Try Red Pepper in print with our pay-as-you-feel subscription. You decide the price, from as low as £2 a month.More info ×
In 1944 two books were published that would come to symbolise the clash of modern perspectives about capitalism. The first, still a bible of the right and reportedly Thatcher’s handbook, was Friedrich Hayek’s The Road to Serfdom. The second, just as influential, was Karl Polanyi’s The Great Transformation.
The Great Transformation describes the evolution of market society by examining the institutions that the market is built upon. For this reason, Polanyi is seen as the fountainhead of what is today called institutionalist political economy – which includes such contemporary luminaries as Joseph Stiglitz and H J Chang. While many earlier societies had markets at their margins, it was only with the emergence of capitalism that our society evolved into one in which markets become central for the production and distribution of most goods.
Since the time of Adam Smith, economic liberals have perceived the evolution of market society as something entirely natural. According to Polanyi, though, there is nothing natural about its emergence; it had to be planned – it had to be created.
A market society requires that the most basic constituent parts of society – labour, land, and money – come under the sway of the market. They have to be commodified. But labour and land are not naturally commodities – they do not exist, like widgets, for the purpose of sale. They can only ever be what Polanyi calls ‘fictitious commodities’. So the history of capitalism as Polanyi relates it is the history of the attempt to commodify these non‑commodities. He describes in rich detail the great transformation that was required to enact this commodification – the enclosures, the poor laws and their reform, the courts and the cops – and thereby construct the first market society.
As the market comes to dictate ever more aspects of life, nature as well as the lives of working people comes increasingly under the sway of market forces, which bring in their wake immense destruction and destitution. In a poignant denunciation of capitalism, Polanyi paints a bleak future for society under the market mechanism:
‘In disposing of a man’s labour power the system would, incidentally, dispose of the physical, psychological, and moral entity “man” attached to that tag … Nature would be reduced to its elements, neighbourhoods and landscapes defiled.’
Yet destruction is not the end of the story. As the creation of a ‘laissez-faire’ society destroys the old social systems, this brings with it a counter-movement of resistance. Resistance expresses itself in the struggles for regulation, rights and protection; hence the struggles over the right to unionise, the minimum wage, the ten-hour day, and so forth. Polanyi calls this movement to liberate the market from society, and the counter-movement to protect the people from its ravages, the ‘double movement’. In a fascinating historical exposition, The Great Transformation illustrates how the myriad interventions and regulations of the market were sometimes propelled by socialists and reformers – that is by ‘planners’ – but just as often by self-serving capitalists trying desperately to ensure the sustainability of the system they benefit from. In other words, the true history of capitalism is the opposite of what liberals believe: the ‘free market’ had to be created, whereas the planned regulations often were not. As Polanyi put it, ‘Laissez-faire was planned; planning was not.’
Six decades after the publication of The Great Transformation, Polanyi’s critique remains relevant. It is now a mainstream tenet that societies face a choice between the free market, or the market on one side and the state on the other, perhaps overlapping at some points but basically separate and distinct.
But Polanyi shows that this is a false dichotomy. There is no such thing as, nor has there ever been, nor could there ever be, a truly free market. Markets are always inherently embedded in the state and institutionalised in various political structures. The parameters of the market, the rules and regulations of the game, are set by law. The state defines what kind of buying and selling is permitted. It establishes minimum wages and fixes tax rates. It creates the paramount institution of modern capitalism – the corporation – and delineates its rights. Thus, the central point, as Polanyi teaches us, is that the fundamental question regarding the market is not ‘free market or intervention?’ but rather ‘intervention for whom and for what?’
The insight that there is no such thing as a free market leads to another: that the current arrangement of the market is in no way ‘natural’, it is political, and therefore subject to debate, reform or fundamental change. There is nothing natural about creating a market system that establishes a business form (the corporation) that is allowed to externalise its carbon emissions or prevent its workers from having a say in management. There is nothing natural about having a central bank obsessed with inflation while masses of people are unemployed. Once we recognise that markets are constructed, we also come to recognise that markets are ultimately only tools, and while in some cases they may make good servants, they always make terrible masters.
Ultimately, The Great Transformation leaves us with a fundamental dilemma: either the market will continue to dominate society, in which case it will surely destroy us, or society will come to dominate the market. Unfortunately Polanyi didn’t leave a clear picture of what exactly it might mean for society to dominate the market. Working this out remains our task.
Tom Malleson is a PhD candidate at the University of Toronto in Canada
Nick Dowson looks at the new wave of co-ops and community groups where people are building their own truly affordable homes
Hsiao-Hung Pai meets people affected by the fire, and finds sadness and suffering mixed with a continuing wariness of the official investigations
Chris Williamson MP, winner of the election's tightest marginal, Derby North, and recently reappointed shadow minister for fire services, talks to Ashish Ghadiali about Jeremy Corbyn, the housing crisis and winning from the left
The Corbyn-supporting group is preparing for another election at any moment, writes Adam Peggs – and now has the potential to create powerful training initiatives, union links and party reform efforts
’We believe in you. We are with you. We will never forget.’ Grenfell solidarity sweeps East London in mass banner drops from housing estates
Michael Calderbank profiles Jeremy Corbyn's new supporters in parliament
The Democratic Republic of Congo (DRC) continues to witness devastating political violence, but the world refuses to act. Ishiaba Kasonga and Serge Egola Angbakodolo ask why?
When fire safety has become a privilege for the rich, it’s time to stop austerity and fund emergency mass works to raise standards immediately, writes Jane Shallice
Interview: Queer British Art
James O'Nions talks to author Alex Pilcher about the Tate’s Queer British Art exhibition and her book A Queer Little History of Art
Cable the enabler: new Lib Dem leader shows a party in crisis
Vince Cable's stale politics and collusion with the Conservatives belong in the dustbin of history, writes Adam Peggs
Anti-Corbyn groupthink and the media: how pundits called the election so wrong
Reporting based on the current consensus will always vastly underestimate the possibility of change, argues James Fox
Michael Cashman: Commander of the Blairite Empire
Lord Cashman, a candidate in Labour’s internal elections, claims to stand for Labour’s grassroots members. He is a phony, writes Cathy Cole
Contribute to Conter – the new cross-party platform linking Scottish socialists
Jonathan Rimmer, editor of Conter, says it’s time for a new non-sectarian space for Scottish anti-capitalists and invites you to take part
Editorial: Empire will eat itself
Ashish Ghadiali introduces the June/July issue of Red Pepper
Eddie Chambers: Black artists and the DIY aesthetic
Eddie Chambers, artist and art historian, speaks to Ashish Ghadiali about the cultural strategies that he, as founder of the Black Art Group, helped to define in the 1980s
Despite Erdogan, Turkey is still alive
With this year's referendum consolidating President Erdogan’s autocracy in Turkey, Nazim A argues that the way forward for democrats lies in a more radical approach
Red Pepper Race Section: open editorial meeting – 11 August in Leeds
The next open editorial meeting of the Red Pepper Race Section will take place between 3.30-5.30pm, Friday 11th August in Leeds.
Mogg-mentum? Thatcherite die-hard Jacob Rees-Mogg is no man of the people
Adam Peggs says Rees-Mogg is no joke – he is a living embodiment of Britain's repulsive ruling elite
Power to the renters: Turning the tide on our broken housing system
Heather Kennedy, from the Renters Power Project, argues it’s time to reject Thatcher’s dream of a 'property-owning democracy' and build renters' power instead
Your vote can help Corbyn supporters win these vital Labour Party positions
Left candidate Seema Chandwani speaks to Red Pepper ahead of ballot papers going out to all members for a crucial Labour committee
Join the Rolling Resistance to the frackers
Al Wilson invites you to take part in a month of anti-fracking action in Lancashire with Reclaim the Power
The Grenfell public inquiry must listen to the residents who have been ignored for so long
Councils handed housing over to obscure, unaccountable organisations, writes Anna Minton – now we must hear the voices they silenced
India: Modi’s ‘development model’ is built on violence and theft from the poorest
Development in India is at the expense of minorities and the poor, writes Gargi Battacharya
North Korea is just the start of potentially deadly tensions between the US and China
US-China relations have taken on a disturbing new dimension under Donald Trump, writes Dorothy Guerrero
The feminist army leading the fight against ISIS
Dilar Dirik salutes militant women-organised democracy in action in Rojava
France: The colonial republic
The roots of France’s ascendant racism lie as deep as the origins of the French republic itself, argues Yasser Louati
This is why it’s an important time to support Caroline Lucas
A vital voice of dissent in Parliament: Caroline Lucas explains why she is asking for your help
PLP committee elections: it seems like most Labour backbenchers still haven’t learned their lesson
Corbyn is riding high in the polls - so he can face down the secret malcontents among Labour MPs, writes Michael Calderbank
Going from a top BBC job to Tory spin chief should be banned – it’s that simple
This revolving door between the 'impartial' broadcaster and the Conservatives stinks, writes Louis Mendee – we need a different media
I read Gavin Barwell’s ‘marginal seat’ book and it was incredibly awkward
Gavin Barwell was mocked for writing a book called How to Win a Marginal Seat, then losing his. But what does the book itself reveal about Theresa May’s new top adviser? Matt Thompson reads it so you don’t have to
We can defeat this weak Tory government on the pay cap
With the government in chaos, this is our chance to lift the pay cap for everyone, writes Mark Serwotka, general secretary of public service workers’ union PCS
Corbyn supporters surge in Labour’s internal elections
A big rise in left nominations from constituency Labour parties suggests Corbynites are getting better organised, reports Michael Calderbank
Undercover policing – the need for a public inquiry for Scotland
Tilly Gifford, who exposed police efforts to recruit her as a paid informer, calls for the inquiry into undercover policing to extend to Scotland
Becoming a better ally: how to understand intersectionality
Intersectionality can provide the basis of our solidarity in this new age of empire, writes Peninah Wangari-Jones
The myth of the ‘white working class’ stops us seeing the working class as it really is
The right imagines a socially conservative working class while the left pines for the days of mass workplaces. Neither represent today's reality, argues Gargi Bhattacharyya
The government played the public for fools, and lost
The High Court has ruled that the government cannot veto local council investment decisions. This is a victory for local democracy and the BDS movement, and shows what can happen when we stand together, writes War on Want’s Ross Hemingway.
An ‘obscure’ party? I’m amazed at how little people in Britain know about the DUP
After the Tories' deal with the Democratic Unionists, Denis Burke asks why people in Britain weren't a bit more curious about Northern Ireland before now
The Tories’ deal with the DUP is outright bribery – but this government won’t last
Theresa May’s £1.5 billion bung to the DUP is the last nail in the coffin of the austerity myth, writes Louis Mendee