Karl Polanyi, in his book The Great Transformation, theorizes that market economy is never autonomous but is influenced, if not driven, by a nation’s politics, religion, and social relations.  He calls this his concept of “embeddedness.”  He contends that if the economy were autonomous that humans would become commodities which would assure their destruction.  So powerful is the economic dynamic left to its own devices.

He writes about the transformation from an economic theory whose purpose was not gain but the sustaining of life to an economic theory wholly focused on gain.  This transformation takes place during the 19th century and is rooted in Western Europe and England.  It facilitated the industrial revolution and the expansion of western culture throughout the world.  A key ingredient of this transformation, which I thought was particularly interesting, was the development and demise of the Gold Standard.

The saying that politics makes for strange bedfellows could not be more applicable.  From Marx to Coolidge to Trotsky, and from Hoover to Lenin to Churchill to Mussolini, both capitalists and socialists, embraced the Gold Standard.  In the face of economic stress, the Gold Standard was put into place to provide economic stability and free trade among nations.  The socialist saw it as representing labor while the capitalist saw it as being useful and scarce, both saw it as valuable.  Global conferences took place to agree to conditions to govern currency stability and the League of Nations exerted influence on behalf of free trade.  However, the more that actions were taken to protect the Gold Standard the worse became the economies represented!  Wealth redistribution worked until there was less wealth to distribute.  Countries were called upon to make sacrifices on behalf of other countries that far outstretched their comfort zone.  Inflation resulted while greed and gain outstripped the value of Gold on hand.  

The Gold Standard is but a historical sentence in economics today.  Polanyi is hard on England, placing the market economy idea, free trade, gold standard, and the industrial revolution at their doorstep.  Whether or not that is completely true, it is a haunting piece of history to track the development of free market ideas that have created more poverty than beneficiaries.  He may well be right in saying that the socio-economic idea of gain had never been reflected in a “self-regulating market” and that it resulted in the idea of capitalism which expresses a religious passion.  

Polanyi leaves a haunting question, “What would happen if labor were taken out of the market?”  

My takeaways from the book:

• An economic system must reflect and collaborate with other social systems to survive and benefit society

• No economic system can flourish for the good of people apart from a Biblical based economic ethic