The Polarity of Human Freedom and the Self Regulating

Paper presented at the 10th International Karl Polanyi Conference, Istanbul, October 2005 „Bodies do not produce sensations, but complexes of elements (complexes of sensations) make up bodies. If, to the physicist, bodies appear the real, abiding existences, whilst the "elements " are regarded merely as their evanescent, transitory appearance, the physicist forgets, in the assumption of such a view, that all bodies are but thought-symbols for complexes of elements (complexes of sensations)”. + The Polarity of Human Freedom and the Self-Regulating Market Reconsidering the theoretical framework of The Great Transformation Claus Thomasberger * 1. Introduction Polanyi’s analysis, according to Douglas C. North’s critique, “in contrast to his colorful description, is vague, imprecise, and at times simply nonexistent”. 1 The impression that The Great Transformation, in spite of its richness of fertile, fruitful, and interesting insights, lacks a rigorous theoretical foundation has become part of the standard interpretation of Polanyi’s Oeuvre during the last decades. Mark Granovetter takes a similar line when he complains about the theoretical vagueness which was typical of Polanyi’s central notions, i.e. ‘selfregulating mechanism’, ‘institutional separation’, and ‘embededdness’. “Polanyi’s assertions about the submergence of society by the economy when markets are in place must be taken as rhetorical, only a statement of tendency, rather than as historical fact”. 2 And even Fred Block in the preface to the 2001 edition of The Great Transformation considers a misreading the interpretation that with the rise of capitalism in the 19th century, the economy was disembedded from society. “Polanyi does say that the classical economists wanted to create a society in which the economy had been effectively disembedded and they encouraged politicians to pursue this objective. Yet Polanyi also insists that they did not and could not achieve this goal”. 3 + Mach, E. 1897, chapter I.13; (K. Polanyi translated 1909/10 the first three chapters of the book, including the quoted paragraph, for the Hungarian journal ‚Szocializmus’). * University of Applied Sciences, Treskowallee 8, 10313 Berlin, e-mail: [email protected]. 1 North, 1981, 181. 2 Granovetter 1993, 12. 3 Block, 2001, 8. 2 Is Polanyi’s thesis that 19th century civilization was unique and extraordinary exactly because the economy was self-regulating, disembedded, and separated from society nothing else than a misunderstanding? Is the difference between the market society and earlier societies only a difference in degree? Is it accurate to say, as Polanyi asserts in The Great Transformation, that “the civilization of the nineteenth century was unique precisely in that it centered on a definite institutional mechanism”? 4 Was “nineteenth century society, in which economic activity was isolated and imputed to a distinctive economic motive, … a singular departure”5 from the general rule that the economic order is merely a function of the social, in which it is contained? Are these assertions in contradiction to other statements of The Great Transformation where Polanyi states that the idea of setting up a self-regulating market system was a “utopian endeavour” 6 and that “the institutional separation of the political and economic spheres had never been complete”? 7 In order to understand Polanyi’s propositions which we find in The Great Transformation – and the relations between the different assertions – we have to comprehend the theoretical framework which Polanyi applies in the book. I will try to investigate in this paper on what kind of analytical approach Polanyi’s study is based. This paper discusses principally two theses. My first thesis is that The Great Transformation contains a precise and unambiguous theoretical analysis which is rooted in the debates of the 1920s. In order to comprehend the approach, we must revert to England and to ‘Red Vienna’. I will try to reconstruct the theoretical framework drawing on the recent three volume publication of Karl Polanyi’s writings during the interwar period which comprises published articles and unpublished manuscripts and allows, for the first time, the possibility to have a closer look at the origins and the development of some of Polanyi’s concepts. 8 My second thesis is that we can only understand the theoretical framework which underlies Polanyi’s exposition, if we read The Great Transformation in terms of a ‘non-deterministic theory of reification and self-estrangement’. 2. From Bennington College back to ‘Red Vienna’ and reverse 2.1. Polanyi in England: Christian Left Study Group Let us start from the concept of an ‘institutional separation of the political and economic sphere’ in modern society which became one of the core notions of his later work. Polanyi 4 Polanyi 1944, 4. Polanyi 1944, 71. 6 Polanyi 1944, 29. 7 Polanyi 1944, 196. 8 Polanyi 2002/2003/2005. 5 3 uses the notion ‘institutional separation’ in order to describe a particular and unique feature of the civilization of the 19th century for the first time in a manuscript with the title Marx on Corporativism, written around the middle of the 1930s. In this manuscript, in which Polanyi refers directly to Marx’s Critique of Hegel's Philosophy of Right 9, we read: “Industrial life required free competitive markets, while political life was to rest on free popular democracy. As Marx recognized, such a development involved a complete separation of the political and the economic sphere in society. … At this point Marx showed an almost prophetic insight. No one before him, and for a very long time none after him, had recognized the importance of the institutional separation of the political and economic sphere in modern society. Such a separation is the true characteristic of liberal capitalism”. 10 The reason why Polanyi got interested in Marx’s Critique of Hegel's Philosophy of Right was the discovery that Marx in the early 1840s had anticipated some of the most essential features of the fascist movement of the 1930s. Indeed, the analysis of fascism is essential to our discussion. But before we have a closer look at the analysis of fascism itself – and in order to develop a better understanding of the antagonism between markets and popular democracy which underlies the separation of the economic and the political sphere – it is helpful to have a look at the related article The Essence of Fascism. This link is justified not only because both texts were written in the same period, but also because Polanyi explicitly refers to it at the end of the manuscript. Here we find under the heading Spann, Hegel and Marx a more detailed analysis of what Polanyi regards as the particular characteristics of the contradiction between the self-regulating market-system and the features of democracy, immediate human relations, and community: “In a developed market-society … the producers … produce for one another. But this relationship is now hidden behind the exchange of goods; it is impersonal: it expresses itself in the objective guise of the exchange value of commodities; it is objective, thing-like. Commodities, on the other hand, take on a semblance of life. They follow their own laws; rush in and out of the market; change places; seem to be masters of their own destiny. We are in a spectral world, but in a world in which spectres are real. For the pseudo-life of the commodity, the objective character of exchange value, are not illusion. The same holds true of other "objectifications" like the value of money, Capital, Labour, the State. They are the reality of a condition of affairs in which man has been estranged from himself. Part of his self is embodied in these commodities which now possess strange self-hood of their own. The same holds true of all social phenomena in Capitalism, whether it be the State, Law, Labour, Capital, or Religion. But the true nature of man rebels against Capitalism. Human relationships are the reality of society. In spite of the division of labour they must be immediate, i.e. personal. The means of production must be controlled by the community. Then human society will be real, for it will be humane: a relationship of persons … In Spann's philosophy it is precisely the self-estranged con- 9 10 Marx 1843/1927/70. Polanyi 2005/Corporativism, 247-8. 4 dition of man which is established as the reality of society … Yet it is denied that there is selfestrangement”. 11 We have to recognize that in the modern world the objective character of economic value, prices, capital, labor, power, state and other social institutions is a reality. Social institutions exist, they follow their own laws, move and develop independent of human will and wishes – as if they were natural phenomena. But at the same time, we know that they are not natural, they are artificial or man-made. Economic value is, essentially, a relationship between human beings. The same is true for Power, Law etc. Social institutions (or ‘objectivations’) are, basically, a relationship between persons. We may call their objective existence the phenomenal aspect of social reality. Freedom, responsibility, transparent human relationships, and community – i.e. social relations which allow the individuals to take over their responsibility – are the ultimate reality of society. They are the eternal, unchangeable reality, the essential aspect behind the reified world of institutionalized human relationships. Polanyi’s discussions of Marx and of the foundations of modern society in the 1930s in England took place in the context of the Auxiliary Christian Left Movement (later simply ‘Christian Left’). The focus of the discussions were the relationship between social reality and community and – obviously because of the background of the discussion – the Christian interpretation of man and society. In a third manuscript of this period, titled Christianity and Economic Life, he comes directly to the core of the problem: In the modern world, economic facts such as markets, commodities, prices, capital, interest, as well as social manifestations such as power, public opinion etc., which often can be described in numerical terms, clearly have an objective, institutionalized existence and, even if exclusively a consequence of human action, seem to exist entirely independent of human will. If we recognize the objective character of these occurrences we have to pose the question: How is it possible that human judgments, appraisals and expressions take on an institutionalized form – the form of a quality of things which are independent of the intentions, the motives and the purposes of the acting people? To remain in the field of economic occurrences: Under what social conditions and how does it come about that goods have a price and that people interact with others not as humans but as possessors of tradable goods? Prices are not a natural quality of things. They are essentially human relationships. Yet, it is indubitably true that in the modern world they appear as objective qualities of commodities, as quasi-natural features of goods for which nobody seems responsible. In the manuscript Christianity and Economic Life which, written in the second half of the 1930s, Polanyi writes: 11 Polanyi 1935, 375-6. 5 “Commodities are goods produced for sale on the market. Their value seems inseparable from the [commodity itself]. … they disappear from the market when prices fall below their value, they reappear again when prices rise – in a word, they come and go, change hands, remain on stock, or are consumed, according to their objective or exchange value. Thus the movements of the commodities on the market appear to be governed by a force (their value) which resides in the commodities themselves as if these objects were endowed with a secret life or spirit of their own which makes them act according to its will. Of course, this is no more than a semblance. Like the stone or tree into which the savage projects his own spirit turning thereby the lifeless object into a superstitiously revered fetish, the goods produced for the market ‘possess an exchange value’ as a result of a similar process of unconscious introjection. What appears to us as the objective exchange value of the goods, is, in reality, merely a reflex of the mutual relationship of the human beings engaged in producing the goods. … Thus, in capitalism producers are determining the prices ‘behind their own backs’. Unconsciously, they are the originators of a process upon the result of which their own economic existence depends. Commodities are things ruling over their own creators”.12 The statement, commodities ‘were endowed with a secret life or spirit of their own’ and ‘follow their own laws’ expresses fundamentally the same idea as when he writes in The Great Transformation: “Market economy implies a self-regulation system of markets; … it is an economy directed by market prices and nothing but market prices”. 13 Under modern conditions, the economy becomes institutionally separated because it follows laws which are not the rules of society as a whole. Self-regulation, autonomy of the economic sphere, and the separation of the economy from the society are in contradiction to the essential truth that the economy is a ‘relationship of the human beings’. Nevertheless, the idea of an institutional separation of the political and economic sphere in modern society does not have its roots in England and Polanyi’s discussions with the Christian Left. This becomes obvious, if we take into consideration that Polanyi had already applied the idea of a separation between the economy and the political sphere in a number of articles written in Vienna 1931 and 1932 for the Österreichische Volkswirt, i.e. before immigrating to England, in order to describe the social conflicts in the interwar period. 14 Discussing the economic and political problems which the MacDonald government in England had to face before and after deserting the Gold-Standard, Polanyi comments: “A gulf has erupted between the economy and politics. This is in plain words the diagnosis of the times. The economy and politics, these two manifestations of life of the society have become independent of one another and wage constant war against each other“ [preliminary translation]. 15 And in another article with the title Die geistigen Voraussetzungen des Faschismus (The Intellec12 Polanyi 2005/Christianity, 260-1 Polanyi 1944, 43 14 Cfr. for example Demokratie und Währung in England (1931) and Wirtschaft und Demokratie (1932) (republished in Polanyi 2002). 15 „Zwischen Wirtschaft und Politik ist eine Kluft aufgerissen. Das ist in dürren Worten die Diagnose der Zeit. Wirtschaft und Politik, diese beiden Lebensäußerungen der Gesellschaft, haben sich selbständig gemacht und führen miteinander dauernd Krieg“ (Polanyi 1932/2002/Economy, 149). 13 6 tual Preconditions of Fascism), which Polanyi put on paper during his last days in Vienna, we read: “The contradictions between the political power of the working class in the State and its powerlessness in the economy and in business make the functioning of the economy itself impossible….Fascism and socialism…want, each beginning from different points, to unify politics and the economy , which are divided today and are often opposed to one another, in the same sphere. Socialism wants to democratize the economy out of a democratized politics; fascism wants to abolish politics and to make absolute the economy“ [preliminary translation]. 16 Here it becomes obvious that the whole discussion about the ‘institutional separation of the political and economic sphere’ in modern society is directly linked to Polanyi’s theory of fascism. Fascism is not an irrational outbreak, it is not simply a ‘German’ virus, but it has to be understood as a possible answer to the institutional separation which characterizes the modern Western World. The philosophy of fascism is rooted in self-estranged conditions, in the economy, and in the spectral world of objective, thing-like and reified entities which ‘follow their own laws’. Its aim is to unify society by making the functional logic of reified institutions the general social condition. The counter pole is democracy based on the ‘true nature of man’, direct human relationships, and community. The articles mentioned here were written before Polanyi participated in discussions with the Christian Left. And it is also apparent that Polanyi did not simply borrow the notion from Marx’s Critique of Hegel's Philosophy of Right. The concept was worked out before he started off for England and before he had a chance to have a look at this text.17 Therefore, the question arises: How did Polanyi arrive at the idea of a division of society in an economic and a political sphere? Is it only coincidental that Polanyi rediscovered his own thought in Marx’s Early Writings? And more in general: Where are the roots of the theoretical framework behind Polanyi’s reasoning? In order to understand the origins of Polanyi’s notions we have to go back to the 1920s and Polanyi’s contributions in ‘Red Vienna’. 2.2. Polanyi in Vienna: Austromarxism and the ‘Seminar’ In the mid-twenties, together with a group of interested students, among them his friend of later years Felix Schafer, Polanyi turned to the readings of Marx, both the economic texts and 16 „Die Widersprüche zwischen der politischen Macht der Arbeiterschaft im Staat und ihrer Machtlosigkeit in Wirtschaft und Betrieb (machen) das Funktionieren der Wirtschaft selbst unmöglich ... Faschismus und Sozialismus ... wollen, von verschiedenen Punkten aus, Politik und Wirtschaft, die heute getrennt und oft gegensätzlich sind, in eine einheitliche Sphäre bringen. Der Sozialismus will von der demokratisierten Politik aus die Wirtschaft demokratisieren; der Faschismus will die Politik abschaffen, die Wirtschaft verabsolutieren“ (Polanyi 1932/2005/Fascism, 218-9 (emphasis by Polanyi)). 17 All the information we have indicates that Polanyi obtained a copy of the Landshut-Mayer-Edition of Marx’s Early Writings (Lipsia, 1932), including Marx’s Critique of Hegel's Philosophy of Right, when he was already in England. 7 the early writings. The ‘seminar’ took place against the backdrop of the discussions in ‘Red Vienna’, influenced by leading Austro-Marxists theorists such as Max Adler, Otto Bauer, and Rudolf Hilferding 18 on the one hand, and the Austrian School of Economics on the other hand. 19 Not only Marx, but also the writings of Menger, v. Wieser, Böhm-Barwerk, v. Mises and other ‘Austrians’ which, as opposed to Marx, denied the objective character of economic institutions completely20 had a strong impact on the discussions within the ‘seminar’. 21 At the center of the discussions which took place at his Vorgartenstrasse home is the question of how such social institutions which seem objective – i.e. which arise independent of human wishes and will, but which are clearly not natural phenomena – could be overcome and how oversight (Übersicht) could be established. The greater part of his ‘socialist writings’ during the 1920s, starting from the Sozialistische Rechnungslegung (Socialist Accountancy), Neuere Erwägungen zu unserer Theorie und Praxis (New Considerations Regarding our Theory and Practice), Über die Freiheit (On Freedom) and Zur Sozialisierungsfrage (Contribution to the Question of Socialisation), 22 express the idea that reified institutions and selfestrangement can be reduced to an increasing degree, if we are able to enlarge oversight, transparency, and democracy. Therefore, he considers ‘the problem of oversight’ (das Übersichtsproblem) as the central problem which the socialist movement has to face. 23 The theoretical difficulty which is at the origin of the ‘problem of oversight’ is the question of how to understand social institutions or ‘objectivations’. In a paper entitled On Freedom, written by Polanyi during this period, we read: “‘Capital’ and ‘Labour’ … confront each other independent of the will of individual capitalists and labourers. And more: Capital gains interest, supply and demand meet in the markets, crises interrupt production. Again and again it is the case that despite available machinery and natural resources, employable work forces and pressing, unsatisfied needs the production apparatus stands still as if lamed and no earthly power would be able to set it once again in motion. Not human will, but prices decide which direction labour must go. Not human will, but interest rates command capital. The capitalist is just as defenceless against the laws of competition as the labourer. Capitalists, like labourers, like people in general appear as a mere accessory on 18 Cfr. for example Adler 1922, ders. 1922a, Bauer 1919, and Hilferding 1904. Remember v. Mises’s famous ‘Privatseminar’ with, among others, Friedrich A.v. Hayek, Gottfried Haberler, Fritz Machlup und Oskar Morgenstern. 20 For example, Carl Menger explained economic value basically in non-reified terms: “Value is … nothing inherent in goods, no property of them, nor an independent thing existing by itself. It is a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being. Hence value does not exist outside the consciousness of men. … Objectification of the value of goods, which is entirely subjective in nature, has nevertheless contributed very greatly to confusion about the basic principles of our science.” (Menger 1871/1976, 120-1 (emphasis mine)). Cfr. also Wieser 1889/93. 21 In order to understand Polanyi’s relation with the marginal approach it is indispensable to take into account the statement (in the article Socialist Accountancy) that he does not regard the subjective theory of value as an adequate explanation of a market economy, but, on the contrary, as the ‘only theory of a non-market economy which we have at our disposal.” (Polanyi 1922/2005/Accountancy, 74, emphasis mine) 22 The papers are published in Vol. III of the ‘Chronik der großen Transformation’; cfr. Polanyi 2005. 23 Cfr. Polanyi 1925/2005/Considerations, 114. 19 8 the business stage. Only competition, capital, interest, prices and so forth, are the real and functioning objective facts of society here, the free desire of human beings is only a mirage, only a sham. Marx saw in these facts a problem. He asked: How can lifeless objects, like machines and natural resources, overwhelm living beings? How can the prices of goods, not stuck onto them by nature, become qualities of these goods like the material from which they are made? How can machines carry interest, as if they were trees whose fruit one could pluck? Or even more generally: What is the essence of this ghostly process that appears to us as reality under capitalism? From where do the laws derive that this reality must follow? Asked in such a way, the question was as good as answered: these apparently inhuman realities are in their most essential form nothing more than the result of certain relationships in the human world. They are results of relations between persons and, indeed of such relations which they contract as economic actors among each other – or in short – of their productive relations” [preliminary translation]. 24 Some pages later he continues: “Between the realm of nature, where necessity reigns and that of the human, where freedom reigns, stands ‘up to now’, as Engels says, the realm of history. Or, according to Marx, between being and consciousness stands the world of ‘social being’. The relations of living persons towards one another are the only real relationship in society: those apparently real relationships can theoretically be dissolved into human relations. Under capitalism, this dissolving can only happen in the mind: it remains a theoretical insight of sociology. To transform it into practice, to put it in reality, is the task of socialism” [preliminary translation]. 25 The problem which Polanyi discusses here, i.e. around the middle of the 1920s, is obviously the same as in the paragraphs quoted earlier. Objective institutions, such as capital, labour, commodities, prices etc. exist. They are real, even if we know that they do not exist by nature, but as a result of human relation. 24 “‘Kapital’ und ‚Arbeit’ ... treten einander gegenüber unabhängig vom Willen der einzelnen Kapitalisten und Arbeiter. Und weiter: das Kapital trägt Zins, am Markte treffen sich Angebot und Nachfrage, Krisen unterbrechen den Lauf der Produktion. Immer wieder tritt der Fall ein, dass trotz vorhandener Maschinen und Rohstoffe, verfügbarer Arbeitskräfte und drängender unbefriedigter Bedürfnisse der Produktionsapparat wie gelähmt stille steht und keine irdische Gewalt ihn in Bewegung zu setzen vermag. Nicht Menschenwille, sondern Preise entscheiden über die Richtung der Arbeit. Nicht Menschenwille, sondern der Zinsfuß kommandiert das Kapital. Der Kapitalist ist gegen die Gesetze der Konkurrenz ebenso machtlos wie der Arbeiter. Kapitalisten wie Arbeiter, der Mensch überhaupt, erscheint als ein bloßer Statist auf der Bühne der Wirtschaft. Nur Konkurrenz, Kapital, Zins, Preise usf. sind hier wirksam und wirklich, objektive Tatsachen des gesellschaftlichen Seins, das freie Wollen der Menschen nicht mehr als eine Einbildung, bloßer Schein. Marx hat nun in diesem Sachverhalt ein Problem erblickt. Er fragte: Wie können leblose Dinge wie Maschinen und Rohstoffe lebende Wesen beherrschen? Wie können Preise der Waren, die ihnen doch nicht von Natur anhaften, zu Eigenschaften dieser Waren werden, wie es der Stoff ist, aus dem sie bestehen? Wie können Maschinen Zins tragen, als wären sie Bäume, deren Frucht man pflücken kann? Oder allgemeiner: Was ist das Wesen jenes gespenstischen Prozesses, der uns im Kapitalismus als Wirklichkeit entgegentritt? Und woraus lassen sich die Gesetze, nach denen diese Wirklichkeit verläuft, ableiten? In dieser Form gestellt, war die Frage schon so gut wie beantwortet: Jene scheinbar aussermenschlichen Wirklichkeiten sind im Urgrunde nichts als die Auswirkungen bestimmter Verhältnisse der Menschenwelt. Sie sind Auswirkungen des Verhältnisses von Menschen zu Menschen, und zwar jener ihrer Verhältnisse, die sie als Wirtschaftende gegeneinander eingehen, oder mit einem Worte: der Produktionsverhältnisse“ (Polanyi 2005/Freedom, 138-9). 25 „Zwischen dem Reiche der Natur, wo die Notwendigkeit herrscht, und dem des Menschlichen, wo die Freiheit herrscht, steht „bis jetzt“ wie Engels sagt, ‚das Reich der Geschichte’. Oder, nach Marx, zwischen Sein und Bewußtsein steht die Welt des ‚gesellschaftlichen Seins’. Das Verhältnis leibhaftiger und lebendiger Menschen zu einander ist das einzig Wirkliche in der Gesellschaft: jene scheinbaren Wirklichkeiten lassen sich theoretisch in Verhältnisse von Menschen zueinander auflösen. Im Kapitalismus kann diese Auflösung nur in Gedanken vollzogen werden: sie bleibt eine theoretische Erkenntnis der Soziologie. Sie auch in Wirklichkeit umsetzen, praktisch durchführen: das ist die Aufgabe des Sozialismus. (Polanyi 2005/Freedom, 141; emphasis by Polanyi). 9 3. The Crucial Question: How to Comprehend Social Realities which are not a Result of Human Intention? In order to understand Polanyi’s approach it is indispensable to comprehend the question which he faced. If we do not take seriously the social and historical background in which Polanyi developed his ideas, we risk misunderstanding his categories completely. This is the more important as the neo-liberal habits of thought which dominate social sciences today, i.e. since the last decades of the 20th century – have removed from their research programs the questions which were crucial to Polanyi’s approach. Today – methodologically speaking – we are living in a period of positivism. Positive economic theories take prices, commodities, wages etc. for granted. They do not explain it. Positive theory limits its analyses to the question of how they are determined, establishes abstract mathematical relations which it then takes as laws. It does not comprehend these laws, i.e. it does not explain why they exist. Contrary to this attitude, Polanyi pretends to elucidate the meaning of economic categories. He recognizes that we not only want to know how prices, wages, and profits are determined, but that we also want to have an answer to the question: why do they exist? What is the significance of prices, economic values and other economic categories? The question emerges because we know that the subject matter of economic (and other social) sciences are not natural phenomenon. ‘Prices do not grow on trees’. It is not sufficient to take their existence for granted. Economic facts are, essentially, human relations. And they can be explained only by human choices, decisions and action. Therefore, the fundamental question which has to be answered is: Why do human relations take the form of reified, objective categories, such as commodities, prices or capital? Why, under what conditions, and to what extent human relations assume the form of objective institutions? At the beginning of the 20th century the question of the origins of objective, reified categories was central to the economic (and other social) sciences. This is true not only for numerous Marxist interpretations of modern society. The claim to overcome reified thinking is also at the origin of the debate between the exponents of classical and neoclassical theory of value, Walras’ distinction between economics as a pure and as a moral science, 26 and Menger’s methodological considerations. 27 F.A.v. Hayek refers to the identical problem when he states that the analysis of “all those unintended patterns and regularities which we find to exist in human society … is the task of social theory“. 28 And so does K. Popper in affirming that “the 26 Walras 1874/41926/54, part I. For example Menger 1883, 161-83. 28 Hayek 1967, 97. 27 10 main task of the social sciences … is … to analyze the unintended social repercussions of intentional human actions“. 29 And Tönnies’ distinction between community and society (Gemeinschaft und Gesellschaft), too, centers around the same question. 30 Polarity of Human Freedom and the Self-Regulating Market Essential dimension of society Phenomenal dimension of society Freedom, Choice, Responsibility Self-Regulating Mechanism, Direct Human Relations, Social Laws, Necessity, Being, Human Will, Consciousness Self-Estrangement Community Reification, Objectivation Oversight, Democracy Prices, Capital, Labor, Commodities Ultimate Foundation of Social Life Historical Reality It is not the question which distinguishes Polanyi’s approach from some of the most important scholars of his time, but rather the answer. Polanyi’s contribution differs from the logic of other authors insofar as he analyzes objective institutions from a specific point of view: the prospective of social freedom and responsibility. Objective institutions endanger human freedom because they withhold us from taking over the responsibility for our part of society. The freedom which we have earned as a byproduct of the market-society may become true social freedom only if we learn to recognize the existence of objective institutions and, at the same time, uphold the claim to freedom, i.e. aim at reforms which deepen human freedom and responsibility. That is what the ‘change of human consciousness’ is all about. In other words, Polanyi’s theoretical framework can only be understood if we take seriously the debates which where at the heart of the discussions within the social sciences at the beginning of the 20th century. It is based on an unavoidable tension between the essential aspect, society considered a personal relationship of individuals, on the one hand and the phenomenal aspect, society regarded as a structure of institutions and other impersonal forces on the other hand. Polanyi’s reasoning is anchored in the insight that society is essentially a relationship between persons, that human relationships, fundamentally, are direct and personal, 29 30 Popper 1950, 286-8. Tönnies 1887. 11 and that objective, self-regulating social mechanisms, such as markets, state-power etc. have to be explained by referring to human relationships. The first pole, immediate personal relations, indicates human freedom, responsibility, oversight, democracy, and community. The second pole, self-regulation, stands for economic mechanisms, institutions, and social ‘objectivations’ in general. The tension arises because self-regulation, mechanical dependencies and ‘objective laws’ are in contradiction to human freedom and responsibility. 4. Polanyi’s Answer: A Non-Deterministic Theory of Reification Polanyi’s approach is founded on this contradiction, the polarity of human freedom and the self-regulating market. Human freedom, direct interpersonal relations, and oversight constitute the first or positive pole. Institutions, ‘objectivations’ which follow their own laws, and self-regulating mechanisms – and, under the conditions of the civilization of the 19th century the market system is by far the most important mechanism – set up the second or negative pole. The design of Polanyi’s analysis – as of any theory of reification – implies starting from the first pole in order to explain the second. Essentially, human relations are (and should be) immediate, direct, and free. Human freedom, the positive pole in Polanyi’s vision, is the only and ultimate foundation of social life. For the reason that social life is the outcome of his decisions and actions, man also bears the responsibility for society. Freedom based upon the responsibility of the individual for his part of the society – not freedom from responsibility, but freedom through responsibility – is the cornerstone of what Polanyi calls the ‘socialist’ idea of freedom. 31 The establishment of a distinct and institutionally separated economic sphere, the negative pole, is in contradiction to the freedom of man because the objective, institutionalized form which human relationships assume makes it impossible for the individual to take his or her part of responsibility in society. As he states in On Freedom: “The true significance of social freedom is based on the actual relation of one human to another. It forces this demand upon us through the double realization that on the one hand there is no human relation which is without social consequences and that on the other hand in society there is no and there can be no existence, no power, no structure, no law that is not based on the behaviour of individual beings. For the socialists, ‘to act freely’ means to act in the consciousness of the fact that we have the responsibility for our part of human relationships – outside of which there is no social reality, that we must carry this responsibility. To be free, therefore, no longer means, as in the typical ideology of the bourgeois, to be free from duty and responsibility, but rather to be free because of duty and responsibility. It is not the freedom of those who are relieved of choices, but of those who choose, not the freedom of an unburdening, but of self-burdening, not a form of freeing oneself from society, but the basic form of so- 31 For a more detailed discussion of Polanyi’s idea of freedom see Thomasberger 2005. 12 cial connectedness, not the point where solidarity with others ends, but the point at which we take up the unshiftable responsibility of society ourselves” [preliminary translation]. 32 If we start from the idea that social and economic relations are fundamentally relations between persons, two basic questions remain to be answered: Firstly, how can institutions or ‘objectivations’ be explained? And secondly, are we able to deconstruct these ‘ghostly realities’ which follow their own laws? During the 1920s, ‘The Epoch of Socialism’, 33 Polanyi is not concerned so much about the origins of reification, alienation, and economic ‘pseudorealities’. His focus is on the question of how to overcome the objective institutions and increase the realm of human freedom. Only during the 1940s does the first question come to the fore. But it remains true that Polanyi, as opposed to Marx, never tries to explain reification by referring either to the theory of objective labor-value, 34 or to the existence of private property. Objective institutions come about, according to Polanyi’s thought, because of a lack of democracy, of direct human relationships, and of community. In a certain way, Polanyi interprets the occurrence of reified entities as the side-effects, unintended consequences, and – to use a notion of Karl Popper – ‘the unintentional results of human action’. 35 Reification can be reduced and freedom can be enlarged as far as we are able to widen oversight and deepen democratic decision-making. What characterizes his approach are at least three aspects: Firstly, an explanation of society cannot rely on laws, neither on natural nor on social laws. This aspect may become clearer if we compare Polanyi with Marx. There can be no doubt: Marx’s theory of the fetish character of commodities is the point of reference of Po- 32 „Der wahre Begriff der gesellschaftlichen Freiheit gründet sich auf das reale Verhältnis des Menschen zum Menschen. Er zwingt uns diese Forderung durch die doppelte Erkenntnis auf, dass es einerseits kein menschliches Verhalten gibt, das ganz ohne gesellschaftliche Folgen wäre, und dass es andererseits in der Gesellschaft kein Seiendes, keine Macht, kein Gebilde und kein Gesetz gibt und geben kann, das nicht irgendwie auf dem Verhalten der einzelnen Menschen beruhen würde. Für den Sozialisten heisst ‚in Freiheit handeln’: im Bewusstsein der Tatsache handeln, dass wir die Verantwortung für unseren Anteil an den gegenseitigen Beziehungen der Menschen zueinander – ausserhalb welcher es keine gesellschaftliche Wirklichkeit gibt –, dass wir dieses Verantwortung zu tragen haben. Frei sein heisst her darum nicht mehr, wie in der typischen Ideologie des Bürgers frei von Pflicht und Verantwortung sein, sondern frei durch Pflicht und Verantwortung sein. Es ist nicht die Freiheit des von der Wahl enthobenen, sondern die des Wählenden, nicht die der Entlastung, sondern die der Selbstbelastung, mithin nicht eine Form des Sichloslassens von der Gesellschaft überhaupt, sondern die Grundform des gesellschaftlichen Verbundenseins, nicht jener Punkt, an dem die Solidarität mit den anderen aufhört, sondern jener, in welchem wir die unabwälzbare Verantwortung des gesellschaftlichen Seins auf uns nehmen“ (Polanyi 2005/Freedom, 146-7). 33 Mises, L.v. 1922/81, I.1. 34 Polanyi regards the labor-theory of value as a misleading attempt to reintroduce a humanizing dimension into a basically naturalistic concept. 35 In ‘The Open Society and its Enemies’ Karl Popper explicitly mentions discussions with K. Polanyi about this topic: “I owe the suggestion that it was Marx who first conceived social theory as the study of the unwanted social repercussions of nearly all our actions to K. Polanyi who emphasized this aspect of Marxism in private discussions (1924)” (Popper 1945/50, 668). 13 lanyi. 36 But Polanyi’s approach differs from Marx’ theory not only in concepts and categories which he applies. Polanyi substitutes the analysis of the real transformation of society, the decisions taken by real actors – the concrete situation, their motivation, their considerations and expectations – for historical laws of development. This is the reason why Polanyi’s approach deserves the attribute ‘non-deterministic theory’. Polanyi does not rely on historical principles, economic laws and other necessities in order to explain reification, but on the analysis of concrete human decisions. Polanyi does not refer to any form of primitive Communism as the original state of mankind. And he never draws upon a philosophy (or a theory) of history. Past, present, and future social change is not determined by scientific laws, but by concrete historical developments, consciousness, and choices. Human action is considered the foundation of any kind of explanation of social arrangements. According to Polanyi, we can understand social transformation only if we comprehend why and under what conditions people make what choices. Therefore, social ‘objectivations’, institutions, and economic mechanisms can only be understood in terms of ‘unintended consequences’ of concrete human action. It characterizes Polanyi’s reading of Marx when he states that “the theory of the fetish character of commodities is rightly regarded as the key to Marx’s analysis of capitalist society”. 37 The ideas of fetishism, reification and self-estrangement are the key concepts which he borrows from Marx. And, in a certain way, he applies them in a more radical sense than many Marxists themselves. If prices, capital, profit etc. are reified categories, then the idea of economic laws which are derived from these notions is in itself an expression of reification. Therefore, in Polanyi’s critical approach there is no room for economic laws, neither in the sense of a theory (or philosophy) of history, nor in the other (and more limited) sense of ‘laws’ of capitalism, like the ‘law of the falling rate of profit’. According to Polanyi’s approach, the rise and the breakdown of the market society were not governed by historical necessities, but by the decisions of interest groups, social classes, and single persons. To give only three examples which may illustrate the difference between Polanyi’s and Marx’s approach: 36 The greater part of Marx´s early writings (published in the Mehring-Edition: Mehring, W. (ed.) 1902: Aus dem literarischen Nachlass von Karl Marx, Friedrich Engels und Ferdinand Lassalle [From the Literary Heritage of Karl Marx, Friedrich Engels and Ferdinand Lassalle], Stuttgart) were available to Polanyi already in the 1920s. As we know from F. Schafer, in the mid-twenties Polanyi discussed these texts in his ‘seminar’ with a group of interested students. In the 1930s, in the discussions with the Christian Left Study Group, Polanyi used also the Landshut-Mayer-Edition of Marx’ early writings (Landshut, S. and Mayer, J. P. (eds.) 1932: Karl Marx: Der historische Materialismus. Die Frühschriften [Karl Marx: Historical Materialism. The Early Writings], Leipzig). 37 Polanyi 2005/Christianity, 260-1. 14 • The ‘iron law of wages’, i.e. the theoretical idea that wages tend towards a minimum level corresponding to the subsistence needs of the workers and that they, for a longer period of time, could not fall below or rise above the minimum requisite to keep the laborer in bare existence as a laborer – an idea which was essential not only for the classical political economy of profit and accumulation in the tradition of Ricardo, but also for Marx’ economic theory – was substituted in The Great Transformation by the analysis of the reasons and the consequences of the Poor Law and the Speenhamland legislation in England (1795) which prevented the creation of a labor market during the most active period of the Industrial Revolution. • Polanyi never presupposes that labor (or labor-power), land and money are commodities, nor that their value can be determined in the same way as the value of any other commodity, but he does analyse how, under what conditions and in what circumstances labour, land and money came to be treated as if they were commodities. • He does not explain the world economic crises, the break-down of the market mechanism, and the end of the nineteenth century civilization as a consequence of the working of economic laws. Here again, his approach is fundamentally different not only from Marx’s and from Schumpeter’s reasoning, but from any theory of economic development. Explicitly he dissociates his own interpretation from the explanations which refer to “laws of economics such as that of the falling rate of profit or of underconsumption or overproduction“. 38 Instead of looking for a purely economic interpretation, Polanyi explores the concrete changes in the relationship between the social forces, between different nations, and between conflicting ideas which directed the social actors in the 1920s and 1930s. And indeed, his answer is that the collapse cannot be explained by economic reasons alone, but that the relationship between the economic and the political sphere plays a key role. Polanyi accepts the problems which the social sciences in his times posed, he accepts the idea that objective economic categories have to be explained by deriving them from human relations, but he is looking for answers not in the direction of economic laws and necessities, but – as far as the past is concerned – rather in the sphere of concrete occurrences and historical incidents. Regarding the future, the genuine subject-matter and the principle task of the social sciences is to show how human freedom can be enlarged and how these reified social institutions can be deconstructed. 38 Polanyi 1944, 249. 15 “The predominant task of science should be, instead of developing the supposed laws which command over everything human, on the contrary, to expand the limits of human freedom within society by demonstrating that these laws are the unintentional results of human action and thereby enlarging the scope of application of human freedom. Only when arriving at its limit, are we able to understand undoubtedly that we have to choose necessarily between different unintentional results of intentional actions. Only then will we know how to bear the consequences of the chosen actions, how to accept the responsibility, and how to incorporate them into the realm of freedom. Not the ‘laws’, but the freedom of man in society would be the principle subject matter of this sociology” [preliminary translation]. 39 In other words, in the modern world economic phenomena belong neither to the ‘realm of freedom’, nor to the ‘realm of nature’, but form a third realm between these two. Therefore, economics can never have the character of a natural science. Secondly, Polanyi’s approach comprises a non-reified idea of man. Even if he never discusses the question explicitly, it should be obvious that Polanyi’s view implies an idea of man which is fundamentally different from the vision of economic liberalism. We do not have here the possibility to explore Polanyi’s view of the nature of man in detail, but it is worth mentioning some aspects. Polanyi’s key idea is the notion of the human being as a ‘socialized being’ (ein vergesellschafteter Mensch). As we know from Felix Schafer, 40 the term ‘vergesellschafteter Mensch’ is borrowed from Max Adler who expressed the notion in the following way: We can look for “the social life nowhere else other than where life alone is really existing: and that is only the case within the single human being. Society is not the carrier of the social life but rather only the single human being, admittedly the single human being, as we can only understand him today: namely the individual who is at the same time a socialized being, meaning the individual who is already out of his ‘I’, out of his entire psychic being, for himself not existing differently than as a single being under many essentially equal creatures, as an entity, which is connected with his fellow creatures through the same form of the spiritual life. … The human being is social, not because he lives in society, but rather he can live in society, because he already is social, immediately in his self-consciousness, meaning that he is related to the essential equality of the psyche to his fellow creatures. … In this way, it is such that the social is neither something between the human beings nor over them, but rather it is within them, and indeed fully in any single being, so that the social connection, the society as a reality, not as an idea, fully exists already in every single consciousness“ [preliminary translation]. 41 39 „Wissenschaft hätte vornehmlich die Aufgabe, statt die vermeintlichen Gesetze, unter denen angeblich alles Menschliche steht, zu entwickeln, umgekehrt die Grenzen der menschlichen Freiheit innerhalb der Gesellschaft hinauszurücken, indem sie diese Gesetze als die unbeabsichtigter menschlicher Handlungen aufzeigt und damit den Geltungsbereich des freiwilligen Willens ausdehnt. Erst wenn wir an seiner Grenze angelangt, klar zu erfassen vermögen, dass wir notwendigerweise zwischen verschiedenen unbeabsichtigten Folgen beabsichtigter Handlungen zu wählen haben, werden wir in die Lage versetzt sein, die Folgen der gewählten Handlungen auf uns zu nehmen, sie zu verantworten und sie damit dem Reiche der Freiheit einzuverleiben. Nicht die ‚Gesetze’, sondern die Freiheit des Menschen innerhalb der Gesellschaft wäre der Hauptgegenstand dieser Soziologie“ (Polanyi 2005/Freedom, 159, emphasize mine). 40 Schafer 1926, 7, 26-7, Schafer 1963-65, 14. 41 Wir können „das soziale Leben nirgends anders suchen ..., als wo es alleine real gegeben ist: und das ist nur im Einzelmenschen der Fall. Nicht die Gesellschaft ist der Träger des sozialen Lebens, sondern nur der Einzelmensch, aber freilich der Einzelmensch, wie wir ihn heute allein noch verstehen können: nämlich der Einzel- 16 At least the following aspects should be emphasized: • If we do not want to remain trapped in an infinite regression, institutions, self-regulating mechanisms, and other reified structures cannot be regarded as the starting point of any kind of theoretical explanation of society. Essentially society is a relation between persons. Therefore, only human action can explain objective institutions, but not the other way round. Even if there is no doubt that in the actual development institutions and action may exert a reciprocal influence, it remains true that from a theoretical point of view human beings have to be regarded as the origin and objective institutions as the result. • At the same time it should be clear that the human being from whom Polanyi starts out is not the atomized and isolated actor which we know from liberal theory. The origin and starting point of any kind of explanation of society is man as a socialized being. Man is social in his existence and he is social in his self-consciousness. The fact that man is a socialized being is an indispensable part of man’s consciousness. Therefore, human action is not only goal-orientated, but it is meaningful. The goals which human beings strive for have to have meaning, i.e. they are based on and reflect social norms and values. 42 • Society cannot – and must not – be explained starting out from the behavior of isolated, ‘gain-seeking’ actors. The idea of an isolated human being is in itself a contradiction in terms. Society is an indispensable dimension of the ‘human condition’. As in every cell of an organism the whole of the living body is embryonically present, so the whole of society is existing as a germ in every single human being. 43 mensch zugleich vergesellschafteter Mensch ist, das heißt der bereits aus seinem Ich heraus, aus seinem ganzen psychischen Sein, sich selbst nicht anders gegeben ist wie als ein einzelner unter wesensgleichen vielen, als ein durch die gleich Art des geistigen Lebens mit seinen Artgenossen zu einer Einheit verbundenes Wesen. ... Der Mensch ist sozial, nicht weil er in Gesellschaft lebt, sondern er kann in Gesellschaft leben, weil er schon unmittelbar in seinem Selbstbewußtsein sozial ist, das heißt auf die Wesensgleichheit des Psychischen mit seinen Artgenossen bezogen ist. ... Auf diese Weise ist als das Soziale weder etwas zwischen den Menschen, noch über ihnen, sondern es ist in ihnen, und zwar in jedem einzelnen ganz., so dass der soziale Zusammenhang, die Gesellschaft als Tatsache, nicht als Begriff, schon in jedem Einzelbewußtsein vollständig gegeben ist“ (Adler 1922, 6 (emphasis by Adler)). 42 „The fundamental lawfulness of human life is its dependency on norms, meaning its alignment toward the highest common goals according to every direction of its actuality“ [preliminary translation]. „Die fundamentale Gesetzmäßigkeit des menschlichen Lebens ist seine Normmäßigkeit, daß heißt seine Ausrichtung auf oberste Einheitsziele nach jeglicher Richtung seiner Aktualität“ (Adler 1922, 8). 43 Max Adler expresses this idea in the following words: “The starting point of Marxism is...the idea of society as a social being and occurrence, which, from the outset, makes it impossible to regard human beings as isolated beings , but rather as beings which are connected with one another , and so not merely as sociable, but rather as socialized creatures. … Society can’t be entered, it is neither founded by contract nor born out of altruism or sympathy, nor is it forced by a social drive , but rather it exists with man historically and economically” [preliminary translation]. „Ausgangspunkt des Marxismus ist ... der Begriff der Gesellschaft als ein soziales Sein und Geschehen, das die Menschen von vornherein als isolierte Wesen unmöglich macht, sondern nur mehr als aufeinander bezogene, also nicht etwa bloß als gesellige, sondern als vergesellschaftete Wesen aufzeigt. ... Die Gesellschaft wird nicht eingegangen, sie wird weder durch Vertrag begründet, noch aus Geselligkeit und Sympathie 17 It is this view of human nature which Polanyi refers to in The Great Transformation when he emphasizes “the changelessness of man as a social being“. 44 By nature man is a social being. Man needs to make sense of his world, and he reflects on and judges his actions from the point of view of norms and values which refer to society as a whole. As he expressed in On Freedom: “Whoever says ‘man’, says ‘being’ and ‘should’ as one: as a thing, as an animal, man is merely; he is a mere being. But as a measure and a meaning of the world, the human world, he is the embodiment of ‘what should be’” [preliminary translation]. 45 Therefore, in all his works he never accepts the idea that being and consciousness (in German: Sein and Bewusstsein) could be separated. In a central part of the Behemoth-manuscript, titled Sein und Denken (Being and Thinking), 46 he polemicizes against the positivist interpretation of social sciences which attempts to separate social reality from human thinking, judgment and valuation. Against any attempt to divide both sides he objects: “That which we call the social being is basically no more than an integration of thought of individuals” [preliminary translation]. 47 What is valid for the picture of man in general is also true for the human being during the civilization of the 19th century. The motive of gain is no natural, but rather a particular historical form of consciousness of man as a social being. It contains a certain vision of the whole of society, a certain consciousness, a very singular – and in human history exceptional – motivation which was provided – and at the same time legitimized – by the theories of economic liberalism. “Nineteenth century civilization alone … chose to base itself on a motive only rarely acknowledged as valid in the history of human societies, and certainly never before raised to the level of a justification of action and behavior in everyday life, namely, gain. The self-regulating market system was uniquely derived from this principle”. 48 The motive of gain is, according to Polanyi’s point of view, a historical reality. Its origin is not human nature, but the social conditions within a market society. And this is clearly an idea which is fundamentally different from what Granovetter refers to as “the substantivist view” which “does rest on a concept of human nature as fundamentally oriented to group rather than geboren, noch durch einen sozialen Trieb erzwungen, sondern sie ist historisch-ökonomisch mit den Menschen gesetzt“ (Adler 1922a, 31). 44 Polanyi 1944, 46. 45 „Wer Mensch sagt, sagt Sein und Sollen in einem: als Ding, als Tier ist der Mensch bloss; er ist blosses Sein. Aber als Maß und Sinn unserer Welt, der Menschenwelt, ist er der Inbegriff des Sein Sollenden“ (Polanyi 2005/freedom, 165). 46 Polanyi 2005/being and thinking, 200-7. 47 “Das, was wir das gesellschaftliche Sein nennen, (ist) im wesentlichen nichts anderes als eine Integration des Denkens der einzelnen” (Polanyi, 2005/being and thinking, 203). 48 Polanyi 1944, 30. 18 individual benefits”. 49 Polanyi is not concerned with the question of whether human nature is altruistic or egoistic. The idea of man as a social being means that human motives are meaningful, i.e. that we can understand human motives only in relation to the social consciousness. Therefore, it is obvious that human beings are never completely uniform and onedimensional. Even in a world in which economic liberalism is the dominating world view, in which the profit motive is legitimatized by economic theory and in which profit plays a key role for production and consumption, other motivations could not be excluded completely. “In actual fact man was never as selfish as the theory demanded. Though the market mechanism brought his dependence upon material goods to the fore, ‘economic’ motives never formed with him the sole incentive to work. In vain was he exhorted by economists and utilitarian moralists alike to discount in business all other motives than ‘material’ ones. On closer investigation, he was still found to be acting on remarkably ‘mixed’ motives, not excluding those of duty towards himself and others – and maybe, secretly, even enjoying work for its own sake”. 50 Thirdly, if we interpret The Great Transformation in terms of a theory of reification, we understand why Polanyi never makes the attempt to distinguish strictly economic theory from the objective economic reality. The reason is simple: ‘The economy’ does not exist apart from the action of man. 51 And human action does not take place apart from consciousness, feelings, judgments and valuations of human beings. Judgments and valuations are not independent of the dominating world view and the theories of economic sciences. In the modern world science is the dominating world view. Therefore, human action necessarily refers to the ideas and models which are expressed by social sciences. As he states in Demokratie und Währung in England: “A modern democracy can acquire continuance only on the basis of an economic doctrine which has become a popular conviction“ [preliminary translation]. 52 From the point of view of a theory of reification the question, if in the civilization of the 19th century ‘institutional separation’, ‘self-regulation’, and ‘disembedding’ were realized completely or if they were expressions of an ideal model promoted by economic theory, does 49 Granovetter 1993, 13. And it is also misleading to associate Polanyi’s view with the ‘oversocialized’ conception of man who adheres “slavishly to a script written for them by the particular intersection of social categories that they happen to occupy” (Granovetter 1985, 487). 50 Polanyi 1947, 114. 51 Also Max Adler emphasizes this aspect when he discusses economic relations in terms of spiritual relations: „The economy is the purposeful action of people, … to provide in the face of an existing scarcity of goods for the satisfaction of their needs....economic relationships are not thing-like , but rather human relationships ... at the same time and essentially spiritual relationships, i.e. they always contain a certain purposeful action of human beings” [preliminary translation]. „Wirtschaft ist die zweckbewusste Tätigkeit von Menschen, gegenüber einer vorhandenen Knappheit von Gütern für die Befriedigung ihrer Bedürfnisse vorzusorgen. ... ökonomische Verhältnisse sind keine dinghaften, sondern sind menschliche Verhältnisse ... zugleich und wesentlich geistige Verhältnisse, d.h. sie enthalten stets eine bestimmte zweckbewusste Tätigkeit von Menschen“ (Adler 1930, 156). 52 „Eine moderne Demokratie kann nur auf Grund einer zur Volksüberzeugung gewordenen nationalökonomischen Lehre Bestand haben“ (Polanyi 1931/2003/Demokratie, 127). 19 not make sense. Only because Granovetter separates human consciousness, judgments and valuations from social reality may he regard as “strange enough” Polanyi’s acknowledgment that the market society was never dominated by the motive of gain alone. 53 The fact that, essentially, economic categories are – and remain – human relations explains what Polanyi means when he states that “the institutional separation of the political and economic spheres had never been complete“, and that, when he analyses the self-regulating properties he is “not dealing here, of course, with the pictures of actuality, but with conceptual patterns used for the purpose of clarification”. 54 The ideas of economic liberalism were utopian and illusionary, but, at the same time, they were a correct description of the utopian endeavor which, concerning only the civilization of the 19th century, was real. This contradiction is simply another expression for the fact that “the idea of a self-adjusting market implied a stark utopia”. 55 Economic relations are, essentially, relations between persons, but at the same time – at least as long as the idea that following their own advantage is in the interest of society as a whole is dominant – the market mechanism behaves as if it were a self-regulating mechanism and, therefore, works as if it functioned independent of human will and decisions. 56 Now, the fact that self-regulation was not as complete as the economic theories promised does not mean that Polanyi overstated the differences between the civilization of the 19th century and earlier periods. The market society of the nineteenth century was unique, singular and exceptional precisely in that it centered on markets, i.e. a definite institutional mechanism which determined production, income formation, the distribution of resources and goods. The consequence was that society became an adjunct of the market. That is what Polanyi intends when he states that “instead of economy being embedded in social relations, social relations are embedded the economic system”. 57 In this sense he calls the nineteenth century civilization an economic society. For sure, this is not simply a statement about an ‘objective’ fact, but about the significance of an institutional arrangement. If Ernst Mach’s remark is true, that even in natural sciences ‘bodies’ should not be mistaken as ‘reality’, but regarded as ‘thought- 53 Granovetter 1993, 12. Polanyi 1944, 196. 55 Polanyi 1944, 3. 56 Polanyi demonstrates the fact that the independence of human will is, essentially, an illusion in the following way: “It is apparently the competition which forces capitalists to invest constantly the surplus-value . But what would happen if the capitalist didn’t want to compete and simply consumed his fortunes ? If he were to suspend his business and retire?” [preliminary translation]. „Es ist angeblich die Konkurrenz, die den Kapitalisten zur ständigen Investierung des Mehrwerts zwingt. Was wäre aber, wenn der Kapitalist nicht konkurrieren wollte und sein Millionenvermögen einfach verzehren würde? Wenn er den Betrieb einstellen würde und sich zur Ruhe setzte?“ (2005/Being and Thinking, 202). 57 Polanyi 1944, 57. 54 20 symbols for complexes of sensations’ 58, it applies even more to the social sciences, insofar as social reality cannot be disconnected from human action, perception and consciousness. 5. Conclusion If we interpret Polanyi’s approach in terms of a non-deterministic theory of reification and self-estrangement the consistency of Polanyi’s exposition becomes apparent. What, from a positivist point of view, may seem to be an inconsistency or a lack of rigor is not a deficiency in the theoretical exposition, but a real contradiction, a contradiction in modern social reality. • The self-regulating market system is a utopia. But the utopian character does not mean that it is not real. The utopia of self-regulation has in fact determined and – even if in a different way – is still determining our lives. • Economic categories such as prices, capital, labor etc. are objective, independent of human will and wishes. And at the same time we know that they are not objective, but essentially human relations which do not exist by nature. • In the market society of the 19th century economic relations were disembedded, they formed a sphere of their own, even if we know that the institutional separation between the economy and society can never be complete. There is and remains an indissoluble contradiction between the phenomenal and the essential level of social reality. Essentially, economic relations are direct, they are an integral part of society, and self-regulation is unfeasible. But on the phenomenal level, disembeddedness, self-regulation and the separation of the economy from the society are the realities which, from an institutional point of view, distinguish the civilization of the 19th century from other civilizations. The fact that Polanyi faces these contradictions is the reason why The Great Transformation today, more than half a century after its publication, has lost nothing of its relevance. The Great Transformation is more than an analysis of economic history. It does not explain only why the transformation of the market society was accompanied by human catastrophes of enormous dimensions. Even in dealing with the rise and the breakdown of the market society, it provides not only an explanation of pauperism, two world wars, the origins of fascism, and other developments of a sunken age, but it also contains a general idea about the origins and the significance of ‘objectivations’, self-regulating mechanisms and the institutional separation of modern societies. Only a non-deterministic theory of reification makes it possible to understand why all the inhuman incidences which made up the history of the 19th 58 Cfr. the introductory quote. 21 and the 20th century occurred. Therefore, it is and remains relevant for our understanding of the world today. 6. Epilogue What about Polanyi’s studies in economic history and anthropology which became the focus of his efforts in the last decade of his life? Is there any connection between his interest in economic history and anthropology and the approach which he used in the 1920s and 1930s? Is there a link between objective institutions, reification, self-estrangement and his addiction to the study of economic institutions in primitive, archaic and modern societies? I think there is a direct connection – and the connection is quite obvious: The discovery which Polanyi made during his studies of economic history and anthropology was that they confirmed his insights. If in Vienna he had been convinced that, essentially, economic relations were not a separate realm, but a relation of persons, economic anthropology supplied evidence that this was empirically true. The findings of economic history and anthropology demonstrated that the civilization of the 19th century was in fact exceptional insofar as an objective institution, a self-regulating mechanism, the market system, dominated (impressed its seal on) the whole of society. The distinction between the essential and phenomenal aspect of society which characterizes the theory of reification proved to be historically significant. The comparative study of economic institutions demonstrates that the statement that economic relations are relations of persons is not only essentially true, but also empirically universal. To separate economics from the rest of society was a new and unique innovation which distinguished western civilization of the 19th century from all social arrangements before that time. Reification of human relations up to a point of self-regulation and disembedding of the economy were exceptional features which distinguished the period from all other historical epochs. If this interpretation is correct, the new language does not reflect a fundamental change in Polanyi’s reasoning. In The Great Transformation the notions ‘self-regulation’, ‘institutional separation’, and ‘disembedding’ are substituted for the terms ‘objectivation’, ‘reification’, and ‘alienation’. And the changed economic, social, and political conditions suggest more weight should be given to the understanding of the significance than to the deconstruction of reified entities. But Polanyi’s fundamental idea remains unchanged: self-regulating mechanisms or objective institutions contradict human freedom and responsibility, because they follow their own laws. Our task is to understand and, at the same time, to overcome these entities as far as possible by enlarging democracy. 22 References Adler, M. 1922: Marxistische Probleme, Stuttgart/Berlin: Dietz Nachfolger/Buchhandlung Vorwärts. Adler, M. 1922a: Die Staatsauffassung des Marxismus (Marx - Studien IV), Vienna: Wiener Volksbuchhandlung. Bauer, O. 1919: Der Weg zum Sozialismus, Vienna: Wiener Volksbuchhandlung. Block, F. 2001: Introduction. In: Polanyi, K. 2001: The Great Transformation, Boston: Beacon Press. Granovetter, M. 1985: Economic Action and Social Structure: The Problem of Embeddedness. In: American Journal of Sociology, Vol. 91, No. 3, 481-510. Granovetter, M. 1993: The Nature of Economic Relationships. In: Swedberg, R.: Explorations in Economic Sociology, New York: Russell Sage. Hayek, F.A.v. 1967: Studies in Philosophy, Politics and Economics, London: Routledge & Kegan Paul. Hilferding, R. 1904: Böhm-Bawerks Marx-Kritik. In: Marx-Studien. Blätter zur Theorie und Politik des wissenschaftlichen Sozialismus. Band 1, Vienna: Wiener Volksbuchhandlung, 1-61. Mach, E. 1897/1959: The Analysis of Sensations (Translation by C M Williams and Sydney Waterlow), Dover Edition. Marx, K. 1867/490/87: Capital (translated by S. Moore and E. Aveling), Moscow: Progress Publishers. Marx, K. 1843/1927/70: Critique of Hegel's Philosophy of Right (§§ 261-313) (translated by Joseph O'Malley), Oxford University Press. Menger, C. 1871/1976: Principles of Economics (Translated by James Dingwall and Bert F. Hoselitz), New York: New York University Press. Menger, C. 1883: Untersuchungen über die Methode der Sozialwissenschaften, und der politischen Ökonomie insbesondere, Leipzig: Duncker & Humblot. Mises, L.v. 1922/81: Socialism: An Economic and Sociological Analysis (translated by J. Kahane), Indianapolis: Liberty Fund Inc. North, D.C. 1981: Structure and Change in Economic History, New York/London: W.W. Norton & Company. Polanyi K. 1922/2005/Accountancy: Sozialistische Rechnungslegung. In: Polanyi 2005. Polanyi, K. 1925/2005/Considerations: Neue Erwägungen zu unserer Theorie und Praxis. In: Polanyi 2005. Polanyi, K. 1931/2002/Democracy: Demokratie und Währung in England. In: Polanyi 2002. Polanyi, K. 1932/2002/Economy: Wirtschaft und Demokratie. In: Polanyi 2002. Polanyi, K. 1932/2005/Fascism: Die geistigen Voraussetzungen des Faschismus. In: Polanyi 2005. Polanyi, K. 1935: The Essence of Fascism. In: Lewis, J./K. Polanyi/D.K. Kitchin (ed.) 1935: Christianity and the Social Revolution, London: Victor Gollancz Ltd. Polanyi, K. 1944: The Great Transformation, Boston: Beacon Press. Polanyi, K. 1947: Our Obsolete Market Mentality. In: Commentary 3. Polanyi, K. 2002: Chronik der großen Transformation I: Wirtschaftliche Transformation, Gegenbewegungen und der Kampf um die Demokratie (ed. Cangiani, M./C. Thomasberger), Marburg: Metropolis. 23 Polanyi, K. 2003: Chronik der großen Transformation II: Die internationale Politik zwischen den beiden Weltkriegen (ed. Cangiani, M./C. Thomasberger), Marburg: Metropolis. Polanyi, K. 2005: Chronik der großen Transformation III: Menschliche Freiheit, politische Demokratie und die Auseinandersetzung zwischen Sozialismus und Faschismus (ed. Cangiani, M./K. Polanyi-Levitt/C. Thomasberger), Marburg: Metropolis. Polanyi, K. 2005/Christianity: Christentum und wirtschaftliches Leben. In: Polanyi 2005. Polanyi, K. 2005/Corporativism: Marx über Korporativismus. In: Polanyi 2005. Polanyi, K. 2005/Freedom: Über die Freiheit. In: Polanyi 2005. Polanyi, K. 2005/Being and Thinking: Sein und Denken. In: Polanyi 2005. Popper, K. 1945/50: The Open Society and its Enemies, Princeton: Princeton University Press. Schafer, F. 1926: Über Staats- und Rechtsbegriffe und ihre Verselbständigung (dissertation), Vienna: University of Vienna. Schafer, F. 1963-65: Memories, unpublished manuscript, Montreal: Karl Polanyi Archive. Thomasberger, C. 2005: Human freedom and the ‘Reality of Society’. In: History of Economic Thought, forthcoming. Tönnies, F. 1887/31920: Gemeinschaft und Gesellschaft, Berlin: Karl Curtius. Walras, L. 1874/41926/54: Elements of Pure Economics or the Theory of Social Wealth (translated by W. Jaffé), London: Allen and Unwin Ltd. Wieser, F. v. 1889/93: Natural Value (translated by Christian A. Malloch), London: Macmillan.