of the nations who adopted it

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