Vive Le Canada

The Decline of Transcendent Markets and the Rise of Fascism
Date: Monday, September 12 2005

There has been a revival of interest in The Great Transformation (1944), by Karl Polanyi. In 1987 The Karl Polanyi Institute of Political Economy was established at Concordia University A new edition of the book appeared in 2001, with a forward by Joseph Stiglitz. Also in 2001, in her "All You Can Eat", Linda McQuaig writes extensively on Polanyi's ideas.

1. Nothing Else Matters
Polanyi predicted that if a self-adjusting market society (such as ours) collapses, two choices emerge: socialism or fascism. (His reasoning for this prediction is given below). Today it may be argued that the self-regulating market economy we live in is in decline- due to internal (democratic) and external (environmental) decay. But rather than a renewed socialism, signs of an emerging fascism appear evident in:

  • free trade and other such agreements, such as the FTAA and the so-called 'Task Force on the Future of North America', wherein decisions are made outside of the democratic process

  • a growing privatization and control of information (limits to the democratic freedom of the press)

  • 'real estate' wars and environmental rape and degradation
  • privatization of the money supply

  • nondemocratic global policing and 'structural adjustment' organizations such as the World Bank, the IMF, the BIS (Bank for International Settlements) and the like

  • The consolidation of power in the hands of a few cabinet ministers/advisors

  • Repressive anti-terrorism laws and no-fly lists
  • Unauthorized government invasions of internet and email privacy and piracey

Let us take a look at The Great Transformation, and Polanyi's thought.

One-Dimensional Societies
Polanyi argues that, with the advent of the Industrial Revolution, the marketplace grew- from local to international- to be of such a magnitutde that it not only "disembedded" from society; but also became more important than society itself: it became what he terms a 'self-regulating market':

"...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." [Italics mine]

The problem with this is that the sole aim of the marketplace is profit. Nothing else matters.

2. Liberalism (what we have now), Fascism (emerging), or Socialism (what we could have)?
Polanyi claims that "To allow the market mechanism to be sole director of the fate of humans beings and their natural environment...would result in the demolition of society...human beings...would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighbourhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed."

Sound familiar?

Fascism or Socialism...
Polanyi claims that the collapse of a self-regulating market is inevitable, as it is "a stark utopia" (i.e., an unrealizable fantasy). Therefore, when (not if!) it collapses, it may produce either of two offsprings: socialism or fascism. He defines each:

"Socialism is, essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society."

"The fascist solution...can be described as a reform of market economy acheived at the price of the extirpation of all democratic institutions."

He claims that these two alternatives to a self-adjusting market economy...
"should never have been ascribed to local causes, national mentalities, or historical backgrounds as was so consistently done by contemporaries...To imagine that it was the strength of the movement which created situations such as these, and not to see that it was the situation that gave birth in this case to the movement, is to miss the outstanding lesson of the past decades. Fascism, like socialism, was rooted in a market society that refused to function." [Italics mine]

For example,

"During the period 1917-23 governments occasionally sought fascist help to restore law and order: no more was needed to set the market system going. Fascism remained undeveloped.
In the period 1924-29, when the restoration of the market system seemed ensured, fascism faded out as a political force altogether.
After 1930 market economy was in a general crisis. Within a few years fascism was a world power... It now emerged as an alternative solution of the problem of industrial society."

"The discarding of the market utopia brings us face to face with the reality of society. It is the dividing line between liberalism on the one hand, fascism and socialism on the other."

3. Commodity Fictions
Polanyi claims that, as a precondition of a market economy, three commodity fictions are necessary:

"labor, land and money are obviously not commodities; the postulate that anything that is bought and sold must have been produced for sale is emphatically untrue in regard to them. Labor is only another name for a human activity which goes with life itself, which in its turn is not produced for sale but for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized; land is only another name for nature, which is not produced by man; actual money, finally, is merely a token of purchasing power which, as a rule, is not produced at all, but comes into being through the mechanisms of banking or state fianance. None of them is produced for sale. The commodity description of labor, land and money is entirely fictitious."

(A major theme, touched on throughout the book, is that of the critical importance to a self-adjusting market of money as a commodity fiction. Space prohibits exploration of this theme here.)

Human Beings as Commodities
The implementation of these commodity fictions, Polanyi argues, lead to a shift in values:

"...if workers were physically dehumanized, the owning classes were morally degraded. The traditional unity of Christian society was giving way to a denial of responsibility on the part of the well-to-do for the condition of their fellows. The Two Nations were taking shape. To the bewilderment of thinking minds, unheard-of wealth turned out to be inseperable from unheard-of poverty."

Economic Liberalism: Secular Salvation
The shift in values lead, in turn, to an attempt to validate the shift.
"Not until the 1830s did economic liberalism burst forth as a crusading passion and laissez-faire become a militant creed."


"Economic liberalism was the organizing principle of society engaged in creating a market system.... it evolved into a veritable faith in man's secular salvation through a self-regulating market. Such fanatisism was the result of the sudden aggravation of the task it found itself committed to: the magnitude of the sufferings that had to be inflicted on innocent persons..."

4. The Double Movement
At this point, Polanyi introduces the concept of 'the double movement', which is to say that people were not standing idly by while their lives were being uprooted or destroyed (nor are they today). Reactions occurred to the upsurge of the self-regulating market across the face of Western societies. Space prohibits Polanyi's description of these struggles, but "Almost simultaneously the self-protection of society set in: factory laws and social legislation; and a political and industrial working class movement sprang into being."

In PART III of The Great Transformation Polanyi describes what happens when (not if!) an international self-regulating market economy begins to dissolve. He argues that so long as the supply of commodity fictions remain more or less intact, the economy will function; but signs of its decline can be detected in disruptive strains which begin to emerge- such as unemployment, class tensions (labor), pressures on exchanges (money), and national rivalries (land). Today we might add to the latter environmental strains.

He says that, during the 1920s, when the market system was under duress, "Economic liberalism made a supreme bid to restore the self-regulation of the system by eliminating interventionist policies which obstructed the freedom of markets for land, labor, and money."
But in spite of all efforts,
"The collapse came in America in the course of the usual business cycle, but by the time it came, the financial web created by Geneva and Anglo-Saxon banking entangled the economy of the planet in that awful capsize."


"Nineteenth century civilization was not destroyed by external or internal attack of barbarians; its vitality was not sapped by the devastation of World War I nor by the revolt of the socialist proletariat or a fascist lower middle class. Its failure was not the outcome of some alleged laws of economics such as that of the falling rate of profit or of underconsumption or overproduction. It disintegrated as the result of an entirely different set of causes: the measures which society adopted in order not to be, in its turn, annihilated by the action of the self-regulating market."

5. Freedom. Towards a Socio-Economic Philosophy of Freedom: A Just Economy = A Just Society
Polanyi ends The Great Transformation with a consideration of the question of Freedom. First of all, he says, there can be no real freedom under a self-regulating market society: "Neither freedom nor peace could be institutionalized under that economy, since its purpose was to create profits and welfare, not peace and freedom."
"... we find the path [to freedom] blocked by a moral obstacle. Planning and control are being attacked as a denial of freedom. Free enterprise and private ownership are declared to be essentials of freedom. No society built on other foundations is said to deserve to be called free. The freedom that regulation creates is denounced as unfreedom; the justice, liberty and welfare it offers are decried as a camouflage of slavery."

Sound familiar?

"With the liberal the idea of freedom degenerates into a mere advocacy of free enterprise-- which is today reduced to a fiction by the hard reality of giant trusts and princely monopolies. This means the fullness of freedom for those whose income, liesure, and security need no enhancing, and a mere pittance of liberty for the people, who may in vain attempt to make use of their democratic rights..."

But freedom does not come into being without a price: "No society is possible in which power and compulsion are absent, nor a world in which force has no function." The maintenance of freedom is contingent upon constant and responsible vigilance.
Freedom of Opinion
"...power & economic value are a paradigm of social reality. They do not spring from human volition; noncooperation is impossible in regard to them. The function of power is to ensure the measure of conformity which is needed for the survival of the group; its ultimate source is opinion...Any opinion or desire will make us participants in the creation of power and in the constituting of economic value. No freedom to do otherwise is conceivable."

What, then, will happen when (not if!) the self-regulating market society- which we have today- collapses? In the end,

"The discovery of society is either the end or the rebirth of freedom. While the fascist resigns himself to relinquishing freedom and glorifies power which is the reality of society, the socialist resigns himself to that reality and upholds the claim to freedom, in spite of it."

Even so,

"The passing of market economy can become the beginning or an era of unprecedented freedom. Juridicial and actual freedom can be made wider and more general than ever before; regulation and control can aceive freedom not only for the few, but for all. Freedom not as an appurtenance of privilege, tainted at the source, but as a prescriptive right extending far beyond the narrow confines of the political sphere into the intimate organization of society itself...Such a society can afford to be both just and free... An industrial society can afford to be free." [italics mine]
Polanyi admits that "This may happen in a great variety of ways, democratic and aristocratic, constitutionalist and authoritarian, perhaps even in a fashion as yet unforeseen."

* * * * * * * * * * *

I hope this brief outline peaks your interest in The Great Transformation. I think that, after 60 years, we are just catching up to it. It is rooted in history and is a reasoned guide towards change in a global social system going critical.

In Canada, the only federal party articulating the solutions-based ideas and policies necessary to move towards "...a society [which] can afford to be both just and free" is The Canadian Action Party:

The choice seems clear. A Just Economy = A Just Society. A federal election is coming soon. NOW is the Time.
John Riddell

[[Dear Editors: I thought I would submit this review/article on The Great Transformation in a shorter version, for your consideration. I think it is arguably the most important book of the 20th centruy. If you wish to edit, take out the end section, ok. Vive to all at Vive, John]]

[Editor's note: Thanks John. Definitely a good read. No trimming needed.

[Proofreader's note: this article was edited for spelling and typos on September 12, 2005]

The Karl Polanyi Instit... Joseph Stiglitz. Linda McQuaig The Canadian Action Party

This article comes from Vive Le Canada

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