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Is An Economy Devoid of Morality?

Written by: on January 24, 2019

Karl Polanyi’s seminal work, The Great Transformation: Political and Economic Origins of Our Time is to be commended for pointing out the dire consequences of leaving market economies unchecked. During his time the role economy played in people’s everyday lives was taken for granted. The idea was simple then. How does one make a lot of money? Making lots of money equated with progress, so the thinking went. Progress meant opportunities, stronger local and national economies, innovation, low employment, etc., but most of all it attained peace.1 Peace was attained at the expense of liberty. When a people lose their sense of priorities, first things become second things, then second things become first things – a sort of Faustian bargain.

The 100-year peace preceding the Great War proved to many that whatever economic mechanisms were in place worked, and the bargain appeared to work. However, that did not last. The forces sustaining peace broke down. What caused its demise? A cursory reading of Polanyi, even by experts, might suggest that it was the result of a cultural milieu bent on prosperity in Western Europe in which markets were left completely autonomous. That human society accumulated wealth at the expense of other human needs is important to consider in this discussion. Polanyi blamed and bemoaned the fact that human society was subordinated2 by economics and not the other way around as it ought to be. However the charge that self-regulating markets caused societal decline leading to wars is too hasty. I realize this is a minority position and needs defending. My three main arguments are:

1. Polanyi himself did not make that claim. He said it himself in the beginning of his book:

“But if the breakdown of our civilization was timed by the failure of world economy, it was certainly not caused by it. Its origins lay more than a hundred years back in that social and technological upheaval from which the idea of a self-regulating market system sprang in Western Europe.”3

This is honest. To say that two things have a correlation but not causation is an important and honorable distinction. For example, we all know the rooster does not cause the sun to rise even though we observe the two occurring tother. The cause was something else which segues to the second observation.

2. Greed and jealousy caused economic collapse which led to wars, not the proliferation of self-regulating markets.

Polanyi writes:

“British and French interests differed in Africa; the British and the Russians were competing with one another in Asia; the Concert, though lamely, continued to function; in spite of the Triple Alliance, there were still more than two independent Powers to watch one another jealously.”4

He adds that this started the formation of alliances among the super powers, thereby threatening world peace. 

The 19th century experienced a boom in new infrastructure. Railroads were crisscrossing plains once desolate, the telegraph was invented and the industrial age was in full swing expanding the middle class. The upsurge in new technologies and innovation caused nations to compete against each other. World leaders began manipulating their currencies (now detached from the gold standard) resulting in imbalances of exports/imports. To the degree nations deal with these challenges is the same degree to which peace and prosperity either is maintained or sacrificed.

3. Polanyi’s discussion of the “balance of power” neglected to mention the genius of the United States constitution. His working definition appears to have only included a potential of two powers, that of the government and that of the governed. This was a popular view in British history5 until it was not in 1776. Polanyi argued that because the balance of power was shifted from the government to the people, sound economic policies were ignored thus contributing to his thesis that self-regulating markets do not work. However, this thinking becomes moot in light of the American Revolution. The balance of power principle as it was conceived in the British empire did not go far enough. It was not enough to consider two opposing forces jockeying for their own interests. This set up only served to pit people against their rulers. The American experiment took those powers and subdivided them even more. The revolutionaries wanted to ensure that no one person could dictate the affairs of the governed, thus establishing three branches of government. Each looked upon the affairs of the other, which the Weimar Republic failed to see.

Finally, there is the myth of self-regulation that needs to be addressed. Polanyi was convinced that a self-regulating economy was not good for the public good. However, the more insightful question to be asked is since when have we not had a self-regulating economy? And even if we had one, which I think we do, who would be responsible for regulating it? Is it the government or the governed who controls the economy? Ultimately it is the people who regulate it because fascist regimes eventually get replace by benevolent ones. Moreover, it is hopelessly difficult to differentiate the ideals of the government and the governed. This was made clear even from the opening lines of the U.S. Constitution (Preamble), “We the people of the United States…” in that the people themselves are the government. 

Self-regulation does happen. It happened in the 1930s to correct the market after the Great Depression under Herbert Hoover and as recently as 2008, after the Great Recession by Barack Obama in the Dodd-Frank Wall Street Reform and Consumer Protection Act.6 

The economy serves the people and not the other way around as Polanyi would assert. This is good. And by keeping first things first we will have learned that there is no place for greed and jealousy, for all they do is “stir up conflict.”7


1Karl Polanyi, The Great Transformation (Boston, MA: Beacon Press, 1957), 6.
2Ibid., 74
3Ibid., 4
4Ibid., 20
5Ibid., 269
6Alan Greenspan, “How to Fix the Great American Growth Machine,” The Wall Street Journal, October 12, 2018, , accessed January 24, 2019, https://www.wsj.com/articles/how-to-fix-the-american-growth-machine-1539361093.
7Proverbs 28:25

About the Author

mm

Harry Edwards

Harry is married to Minerva and has the privilege of raising two young men. He is the founder and director of Apologetics.com, Inc., an organization dedicated to defending the truth claims of Christianity on the internet, radio and other related activities. He received his Bachelor of Arts degree in Christian Education and a Masters of Arts degree in Christian Apologetics from Biola University where he currently works full time as the Associate Director of the graduate programs in Christian Apologetics and Science & Religion. Harry is currently pursuing a DMin (Leadership & Global Perspectives) from George Fox University. He is an active member at Ocean View Baptist Church where he leads an adult Bible study and plays the drums for the praise and worship band. In his spare time, Harry enjoys doing things with his family, i.e., tennis, camping/backpacking, flying RC planes and mentoring others to realize their full potential in the service of our Lord.

7 responses to “Is An Economy Devoid of Morality?”

  1. mm Harry Fritzenschaft says:

    Harry,
    Thanks for a great read of your thoughts and perspectives. How does this material relate to your own research (if at all)?

    • Good question Harry. I may tie Polanyi with Bebbington to show that Evangelicalism might have an inculpating role in economics. But it’s not so much in the area of casting blame, but to be mindful that morality does seep into everything we do, including how we handle money. I don’t think greed and jealousy are what necessarily follows from a free market economy; but it’s certainly something we need to watch more closely. It’s like a nuclear reactor — we like the positive things we get from it, i.e., clean and efficient energy, but if we don’t look after it, it could spell disaster.

  2. mm Karen Rouggly says:

    Harry this is a really insightful post. I really appreciated how you interacted with Polanyi’s text. I was really fascinated by your third point. I didn’t even think about this in relation to our US Government. My head as been in Britain the last few weeks. This made me think differently. How do you feel like Polanyi would have commented on the 2008 economic collapse?

    • Thanks Karen for the comment and question. Reading him made me think of the years following his writing. In my original post, I gave him credit for exposing the link between morality and economic systems. Although he tries to avoid using the term “morality” and that’s where I think he gets it wrong.

      Economic systems are just tools to get society to where it wants to go. Understanding the moral nature of human beings is key to the discussion and I think Polonyi just skirts around the issue.

      To your question, Polanyi would say “I told you so.” But again, it’s not capitalism that failed. It’s the greed that caused the world economy to collapse. The main culprit was sub-prime lending as we all know, betting on futures, phantom money, etc.

      You might recall the few years that precipitated the Great Recession of 2008. People were buying homes with no jobs, equity, etc. Banks were granting these loans left and right without verification. I have several friends who got into this and unfortunately defaulted. Banks were eager to lend thinking they’d get a quick return. Homebuyers spent above what they could afford. So you see, it’s greed and lack of wisdom that caused the economy to fail. The system corrected itself by legislating new policies. Some say it was too restrictive. But this is more, as C.S Lewis would say, part of human undulation.

  3. mm Nancy VanderRoest says:

    Great post, Harry. I agree with your statement that greed and jealousy caused economic collapse which led to wars, not the proliferation of self-regulating markets. Polanyl made a strong case with regards to this statement being true and I appreciated your reflection on that belief. Thanks for sharing your enlightening post, Harry.

  4. mm Mary Mims says:

    Great post, Harry. Sorry I didn’t get to comment sooner but I wonder how you see the current situation with the markets self-regulating? It seems we are headed in a terrible direction with market manipulation by the government. I really appreciate your analysis.

    • Thanks Mary. Yes, I read that somewhere recently that we may be headed in the same direction that got us 2008.

      I may be conflating the two ideas discussed in the book: self-regulating economies and non-self-regulating economies. In my original post I challenged the idea that all economies are self-regulating unless it exists within a fascist regime.

      Soon after the Great Recession of 2008, legislature was passed to help prevent another economic meltdown, the government bailed out companies, etc. So if we consider our government to be of the people, by the people and for the people, then it appears some self-regulation did occur.

      What’s going on with the Trump administration is interesting and only time will tell whether or not his protectionist strategy yields positive results. Trade wars go against globalization. Cooperation is good even among nations. However, if trade imbalances put us at risk, we need to change course. Prices will rise but I think that’s a good thing. Why? Because it’s going to train consumers to buy less junk, not tolerate mediocrity in production, waste less, etc. That’s how I see it. We could get there if we are patient. But just like the ups and downs of the stock market, I’m not really sure.

      So there you have it. I’m going back to what I wrote earlier. Economies will have a better chance of succeeding if we get rid of a couple of things: greed and jealousy. Of course business acumen and good accounting practices can’t hurt.

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