Karl Polanyi on market society, economic liberalism, & Speenhamland
PPE 475-302: Economic Liberalism & Its Critics
HANDOUT #9: Polanyi on market society, economic liberalism, & Speenhamland – Some clarifications and tips
As I mentioned in class, you won’t be getting a detailed handout to guide your reading of Karl Polanyi’s The Great Transformation. (I do recommend that you review Handout #3A … and, if you like, you might also find the Foreword by Joseph Stiglitz and/or the Introduction by Fred Block useful to help orient yourselves, though neither is required or essential.)
However, this handout does provide a brief overview of Polanyi’s argument. In addition, I want to offer some tips about how to deal with one historical topic that Polanyi discusses in The Great Transformation, the so-called Speenhamland system and its consequences. Polanyi’s discussion of Speenhamland is mostly concentrated in chs. 7-8, but bits of it are spread through chs. 9-10 as well, and there are occasional references thereafter.
With respect to Speenhamland, the main point I want to emphasize is that you should not get too hung up on Polanyi’s discussion of Speenhamland. It’s not really crucial to his central theoretical and historical arguments. And my impression is that for many readers (I include academics as well as students), Polanyi’s discussion of Speenhamland not only is easy to misunderstand, but also tends to be distracting and even misleading in terms of understanding his central arguments in The Great Transformation. In fact, if there were some simple and convenient way to cut Speenhamland out of the assigned reading, I might be tempted to do that. But the discussion of Speenhamland is too closely woven into Polanyi’s historical narrative to be easily disentangled. So instead I will use this memo to clarify what you do and don’t need to worry about in connection with Polanyi’s account of Speenhamland, to help you avoid being either distracted or misled.
=> First, a quick overview of Polanyi’s argument to provide some background and context. (Page numbers refer to the 2001 Beacon Press edition.)
Polanyi argues that one of the crucial defining features of modernity has been the emergence, to an unprecedented extent, of a self-regulating market economy. Contrary to the claims of economic liberalism, Polanyi insists, the market economy is neither ‘natural’ nor universal. Socio-economic systems that include markets to a greater or lesser degree, along with other modes of economic activity and coordination, have certainly been around, in various forms, for thousands of years. But the emergence of a comprehensive, fully developed, self-regulating market economy—an economic system dominated by the market and its systemic logic—is a distinctive and historically recent phenomenon. Polanyi further argues that if one considers all the social requirements and consequences of a self-regulating market economy, they add up to a massive overall transformation in society, politics, and culture. Thus, “A market economy can exist only in a market society” (GT, p. 74).
In chs. 3-10 of The Great Transformation (Section I of Part Two), Polanyi is, among other things, telling two historical stories, which are interrelated but analytically distinct. He is tracing (a) the emergence of market society and (b) the emergence of the philosophy of market society, economic liberalism. The notion of a society based on the self-regulating market, which is at the heart of economic liberalism, has been one of the most powerful, persistent, and influential utopian visions of the modern era. Both of those phenomena built on long-term processes involving a range of western societies. But in both cases the first breakthrough to their full consolidation happened in Britain. So a good deal of Polanyi’s historical discussion in that part of The Great Transformation focuses on Britain in the late 18th and early 19th centuries (what some might call the early phase of the ‘long’ 19th century).
I spoke of the emergence of a self-regulating market economy “to an unprecedented extent” because no actual society has ever been a pure market society, with total commoditization and the completely unhampered operation of the self-regulating market. This is neither accidental nor unfortunate, according to Polanyi, since such a society would be unsustainable and humanly unlivable. Not only do specific individuals and groups have various reasons, sometimes quite selfish, to try to protect themselves and their interests against market pressures and effects. Even more fundamentally: “To allow the market mechanism to be the sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society” (p. 76).
The emergence of the self-regulating market thus provoked, and has continued to provoke, a wide range of reactions seeking to protect particular groups, institutions, social practices, and communities, as well as whole societies, against the comprehensive and unhampered operation of the market. Polanyi sums this up as a broad “countermovement” for the “self-protection of society.” It is worth emphasizing that the manifestations of this “self-protection of society” have been very diverse in nature and intent, often uncoordinated, and sometimes even contradictory. They include measures and practices that are selfish and public-spirited, governmental and non-governmental, wise and unwise, beneficial and harmful, radical and conservative—as well as grand political tendencies ranging from fascism and Stalinism to the New Deal, social democracy, environmentalism, and so on.
Much of the history of the last several centuries has therefore been shaped, and continues to be shaped, by the dynamics of what Polanyi terms the “double movement” (e.g., pp. 79-80 & 136-139): On the one hand, there is the ongoing expansion and consolidation of the market, its increasing scope and its penetration into more and more aspects of social life, promoted by the ideological project of economic liberalism to remove all obstacles and alternatives to the unhampered operation of the self-regulating market. On the other hand, there is the multifarious “countermovement” of social self-protection, which has valuably prevented the market from totally subsuming society but, in the process, has also produced various unintended and sometimes unwelcome consequences of its own.
There is a good deal more to Polanyi’s argument, but those are some of the basic outlines.
=> How does Speenhamland fit into this larger picture?
“Speenhamland” was one name for a system of poor relief operating in England during the late 18th and early 19th centuries (also referred to in contemporary debates as the Poor Law—by Ricardo, for example, in ch. V of his Principles of Political Economy and Taxation). It covered the rural poor, who by that time were overwhelmingly agricultural wage-laborers rather than peasant farmers. In order to keep wages from falling below a basic subsistence minimum, the wages of workers that did fall below that rate were subsidized by local authorities to bring them up to the minimum scale (based primarily on the prevailing price of bread in the area). You can get the details from chs. 7-8 of GT. Polanyi argues that the intent was to help buffer not only the poor but also the structure of rural society against the potentially disruptive effects of an emerging national labor market. Polanyi also argues that, for various reasons, the system was badly designed. It generated a cascade of unintended consequences that wound up contributing to widespread demoralization and pauperization among the rural poor rather than actually helping them.
There has been historical debate about Polanyi’s account of Speenhamland. Some analysts, including admirers as well as critics of Polanyi’s overall perspective, have questioned his analysis of Speenhamland and its consequences. Much of the distress blamed on the Speenhamland system, at the time and in retrospect, may have been due to quite different economic factors operating during that period. Or maybe not.
Fortunately, for our purposes in this course we don’t need to get involved in those particular historical debates. Whether or not Polanyi is right about the immediate social and economic consequences of the Speenhamland system is, to repeat, peripheral to his central arguments in The Great Transformation. Instead, here are the main points you need to keep in mind concerning Polanyi’s account of Speenhamland.
● I said earlier that in chs. 3-10 of The Great Transformation Polanyi is, among other things, telling two historical stories that are interwoven but analytically distinct: about (a) the emergence of market society and about (b) the emergence of the philosophy of market society, economic liberalism. Polanyi’s account of Speenhamland is not directly significant for the first of those two stories. Instead, it is most directly relevant to the second story, concerning the development of economic liberalism.
Polanyi is struck by the radicalism of economic liberals in the era of Malthus and Ricardo, and their callous and punitive attitude toward the poor—very different in tone from the attitude of Adam Smith, for example. He argues that these features of their world-view were powerfully shaped by the experience of Speenhamland, as they interpreted it. The conclusion they drew was that any interference with the self-regulating market, no matter how well-intentioned, would necessarily generate disastrous results. “Out of the horrors of Speenhamland men rushed blindly for the shelter of a utopian market economy” (p. 107).
● Whether or not Speenhamland—and, more important, the critical analysis of Speenhamland by economic liberals—played a central role in this ideological radicalization, that is indeed the conclusion they drew.
● Polanyi, of course, believes that this conclusion was profoundly wrong, and that the whole tradition of market utopianism has had disastrous consequences of its own, both direct and indirect. In fact, ‘interferences’ with the market are both inevitable and essential. But some are wiser and more effective than others, and the results depend not only on the measures themselves but on the social and historical circumstances involved, which need to be considered concretely rather than dismissed on the basis of abstract ideological dogmas.
=> Otherwise, once you have made sense of Polanyi’s account of Speenhamland, I advise you to side-step this topic and focus on the main arguments of The Great Transformation.