Market fundamentalists see democracy as tyranny

Gareth Dale: "With neoliberalism, the work of Karl Polanyi became highly topical again"


February 14, 2019 | Matthias Lievens

An interview with Gareth Dale, the biographer Karl Polanyis, about his work. The economist Polanyi (1886-1964) has proven to be an important source of inspiration for criticizing market fundamentalism in recent years.

From neoliberalism to environmental politics, from the rise of capitalism to the interaction between democracy and the market, Karl Polanyi seems to have something to say. Can one speak of Polanyi's rebirth?

Gareth Dale: Yeah, definitely. In the 1950s and 1960s, Polanyi was best known in the field of economic anthropology. With the rise of neoliberalism in the 1980s, however, his work became highly topical again. The focus of his work is above all the time until the rise of market-based fundamentalism, i.e. the period at the end of the 19th and beginning of the 20th century.

Polanyi has built a reputation for himself in several branches of the social sciences. He is, so to speak, one of the theorists from the second row: not as famous as Karl Marx, Max Weber or Emile Durkheim, but his work is known to a large number of academics and has reached wide circles beyond that.

Many Marxists and critics of neoliberalism are inspired in their analyzes by Polanyi's point of view. What exactly are its influences here?

Gareth Dale: Polanyi's influence is not limited to Marxist circles. For example, it is also known to the school of world systems analysis, which was not only inspired by Karl Marx and Fernand Braudel, but also by Polanyi. Terry Hopkins and Immanuel Wallerstein, the founders of world systems analysis, knew Polanyi personally.

He also influenced the left-wing Social Democrats as well as some right-wing Social Democrats, such as Dominique Strauss-Kahn and Maurice Glasman. The latter is the initiator of Blue Labor, a trend within the British Labor Party that advocates a stricter immigration policy and at the same time advocates rapprochement with the variant of German capitalism. Glasman finds arguments in Polanyi for a protectionist orientation of society, which offers more security, places more emphasis on manual skills and the role of the skilled worker and controls the financial capital more strictly. All of this is fundamentally compatible with the continued existence of the class society in which we live today.

What are the key ideas that made Polanyi a great writer for the political left?

Gareth Dale: Polanyi is radically opposed to what he calls "economic sophism." In other words, to make people believe that concepts developed to explain and post-justify the modern capitalist world could also apply to pre-capitalist societies. This claim is a characteristic of the work of many neoclassical economists. In this way the idea of ​​the transcendence of capitalism was born, that is, the idea that this system would always have existed in old societies, even if it only existed there in an embryonic form. Polanyi shows very clearly that capitalism appeared at a very specific point in history, that it has gone through all conceivable developments over time and that it therefore does not have to be forever.

Polanyi is best known for his criticism of the market economy. However, we can state that this type of society has been the exception rather than the norm throughout history. It is only recently that the market economy has begun to break away from other spheres in order to dominate society as a whole.

For Polanyi, the market society emerged from a very specific upheaval that occurred in Great Britain at the end of the 18th and early 19th centuries. The concepts that allow us to understand how they work only apply to this very special type of society. These considerations prompted him to question the economic history of ancient societies and to develop a "world economic history". According to him, the economic processes are reduced to three different models of integration: reciprocity, redistribution and exchange.

One of the models will prevail depending on how society intends to deal with land, money and labor. Based on this line of argument, he delivered important work on the economic history of antiquity. But he achieved fame above all for his criticism of market fundamentalism.

The particular upheaval he speaks of, which first appeared in Great Britain at the beginning of the 19th century, is the total commercialization of land, money and labor. Polanyi speaks of "fictional goods" because land, money and labor are not intended to be sold in the market. The creation of specific markets for these goods is therefore the starting point of an overall "utopian-liberal" project. The originally socially anchored market will then break away from this social anchorage ("disembedding") and submit all areas of society to its logic.

This commercialization will lead to social disorder in the form of crises, unemployment, the breakdown of social fabric and local communities, environmental pollution, and so on. It will also trigger a spiritual and moral crisis due to the degradation of social standards. Ultimately, this dominance of the market will lead to a situation where people will no longer be able to take responsibility for their decisions.

And that will then lead to different forms of resistance, what Polanyi calls the "counter-movement"?

Gareth Dale: The commercialization of land, money and labor poses a threat to nature, to the population, but also to the economy itself. And that inevitably provokes criticism and other forms of resistance. Polanyi shows how, as a reaction to this utopian-liberal project, a counter-movement emerged very quickly to protect society from the impairments caused by market forces, in particular through social legislation, protectionism, the control of the monetary system, etc. Polanyi was much less into classic economic protectionism interested in protecting against foreign competition. For him it was above all important to protect himself from shocks that are responsible for the disruption of the social fabric and social institutions and that are harmful both to the individual and to nature.

One of the key concepts in his book "The Great Transformation" is the "double movement". He refers here to the attempt of the market fundamentalists to tear the market out of its social anchorage, which has provoked a strong reaction in favor of the level of social protection against the consequences of the market effects. This double movement is often interpreted as a pendulum movement: If we move too much in the direction of market society, it automatically leads to counter-reactions and vice versa. At least that is the most common interpretation of this concept. Is that what Polanyi meant?

Gareth Dale: This common interpretation of this concept assumes that in a capitalist society there is a pendulum movement between the tendency towards total commercialization on the one hand and the tendency (social democratic or otherwise) of society to defend itself against this commercialization on the other side give. I found no argument in Polanyi's work to support this theory. On the contrary, Polanyi argues that the emergence of a market economy marks a clear and unique dividing line in human history. This rupture has led to an unnatural separation of economic and political power.

Polanyi, influenced by Christian values, explains that this separation is unnatural, in other words, it violates the God-willed state that the main characteristic of humanity is that people work in community and not against each other. In addition to the conflict between the social classes, there will therefore also be a conflict between the economic system and the political system, a particularly profound dispute. In particular, when workers are given universal suffrage and demand social protection measures, it becomes difficult to maintain the stable balance between these two systems. Once the system is in question, the laissez-faire economy and democracy become incompatible.

"The Great Transformation" analyzes the functioning of market society, which was relatively stable in the 19th century, but inevitably encounters its own contradictions and destroys its own conditions for survival at the beginning of the 20th century. The living conditions of many people are regressing and provoking a reaction ("counter-movement"). The imbalance between the protective countermovement and the thirst for liberal marketing will ultimately no longer be stabilized. Polanyi shares the thesis of the Austrian School that every intervention in the market will change its functioning: higher wages lead to less investment and a strong trade union movement reduces the ability of capitalism to regenerate. Regulated capitalism is therefore inherently unstable. Tensions mount and devastate society, resulting in a series of disasters: World War I, Great Depression, World War II.

The crisis of the market society is a central point of reference in socialist theory, but isn't it also a breeding ground for the spread of fascism?

Gareth Dale: The desire to reconcile society in one way or another and to reconcile politics and economics is very attractive in the context of a crisis. This can be done either reactionarily through fascism, which aims to reunite society under the influence of capital and weaken democracy, or progressively through socialist approaches. For Polanyi, the Soviet Union represents a semi-progressive strategy. While he was very critical of the October Revolution in the 1920s, he surprisingly begins to defend the Soviet Union and Stalin in the 1930s. In his historical studies, he analyzes how various forms of tyranny can serve as a prelude to democracy, an analysis that he keeps in mind as he studies the Soviet Union. An increase in the level of education could, for example, open the door to democratization. Later he will withdraw these statements and be much more critical of the Soviet Union.

Polanyi hoped for a democratic socialism embodied to some extent by the American New Deal and social democratic governments like that of Clement Attlee in Britain. He assumed that the trend towards the unification of society under democratic socialism would gradually gain in importance over the course of the 20th century. Even if this scenario did not materialize, at no point did Polanyi accept that the trend would ultimately weaken, fail, or even reverse after the war. He never really asked whether his prognosis was true or not.

To see the New Deal, the Attlee government and the Soviet Union as expressions of one and the same counter-movement in favor of democracy, beyond the split between economics and politics, isn’t that a simplistic idea of ​​the state?

Gareth Dale: For Polanyi, the state is not primarily a means of political repression or an instrument of bourgeois rule. His understanding of the state is more mainstream: the state is an institution through which a community of citizens becomes a collective subject with a common will. According to him, modern democracy has an inherently social democratic side because of the role that citizens will play in it. From a Marxist point of view, the idea that capitalism and democracy are separate and opposing systems is of course untenable. However, the idea that these are separate systems is an example of fetishistic thinking that views relationships between people as relationships between things.

Today there are different manifestations of a counter-movement seeking protection. How are these to be interpreted? For example, what should we think of the demand for protectionism that is emerging again today?

Gareth Dale: The normal functioning of a capitalist society is based on commercialization and exploitation, which leads to all sorts of exertions and forms of suffering. One of the fundamental tasks of the state is to alleviate this suffering through protective measures such as the welfare state. This is how immigration control policy works, sowing division and xenophobia under the pretext of protecting the "nation". Personally, I see this as a necessary part of the functioning of a civil society. Although Polanyi's theory of countermovement is diverse and interesting, I do not believe that protectionism runs counter to the basic structures and functioning mechanisms of market society.

You still describe the book "The Great Transformation" as unique, why?

Gareth Dale: I think this work is very topical and at the same time very timely. From what I've read, Polanyi was an old-school left-wing Social Democrat, at least during the period of his life when his fame peaked, in the 1930s and 1940s, when he was working on his book The Great Transformation . The left social democracy of that time was not what we know today. The left social democrats of that time were still convinced that the parties they supported were committed to a post-capitalist future. There was a moral claim, and in Polanyi's case it was a Christian one, in left-wing social democratic circles it was a certain ethic of duty and helpfulness towards one's fellow men. What I find unique about this book is the strong response from this period, which I call the "lost world of socialism" in my biography. A form of socialism that no longer exists today. The great socialist personalities with whom Polanyi maintained contacts, such as G.D.H. Cole, or Richard Tawney, are practically unknown today.

The book is also very timely in the sense that it tries to understand how the society of the all-encompassing market, based on profit and purely economic interests, tends to take the whole of society by surprise and turn it into an appendage of economic interests. A very topical argument in this neoliberal era.

In a captivating chapter of your book "Reconstructing Karl Polanyi" you show that Polanyi was intellectually close to neoliberal authors such as Friedrich von Hayek. That is rather surprising and at the same time fascinating: starting from similar hypotheses to arrive at radically contradicting conclusions.

Gareth Dale: The connection between Hayek and Polanyi is exciting. Indeed, these two authors share identical ideas about certain aspects and defend completely opposite points of view on others. Polanyi was shaped by the Austrian School, which would later play a decisive role in the development of neoliberal ideas. He advocates their theory of value, their theory of marginal utility or marginalism, which is radically different from Marx's theory of labor value.

As with Hayek, we find the idea of ​​personal responsibility, which also plays a central role in Polanyi's ethics. The concept of spontaneity is also important to both. The idea that the market is a spontaneous order that results from individual behavior is fundamental at Hayek. For Polanyi, on the other hand, a form of spontaneity manifests itself in the countermovement that opposes the market. Polanyi is influenced here by Jean-Jacques Rousseau. According to him, the market is an artificially constructed institution that creates various forms of suffering. The social response, on the other hand, an expression of this human suffering, is a spontaneous response. It manifests itself in the demand for more social protection by the trade unions, the state, the church etc. Hayek, on the other hand, places spontaneity in the functioning of the market, while he sees socialist alternatives as artificially constructed and thus dangerous.

They also share the same view of the state as being clearly separated from the market. If the state does not act as a night watchman, but directly on the market, a limit will be crossed. If the state intervenes in the market, writes Hayek, it disrupts the functioning of the market.This will lead to crisis phenomena that will increase the demand for additional or more intensive interventions in the market. The notorious argument that Hayek developed in his book “The Path to Servitude” goes as follows: Once you begin to intervene in the spontaneous functioning of the market, you set in motion a logic of ever greater state intervention, which ultimately leads to totalitarianism will lead.

Polanyi reverses this argument: workers and other groups will inevitably organize to defend themselves against the devastating effects of the market. In particular, they are calling for government intervention. This will lead to disruptions in market mechanisms and calls for more profound changes. This process would ultimately lead to a transformation and overcoming of the market society.

So Polanyi naively believed that democratization would lead to socialism. According to Hayek's vision, however, crossing the line between state and economy leads to servitude. So there is a similarity here, where what is a nightmare for Hayek would be a dream for Polanyi. All of this, of course, only under certain conditions, because Polanyi recognizes that there is a risk that this spontaneous counter-reaction can also lead to fascism. That was the question earlier: would the counter-movement inevitably lead to socialism or fascism, according to him?

In your opinion, what added value does “The Great Transformation” bring to the Marxist tradition?

Gareth Dale: Polanyi was an exceptional intellectual, a brilliant writer. Someone we can always learn from. You ask me whether he went further than the Marxists on one issue or another? I would answer that it depends on the Marxist you are thinking of. Many of the subjects he dealt with in depth were already addressed to some extent by Marx, such as the analysis of commodity fetishism or the criticism of economic sophistry. Polanyi criticized classical political economy, particularly Malthus and Ricardo, and gave a detailed explanation of the crisis that broke out between the two world wars. I do not mean to say that his analysis is richer or more advanced than that of Gramsci, for example. But Polanyi's ability to summarize in a single perspective the predisposition of the international system to crisis, the development of the world economy and nationalism, and what he calls the struggle between democracy and capitalism, gives an original view of the collapse of liberal societies during the Interwar period. Does “The Great Transformation” introduce a research agenda that goes beyond Marxism? I do not believe that. Does this book broaden our understanding of classical 20th century political economy and international political economy? Yes for sure.

In his analysis, Polanyi looks at the damage that the market inflicts on society in a wide variety of areas and the various backlashes this triggers. Can we say that, according to Polanyi, the potential for resistance is greater than in the analyzes of Marxism? Market crises affect far more people than just the working class.

Gareth Dale: The idea that for Marx the concept of change agent is limited to those who work in production is a misunderstanding. It is often said that Marx focused on production while Polanyi focused on the suffering caused by the market such as alienation, unemployment and price volatility, and therefore the suffering that can affect anyone, including capitalists and landowners. Indeed, that is Polanyi's main concern. If we understand this, we can better understand his support for the Popular Front in the 1930s, a time when he was very close to the communist movement.

According to Polanyi, the market system creates different forms of suffering in all social classes. Everyone, including capitalists and landowners, is affected by the market. That is why the agent of change can be found throughout society. With this argument, Polanyi underscores a fetishism of society: an understanding of things that are hidden in market products and behind which social conditions disappear. He underestimates the importance of class contradictions. In his argument about coalitions of social forces, he neglects the stark contradictions that exist between these forces; ultimately, these contradictions could also undermine the resistance.

But I am not advocating a return to Marxism, which sees the industrial working class as the spearhead of ongoing change. That was never Marx's approach or that of the most famous Marxists. The formation of coalitions of social forces is essential. Today's capitalist society experiences all kinds of oppression. Linking the movements and interests of exploited and oppressed groups is fundamental to any revolutionary policy.

Polanyi nevertheless had very close relations with some of the famous Marxists of his time?

Gareth Dale: Polanyi grew up in Budapest. He had good relations with Georg Lukács, the famous Hungarian Marxist philosopher. Friends of childhood, they remained so until the end of their lives, if only sporadically. It was around 1917 when their differences of opinion were most pronounced. Lukács became a revolutionary Marxist. For his part, Polanyi, although a little flirted with this perspective during the brief existence of the Hungarian Soviet Republic in 1919, never took the step that Lukács took. On the philosophical level, like Lukács, Polanyi was heavily influenced by Marx's theory of commodity fetishism. According to this theory, relationships between people in capitalism are transformed into relationships between things. These things, namely money, goods and capital, then develop their own dynamics and people take over.

In the 1920s, however, Polanyi will be hostile to Marxism in many areas, especially in its Bolshevik form. Later he will approach Marxism in its Austro-Marxist variant. For a long time he also showed great sympathy for the work of Eduard Bernstein. Then in the 1930s he defended the Soviet Union.

He was particularly drawn to the ethical concerns of the Austromarxists and the importance they attached to the education of the working class. The fact that the Austromarxists admired Ferdinand Tönnies' work, which was also highly valued by Polanyi, certainly played a role. Tönnies was a German sociologist for whom there was a difference between "society" and the associated model of depersonalized, cold and formal social relationships (especially under market dominance) and "community", where social relationships were much stronger and more personal . According to Polanyi, socialism should first have restored real community relationships between people. This also explains his sympathy for guild socialism, or guild socialism, which advocated self-government by workers' guilds, consumer organizations and other community organizations.

Polanyi was primarily shaped by the experience of “red Vienna”. Between 1918 and 1934 the Austrian capital was ruled by a majority of the Social Democratic Party with strong Marxist influence. Polanyi was particularly impressed by the cultural uplift, the self-confidence, the public visibility of the working class in Vienna and the concrete changes in everyday life. At that time, many cultural associations flourished, educational programs, libraries and kindergartens emerged. “To be, but not to have” is how Polanyi sums up this concrete experience of common socialism.

In the biography you mention Polanyi's Jewish origins. However, he was very interested in Christian values ​​and even went so far as to defend a kind of Christian socialism. How do you explain that?

Gareth Dale: Polanyi was never a practicing Jew, he was more of a Jew of origin. He came from the Jewish petty bourgeoisie, strongly represented among the liberal professions, but also oppressed. Jews from his milieu did not feel accepted by the national community. Polanyi identified himself very strongly with the Hungarian nation. The search for a stronger sense of community has been a great motivation throughout his life. In part he experienced it in the cosmopolitan community of left intellectuals and activists, but in part also more abstractly in Christianity. He borrows from Christianity the idea that a religious system can sustainably stimulate a community of believers. He hoped to link this moral community spirit with the socialist movement. He believed that this union would lead to a total and radical change in society.

His idea of ​​socialism therefore seems to be based on moral values ​​and community spirit. Do his ideas have any relevance for reflection on socialism today?

Gareth Dale: His ideas are getting some resonance in the current debates. One of the reasons for Polanyi's popularity is the widespread feeling nowadays that there is something fundamentally wrong with the global system. But at the same time we are not living in a time of great social movements, as was the case in the 1960s and 1970s. At that time we had collective and visible actors who seemed to give society a radically different orientation. The situation is different today, and although criticism of the system is widespread, the form of collective action is relatively weak. In such a context, a general moral criticism of the system, such as that of Polanyi, which emphasizes ethical values ​​and the importance of cooperatives, can easily find its way.


Although Gareth Dale describes himself as a Marxist rather than a follower of Polanyi, he has become one of Karl Polanyi's most important contemporary specialists. In the last ten years he has devoted himself to researching the life and work of the Hungarian economist. - The interview first appeared on ▸ We thank you for permission to translate and re-publish. Translation: Martin Ahrens.

Matthias Lievens is a lecturer at the Catholic University of Leuven in Belgium.