The clash betweeh society and economic ideas

[innonimatu]

Comments made in the social security thread convinced me that it would be useful to discuss the degree to which our society has been shaped by the ideas about the economy.

There's an old work, by a "rival" of Hayek, another austrian, Karl Polanyi, which is becoming popular due to the present crisis. "The Great Transformation" is Polanyi's history of the development of modern capitalism and its crisis. He argued two very important ideas: that "free markets", or rather, laissez-faire capitalism, were and could only could only be a result of government intervention, and that capitalism had inaugurated an era where economic ideas ruled society - society served economic ideas, instead of the opposite. Opposite to the claims of the liberals (and our contemporary neoliberals) he argued that this system was necessarily unstable - this was the real road to serfdom. I cannot find the whole text freely available in the Internet, so I'll just recommend a look at this article by Girish Mishra and quote from it:

[Polanyi] had his own explanation for the dominance of market liberalism and for the consequences flowing from this dominance. The concept of embeddedness, put forth by him, is the key to his explanation. This concept underlines that, prior to the advent of Industrial Revolution, the economy was not autonomous, but an integral part of the society and was subordinated to its politics, customs, religious practices and traditions, and social relations. With Industrial Revolution, a new crop of economists, from Adam Smith onward, emerged; who did not think it was logical to continue with the old pattern of keeping the economy under the thumb of the society but to leave it under the system of self-regulating markets. Thus it was the society that came to be subordinated to the logic of the market. To quote Polanyi,"Ultimately, that is why the control of the economic system by the market is of overwhelming consequence to the whole organization of society; it means no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system. The vital importance of the economic factor to the existence of society precludes any other result. For once the economic system is organized in separate institutions, based on specific motives and conferring a special status, society must be shaped in such a manner as to allow that system to function according to its own laws. This is the meaning of the familiar assertion that a market economy can function only in a market society."
[...]
The mission to create a totally self-regulating market economy is predicated on the assumption that both the human beings and natural environment are turned into pure commodities, that is, they are freely bought and sold.[...]

To understand the main plank of this resistance movement, let us go back to what Polanyi said. He termed the thing that was produced for sale in a market a commodity. From this angle, he made a distinction between a real and a fictitious commodity. He regarded land, labour, and money, not real but, as fictitious commodities as they were not primarily produced to be sold on a market.

As far as labour was concerned, converting it into a commodity was sure to prove disastrous. "To separate labour from other activities of life and to subject it to the laws of the market was to annihilate all organic forms of existence and to replace from by a different type of organization, an atomistic and individualistic one.

"Such a scheme of destruction was best served by the application of the principle of freedom of contract. In practice this meant that the noncontractual organizations of kinship, neighborhood, profession, and creed were to be liquidated since they claimed the allegiance of the individual and this restrained his freedom. To represent this principle as one of noninterference, as economic liberals were wont to do, was merely the expression of an ingrained prejudice in favor of a definite kind of interference, namely, such as would destroy noncontractual relations between individuals and prevent their spontaneous re-formation ."

I'd like to know what people here think about Polanyi's ideas.

 

[History_Buff]

He seems to be articulating what I've long thought about the way the economy has worked. It seems to me that people assume that if the economy is good, people are happy, and that's just fine; taking things further, it becomes that the prime concern of society should be keeping the economy chugging, by sacrificing the ideals mentioned in the bolded paragraph.

The free market is a tool, and not a means to it's own end.

 

[Mr. Dictator]

nb4 "inno's socialist"

 

[amadeus]

nb4 "inno's socialist"

Actually, a Marxist. And I didn't say it, he did.

 

[Bill3000]

Actually, a Marxist. And I didn't say it, he did.

Link? He's explicitly denied being labeled a Marxist in the past.

 

[luiz]

Such a scheme of destruction was best served by the application of the principle of freedom of contract. In practice this meant that the noncontractual organizations of kinship, neighborhood, profession, and creed were to be liquidated since they claimed the allegiance of the individual and this restrained his freedom.

This seems contradicted by the rather obvious fact that kinship, neighborhood, profession and creed were not liquidated by the considerable freedom of contract we enjoy. I don't think he fully understood Hayek, and it's no surprise that while the OP calls him Hayek's adversary, the level of recognition of both is quite different.

 

[I'm Cleo!]

As History_Buff pointed out, the free market is a means, not an end. Polanyi's first point -- that the market is the product of government action in the first place, and that it doesn't have a pre-historical existence apart from the decisions of men that make up the government action that defines it -- is really important, and was recognized by the pragmatists who enacted the New Deal and ushered in the modern economy we've all lived in for generations. Any effort to define the free market in natural law terms leads to the conclusion that the current distribution of wealth in a society is built on that same natural law foundation. Which is absurd, but the people with all the wealth think that's just a brilliant idea (and self-evident)!

Cleo

 

[Arwon]

This seems contradicted by the rather obvious fact that kinship, neighborhood, profession and creed were not liquidated by the considerable freedom of contract we enjoy. I don't think he fully understood Hayek, and it's no surprise that while the OP calls him Hayek's adversary, the level of recognition of both is quite different.

Maybe they weren't entirely liquidated and maybe they still exist in a risidual sort of form, but the moral economy, guilds, just price theory and things like usufruct are pretty out of favour these days, hey?

 

[Verbose]

This seems contradicted by the rather obvious fact that kinship, neighborhood, profession and creed were not liquidated by the considerable freedom of contract we enjoy. I don't think he fully understood Hayek, and it's no surprise that while the OP calls him Hayek's adversary, the level of recognition of both is quite different.

Hear, hear.

This was my first though exactly. Adding that since we are implicitly talking about the US as the place where these things have been most comprehensively put into effect, it is interesting that in the US things like family/kinship etc. are relatively more important than in a lot of other places practising the same form of economic system, if less dedicatedly. Family in fact becomes more important in a system like this, as it provides another, complementary kind of security.

 

[I'm Cleo!]

Not really a response to the OP (which I think makes a lot of good points, see my first post supra), but how come people are always complaining about the destruction of the family? Right-wingers claim that socialism destroys the family; this guy (Polanyi) says that radical capitalism destroys the family. It seems like the rule is this:

"What I support helps the family. My opponents would destroy it."

My prediction: nothing is going to destroy the family.*

Cleo

*Except letting gay people in California get married.

 

[amadeus]

Right-wingers claim that socialism destroys the family;

Socialism doesn't destroy the family, it destroys everything else.