BAUM 1996 Karl Polanyi On Ethics and Economics

Karl Polanyi on Ethics and Economics
Breaking new ground in Polanyi scholarship, Gregory

Baum explores the relation between ethics, culture, and eco-
nomics in Karl Polanyi's writings. He identifies and analyses
key concepts of Polanyi's thought and shows how they
apply to the contemporary debate on ethics and economics.
Exploring Polanyi's lesser-known works as well as The
Great Transformation, Baum provides a more complete and
nuanced understanding of Polanyi's thought. He examines
Polanyi's interpretation of modern economic and social his-
tory, clarifies the ethical presuppositions present in Polanyi's
work, and shows how Polanyi's understanding of the rela-
tion between ethics and economics touches on many issues
relevant to the contemporary debate about the world's eco-
nomic future. He argues that we should look to Polanyi's
understanding of modern capitalism to reinstate the social
discourse and, in political practice, the principles of reci-
procity and solidarity and points to examples, both in
Canada and abroad, of attempts to formulate alternative
models of economic development and to create new forms
of institutional and cultural intervention.
Karl Polanyi on Ethics and Economics provides fascinating
insights into Polanyi's work and today's central social and
political issues. It will be of great interest to sociologists,
economists, political scientists, and philosophers.
GREGORY BAUM is professor emeritus of theological ethics

and sociology of religion, McGill University.
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Karl Polanyi on
Ethics and Economics
Gregory Baum
McGill-Queen's University Press

Montreal & Kingston London Buffalo
McGill-Queen's University Press
ISBN 0-7735-1395-7 (cloth)
ISBN 0-7735-1396-5 (paper)
Legal deposit first quarter 1996

Bibliotheque nationale du Quebec
Printed in Canada on acid-free paper
McGill-Queens University Press is grateful

to the Canada Council
for support of its publishing program.
Cataloguing in Publication Data
Baum, Gregory, 1923-

Karl Polanyi on ethics and economics.
Includes bibliographical references.
ISBN 0-7735-1395-7 (bound) -
ISBN 0-7735-1396-5 (pbk.)
I. Polanyi, Karl, 1886-1964. 2. Economics - Moral and
ethical aspects. I. Title.
HB72.B34 1996 330'.092 C95-920889-5
Typeset in Adobe Garamond 10.5/13

by Caracte'ra inc., Quebec City
Contents
Foreword by Marguerite Mendell vii

Preface xiii
I Polanyi's Theory of the Double Movement 3
2 The Ethical Foundations of Polanyi's Social Theory 20
3 Polanyi's Contemporary Relevance 39
4 Ethics in a Pluralistic Society 63
Notes 85
Index 93
Foreword
There is currently widespread interest in the work of Karl

Polanyi among progressive thinkers, activists, and a growing
community of heterodox social scientists. Although The Great
Transformation, published in 1944, is acclaimed in France as
one of the ten classics of twentieth-century social thought and
has been translated into eight languages, Polanyi's influence
within North America was, until recently, largely within the
discipline of anthropology. Those who acknowledged the
broader significance of his writings to contemporary social
thought were marginalized by the intellectual community.
The publication of Trade and Markets in the Early Empires
in 1958 launched a historic debate in anthropology and led to
the establishment of two rival schools of thought within this
discipline. Polanyi's followers, the substantivists, emphasized
the role of culture, history, and institutions in the economic
life of so-called primitive and archaic societies. The opposing
formalist school defended the prevailing neo-classical eco-
nomic orthodoxy. Although this debate raged in the pages of
major anthropological journals in the 1960s, Polanyi received
little recognition elsewhere. His analysis of non-market soci-
eties shook the discipline of anthropology, which was firmly
oreword
ommitted to the universality of the principles underlying

neo-classical economic theory, but the more radical conclusio
of The Great Transformation, that these principles were un
versally inappropriate - for market as well as non-mark
economies - was not part of the debate. Polanyi's work rarel
appeared on an economic syllabus; instead, the counterpois
to neoclassical orthodoxy was a vulgar Marxism. On the Marx
ist left Polanyi was considered to be a "circulationist" whos
focus was on exchange and not on relations of productio
The emphasis he placed on social and cultural dislocatio
further alienated him from the Marxist left.
How do we explain the current Polanyi revival? Polanyi's
thesis that there can be no self-regulating market was con
firmed by nineteenth-century liberalism, which enshrined a
set of ideals it could not put into practice. The principles
h
institutional framework to protect society from the ravages o
a free market economy and to establish the very condition
without which the economy could not function. Laissez-faire
was quickly reduced to an ideology without a corresponding
practice. It is that historic duplicity which guides policy
makers today.
The international financial crisis and the depression of the
1920s and 1930s led to the welfare state and Keynesian ec
nomic policy, both to preserve capitalism and to protect tho
who were unable to participate fully in economic life. Sadl
the return of nineteenth-century ideals as we approach th
end of the twentieth century is less hopeful. The "place of th
economy in society" is not considered in a world driven b
principles that have been stripped bare of their history. It i
in this environment that progressive thinkers are discoverin
or rediscovering Karl Polanyi.
In 1986 the First International Karl Polanyi Conference was
held in Budapest to commemorate the centenary of Polanyi
viii
Foreword
birth. Papers were presented by historians, economists, political

scientists, anthropologists, sociologists, and Hungarian politi-
cal figures and intellectuals, among others. The presence of
political figures and intellectuals reveals a great deal about the
previously ambiguous reception of Polanyi. Because he was a
socialist, communist intellectuals in Hungary paid tribute to
Polanyi's work while ignoring his earlier critical writings on
central planning and economic determinism. At the same
time, however, dissident intellectuals in Hungary were discov-
ering Polanyi as an important ally in their struggle against
communism.
The collapse of communism in Eastern Europe in 1989
should have heightened interest in Polanyi's work in this part
of the world. This did not happen. Instead the neo-liberal
agenda adopted in the West for more than a decade, complete
with its documented failures and contradictions, went unchal-
lenged and indeed was embraced as the road to freedom.
Polanyi's influence, celebrated only three years earlier in Hun-
gary, was forgotten. The social degradation of nineteenth-
century industrial capitalism so poignantly described in The
Great Transformation was ignored as these countries, one by
one, adopted the principles of laissez-faire.
Instead of the promised prosperity, Eastern Europe and the
former Soviet Union are now experiencing widespread poverty,
violence, and growing social malaise. The recent democratic
election of communist parties in several countries comes as no
surprise. They can only look back to their pasts, not toward
the West, which has no lessons to impart. It took these events
to spark a revival of the dialogue about Polanyi begun in 1986
in Budapest.
Those of us who returned to the West following the 1986
centenary began to establish the means to broaden Polanyi's
influence among intellectuals and activists. The response was
overwhelming. This counter-movement to the hegemonic
ix
Foreword
discourse of the right led to the establishment in 1988 of the

Karl Polanyi Institute of Political Economy at Concordia Uni-
versity in Montreal. In a short period of time the Institute
created an international network of scholars and activists that
offers a vital intellectual space for critical social thought.
In the late 1980s I met Gregory Baum, who had recently
arrived in Quebec. He welcomed the establishment of an
independent institute for progressive scholarship and became
actively engaged in all aspects of its life. His enthusiasm has
been a driving force behind the many events the Institute
continues to hold - from its Club Jeudi suppers, at which he
has led many discussions, to our international conferences and
publications. His commitment to the Institute has been
important to its continued existence. With the Institutes
founders and friends, he has helped to develop a unique
interdisciplinary intellectual environment in Quebec.
Two summers ago Gregory Baum was a resident scholar at
the Karl Polanyi Institute. Inspired by many discussions with
Kari Polanyi Levitt about her father's early writings in German
on fascism and socialism, he decided to research these docu-
ments. As our offices were next door to each other, I was
privileged to discover these works with Professor Baum as he
generously shared his readings and reflections with me. He
was fascinated by the material and eager to communicate it
to a wider audience. His findings were first presented in a
lecture series - the Sproul Lectures at McGill University in
1993 and are now woven into this book.
For Gregory Baum, Polanyi's early writings contribute sig-
nificantly to his own "ongoing involvement in the church and
[an] uninterrupted dialogue with critical social science." In
the pages that follow he presents new insights into Polanyi's
thought and advances a powerful argument against the phi-
losophy of individualism that governs people's lives today. We
need a new ethics of responsibility, Professor Baum writes,
X
Foreword
which can be found in Polanyi's ethics applied to present

circumstances, particularly Polanyi's concept of the Lebensweg,
the day-to-day ethical task of living that is so severely com-
promised in a society dominated by material gain. Polanyi
believed that the repository of social creativity lies in the
culture of the common people, a creativity that today is
expressed in the resistance to neo-liberal orthodoxy by pro-
gressive social movements. Although much has been written
about these emerging democratic alternatives, a new theoret-
ical perspective within which they can be understood is lack-
ing. In Karl Polanyi on Ethics and Economics, Professor Baum
breaks this intellectual impasse.
A critical discourse that speaks to the dehumanizing cultural
consequences of the free market system is vitally needed today.
Gregory Baum has found this discourse in Karl Polanyis
writings, adding to it a theory of ethics that is rooted in
Enlightenment values and Christian social thought to show
that only if people are free to live an ediical life can there be
social or societal freedom - gesellschaftliche Freiheit. Professor
Baum's compelling analysis is a critical contribution to an
intellectual counter-movement in which he himself is a lead-
ing figure.
Marguerite Mendell
Concordia University, Montreal
xi
Preface
So much has happened in the world over the last decade

that we seem to be living in a new age. The Gulf War of
1991 shattered hopes for a more peaceful world. At the same
time, the collapse of the Soviet bloc communist regimes
substantially transformed the geography of power in the
world, while the collapse of Marxism and the decline of the
Left have occasioned the waning of human solidarity in social
theory and political practice. Contemporary capitalism,
meanwhile, is revealing its inner contradictions by producing
massive unemployment and economic disarray in the devel-
oped nations and allowing misery to worsen in the less
developed world. The spread of that misery generates waves
of emigrants and refugees and makes those who remain at
home increasingly angry and restless. Even in the relatively
prosperous West, people pushed to the margin are becoming
angrier and the governments reaction to them meaner.
Finally, the ecological crisis is impinging on our conscience
as never before and raising questions we are not yet prepared
to answer.
Today social scientists wonder whether their inherited con-
cepts are adequate for the interpretation of what is taking place
Preface
in the world. On what wisdom should they draw in their

response to contemporary conditions? "Have we read the
wrong authors?" asks a Canadian political scientist.I Were
there important thinkers whom we did not take seriously
enough because at the time they did not fit into the dominant
framework? Can we derive help from scholars whom we read
too quickly in the past?
Standing out in the current revival of long-neglected
authors is Karl Polanyi, economist, economic historian, and
anthropologist, whose magnum opus, The Great Transforma-
tion, published in 1944 and translated into many languages, is
gradually becoming a classic in social science and political
economy. Born in Vienna, Polanyi lived and worked in Hun-
gary, Austria, England, and, from 1950 on, in Canada, where
he died in 1964. His brilliant analysis of the crisis of our times,
explored in many publications, is now receiving wide attention
among scholars belonging to several disciplines.2 Original in
his political economy is the importance he attaches to ethical
values and cultural issues.
In Montreal, Kari Levitt, professor emeritus of McGill
University, and Marguerite Mendell, professor of economics
at Concordia University, have founded the Karl Polanyi Insti-
tute of Political Economy, which promotes dialogue and
interdisciplinary research regarding the present social and eco-
nomic crisis by taking seriously as did Polanyi - the role of
culture and the need for ethics. I became a member of this
institute soon after I arrived in Montreal in 1986 to take up
a teaching position in the Faculty of Religious Studies at
McGill University.
In 1993 I was invited by my faculty to give the Sproule
lectures on Christian ethics, offered in February of each year.
Since social ethics the subject I teach at McGill - is a
discipline engaged in dialogue with social, economic, and
political theory, I decided to address in my lectures the
xiv
Preface
contemporary relevance of Karl Polanyi's work. The present

book represents a slighty edited version of these lectures.
In chapter I I present Polanyi's original and now celebrated
theory of "the double movement," introduced and demon-
strated in The Great Transformation. The scholarly commen-
tary on Polanyi's social theory is ample, but his work has rarely
been examined from the perspective of social ethics.3 This is
what I attempt to do. In the second chapter I examine the
ethical foundation of Karl Polanyi's thought. Although he did
not write as a professional philosopher, he held that humans
had an ethical vocation and that ethics played an essential role
in the making of society and in the scientific endeavour to
understand it. In chapter 3 I investigate to what extent
Polanyi's social theory is relevant to the historical conditions
of the present. Since Polanyi thought that humanity was
addressed by a universal call to solidarity, responsibility, and
respect for nature, I examine in the final chapter whether there
are resources for such an ethic in today's liberal, pluralistic
society.
I do not wish to close this preface without thanking Dean
Donna Runnalls of McGill's Faculty of Religious Studies for
the support she has given me over the years in my activities
as an author and editor; and Professor Marguerite Mendell
of Concordia University, currently the director of the Karl
Polanyi Institute, for her challenging ideas and her friendship.
Gregory Baum
Montreal, Quebec
XV
I
Polanyis Theory of
the Double Movement
In The Great Transformation, Karl Polanyi analyses the crisis

of modern society. He does not claim that his idea is wholly
original, for he finds aspects of it in the thought of the
nineteenth-century social reformer Robert Owen. Owen
argued that the new capitalism had caused not simply the
material impoverishment of the workers but also the disrup-
tion of the ethical culture to which they belonged and through
which they defined their identity. He was among the first to
recognize that economic institutions have an impact on peo-
ples cultural self-understanding. He advocated and actually
established - an alternative organization of industrial produc-
tion, one that allowed workers to define their lives through
mutual respect and cooperation. These were ideas that Polanyi
pursued in a systematic way.
In The Great Transformation Polanyi offers a critical exam-
ination of the industrial capitalism set up in England in the
early part of the nineteenth century. Whereas Karl Marx
accused capitalism of exploiting workers, Polanyi without
denying this - concentrates on the dehumanizing cultural
consequences of the free market system. The predominance
of the unregulated market removed people from the socio-
cultural framework which constituted the matrix of their

human existence. In the past, Polanyi argues, economic activ-
ity was embedded in the social relations that made up the
community as a whole. What was new and startling with the
self-regulating market was that it "disembedded" the economy
from its social base, created widespread cultural alienation
among workers and owners, and left society and the natural
environment without protection. This "disembedding" of eco-
nomic activity from peoples social relations remains a key
concept in Polanyi's analysis.
The self-regulating market, advocated in England at the end
of the eighteenth century and legally constituted by the Poor
Law Reform Act in 1834, was a novum in human history.
Polanyi analyses the destructive impact of the new economic
system by focusing on the transformation of labour and land
into market commodities. In the new industrial capitalism,
both labour (human beings) and land (the natural endow-
ment) were bought and sold, used and destroyed, as if they
were simply merchandise, even though they were in no sense
the products of human industry. They were commodities only
fictitiously. With regard to the commodification of "land,"
Polanyi, as early as the 1940s, draws attention to the ecological
devastation produced by the self-regulating market. "Nature
would be reduced to its elements, neighbourhoods and land-
scapes defiled, rivers polluted ... and the power to produce
food and raw materials destroyed."I
In his critique of the emerging economy, Polanyi - as we
shall see transcends the traditional debate between capital-
ism and socialism. In fact, he rarely uses the word "capi-
talism." The object of his sustained criticism is the self-
regulating market system. Polanyi holds that markets are
important institutions: complex societies cannot get along
without them. He has no sympathy whatsoever for the
centralized command economy advocated by and practised in
4
The Double Movement
the communist Soviet Union. Yet he distinguishes between

markets and the market system, that is to say, the integration
of all markets into a single national or international economy.
The market system is a modern phenomenon. What concerns
Polanyi, and what he criticizes vigorously, is the self-regulating
market system - a market economy unconstrained by society
and operating simply according to its own law of supply and
demand.
Polanyi's examination of industrial capitalism in nineteenth-
century England does not stop at this negative result. He
shows in great detail that, after a relatively short period during
which the market remained unregulated, a political and cul-
tural counter-movement emerged in England. Originating in
the late 1840s, this movement sought to protect society both
its people and the land - from unrestrained market forces.
"Not until 1834," Polanyi writes, "was a competitive labour
market established in England; hence, industrial capitalism as
a social system cannot be said to have existed before that date.
Yet almost immediately the self-protection of society set in:
factory laws and social legislation, and a political and indus-
trial working class movement sprang into being. It was in this
attempt to stave off the entirely new dangers of the market
mechanism that protective action conflicted fatally with the
self-regulation of the system."2
Polanyi argues that the self-regulating market is a new
human invention for which there are no parallels in past his-
tory. But new does not mean progressive. Greater sanity
belongs to the earlier phases of human development when eco-
nomic activity exercised a social function and thus helped to
constitute society as a whole. Labour was then embedded in
social relations. The production and distribution of goods in
tribal, feudal, and mercantile societies did not create a separate
economic system. Polanyi claims that the self-regulating
market, created by state intervention, was so foreign to human
5
ways and so devastating in its consequences that it provoked

almost immediately a significant counter-current that sought
to protect society and the land.
The conclusion at which Polanyi arrives, then, is that
modern capitalist society is characterized by "a double move-
ment": on the one hand, the self-regulating market supported
by the owning and trading classes, and, on the other, the
safeguarding of society by social forces that seek to protect the
people, their land, and their culture. Sometimes he speaks of
the first movement as seeking blind "economic improvement"
and of the second as protecting "habitation."3
Because of this double movement, Polanyi argues, modern
industrial society, despite the newness of the free market,
remains in continuity with the great social orders of the past.
Modern society continues to protect itself against the forces that
undermine its social solidarity and threaten to distort its rela-
tionship to the natural environment. This counter-movement
is what Polanyi calls the Great Transformation.
Is the double movement a theory dhat can be trusted? Are
there social forces in our day that move against the stream and
seek to protect people and safeguard habitation? When I first
read Karl Polanyi, I asked myself whether this great economic
historian was a functionalist social thinker who, like Emile
Durkheim, looked upon society as an organic unit that would,
whenever disturbed, return to equilibrium by its own inner
vitality.4 Such assumptions about the nature of society are, in
my mind, unwarranted. By contrast, some students of Polanyi
have suggested that his theory of the double movement was
inspired by a dialectical understanding of history in the tra-
dition of Hegel and Marx. Did Polanyi believe in necessary
progress?
For the Christian ethicist these are important questions.
Both functionalist and dialectical theory presuppose that history
moves according to certain laws, that the direction of human
6
The Double Movement
development is predictable, and that the human enterprise is

governed by necessity. Christian thinkers with very few
exceptions take a much different view. For Christians, his-
tory remains always open, open to the self-chosen, human
destructiveness called "sin" and open to the surprising powers
of generosity and reconciliation called "divine grace." The
course of human history cannot be predicted by science. What
the sciences can discover in historical developments are cur-
rents or trends, not laws; and on the strength of these trends,
scientists are able to make modest predictions, suggest what
is likely to happen, and propose courses of action that promise
to serve human well-being.
Is Polanyi's work based on necessity or freedom? To reply
to this question, we must analyse in greater detail the dem-
onstration he offers for his theory of the double movement.
In The Great Transformation Polanyi proposes two distict
arguments, one historical and the other anthropological. The
first argument he draws from his research into the economic
and social history of England from the late eighteenth cen-
tury to the end of the nineteenth century. Here he shows
that the concrete history of one country, the country in
which industrialization began, was the locus of the double
movement.
The second argument is of a different kind. Here Polanyi
appeals to what he calls "the changelessness of man as a social
being."5 Relying on extensive anthropological research, he
demonstrates that throughout known human history eco-
nomic activity has always been embedded in social relations.
Since the self-regulating market, a unique and unparalleled
institution, separates the economy from society and endangers
the latter in the process, it can be expected that, following
age-old wisdom and practice, society will generate a counter-
movement and protect itself against disintegration. Let us look
at these two arguments in greater detail.
7
a
THE HISTORICAL ARGUMENT
In his treatment of English economic history, Polanyi

attaches great importance to the Speedhamland settlement of
I795,6 which, in one location, guaranteed support for the
poor according to a scale depending on the price of bread.
Soon copied all over England, the Speedhamland settlement
represented traditional Tory collectivism, which recognized
"the right to live"7 by holding society responsible for the lives
of all its members. In essence, the Speedhamland law pre-
vented the formation of a free labour market, something
which the burgher class, the owners of the newly created
industries, greatly desired. According to the theorists of the
self-regulating market, hunger and the will to survive should
prompt labourers to work in the factories and their wages
should be determined by the mechanism of the market.
Public support for the poor was seen as an obstable to
industrial capitalism.8
In 1832 the burgher class gained power in the British
parliament, and in 1834 parliament repealed the traditional
poor laws. Speedhamland was no longer in force; people no
longer enjoyed "the right to live." Because the Poor Law
Reform Act of 1834 established the free labour market in
England, Polanyi regarded this date as the beginning of mod-
ern, industrial capitalism. The self-regulating market was
reinforced by subsequent legislation, especially Sir Robert
Peels Bank Act of 1844 and the repeal of the Corn Laws in
1846.9
The consequences were devastating and, Polanyi insists,
were not confined to the realm of economics. A few revisionist
historians have claimed that the poverty of workers in the
industrial age represented an improvement over the poverty
that had prevailed in villages in pre-industrial time and cer-
tainly was not as bad as contemporary authors, for polemical
8
The Double Movement
reasons, had claimed. Polanyi regards this argument as mis-

guided. The damage caused by the self-regulating market was
above all cultural. By divorcing economic activity from its base
in social relations, the free market tore apart the cultural bonds
- the values and the inherited institutions - by which people
constituted their identity. The new economic system created
a devasting anomie which seriously damaged the humanity of
workers and affected the whole of society and its relation to
the natural environment.
It is not out of place to mention that, in dhe contemporary
debate over Third World underdevelopment, political scien-
tists who defend the neo-Marxist "theory of dependency" as
well as those who try to refute it present a purely economic
analysis of the impact of capitalist development. In fact, how-
ever, the dislocation and marginal existence of Third World
populations is much better understood with the help of
Polanyi's theory that importing Western-style economic devel-
opment effectively "disembeds" people's economic activity
from their social relations, tears the population out of the
social matrix that assured their cultural identity, and in the
long run destroys their human self-respect. We shall return to
this topic in chapter 3.
In England the free, unregulated market system did not
remain unchallenged for long. Polanyi shows that from the
late 1840s on workers and other people too sought to create
their own organizations to protect themselves against the logic
of the free market. Eventually Parliament itself introduced law
after law to save society and the land from the destructive
consequences of the universal market. Polanyi cites a list of
government interventions compiled in 1884 by a horror-struck
Herbert Spencer, the famous social philosopher, who accused
the Liberal Party of having forsaken liberal principles and
introduced restrictive legislation. The following is Polanyi's
summary of Spencer's list:
9
In 1860, authority was given to provide "analysts of food and drink

out of local rates"; there followed an Act providing "the inspection
of gas works"; an extension of the Mines Act "making it penal to
employ boys under twelve not attending schools and unable to read
and write." In 1861, power was given "to guardians to enforce
vaccination"; local boards were authorized "to fix rates of hire for
means of conveyance"; and certain locally formed bodies "had given
them powers of taxing the locality for rural drainage and irrigation
works, and for supplying water to cattle." In 1862, an Act was passed
making illegal "a coal-mine with a single shaft"; an Act giving the
Council of Medical Education exclusive right "to furnish a Pharma-
copoeia, the price of which is to be fixed by the Treasury." ... In
1863, came the "extension to compulsory vaccination to Scotland
and Ireland." There was also an Act appointing inspectors for the
"wholesomeness or unwholesomeness of food"; a Chimney-
Sweeper's Act, to prevent the torture and eventual death of children
sent to sweep too narrow slots; a Contagious Disease Act; a Public
Libraries Act, giving local powers "by which a majority can tax a
minority for their books."10
What was taking place, according to Polanyi, was the self-

organization of society, sometimes with the help of the gov-
ernment and sometimes in spite of it, to protect people and
land against the disintegrating forces of the market system.
Political democracy made possible the formation of a "civil
society" that was distinct from the state, even if in many
instances it was assisted by the state. In other words, there
arose a complex set of institutions, associations, movements,
and networks that enabled people to participate in the shaping
of their own social world.
In his interpretation of nineteenth-century England Polanyi
reveals himself as a reformist thinker. He has little sympathy
for the Marxist theory that in capitalist society the actions of
government necessarily aim at protecting the interests of the
10
The Double Movement
capitalist class. He rejects the idea that the political order, in

this case democracy, is simply a superstructure which reflects
power relations defined in economic terms. Polanyi recognizes
the reality of the class struggle in England: he admires the
collective efforts of workers and ordinary people to set up
socialist, cooperative, and labour organizations to defend
themselves against the self-regulating market system. But he
dismisses the idea that the class struggle by itself is the key for
understanding the historical development of society.
The important question for Polanyi is why certain class
struggles fail and others succeed. He argues that a class struggle
is likely to achieve its goals if it transcends narrowly conceived
class interests and promises to protect society as a whole. In
that case the class struggle is likely to find support among
people of other classes and eventually affect the direction of
government policy.
In the context of such reflections, Polanyi offers a carefully
worded definition of what he means by the double movement.
This definition deserves our attention. "The double move-
ment," Polanyi writes,
can be personified as the action of two organizing principles in

society, each of them setting itself specific institutional aims, having
the support of definite social forces and using its own distinctive
methods. The one is the principle of economic liberalism, aiming at
the establishment of a self-regulating market, relying on the support
of the trading classes, and using largely laissez-faire and free trade as
its method; the other is the principle of social protection aiming at
the conservation of man and nature as well as productive organiza-
tions, relying on the varying support of those most immediately
affected by the deleterious action of the market primarily, but not
exclusively, the working and the landed classes - and using protective
legislation, restrictive associations, and other instruments of inter-
vention as its methods."
II
Here it becomes quite clear that Polanyi is not a function-

alist thinker. The counter-movement of protection is not the
product of society as such acting according to its own inner
logic; it is rather the work of specific groups in society which,
relying on their cultural heritage and worried about their
material well-being, elect to protect themselves and the society
to which they belong. Their effort is not "necessary," not
written into the nature of things, but freely chosen and fallible.
The historical experience of nineteenth-century England,
Polanyi believes, was repeated in other countries as they moved
into industrial capitalism. On this basis he proposes his theory
of the double movement. He holds that the conflict between
the self-regulating market and civil society is a permanent
characteristic of capitalist countries. He also maintains that
the self-regulating market and democracy are in the long run
irreconcilable. Either the free market economy will give way
to a more cooperative, social economy, or, if the free market
economy remains in force, it will increasingly depend on
authoritarian or even fascist protective rule.
THE ANTHROPOLOGICAL ARGUMENT
Let us now turn to Polanyi's second argument for the double

movement, dhe one based on his anthropological research into
the role of the economy in tribal and other pre-modern forms
of society. Polanyi shows that throughout history economic
activity has been embedded in social relations: economics, in
short, was accessary to society. The separation of the economy
from society brought about by the self-regulating market goes
against dhe experience of the human race. It reverses the order
of things: society becomes accessary to the economy, people
and land come to constitute elements of the economic process.
Since the constancy of pre-modern economic history reveals
the nature of human society, Polanyi argues, we must expect
12
The Double Movement
that a society challenged by the self-regulating market will

mobilize itself for its own self-protection.
During his career Polanyi became increasingly fascinated by
anthropological research. In fact, his greatest contribution to
empirical social science was his extensive work on the eco-
nomics of tribal societies. He believed that tribal societies,
because of their simplicity, reveal most clearly the nature of
economic activity.
In the simplest societies Polanyi recognizes two types of
economic activities which he calls "reciprocity" and "redistri-
bution." Members of tribal societies had symmetrical rela-
tions, meaning that the services they rendered were in one
form or another reciprocated. People helped one another,
relied on one another, gave freely and received freely. But the
simple societies also had some sort of central authority capable
of providing assistance to the excluded, the hungry, or the
sick, thus acting as an agent of redistribution. When someone's
dwelling was destroyed, the chief saw to it that the other
members of the tribe came to the person's assistance. Reci-
procity and redistribution were economic society-building
activities. Producing and distributing goods and rendering
services were actions that confirmed and stabilized social
relations.
A third economic activity, named "householding" by
Polanyi, was found in extended families living in relative
independence from the tribe. Householding provided most of
the goods and services these families required. Extended fam-
ilies were institutions that aimed at a certain self-sufficiency.
Polanyi insists that the early forms of economic life, defined
by reciprocity, redistribution, and householding, did not
include markets at all. Here he differe from liberal philoso-
phers and economists who assert that human beings have
always been, and are by nature, barterers and hagglers, that
the local market is therefore the earliest economic institution,
13
and that modem market-capitalism is simply the evolutionary

culmination of the simplest form of econonic life. To refute
this widely held theory, Polanyi presents an analysis of the
genesis and the roles of markets in pre-modern societies.
Historical research uncovers two kinds of markets: the exter-
nal market, which trades in goods brought from distant lands;
and the internal market, which trades in goods produced in
the local communities. These two markets had different ori-
gins and functions and were strictly separated. The earliest
form of external trade existed for a long time without a
competitive market. Because external trade encouraged the use
of money, it tended to be concentrated in towns, especially
ports, and did not become a universal institution.
By contrast, the internal or local market was competitive
from the beginning, involving barter and haggling, yet it did
not necessarily presuppose money. People produced for their
own needs, but their surplus, that which they did not use,
was brought to the market to be exchanged for other goods.
This market was controlled to protect the peace of the local
community. The exchanges were ritualized and the days and
the hours were limited. Local markets were eventually estab-
lished everywhere. They had the same basic structure, but -
Polanyi insists - they did not replace the traditional economic
activities of householding, reciprocity, and redistribution. Nor
were these markets the starting-point for nation-wide internal
trade.
In western Europe, nation-wide internal trade was made
possible through the intervention of the state. Polanyi shows
that the localism of internal markets was gradually broken
down by the mercantilist policies adopted by monarchs. This
first took place in England and France. Later it was state power
excercised by the successful burgher class that removed tradi-
tional barriers, local customs, and inherited community rights
to create the free market system.
14
The Double Movement
The structuring of regional markets into a single, indepen-

dent, self-regulatory market system was not produced by the
natural expansion of local markets; it was rather a highly
artifical creation, brought about by political power exercised
on the social body in response to an equally artificial phenom-
enon, industrial production in factories. During the industrial
revolution, for the first time in history, society became an
adjunct of the economic system. No wonder, Polanyi argues,
that society defended itself against this process.
On the basis of this examination of Polanyi s historical and
anthropological arguments, we may conclude that the theory
of the double movement is presented not as a law of history
but simply as an historical trend for which there is much
evidence. It is clear that Polanyi is neither a functionalist nor
a proponent of a dialectical dieory of history. He rejects the
evolutionary perspective and the idea of necessary progress that
in his day dominated social theory on the right and on the
left. Polanyi refuses to look upon modernity as the high-point
of humankind's historical development. To him it is absurd to
interpret the rich variety of traditional cultures simply as stages
of preparation for die supposedly higher achievements of dhe
scientific-technological age. He holds that these great cultures
embodied profound human wisdom and provided examples of
humanity from which we can and should learn today.
At the same time, while rejecting the evolutionary perspec-
tive, Polanyi's theory of the double movement provides hope
and direction for the future. In the long run, people always
seem to be ready to protect themselves and their habitation.
PROTECTING THE ENVIRONMENT
Karl Polanyi was among the first social thinkers to recognize

the damaging impact of the self-regulating market upon
nature. "What we call land," he writes, "is an element of
15
nature inextricably interwoven with man's institutions. To

isolate it and form a market out of it was perhaps the weirdest
of all undertakings of our ancestors."12 At the same time,
Polanyi shows that there existed a counter-movement that
defended human habitation and sought to protect the land.
Land is part of nature. For the human community, the
economic function of land is just one of its many vital pur-
poses. Land is the site of human dwelling, it assures human
survival and upholds the community's rootedness in nature, it
invests human life with stability, it is the landscape and the
seasons. Thus, to make land into a (fictitious) commodity and
subject it to the laws of the real estate market threatens to
shatter the cultural bases of human existence.
The impact of the commodification of land is seen most
clearly in the colonies of the European empires. It is immate-
rial whether the colonists needed the land because they wanted
the metals and resources hidden under it, or whether they
needed the land to organize the production of a surplus of
food, for in any and every case, Polanyi argues, "the social and
cultural system of native life first [had to] be shattered."13 We
see in the colonies a brief, dramatic presentation of what
happened in Europe over a longer period of time.
Polanyi describes the stages of this development. It began
under feudalism, especially in England, when the aristocracy
rationalized and commercialized the treatment of land in order
to increase its own revenue. (Such is the historical context of
the secularization of church lands.) The process was acceler-
ated with the arrival of industrial capitalism, which made
necessary an increase in the production of food and organic
raw materials in order to feed and clothe the population in
the rapidly growing towns and cities. This stage is best sym-
bolized by the Benthamite reforms in England during the
1830s and 1840s. Bentham had argued that, to create the most
favourable conditions for agriculture, it would be necessary to
16
The Double Movement
remove traditional rules - entails, unalienable endowments,

common lands, tithes, the right of redemption, and so on. For
Bentham, this matter was related to individual liberty. To
extend that liberty was the aim of a series of acts, such as the
Prescription Act and the Inheritance Act, promulgated in the
first part of the nineteenth century. Pressure exerted by the
burgher class produced similar developments on the European
continent, and the end result was the dismantling everywhere
of the barriers that had prevented land from being separated
from the community.
Linked to all of this was the creation of interregional mar-
kets for agricultural products. Because certain industrialized
regions with high population density were unable to produce
the food they needed, newly created markets brought these
products from other regions and eventually from other parts
of the world, especially the colonies. This was a new phenom-
enon. The goods of everyday life had never been bought and
sold on a regular basis; until then, grain surpluses had been
saved to provision the local neighbourhood, especially the
towns, and corn markets had tended to be confined to the
region. Now the growth of the metropolis compelled the
authorities to loosen restrictions on the corn trade and allow
it to develop on a national and eventually world scale.
"The effect of this change," Polanyi writes, "was the true
meaning of free trade.''14 The production of goods grown on
the land was gradually shifted from the local countryside to
the tropical regions, thus extending the division of labour
between industry and agriculture to the entire planet. As a
result, the peoples of these distant zones were drawn into the
vortex of change, the nature of which was obscure to them,
and the nations of Europe became dependent upon a system
that destroyed their own agricultural population.
But then, from the middle of the nineteenth century on,
the counter-movement slowly emerged, offering a social
17
defence against the commodification of the land and the

disintegration of local cultures. In the 1870s, Polanyi argues,
public legislation in England changed its orientation. The
inheritance of the common law was deliberately enhanced by
statutes expressly passed to protect the habitations and occu-
pations of the rural classes from the effects of freedom of
contract. Efforts were even made to assist the poor by improv-
ing their housing and by alloting them land where they could
produce food to supplement their diet.
On the continent, Polanyi explains, it was mainly statute
law and administrative action that protected peasants and
agricultural labourers from the worst effects of urbanization.
Since the global division of labour and international trade
seriously threatened many rural communities, central Euro-
pean countries were eventually forced to protect their peasant
populations through the introduction of corn laws and other
tariffs.
That farming was simply "a business" and that those who
went broke had to clear out was an idea that frightened not
only the peasants but also the landlords. Free trade was their
enemy. Yet industrial workers favoured free trade since it
reduced the price of food, and so they began to brand the
peasantry of the world as reactionaries. Thus, opposed to the
protection of the land and rural culture were not only the
liberals, who represented the interests of the burghers, but also
the revolutionary socialists. City dwellers created the myth that
peasants were unintelligent and country life stupid. In central
Europe it was eventually the aristocracy and the church that
protected the land against the self-regulating real estate market
and the peasants against the disintegration of their culture.
Through these classes society saved its relationship to nature.
This is how Polanyi explains the power exercised by conserva-
tive and even reactionary forces in the nations of Europe, long
after the advent of democracy and the market economy.
18
The Double Movement
The defence of society's relation to nature is, for Polanyi,

one factor explaining the success of European fascism during
the 1920s and 1930s, especially in villages and small towns.
Despite its dream of conquest and social subordination, fas-
cism was a social movement through which society attempted
to protect the land from the "progressive" forces of capitalism
and socialism. But because of its commitment to war and
slavery, dhe world - fortunately turned against fascism and
destroyed it.
If Karl Polanyi were still alive today, he would regard the
mobilization of people on behalf of ecological causes as part
of the counter-movement. He would urge that this mobiliza-
tion not become ideological, that it not separate itself from
existing institutions, that it try to stay close to the popular
sector of society, and that it find forms of expression that draw
upon the wisdom of the people and their religious and
humanistic traditions. Examining environmental destruction
in the 1940s, Polanyi emphasized the importance of state
power. Territorial sovereignty is so important, he argues,
because only through it can society prevent the supply-and-
demand mechanism of the market from destroying the natural
environment and - in his words - "even its climate ... which
suffers from the denudation of forests, from erosions and
dustbowls, all of which, ultimately, depend upon the land
factor."15 Long before the public outcry against the devastation
of the environment, Karl Polanyi was the prophetic theoreti-
cian of the ecological movement.
19
2
The Ethical Foundations

of Polanyi's Social Theory
In this chapter I study Karl Polanyi's reflection on the role of

ethics in the making of society and in the social scientific
understanding of it. Polanyi, who in his personal life was greatly
inspired by Leo Tolstoy,1 was not a philosopher in the strict
sense. Yet he believed that as a social and political thinker he
had to articulate his intuitions regarding the ethical foundation
of human thought and action. He first did so as a young man
in the Vienna of the 1920s while struggling against his depres-
sion over the useless killing of the Great War. As Polanyi studied
social and economic science and became involved in workers'
education during these years, he began to ponder the ethical
foundations of human existence. His thinking was expressed in
two major essays, "Behemoth" and "Uber die Freiheit," and in
several smaller ones. Because these papers were never published
- and because, as Abraham Rotstein has pointed out,2 Polanyi
was to remain faithful throughout his scholarly career to the
ethical perspective he had developed in Vienna -1 present their
argument at some length.3 Afterwards I turn to an essay written
in the 1930s, when Polanyi lived in England. In this essay, enti-
tled "On the Essence of Fascism," Polanyi went so far as to offer
a theological argument for his ethical position.
Ethical Foundations
"BEHEMOTH"
In "Behemoth" Polanyi laments the indifference to ethics dem-

onstrated by social and economic science. Scientists have
become superstitious, he argues: they believe without evidence
that they can understand the shifting patterns of history with
the help of clearly defined laws, that on the basis of this knowl-
edge they can make predictions regarding future developments,
and that, thus enlightened, dhey can recommend public policies
to those in power. In this approach to social and economic sci-
ence, Polanyi states, free individuals seem to disappear alto-
gether. Some scientists concede that the ends of social action are
determined by ethical considerations - for instance, the protec-
tion of society from criminals or the emancipation of industrial
workers - but then they insist that the means by which these
ends are to be achieved are selected according to purely scientific
criteria. Polanyi does not believe in value-free science.
Polanyi's polemic is primarily directed against the scientific
Marxism dominant in Austrian socialism, but it also applies
to the positivistic social and economic science produced in the
liberal tradition. Positivism on the right and on the left,
Polanyi argues, recognizes only the external or material dimen-
sion of human existence and disregards as historically insig-
nificant human consciousness and human ideals. Even the
ends of social action seem no longer freely chosen but rather
determined by some sort of necessity, by the human animal's
struggle for survival or some other logic implicit in history.
Polanyi regarded the consistent exclusion of ethics from social
and economic science as one of the factors that prepared the
way for European fascism.
Polanyi thought of himself as a man of the left and, as we
shall see, proposed what he called a "new socialism." In his
Viennese manuscripts he offered a devastating critique of
scientific Marxism, especially in its Leninist form. It is worth
21
mentioning, however, that in the 1930s when Marx's early

writings, the Economic and Philosophical Manuscripts, suddenly
appeared in print - Polanyi (then living in London) discovered
the humanistic dimension of Marx's thought and recognized
the possibility of an alternative reading of his work.4
While still in Vienna, Polanyi defended the ethical founda-
tion of all human knowledge. The first thing we know, he
argued, is the experience of being engaged in the day-to-day
ethical task of living, dhe Lebensweg as he called it: how to
relate ourselves to those dear to us, how to act in regard to
our neighbours, how to respond to the culture in which we
live, how to assume an appropriate, self-critical attitude
towards ourselves. This uninterrupted engagement in the
Lebensweg was for Polanyi the primary experience of our
existence. We are beings of conscience.
The knowledge of the Lebensweg, Polanyi continues, allows
us to respond to several questions raised by social and eco-
nomic science. First, is there freedom of the will or do people
act out of necesssity? The answer to this question, Polanyi
argues, is not a theoretical but an existential one. Why?
Because I live every day as one who assumes responsibility for
my life. If I do not enjoy this freedom, if I am compelled to
act by forces I do not recognize, then I know at least that I
desire to be delivered from these forces and choose my Lebens-
weg freely and responsibly.
Secondly, do ideals have historical importance or do they
only exist in the mind? For Polanyi, the answer comes again
from experience. While the yearning of a single soul achieves
very little, he wrote, we know that the yearning of the many
affects the course of history. As an example, Polanyi offers "the
truths of Jesus," which, by "living in the hearts of millions,"
have exercised great power through the ages. The content of
consciousness, Polanyi insists, may under certain circum-
stances affect the transformation of material reality.
22
Ethical Foundations
The third question comes from another angle. Is there being

beyond myself? Again Polanyi appeals to the Lebensweg. Our
ethical conscience demands that we think of others, take into
account the consequences of our actions, and assume respon-
sibility with others for the well-being of all. Thus again, ethics
is the foundation for our certainty of the worlds existence.
In a small, incomplete manuscript from the same period,
entitled "Die Lehre vom Lebensweg," Polanyi explored his
own ethical understanding of human existence. He believed
that the call to live responsibly had been mediated by the
founders of the world religion, by great religious personalities,
and by men and women of wisdom belonging to all ages, so
much so that the human ethical vocation had become
inscribed in the major cultural traditions and hence is acces-
sible to ordinary people everywhere. In this regard, Polanyi
offered empirical arguments for the universality of the ethical
call to love. In his subsequent writings, he proposed that this
vocation actually belongs to human nature.
In "Behemoth," Polanyi argues with people of his day who
refuse to concede the primacy of the ethical. Some of them,
he writes, recognize the call to love, but they believe that social
injustice must be overcome before people will be free to love
their neighbour. Others, Polanyi writes, commit the opposite
error. They claim that the task of living an ethical life and
becoming a loving person is so demanding that they must
withdraw from social engagement. Though Polanyi has some
sympathy for these objections, he forcefully argues against
them. The ethical call experienced in the Lebensweg affects our
relationship to our own small circle and to the larger society
to which we belong. There is no double morality, one for the
home and the other for the social order. Ethical concern
extends to every aspect of human life.
Today, such reflections are commonplace in Christian
ethics. But when Polanyi offered these thoughts in the 1920s,
23
there were few ethical thinkers in the churches who shared his
convictions.5 At the time, Polanyi addressed his argument
mainly to the Marxist socialists whom he encountered in
Vienna. They did not recognize, he thought, the ethical call
implicit in human existence. They understood the human
impulse to act in purely materialistic terms as an expression
of economic class interest, which they regarded as the motor
force operative in history. Polanyi was keenly aware that social-
ist workers struggling to improve the material conditions of
their lives were also inspired by high ideals, a desire for social
justice and solidarity with the exploited. Yet Marxist theory
did not acknowledge this commitment to value and vision but
instead interpreted it simply as an expression of collective
self-interest.
Polanyi compared the Marxist approach with that of Robert
Owen, who envisaged an industrial organization, an alterna-
tive to capitalism, based on an ethic of cooperation. What
followed after Owen, Polanyi argued, were the cooperatives,
the labour movement, and guild socialism, whereas Marx was
followed by state capitalism and Lenin's centralized commu-
nism. Drawing his inspiration from the British tradition, Pola-
nyi began to speak of the "new socialism," different from
Marxism, that must replace the present order.
"UBER DIE FREIHEIT"
In a remarkable essay, "Uber die Freiheit," Polanyi used his

ethical understanding of the human being to produce a ratio-
nal demonstration in support of the new socialism. To my
knowledge, this is an original argument.
How is it, Polanyi begins, that lifeless things like raw mate-
rials, merchandise, and machines are able to control so much
of human life? Marx, he adds, recognized the enormity of this.
Just as people in an earlier period believed that trees and rocks
24
Ethical Foundations
had spirits dwelling within them, so people in the present age

believe that material things have a life of their own - like
prices going up and down. Is this not the survival of fetishism?
Freedom, Polanyi argues, must mean - among other things
- the liberation of people from the domination of impersonal
material powers. The new socialism, he continues, reaches
beyond the question of justice, that is, the just distribution of
society's wealth; it intends to overcome the domination of
people by material things and introduce them to a new free-
dom, the capacity to shape their own society. Socialism is thus
concerned with the spiritual dimension of human existence.
It is ethical in nature.
Yet socialists, Polanyi goes on, do not need ethical retrain-
ing; they do not have to invent a new set of values. The ethical
principle developed in the womb of the inherited society
retains its full validity. He calls this principle das burgerliche
Gewissen - in English, the bourgeois or the citizens' con-
science, or possibly simply "the civil conscience." In the feudal
order people received their ethical norms from the communi-
ties to which they belonged and in which they were embed-
ded: families, villages, guilds, estates, and churches. The
Protestant Reformation protested against this ethical conform-
ism in the name of a higher obedience to the scriptural word.
But in civil society a new form of ethical awareness emerged,
the autonomous conscience, a sense of self-responsibility that
would not allow another to set the norms and instead required
that persons decide for themselves what is the good and what
has to be done. No one can make this decision for the free
citizen. Neither the state, nor society, nor the church is an
ethical subject. The person alone, ever open to new experi-
ences, new challenges and new evidence, assumes ethical
responsiblity for his or her Lebensweg.
Living in civil society, a person is inevitably co-responsible
for what happens in it. The class division, for instance, which
25
unjustly assigns one sector of the population to subservience,

is not a process from which an individual can remain aloof
but one in which he or she inevitably participates. In a simpler
society, Polanyi argues, people knew the impact their actions
had on others: they knew the farmer, the miller, the baker,
and the other craftsmen and merchants with whom they dealt.
They could estimate whether their interaction with them was
just or unjust. Their society was "transparent." But, because
of ever increasing complexity, modern, industrial society has
become largely "opaque." We realize that our actions have an
impact on other people, but most of the time we do not know
what this impact is. We are aware that our participation in
society makes us co-responsible for the good and for the evil
done by society, but we do not know with any precision what
these good and evil actions are.
In this situation, Polanyi argues, the civil conscience is
deeply anguished. People desire to be ethical and assume
responsiblity for the consequences of what they do, but in an
opaque society they cannot know what these consequences
are. The cup of coffee we drink in the morning - to take a
simple example - raises an uncomfortable question regarding
the impact of the coffee trade on the coffee pickers and their
tropical villages. Complex society leaves us largely ignorant.
The ethical longing of the bourgeois, Polanyi argues, cannnot
be satisfied within bourgeois society.
How have people responded to this anguish? Immanuel
Kant, according to Polanyi, made a desparate attempt to escape
the dilemma by defining personal self-responsibility in terms
of an empty categorical imperative in which the neighbour
disappeared completely. Kant created a notion of duty to prin-
ciple that remained indifferent to the consequences of the
action taken. According to Max Weber, many Christians in
the Protestant tradition resonated with such a Gewissensethik
(ethics of conscience), which tended to restrict the significant
26
Ethical Foundations
ethical decisions to the extra-societal aspects of life, that is,

those dealing with inwardness, intimacy, and transcendence.
Yet the great majority of citizens escape the dilemma in a
different way. With Max Weber, Polanyi holds that most
people prefer to follow a half-hearted ethic, one that does not
challenge the whole of their existence. He also remarks that
the fascists of his day cynically repudiated the civil conscience
altogether.
This, then, is Polanyis original argument: the longing of
the bourgeois conscience transcends the possibilities of bour-
geois society. What this conscience calls for is the creation of
a transparent society that allows its members to estimate the
effects of what they are doing and thus assume ethical respon-
sibility for their actions. Civil society, that is to say, the
capitalist society to which we belong, is dominated by material
forces that behave according to a logic of their own and thus
deprive the citizens of the responsibility for their social life.
The new socialism, the society demanded by the ethical con-
science, will offer people what Polanyi called gesellschafiliche
Freiheit or, in English, social freedom - the freedom to be
ethical under the conditions of industrial society.
Polanyis concept of freedom, we notice, is not a liberal one:
for him, freedom is not the capacity to choose and do as one
pleases. Freedom, rather, is always the capacity to live an
ethical life. He distinguishes between personal and collective
freedom. The latter freedom, not enjoyed under present con-
ditions, only becomes available when people have been liber-
ated from the opaque forces that now determine their lives.
Implicit in the notion of collective freedom is a double
intuition regarding the nature of society. Polanyi presupposes
that there is no human action that does not have some social
consequences, and, conversely, that there is no power structure
in society that does not rest in some way on the behaviour
of individuals. This second affirmation stands against any
27
mechanistic or structuralist understanding of society. Accord-

ing to Polanyi, there are no fixed laws that define the life of
society. If it seems to people that such laws do exist, then the
reason for this is that they have been successfully persuaded
to see society in that way. What people must discover is that
the structures in which they live rest upon their own partic-
ipation and that, if they so wished, if there existed a collective
will, they could actually transform these structures. Against
the structuralist tendency in sociology, Polanyi puts the
emphasis on agency.6 The subject of history is responsible
human beings.
Polanyi consistently rejects the notion of economic laws,
whether they be proposed by liberals or Marxists. Humans are
free, at least in principle, to create the economy they consider
just and humane. Striving for "transparency" in the complex
social conditions of today is not pursuing an impossible
dream, not an ideal that can never be realized. For Polanyi,
transparency is a possible Utopia, a state of affairs that should
be the object of a social struggle, even if this struggle never
comes to an end.
In "Uber die Freiheit" Polanyi makes remarks about human
existence that are important for the understanding of his entire
intellectual achievement. He has a keen sense of the anguish
that grips members of modern society. A part of us, he argues,
contributes to the cause of the injustices committed by society,
while another part of us, separated from the first and possibly
unaware of it, is the effect of these unjust conditions. These
two parts stand against each another, they divide the soul, they
cannot be synthesized, they produce internal division and
ethical dilemma. The social conditions in which we live make
us colonizer and colonized at the same time. Few ethicists have
recognized the human condition thus.
From our anguish comes the longing for collective freedom.
Yet, because Marxist socialism has paid so little attention to
18
Ethical Foundations
the individual person, Polanyi insists that, even in a society

gifted with collective freedom, personal freedom remains unre-
mittingly important and retains its independent identity. As
Polanyi puts it (in my own translation): "The greater and in
fact the essential part of human life takes place in the extra-
societal sphere. A person's relationship to the world around
him, his friends, his family, his life's companion and his
children, his relation to his own capacities and his work, his
relation to himself: the honesty with which he critically
encounters himself and the response he gives in his innermost
heart to his own existence marked by mortality. Here the
personal freedom comes to life through which a human being
become truly human. Without this freedom, a human society
is unthinkable."
Polanyi's understanding of modern society made him aware
of the degree of ignorance in which we live. And, because he
realized that we can never be certain that our actions will have
the consequences we anticipate, his ethical passion, according
to Abraham Rotstein, was tamed by a certain caution or
reserve.7 Polanyi's intellectual approach did not allow him to
become a revolutionary. He was a passionate reformist.
"THE E S S E N C E OF F A S C I S M "
When Polanyi moved to England in the early 1930s, he found

a hearing in the labour movement and, more especially, among
Christian socialists. Eventually he involved himself again in
the education of workers. After 1933, the year Hitler assumed
power in Germany, Polanyi produced an essay on the nature
of fascism,8 in which he used his acquaintance with the con-
tinental situation to explain to British workers the threat of
the Nazi movement. He argued that Italian and Austrian
fascism was mild compared with the German fascism of the
Nazi Party: it was in that party that fascism revealed its
29
essence, its profound opposition to humanism, its philosophy

and brutal practice of inequality.
Polanyi shows that fascism regards the ethical conscience of
the individual as the principal enemy which it, fascism, must
destroy if it wants to be victorious. In "Uber die Freiheit" he
had used the term "civil conscience"; however, in dhe essay
now under review, he adopts a curious vocabulary: he calls the
civil conscience "individualism." He does so, I presume,
because an Austrian fascist thinker whom he quotes at length
lauds the historical role of collectivism and defines fascist
philosophy as anti-individualism. The thesis of Polanyi's essay
is that German fascism, faithful to its philosophical essence,
aims at the destruction of the workers' movement and Chris-
tianity, the two loci where the individual ethical conscience is
most alive.
Confronted with Nazism, Polanyi feels that it is necessary
to locate the origin of the civil conscience in the religious
traditions, in particular in Christianity. He had hinted at this
relationship before, and now he makes it explicit, claiming
that Christian faith is the most solid ground for ethical con-
viction. Given that he was writing in the 1930s, his praise of
Christianity is surprising. Polanyi is keenly aware of the influ-
ence of the so-called German Christians (Christians commit-
ted to Nazism) on the Protestant Church of Germany, and he
mentions the complicity of the Catholic Church in several
countries with reactionary politics and sometimes even with
fascist parties. Yet he is convinced that the roots of the Western
moral conscience lie in the Christian tradition, and that this
spiritual heritage has not totally disappeared. He mentions
Christians in Austria and Germany who disagreed with their
ecclesiastical leaders and stood up for socialist justice, and he
reports a recent development, the resistance to Hitler's dicta-
torship by a group of Christians in Germany. He further
maintains that the Nazis, in their fight against the socialist
30
Ethical Foundations
movement and its ethical inspiration, cannot in the long run

avoid opposing what he calls the teaching of Jesus. By virtue
of its essence, fascism must inevitably turn against the
churches. There is evidence, Polanyi claims, that this is already
beginning in Germany.
To clarify the nature of the Christian conscience and the
ethical inspiration of socialism, Polanyi introduces - rather
polemically - the distinction between "atheistic" and "Chris-
tian" individualism. The atheist conscience rejects any relation
to an absolute and for this reason, possibly without intending
it, affirms itself as the absolute measure. Polanyi turns to the
novels of Dostoyevsky for examples of typical atheist individ-
ualists. In The Demons, Kiriloff exclaims, "If there is no God,
then I, Kiriloff, am God." Polanyi find this reasoning con-
vincing. God, he writes, is that which gives meaning to human
life and creates the difference between good and evil. If there
exists no such God, then I am forced to do these things myself
and thus become my own God. In The Demons, Kiriloff
pursues the full realization of his divinity by wrestling with
and eventually overcoming his fear of death. He wins this
battle as he commits suicide. In all of his novels, Polanyi tells
us, Dostoyevsky uncovers the nature and the limitations of
the self-sufficient personality.
Polanyi continues his argument against more recent poets
and philosophers who have adopted the self-sufficient person
as their ideal. Their individualism, he laments, undermines
the virtues of justice and solidarity, which are absolutely nec-
essary for the creation of a non-exploitative society.
This presentation of "atheist individualism" is undoubtedly
polemical. When speaking of the "civil conscience" in his
earlier writings, Polanyi had not described it as necessarily
theistic. All he proposed at that time was that the notion of
the autonomous, self-responsible person was ultimately rooted
in the great religious traditions, especially Christianity. But,
31
confronted by the threat of German fascism, he comes to

believe that the individual conscience can be protected only
if it is religiously grounded.
Allow me to add that the heroic-tragic atheism of Kiriloff
does not, in my opinion, represent the atheism so widespread
in contemporary culture. What we have today, it seems to me,
is the "secular atheism" of people in whose mental universe
the God-question has never seriously emerged: some of them
live lives of self-gratification, while others identify themselves
with an ethical tradition and live in accordance with its values.
There is also the "religious atheism" of those who want to
believe in God but find themselves unable to do so because
of the massive, never-ending suffering experienced by people
throughout history, suffering to which God seems indifferent.
In his essay on the nature of fascism, Polanyi contrasts
heroic-tragic individualism with Christian individualism,
defined by a contrary relation to the absolute. Here the indi-
vidual person has infinite value because there is God. Chris-
tians find themselves surrounded by other people whom they
honour, whose infinite dignity they recognize, whom they
embrace as their brothers and sisters and for whose well-being
they feel morally responsible. To say that people have souls,
Polanyi writes, is another way of affirming that they deserve
infinite respect, are equal among themselves, belong to one
another, and constitute a single human family bound together
in solidarity. This, according to Polanyi, is the teaching of
Jesus. Christian individualism is thus essentially social.
In another context, Polanyi recalls that in the nineteenth
century Robert Owen, whose social vision he greatly admires,
abandoned the Christian faith because he believed that the
teaching of Jesus called for a narrow individualism focused on
personal salvation and otherworldy piety.9 Polanyi believes
that Owen was wrong on this issue. Similarly, through con-
versations with members of the Christian Left in England,
32
Ethical Foundations
Polanyi had learnt that many of them also had the impression
that the teaching of Jesus contained no social message and
that they were thus obliged to draw their social inspiration
from other sources. In his essay on fascism, he endeavours to
persuade them otherwise.
There does exist, Polanyi argues, a Christian concept of soci-
ety. What the New Testament reveals is that persons belong to
a community of men and women whom they love, for whom
they are co-responsible, and with whom they must create a
common world. The society they build together must never
be allowed to humiliate or damage the dignity of any one of
its members. Polanyi writes that the discovery of the soul is at
the same time the discovery of society. Society, seen from his
perspective, is a "relationship of persons."
Many sociological theories, following Emile Durkheim, rec-
ognize that individual persons come to be through interaction
with others and that, in this sense, society does not remain
purely extrinsic to persons but actually enters into the defi-
nition of their identity. Persons are persons-in-community.
Reflecting on the communal nature of human beings, a number
of twentieth-century Christian philosophers, among them John
Macmurray,10 proposed an ethical social theory called "person-
alism"11 which tried to bridge and transcend the individualism
of the liberal tradition and the collectivism of scientific Marx-
ism. John Macmurray was a Christian socialist thinker in Great
Britain with whom Polanyi was acquainted and to whom he
refers with approval in his essay on fascism. When Polanyi
writes that the discovery of the soul is at the same time the
discovery of society or that society is a relationship of persons,
he offers a personalist conception of society, that is, a society
characterized by cooperation and co-responsibility that recog-
nizes the personal dignity and equality of its citizens.
Implicit in Polany's concept of society is a critique of soci-
eties that structure people in inequality, distribute unjustly
33
wealth, power, and prestige, and remain subservient to opaque

forces that prevent people from understanding the ethical
implications of their actions. Society is meant to be just and
transparent. Polanyi believes that basic Christian teaching
reveals the true nature of society and implicit in that teaching
is the ethical summons to reform accordingly the existing
social structures. In his essay on fascism, I conclude, Polanyi
offers an ethical theory based on what in classical philosophy
and theology is called "natural law," except that for him this
"law" is made known in the teaching of Jesus.
Polanyi claims that, for St Augustine, the New Testament
concept of a society created by relationships of love and free
from injustice and oppression is an ideal that can be realized
only in small communities. The "city of God," defined by love
of God and neighbour, would always remain a minority com-
munity in the wider society; the latter would inevitably be the
"city of men," characterized by self-seeking and personal ambi-
tion. But since the days of Augustine, Polanyi argues, we have
learnt that even societies are transformable. The collapse of
the Roman empire was followed by the creation of the feudal
order, and the feudal order was succeeded by civil society.
According to Polanyi, as we have seen, civil society has a built-
in principle of transformation: it expects its citizens to act
according to their conscience. This ethical conscience cannot
rest until society becomes transparent, just, and participatory.
Finally, because fascism sought to destroy individualism,
Polanyi argues that the labour movement, the socialist parties,
and the Christian churches must stand together and resist it
as their mortal enemy.
Living in England in the 1930s, Polanyi, as I mentioned
above, read and was greatly impressed by the recently pub-
lished early writings of Karl Marx. In those writings Marx
showed that he also understood the essence of society as a set
of transparent interpersonal relations that frees people from
34
Ethical Foundations
the alienation inflicted by an exploitative order. Polanyi, for

his part, argues that Christians can use Marx's analysis of
capitalism even while remaining wary of his philosophy, which
sees the human as wholly immanent in society. Faithful to his
basic understanding of the personal Lebensweg, Polanyi
responds to Marx by positing the concept of a vast extra-
societal sphere in which human beings constitute their lives.
Marx offers no ethical guidance, Polanyi writes, on how people
should live once socialism has been realized, nor - one might
add - on how people should behave as they struggle for their
political objectives in a socialist party.
I do not know how important theological reflections were
for Karl Polanyi in subsequent years. Yet he always retained his
ethical perspective. While struggling against a monstrous
danger such as German fascism, people are often prompted to
seek metaphysical or even religious foundations for their resis-
tance. In the process, they sometimes have profound spiritual
experiences. But in many cases, once these great dangers sub-
side, the sense of urgency is diffused and what was important
or even crucial at one time becomes simply a memory. Many
intellectuals who in the 1980s struggled against communist
regimes in eastern Europe and found great strength in their
identification with the Christian tradition became increasingly
indifferent to the message of religion as these dictatorships
collapsed. I have no idea whether and to what extent Karl
Polanyi regarded himself as a believing Christian all of his life
and, in any case, this is none of my business. What remained
constant was his ethical vision and his esteem for religion.
THE REALITY OF SOCIETY
"The discovery of society" and "the reality of society" are rich

concepts in Polanyi s writings he also uses them in the last
chapter of The Great Transformation though he never offers
35
a complete definition of what he means by these terms.12 In

the essay on the nature of fascism, the "reality of society"
refers to the hidden, ethical content of society that must be
revealed. Just as persons have a nature which they must
discover and to which they must learn to be faithful, so society
too has a nature which must be understood and which
generates a summons for social change. The discovery of the
person or the soul is rooted in the religious tradition, but the
discovery of society in the full sense, Polanyi holds, took place
only in modern times when people became critical of the
existing orders and recognized that they could be transformed.
Understanding society also means becoming aware that the
market and the state are not the only realities and that the
subjectivity at the base - in the form of people's multiple
interactions is the most powerful source for social transfor-
mation. Encountering society as an ethical, interactive reality
engenders a commitment to modesty and self-limitation so
that space is left for other societies, resources are saved for
future generations, and the natural environment is rescued
from destruction.
Polanyi was not a philosopher, nor was he a theologian. But
he had profound intuitions of philosophical and theological
ideas that in subsequent decades were to acquire great impor-
tance in the reflections of the Christian churches, such as the
documents of the World Council of Churches and the social
teachings of Pope John Paul II. Today the pope proposes that
human beings are free agents or "subjects" responsible for their
lives and the institutions to which they belong. A society
deserves to be called just, John Paul II argues, to the extent
that it acknowledges "the subjectivity" of its members, that is
to say, the free exercise of their co-responsibility for the well-
being of all.13 It is thus no exaggeration to say that Karl
Polanyi's thoughts on ethics anticipated developments that
were to take place in the Christian churches at a later time.
36
Ethical Foundations
The reality of society as Polanyi perceived it also implied

that the scientific effort to understand a social situation was
also and at the same time an ethical task. Again, Polanyi did
not develop this point in a systematic way. Yet, as I pointed
out in my examination of The Great Transformation in
chapter I, Polanyis scientific approach was guided by an eth-
ical commitment. Social science has an objective dimension,
contained in the demonstration of a thesis through a system-
atic alignment of facts, but it also has a subjective dimension
that is present in the vision and values held by the researcher.
Social-scientific research is always undertaken from a particu-
lar perspective or standpoint, always makes use of paradigms
or concepts that inevitably have value-implications, and is
always guided by an intention to answer certain questions and
achieve certain goals. Whether the scientist realizes it or not,
social-scientific research is a form of social action; it may have
the effect of stabilizing the existing order or supporting move-
ments for social change, but in both cases it has consequences
for society. Though positivistic practitioners of social and
economic science claim maximum objectivity and deny the
subjective dimension, it is generally recognized that the impor-
tant controversies in the social sciences cannot be resolved by
the scientific method alone and indeed reflect profound dif-
ferences in philosophical presuppositions.
Analysing the presuppositions operative in Polanyis work
would be a study in itself. Yet it is possible to offer some
thoughts on the underlying assumptions of his work: on the
perspective adopted by him, on the value-implications of the
concepts he used, and on the intentions that guided his
research.
As a socialist of sorts, engaged in workers' education and
impressed by the ethical imperative present in life itself,
Polanyi studied the crisis of our times from a perspective of
solidarity with the vulnerable and exploited. He focused not
37
on the remarkable achievements of the industrial revolution

but on the effects of this revolution upon the ordinary people
and their environment. His standpoint was that of the Left.
We have already seen, moreover, that Polanyi rejected the
concept - basic to utilitarianism and mainstream economics
- that human beings are defined by the struggle for self-
preservation and self-promotion. He did not see humans as
"utility maximizers" whose lives are determined by necessity.
Rather, he held that humans have a spiritual dimension, are
gifted with personal freedom, and act from a variety of
motives, including material self-interest as well as social soli-
darity and a desire to protect their habitation. Polanyi looked
upon humans as cultural and ethical beings. Even his concept
of society, as we noted earlier, was an ethical one.
Finally, Polanyi's intention in writing The Great Transfor-
mation was to offer a scientific demonstration for his thesis of
the double movement in capitalist society. He was convinced
that, by re-reading the historical evidence, interpreting more
deeply human suffering, and presenting the data in systematic
form, he would lend support to the counter-movement and
thereby promote a culture of hope in difficult times.
38
3
Polanyi's
Contemporary Relevance
Since the 1960s, social ethics has assumed increasing impor-

tance in the theological education, pastoral practice, and min-
istry of the Christian churches. One of the reasons for this
development is the recognition that in the past the churches
tended to identify themselves, consciously or unconsciously,
with the societies in which they lived and, more especially,
with the ruling powers or dominant ideologies. Although
individual Christians and critical Christian movements gave
prophetic witness in their societies, the churches as a whole
tended to remain silent in the face of the injustices practised
by their societies. Today, their behaviour is much different.
But to adopt critical positions on social issues, Christian
social ethics must be in dialogue with the social, economic,
and political sciences. Some Christians have denied this. They
believe that the Scriptures themselves are so rich in meaningful
stories and ethical teaching for instance, the exodus, the
covenant made with Israel, the exile of the people, their
eventual return and the founding of the church that by
relying on them alone the churches are able to formulate their
social message. Yet the work done by theologians who adopt
this viewpoint clearly reveals that they read the Scriptures with
presuppositions taken from their own world and from the

social theories belonging to their culture.1 There is no escape
from ones contemporary self-understanding. Even in reading
the Bible, we bring to the text perceptions of society that
belong to our time.
The two preceding chapters revealed that several of Polanyi's
positions have an affinity with Christian social thought. What
concerns me in this chapter is the light Polanyi's social analysis
sheds on the present situation.
When Ronald Reagan and Margaret Thatcher, with support
from the capitalist elite, abandoned the Keynesian capitalism
that had prevailed since the Second World War and adopted
monetarist economic policies, the economy gradually returned
to the practices of the self-regulating market system, this time
on a global scale. As a result, society has experienced profound
transformations. We suffer from massive unemployment,
growing poverty, increasing social insecurity, cultural disinte-
gration, and the marginalization of ever larger sectors of the
population, including youth. Karl Polanyi helps us to analyse
the damage done by the self-regulating market system, but has
his theory of the double movement any validity today?
To deal with Polanyi's contemporary relevance I will, in the
first part of this chapter, explore certain of his ideas that help
us to understand the human predicament and uncover the still
unrealized possibilities of the present. In the second part I will
examine whether there are counter-movements in modern
society.
EXPLORING POLANYI'S PROPOSAL
The Dialectic of the Enlightenment
Polanyi rejected the evolutionary perspective and the idea of

necessary progress. He did not believe that human history
40
moved through various stages to an ultimate fulfilment; he

refused to look upon the rich and varied cultures of antiquity
as preparations for the supposedly more perfect society of
modern times and he lamented the fact that modern society
increasingly relied upon instrumental rationality and dis-
missed reflections on ethics and values as unscientific. In
contrast, he thought that the ancients showed great wisdom
in the organization of their communities, a wisdom from
which we could and should learn in our present situation.
Still, Polanyi did not repudiate the Enlightenment alto-
gether. As we have noted, he greatly treasured the emergence
of the "bourgeois" or "civil" conscience, that is, the autono-
mous conscience of the person who recognizes himself or
herself as a responsible agent. This ethical achievement was
the product of the Enlightenment in its early stages, before it
allowed itself to be taken over by instrumental rationality. It
seems to me, therefore, that Polanyi's view of the Enlighten-
ment can be fitted into the intellectual framework of the
Frankfurt School philosophers who criticized the Enlighten-
ment without totally disavowing it.2
Originally, according to the Frankfurt School, Enlightenment
rationality had two dimensions: "instrumental" or scientific-
technological reason, and "practical or ethical reason." Yet,
because of the success of industrial capitalism, the advance of
science, and the wealth produced by the burgher class, instru-
mental reason came to be seen as the only valid form of know-
ing and ethical reflections were increasingly regarded as "soft,"
non-rational, a matter of feeling. Once deprived of its ethical
dimension, the spirit of the Enlightenment promoted a purely
instrumental view of human beings and their natural environ-
ment and thus actually constituted an obstacle to the human-
ization of society. But, at the same time, those in the Frankfurt
School were afraid that turning one's back on the spirit of
modernity would endanger the heritage of human rights, the
41
Enlightenment's great achievement. What they adocated, there-

fore, was the "dialectical negation" of the Enlightenment, a
term that referred to a twofold intellectual exercise: first, the
critique and de-centring of instrumental reason and the rejec-
tion of scientism; and second, the retrieval of the ethical dimen-
sion originally associated with the Enlightenment. Polanyi's
work fits well into this framework of "critique" and "retrieval."
For Polanyi, as we have explained, the destructive aspect of
modern society was the self-regulating market system, intro-
duced in society by state power, which created isolated, com-
petitive individuals and undermined the bonds of social
solidarity, the matrix of human well-being. Polanyi showed
how unfettered capitalism disembedded people's economic
activities from their social relations and led to widespread
rootlessness, loss of identity, and spiritual anomie. Polanyi
recognized a curious contradiction in the market system. On
the one hand, the system depended for its efficient operation
upon many cultural (non-market) factors: virtues such as
honesty, trust, diligence, and responsibility and support
groups such as families, neighbourhoods, and communities.
On the other hand, the market system undermined these
cultural factors inherited from tradition and introduced frag-
mentation and instability.
Still, Polanyi rejected neither markets nor industrialization.
What he expected was that the emergence of a counter-
movement in industrial society would lead to a retrieval of a
sense of social solidarity and create societal conditions in
which markets and industries serve, rather than destroy,
human community.
Liberation Theology
Let me at this point say a few words about the contribution

Polanyi's social theory could make to Latin American liberation
42
theology. It is well known that this theology, as originally

formulated, made use of a neo-Marxist social theory to dem-
onstrate that the situation of Latin American societies at the
edge of the capitalist system had led to an increase in their
material poverty. This was the famous "dependency theory,"
first articulated by Andre Gunder Frank and later reformed
and refined by Latin American social scientists.3 In recent
years, dependency theory has been criticized by many econo-
mists, even by some in sympathy with Latin American liber-
ation. They have argued, for instance, that some economically
dependent societies actually experience economic develop-
ment. Questioning the validity of dependency theory has
created confusion among Latin American theologians.
Karl Polanyi's social analysis offers a better understanding
of the Latin American experience. This innovative scholar
made the bold assertion that material poverty in itself is not
a tragic event if people are integrated in a community with
survival skills and a strong sense of solidarity. That is how the
great majority of people have lived throughout history. But
material poverty is tragic if people are not integrated into such
a community: then their material poverty is accompanied by
humiliation, the loss of self-respect, and an entry into self-
destruction. Such is the poverty in the urban slums of North
America and such the deprivation of the dislocated and mar-
ginalized populations of Latin America.
According to Polanyi, we recall, the institution of industrial
capitalism forced people into economic activities that were
disembedded from their social relations: this undermined the
cultural matrix out of which the people defined their personal
identity. Polanyi demonstrated that the identity-destroying
poverty existing in the industrialized parts of nineteenth-
century Europe was exported to other continents whenever
and wherever the Western mode of production and distribu-
tion was introduced. It is unimportant, therefore, whether the
43
economic dependency theory is correct or not. What Polanyi

denounced was the devastating human impact of the self-
regulating market system on traditional communities, even if
they should experience some economic growth. The poverty
Polanyi studied and measured was not principally the eco-
nomic one, but rather the isolation, depression, and cultural
debasement produced by the separation of work from people's
social relations.
The reliance on neo-Marxist dependency theory, it is worth
mentioning, did not prompt liberation theology to lose its
focus on the social and ethical dimensions of human existence.
Liberation theology did not endorse the Western evolutionary
ideal, be it Marxist or liberal. Latin American radicalism saw
itself as an anti-development movement. It looked forward to
a society where the economy, freed from the power of foreign
and local capital, satisfied the economic and social needs of
the population. In such an economy, all members of society
would be involved in production, production would aim pri-
marily at satisfying the needs of the population, the resources
used would principally be those available in the'region, and
the technology employed would be appropriate to people's
skills. The liberationists believed that a society focused on sub-
sistence and transparent human relations was possible in Latin
America because homo xconomicus had not yet arrived among
the Latin American masses - the communitarian spirit of Latin
American culture had not yet been invaded by Western, self-
interested individualism. The liberation theologians hoped
that just as - according to Max Weber - early (pre-industrial)
capitalism spread rapidly in Europe because of the "Protestant
ethic," so populist socialism supported by the liberation move-
ments would find wide acceptance in Latin America owing to
the "Catholic ethic" that was still strong among the people.
The attempt to realize this dream in Nicaragua was under-
mined by American pressure. A decade or two later, that
44
kairos, that special moment of history, is past. At present, the

Westernization of Latin American is in full swing, with ever
greater sectors of the population pushed to the margin of
society.
The Discovery of Society
Though Polanyi was a severe critic of the self-regulating

market system, he also opposed the idea that the state alone
should have the power to regulate the economy. Polanyi
believed that markets are necessary institutions in modern
society. Even in the early 1920s, as we noted above, he rejected
the communism of the Soviet Union and argued against the
Marxist thinkers who wanted to abolish markets and put the
government in charge of the economy. From the 1930s on,
contending with fascism, Polanyi supported social-democratic
policies and governments, but he did not put his trust in
political struggles alone. For him, the problems of the econ-
omy were social rather than political, and hence they had to
be solved through social and cultural transformation. State
power on its own could not do it.
In an interesting article in line with Polanyi's logic, Jacques
Godbout has shown that the state can also become disembed-
ded from society.4 This happens when the state, without
respecting communities and listening to citizens, imposes its
own governing logic from above to the detriment of the social
fabric and the vitality of society. Godbout speaks of the "self-
regulating state." Polanyi himself realized that the welfare state
has its dark side. He expected society to support its members
in need of help, but he criticized the bureaucratic welfare state
because it supplied material help without creating community
and in many cases even pushed the poor into greater isolation.
If neither the market nor the state have the answer to the
problems of modern society, where then can it be found? For
45
Polanyi, the key word was society. We noted earlier that he

spoke of the "discovery of society" as an important event in
modern times, even if he never clearly explained the rich
meaning which he gave this phrase. Since society was so
complex, human actions in society were always accompanied
by unexpected consequences; in short, society was opaque and
ambiguous. At the same time, Polanyi believed that society
had a substantive reality that generated energy for social
change. Thus he looked upon society as the matrix of the
counter-movement. People living in communities and orga-
nized at the grassroots were capable of resisting the forces of
the market or of the state which threatened to undo their
habitation. Polanyi held that society was essentially a relation-
ship among persons and that, whenever this relationship was
reified or subjected to external forces, people experienced an
inner summons to become active in social transformation.
Discovering society meant all these things for Polanyi. In this
regard he anticipated what later sociologists studying social
movements would call "civil society."
Beyond "Homo CEconomicus"
We mentioned above that Polanyi rejected the concept of

homo economicus. Humans were not "utility-maximizers." In
his anthropological studies, Polanyi demonstrated that people's
economic activities were never simply economic: they also
fulfilled cultural and social functions. It was only in modern
market societies that self-preservation and self-promotion
tended to become the overriding motive for people's actions.
People thought they had to define themselves through their
struggle to improve their material conditions. What emerged
as a result was a new selfishness and a new loneliness. But this
materialistic self-preoccupation was itself a collective creation,
the cultural product of a particular economic system.
46
Classical economics assumed the validity of homo eco-

nomicus: because people were seen as "utility maximizers,"
their behaviour was believed to be predictable. Today, since
utility can be expressed in quantitative terms, mainstream
economists look upon their discipline as an exact science. It
is possible, they believe, to discover the laws operative in the
economy, to predict what will happen in the future, and to
specify the short- and long-range consequences of changes in
the organization of the economy.
Polanyi was an economist who did not regard economics
as an exact science. Recognizing the cultural and social dimen-
sion in people's economic activities - their daily work, their
buying and trading, their saving, their consumption - he
attempted to "transcend economic categories in favour of
sociological ones."5 For instance, instead of characterizing pov-
erty in terms of exploitation, loss of income, or absence of
funds, he preferred - as we have seen - to render an account
of it in terms of social dislocation, cultural debasement, or
loss of self-respect.
Polanyi adopted a new approach to the study of the
economy. Instead of looking exclusively at the "formal econ-
omy," that is, the economic activity instituted for profit
making, he recognized the "substantive economy." By this
term he meant all instituted economic activities - whether
part of the "formal" economy or the "informal" one
resulting in the production and distribution of material goods.
While mainstream economics studies almost exclusively the
formal economy that is recorded and constitutes the gross
national product, Polanyi also investigated the traditional
economic activities surviving in modern society: forms of
redistribution, customs of reciprocity, householding, forums
of non-profit exchange as well as unrecorded, small-scale
production. Polanyi argued that without this informal econ-
omy, without the hundreds of little services people render to
47
one another in the family, among friends, and in neighbour-

hoods, society could not survive.
Since this informal economy is embedded in social rela-
tions, it differs from the formal economy and could possibly
heal some of the isolation and fragmentation caused by the
market system. There are, then, social and not only economic
reasons why Polanyi thought that the informal economy
should be promoted.
For Polanyi, humans were cultural beings. He admired
traditional societies where the work people did and their
dreams of the future were integrated in the community to
which they belonged. For this reason, he lamented the social
disintegration produced by the self-regulating market system.
People now worked for themselves and entertained purely
private dreams. Polanyi denounced the mass media, which,
through the power of public opinion, made people increas-
ingly self-concerned, left them litde space for critical thinking,
and undermined the cultural sources of social solidarity.
The Western system makes people shiftless. The market-
driven culture continually increases people's needs and wishes
and prompts them to see themselves as lacking what they
desire and thus in some sense as disadvantaged. Of course, the
Western system provides many of these needs, but it does so
in a totally impersonal manner, leaving people as aloof and
isolated as they were before. Polanyi recognized that even the
modern welfare state redistributes public wealth in a purely
bureaucratic manner and is unable to rescue people from their
anomie. As Marguerite Mendell has pointed out,6 Polanyi did
not believe that thinking about human beings in terms of their
needs, even their basic needs, was fruitful. Whereas that
approach sees people as beings who by nature are always
lacking something, Polanyi preferred to took upon people as
creators capable of inventing the culture that would sustain
them.
48
For the same reason, Polanyi, who analysed in detail the

oppressive impact of the Western economic system, did not like
to refer to people as "victims" or as "oppressed." Even under
oppressive conditions, he believed, people often retain their
human potential to innovate and protect their community.
It is important to add at this point that Polanyi was not
nostalgic about the past. He was not a conservative who
wished to protect traditional societies from social change. He
realized that traditional cultures contained structures of dom-
ination that placed heavy burdens on certain sectors of the
population and demanded ritual conformity that did not
allow the maturing of conscience and the entry into the
fullness of the human vocation - goals which Polanyi had no
hesitation in describing as basic to human nature. To the
extent that traditional societies sustained patterns of inequal-
ity, they too lacked transparency, they too failed to be rela-
tionships among persons in the strong sense Polanyi gave to
this word. Though this innovative social thinker had a rather
conventional view of the role of women in society, his demand
for transparency, equality, and co-responsibility had an
implicit feminist thrust which he himself did not explore.
Polanyi recognized the impact on peoples self-understanding
exerted by mainstream culture and the dominant institutions,
but he did not think that people are wholly defined by the
system to which they belonged. Even in modern, capitalistic
society, people are not totally determined by economic moti-
vations. In their daily lives, they still practise love, friendship,
and solidarity.7 People at the community level, Polanyi
believed, remain capable of responding in imaginative ways to
protect their communities and the natural environment. He
rejected the presupposition entertained by liberals and Marx-
ists that people never act on behalf of the common good or
the whole of society. Since people's identity is socially defined,
Polanyi insisted that people are often willing to make great
49
sacrifices to protect the communal matrix to which they

belong. He saw in that willingness the root of the counter-
movement.
Writing against fascism in the 1930s, Polanyi had recognized
that the fascist movement was a violent reaction not only
against unemployment and material poverty but also against
the social disintegration and loss of identity produced by the
free market system. Fascism was the return of the "repressed"
in perverted form, the forging of the social bond dissolved by
liberalism and Marxism. In fascism, people willingly defined
their collectivity in terms that supressed their own personal
freedom and repudiated the human dignity of outsiders. Fas-
cism had to be fought. But it was Polanyi's hope at that time
that through the struggle against fascism industrial society
would become more democratic, by which he meant more
open to participation and more supportive of social move-
ments at the community level.
Re-embedding the Economy
Since, for Polanyi, the principal vice of the self-regulating

market system was its disembedding of the economy from
the social relations that constitute society, we must ask
whether he believed it was possible to "re-embed" economic
activity in a complex, industrial society such as ours. Polanyi
held that his idea of a participatory, decentralized industrial
economy that created rather than undermined social relations
was not totally new. In the nineteenth century Robert Owen
had created an alternative model of industrialization and
envisaged the organization of society as a federation of coop-
erative towns and villages. Later, British guild socialism had
advocated the democratization of the economy through
worker-owned industries, credit unions, and community-
based companies.
50
In his early essay "Behemoth," Polanyi mentioned with

approval that certain guild socialists divided the goods society
needed into three kinds: first, personal goods such as food,
clothing, and housing; second, goods for the town such as
streets, buildings, tramways, and parks; and third, goods for
the entire society such as trains, airplanes, broadcasting, and
postal service. The first two kinds of goods, these guild social-
ists proposed, could be produced by the local or regional
economy; only the third kind demanded large-scale companies
on the national or international level. This represented the
guild-socialist approach to decentralization.
Later, in his anthropological studies, Polanyi demonstrated
as we saw chapter I that in simple societies economic
activity was made up of householding, reciprocity, redistribu-
tion, and exchange. These activities exercised a community-
creating function. By contrast, in todays complex society the
highly formalized monetary exchange taking place in the
market system - including the exchange of labour for wages
- has become the principal economic activity. It is wholly
quantified, depersonalized to the extreme, and no longer gen-
erates community. Economic activity in the welfare state also
includes the redistribution of wealth, yet this tends to take
place in bureaucratic fashion and hence fails to create personal
relations. The informal economy remains largely hidden and
underdeveloped.
If economic activity in an industrial society is again to be
embedded in people's social relations, it must promote the
cooperative principle at every level of industrial production
and foster the informal economy, including local cooperative
activity and householding. Small-scale production of food,
clothes, and furniture at home or on a cooperative basis
among friends or neighbours and the provision of services by
community-supported groups could provide people with
many goods essential for their material well-being and at the
51
same time create a culture of solidarity. Since the informal

economy is embedded in social relations, Polanyi believed that
developing it would help in shaping the future orientation of
the formal economy too.
Affinity with Catholic Social Teaching
At this point I wish to offer a few remarks on a topic that

deserves a longer treatment, namely the affinity between
Polanyis social theory and the tradition of Catholic social
teaching. The latter has been a topic of special interest to me
over the years. In North America, Catholic social teaching
attracted public attention through the pastoral letter on eco-
nomic justice published by the American bishops in 1986 and
a series of pastoral statements on social justice made by the
Canadian bishops during the 1970s and 1980s.9 Catholic social
teaching affirms the ethical foundation of the economy and
argues that an economic crisis is essentially a moral crisis.
While recognizing the plurality of cultures, Catholic social
teaching repudiates a radical ethical relativism and instead
defends a common human nature shared by all. It also rejects
the idea that human history is internally oriented towards
progress. Thus Catholic social teaching repudiates the eco-
nomic necessity implicit in liberal capitalism and scientific
Marxism and insists instead that the social and economic
structures are ultimately grounded in people's free activities,
which means diat people remain ethically responsible for them
and could, if they exercised their political will, actually trans-
form them. Catholic social teaching believes in the usefulness
of markets, but it opposes the self-regulating market system
and warns against the growing pervasiveness of the competi-
tive mentality. It supports the cooperative movement and
indeed favours cooperation on every level of the economy.
Workers, according to Catholic teaching, are the subjects, not
52
the objects of production: they are entitled to participate in

the decisions that affect the work process and the spending of
the wealth they co-produce with the owners and management.
Ultimately workers are to be the co-owners of the giant work-
bench at which they labour. Catholic social teaching recog-
nizes the need for economic planning and approves of
government intervention in the economy. Finally, it endorses
the principle of "subsidiarity," which protects smaller commu-
nities, local and regional, from the interference of higher
powers as long as the smaller communities are capable of
taking care of their own needs. Subsidiarity is a principle of
decentralization - and, as we have seen - the decentralization
of the economy is an important theme in Polanyi's work.
A C O U N T E R - M O V E M E N T IN THE PRESENT
The economic crisis of today's society recalls the situation of

the 1920s and 1930s, when the self-regulating market system,
freed from all control, failed to provide jobs and bread for
working people and caused social and cultural disintegration
in their midst. During the decades after the Second World
War, conditions changed for the better. Governments assumed
greater responsibility for the well-being of their people. Pushed
by the labour movement and social-democratic parties and
guided by Keynesian economic principles, governments played
an active role in revitalizing national economies and redistrib-
uting, through various social welfare measures, some of the
wealth produced. The new state of affairs was marked by an
unwritten contract between capitalist society and the working
class guaranteeing full employment, social welfare, and respect
for labour unions.
Then, for reasons that are still debated among economists,
the historical situation changed and this contract was betrayed
as governments introduced monetarist policies, encouraged
53
the return to the self-regulating market, and promoted the

globalization of the competitive economy. That is where we
were are today. Since governments must now obey the laws of
global competition and offer favourable conditions to indus-
trial corporations to persuade them to remain in the country,
they are no longer capable of protecting the economic interests
of their people. We witness the massive increase of unemploy-
ment, the presence of hunger and homelessness, the decline
of neighbourhoods, the break-up of communities, the spread
of despair, and a growing sense of powerlessness. Polanyi has
made us especially sensitive to the cultural and human conse-
quences of the economic decline. What is taking place in
many regions and urban neighbourhoods is social disintegra-
tion, which leaves people in a state of psychic pain.
Polanyi would have regarded the present globalization of
the economy as completely insane. Having become dependent
upon foods and clothing cheaply produced in far-away places,
many regions and countries in the North suffer social and
economic disintegration and lose the skills and the will to feed
and clothe themselves. They are no longer able to sustain
themselves physically and culturally by their own work. At the
same time, regions and countries of the South that are obliged
to produce goods for export to the North find themselves
unable to feed, clothe, and house their own people. The
globalization of the economy leads to a universal disembed-
ding of the economy, even in areas such as farming, which
until now have resisted economic rationalization and remained
a way of life for family and community.
The return to the self-regulating market is accompanied by
an intellectual current, reflected in the leading newspapers and
other mass media, that praises contemporary capitalism as the
high-point of human evolution. After the collapse of commu-
nism, the decline of Marxism, and the decimation of the
democratic Left, the omnipresent message we receive is that
54
an alternative to the present system is simply impossible. This

dominant ideology, supported by post-modern indifference
and shoulder-shrugging, prevents critical thinking from get-
ting a hearing and undermines the cultural resources of social
solidarity.
Are there any counter-movements in today's society? In the
1960s and 1970s we witnessed the emergence of many social
movements, especially the civil rights movement, the women's
movement, the peace movement, and the ecological move-
ment. Sociologists such as Alain Touraine10 and Glaus Offe11
interpreted these citizens' movements as forms of protest
against the social and political conditions of those years,
against the structures of social inequality, the nuclear arms
race, and the damage done to the environment. Touraine
suggested that what was happening was the self-organization
of "civil society" in resistance to the bureaucratic power exer-
cised both by the state and by large private corporations. In
that period, many activists and some political thinkers were
convinced that social movements were agents of radical reform
which would succeed in transforming and humanizing
modern society.
Some observers argue that social movements have lost
momentum in recent years. The return to laissez-faire econom-
ics has produced new forms of dislocation and disintegration,
prompting cultural pessimism and social passivity. Other
observers prefer to point to the new orientation of social
movements, even if they are reduced in size. In Canada - to
give one example - social movements have supported the
formation of the Action Canada Network, the nation-wide
popular association that opposes the free trade agreements
with the United States and Mexico. Threatened by a global
economy that serves the interests of an elite, social movements
have recognized that their own economic interests demand
cooperative action, even if they should be in disagreement on
55
some issues. The power of this alliance is hard to calculate.

Though the Action Canada Network was unable to stop and,
later, undo the free trade agreements, it affected and continues
to affect a wide sector of the population.
One Canadian scholar has argued that in Polanyis time
there did exist a double movement and that he correctedly
grasped its orientation, but that in our own time no such
double movement is in sight." In their introduction to a
collection of essays entitled The Legacy of Karl Polanyi,
Marguerite Mendell and Daniel Salee refute this pessimistic
diagnosis. They elucidate the parallels between the economic
situations of the 1920s and the 1990s and argue that several
new currents in society correspond to Polanyis theory of the
double movement.13 In my view, they are right. Polanyi still
helps us to interpret the contemporary situation. There do
exist counter-currents that seek to create social identity and
protect habitation.
The first of these currents is evident on the right. We
witness a disturbing cultural emphasis, often in extreme forms,
on peoples collective identities, whether this be in the emer-
gence of excessive nationalism or regionalism, in new mani-
festations of religious orthodoxies, or in the defence of
exclusively ethnic solidarities. Liberals and Marxists are puz-
zled by this development. Liberals expected people to choose
the enhancement of their individual material benefits, and
Marxists expected them to act according to the economic
interest of their class. Yet Polanyi warned that, threatened by
cultural breakdown and social disintegration, people often
reaffirm or redefine their collective identities with a passion
that submerges their own personal freedom and denies the
human dignity of dissidents and outsiders.
During the 1930s the fascist movement in many countries
was supported by the capitalist elite because it looked upon
fascism as a bulwark against the communist threat. This is
56
one reason why fascism became so successful. In my opinion,

the present situation is quite different. Since communism has
collapsed, the capitalist class has no interest in right-wing
extremism and actually views it as a threat to the good order
necessary for the flowering of the world economy. Dreadful
as these right-wing radicals are, therefore they do not pose a
serious threat to the Western democracies. Society must still
offer vigorous opposition to the extreme right, but, if Polanyi's
analysis is correct, this opposition must not be confined to
police or security intervention but should include a collective
effort to integrate these dislocated people into the social and
economic institutions of their country.
There exists a second social current in present-day society
that is a candidate for Polanyi's counter-movement. No longer
believing that the government is capable of turning the econ-
omy around, some people in our society look for new forms
of economic cooperation at the community level as well as in
the industrial sector. Initiatives by local people in low-income
neighboorhoods, combined with efforts of community
organizations and often supported by financial help from
business and government, have produced micro-systems of
production that deal with local needs, such as common kitch-
ens, jointly run stores, ventures to repair homes, and efforts
to grow food in backyards. These initiatives include loan
associations, set up by community organizations, which give
local people access to capital at low interest rates that they can
use for economic projects that serve the community. Similarly,
both in the United States and Canada, committees have been
set up in outlying regions to encourage local people to coop-
erate in the creation of autonomous economic development.
And in one Canadian province in particular, Quebec, a long-
standing tradition of cooperatism and social solidarity - gen-
erated by a French-speaking people living on a predominantly
English-speaking continent - has produced a vital brand of
57
alternative, community-based economics.14 The development

of these many and varied cooperative efforts constitutes a trend
in society that Polanyi would recognize as a counter-movement.
Although this movement is not a vast undertaking visible
to the uninitiated public, it is substantial and has been the
object of social-scientific research. Accounts of its role in the
United States include Harry Boyte's The Backyard Revolution
(1981) and, more recently, Severyn Bruins and James Meehen's
Beyond the Market and the State: New Directions in Community
Development (1987). An analysis of its importance in Canada
is found in David Ross and Peter Usher's From the Roots Up:
Economic Development As If Community Mattered (1986). The
movement s significance has been recognized by publicly insti-
tuted research agencies such as the Economic Council of
Canada.15
The aims of the projects associated with this movement are
not simply economic; on the contrary, their main purpose is
social in nature. Through them, people learn to engage in
conversation and planning, become partners in the same
enterprise, develop friendships, and find meaning and even
excitement in their lives. In the movement as a whole, people
are rescued from their isolation, their helplessness, and their
anomie. The result is the "re-embedding of economic activity
in social relations." One scholar, recalling Polanyi's analysis of
the substantive economy, has suggested that the popular move-
ment of the late-twentieth century signifies "the return of
reciprocity" in modern society.l6
At a colloquium held in Montreal in 1988 dealing with the
alternative economy, social scientists from western Europe and
North America did not agree on the viability of the move-
ment.17 Some even described it as the self-exploitation of the
poor. A few of them argued, first, that the people involved in
the movement are unable to support it economically, and, sec-
ond, that government and local business are willing put some
58
money into this movement so that the people at the margin

become involved and occupied - and thus unable to cause
trouble. These critics also noted that even with help from out-
side, organizers of the movement tend to become exhausted
and after a few years suffer "burn-out."
Yet the greater part of the assembled social scientists took
a more positive view. Their research convinced them of the
viability of these experiments in social and economic renewal.
Enthusiastic support for the popular movement was expressed
by members of the colloquium who were not only observers
but also active participants in various collective efforts to
promote alternative models of economic development. They
argued that the movement not only served the social integra-
tion of marginalized people but also represented an experi-
ment in economic democracy that may well teach the whole
of society a lesson for the future.
Cooperative efforts at the community level are matched by
similar projects in the business sector. In the past, workers
contributed to industrial production only through their mus-
cles: they were not allowed to contribute with their intelli-
gence. It is argued today that production can be greatly
improved if managers allow workers to become participants
at all levels of the industrial process. It is also argued that the
class conflict between capital and labour carried on within the
industry damages production and hurts the owners as well as
the workers. Can conflict in industry be replaced by cooper-
ation? There are today specific enterprises where both man-
agers and workers, aware of the self-destructive potential of
perpetual conflict, have sought an industrial system based on
cooperation. This effort, sometimes called neo-corporatism, is
hotly debated in the labour movement.18 Is industrial cooper-
ation a ploy used by management to pacify workers without
granting them the power to improve their conditions? Or does
management offer workers sufficient power to make them true
59
partners and thus capable of looking after their own interests?

There are growing numbers of industries where managers and
workers have found ways to improve the level of cooperation
between them.
In Quebec the two trends, the movement at the community
level and the new industrial cooperation, are quite strong.
They are referred to by the French word concertation. We also
hear the expression Quebec Inc., which, while referring mainly
to the growing involvement of the state in business life, sug-
gest that economically Quebec is becoming a more coopera-
tive society.19 The term concertation can easily be used by
politicians and owners of industry as an empty promise that
disguises the real situation. This sort of concertation could also
tempt labour unions to seek improved conditions for their
own members while forgetting about solidarity with the
unemployed and the marginalized. Still, it would be cynical
to suppose that there are no conditions under which concer-
tation in industrial production would significantly improve
economic performance and at the same time make work into
a cooperative activity.
As critical people lose hope of changing society through the
vehicle of social-democratic political parties, they come to
believe that what demands practical support are cooperative
efforts both in building a community-based, alternative econ-
omy and in institutionalizing concertation in more democrat-
ically operated industries. This shift has been recognized in
the Christian churches, especially in Quebec. The Catholic
Church, which represents a minority in modern Quebec, has
expressed support for the popular movement in pastoral let-
ters. Among several such letters, the Labour Day Statement
of I May 1992 on democratizing the economy,20 which
strongly favoured the creation of more cooperative economic
institutions at all levels, is especially important. The statement
recommends the introduction of more democratic procedures
60
in industrial and commercial companies as well as the multi-

plication of small-scale cooperative ventures among the people
deserted and damaged by the market system. Such joint
efforts, the bishops hold, not only satisfy the economic needs
of people in neglected areas but also generate social solidarity
and thus change the quality of life in the community.
The Catholic monthly review Relations - of whose editorial
board I am a member - decided several years ago to offer
intellectual support to the popular movement, encourage the
participants, make known its achievements in the cities and
the outlying regions of the province, and use both utilitarian
and ethical arguments to urge the public and the government
to continue and, if possible, increase their assistance to the
local, community-based economy.21
On the practical level, bishops in the outer regions of
Quebec - accompanied by Catholic social-justice groups -
cooperate with various citizens' groups in creating local enter-
prises that are designed to alleviate their economic problems
and integrate and give new life to their communities.22 Using
Karl Polanyi's terms, we can say that the bishops advocate the
return of institutionalized reciprocity and the "re-embedding"
of people's economic activities in the social relations that
constitute their community.
The network of Catholic social-justice groups and the body
of the Quebec bishops also support the movement Solidarite
Populaire Quebec, which brings together people neglected by
the market system and seeks to articulate with their help a
vision of a more just and participatory Quebec. After this
movement succeeded in attracting the cooperation of orga-
nized labour unions, it convened in March 1994 a large forum
de la, solidarite, which was attended by a thousand activists
representing unions and a wide spectrum of popular groups
and networks, including Catholic organizations and the
Quebec bishops. The aim of this event was to give new
61
strength to a movement that struggles against the govern-

ments neo-liberal economic policies and promotes coopera-
tion and participation at all levels of society.
What I conclude from this cursory glance at Quebec society
is that the movement to create alternative, local, or regional
models of economic development is a candidate for the
counter-movement described in Polanyi's social theory. Equiv-
alent movements are found in all capitalist countries, even if
they are still small and threatened by exhaustion or lack of
support. Though these alternative ventures are unable to chal-
lenge global corporate capitalism, they create solidarity, make
life saner and happier for many people, and produce new ideas
and practices that may eventually help to transform the
present economic system. The great attraction of Polanyi's
social theory is that it offers hope, fosters action, and recog-
nizes the hidden potentialities of ordinary people.
62
4
Ethics in a Pluralistic Society
I now wish to deal in a new way with the question as to

whether Polanyi's theory of the double movement is credible.
In the previous chapter I argued, with the support of a good
number of political economists, that even in the present neo-
liberal decade such a counter-movement does exist. People
continue to defend their habitation against the inroads of the
self-regulating market system. Yet the movement is small.
Since it exists at the community level, will it ever be strong
enough to affect the dominant structures?
If Polanyi were a functionalist, he would argue that by its
own inner dynamism every society, shaken by unexpected and
destabilizing interventions, produces a corrective response and
moves ineluctably towards a new equilibrium. In functionalist
theory, society is a complex social and cultural system that
affects people's minds and prompts them to act in a certain
way, without their necessarily being aware that what they are
doing contributes to the restoration of society's equilibrium.
According to this reasoning, society acts, as it were, behind
people's backs. Yet Polanyi was not a functionalist. When he
claimed that society has a tendency to protect itself, he sup-
ported his case by listing the concrete movements that seek
to correct and overcome the distorting impact of the self-

regulating market. His proposal, therefore, is only as good as
the empirical arguments that can be mustered in its favour.
Polanyi holds that, because humans are social and in fact
ethical beings, they are likely to protect their community and
the land on which they live. In the previous chapter I showed
that a small counter-movement does exist in the present. At
this point I wish to ask whether there are ethical resources in
contemporary society that enable people to transcend the
dominant individualism and choose more communitarian val-
ues. When I speak of ethical resources, I am thinking not only
of ideas. The ethos of a society is produced not so much by
ideas as by the institutions in which people live and the
symbols mediated by their culture.
In the following discussion, then, I summarize Karl Polanyi's
ethical viewpoint, contrast it with the dominant ethos of
capitalist society, and inquire whether the cultural symbols and
social institutions of present-day society still provide resources
for an ethic of community and social solidarity. This argument
is intended to strengthen the realism of Polanyi's theory.
POLANYI'S ETHICS
According to Karl Polanyi, ethics play an indispensable part

in the constitution of society. He believed, as we saw in the
second chapter, that humans are essentially ethical beings.
Though he does not offer a consistent ethical theory, he does
suppose that people, wherever they may be, hear a summons
to love their neighbour and assume responsibility for their
community. Sometimes Polanyi suggests that this ethical sum-
mons is derived from the great world religions and secular
wisdom and is mediated by culture. At other times he suggests
that the ethical summons is an essential part of people's basic
self-recognition: mature persons experience themselves as
64
responsible for their Lebensweg, their daily lives in the com-

pany of others. An in-depth look at the basic experience of
being human, Polanyi proposes, reveals the human being's
ethical vocation. Sometimes Polanyi uses metaphysical lan-
guage to suggest that the ethical vocation is part of human
nature itself. Just as we are by nature rational beings endowed
with freedom, so too we are ethical beings endowed with
responsibility. In other passages Polanyi appeals to a metaphys-
ics derived from biblical revelation, according to which society
itself has a God-given nature. When this nature is violated by
unjust social and economic structures, it summons people to
struggle for the transformation of their society.
Polanyi holds that, as historical conditions change, love and
responsibility also assume new meaning. As societies become
more complex and its members increasingly interdependent,
the love of neighbour is expanded and transformed into social
solidarity. And as global society itself becomes increasingly
interdependent, every human being becomes our neighbour
and love begins to generate universal social solidarity. To
repeat a sentence I have used in my own writings, the love of
neighbour in societies marked by grave injustice transforms
itself into solidarity with the victims and the impulse to act
so that the heavy burden of suffering may be lifted from their
shoulders. This view is, I think, in keeping with Polanyis
concept of ethical developmnent.
The understanding of responsibility has expanded in similar
fashion. Polanyi argues, we recall, that the Enlightenment
brought forth a new sense of personal responsiblity, a new
maturity, urging people to question traditional institutions
and inherited ethical norms and to decide for themselves on
rational grounds what is the good and how they should act.
When Polanyi mentions the Enlightenment in this context,
what he has in mind is not John Locke's utilitarian ethics,
defined by man's rational material self-interest, but rather the
65
ethics of responsibility for the whole that is found in Kant

and Hegel and the humanistic tradition generated by the
Enlightenment. Yet what responsibility for the whole means
changes as human power to transform society increases. As
modern means of communication and transportation trans-
form the globe into a single sphere of influence, individuals
and their societies are held to assume ethical responsibility for
the entire human family.
Polanyi also demonstrates special respect for nature, espe-
cially for the land on which we live. He criticizes the instru-
mental concept of nature that characterizes industrial society.
He laments modern, urban man's estrangement from nature
and suggests that peoples familiarity with nature, at least
through gardening which he himself practised - would have
a beneficial impact on their world view. In addition, Polanyi
was convinced that under present conditions solidarity and
responsibility reach beyond the human family currently living
on this earth to include the populations of the future. Because
he saw ethics as grounded in metaphysics, he believed that we
are obliged to protect the resources of the earth for subsequent
generations.
The idea that ethics plays such an important role in
peoples lives is central to Polanyi's social and economic
theory. For him, the emergence of social movements deter-
mined to set limits to the self-regulating market is rooted in
the ethical resources of ordinary people ready to defend their
community, their habitation, and even their society as whole.
People are by nature ethical and creative. They have the inner
capacity to invent new forms of social and economic arrange-
ments which protect the values that define their communities.
Polanyi held that a social movement bent on transforming
society would improve the conditions of life only if its
participants were guided by an ethical vision. The struggle to
overcome injustice must be inspired by more than legitimate
66
self-interest: it also calls for solidarity, sacrifice, and self-

transcendence.
Polanyi, we recall, used humanity's ethical vocation to offer
an argument for what he called "the new socialism." It is
impossible, he argued, to live a responsible ethical life in an
economic system that operates according to impersonal laws
and prevents the actors from knowing the impact of their
actions on other people. The coffee and sugar we buy and use
every day, to mention a simple example, have effects upon the
lives of the people who produce them, effects of which we are
often ignorant but which we have to understand if our actions
are to be responsible. Ethics calls for a transparent economic
system where we can estimate the impact of producing, buy-
ing, and selling upon society.
THE DOMINANT UTILITARIANISM
Polanyi's ethical reflections are at odds with the dominant

ethos of present-day society, which is utilitarianism. It defines
the bonum as utility or rational material self-interest. In
essence, it is an ethos mediated by the market system, since
the market is a mechanism of exchange demanding that each
player seek to get the best deal. By generating competition, so
the reasoning goes, the market system urges people to work
harder and at the same time tames their greed. Adam Smith
believed that the market was a marvellous invention that
transformed people's self-interested activity into socially useful
labour serving the common good.
Utilitarianism is rooted in the British philosophical tradi-
tion. In the seventeenth century John Locke defined human
beings in terms of their conatus, meaning their struggle for
self-preservation. Though he was not the first, Locke broke
with the classical tradition and subsequent Christian teaching,
both of which had defined human beings through their
67
orientation towards the true and the good. By contrast, Locke

thought that human beings were engaged in a never-ending
conflict and competition in which all were afraid that their
neighbours might steal their property or even take their lives.
People, indeed, lived in constant fear. In order to transcend
their fear and pursue their material well-being in an enlight-
ened, rational way, human beings entered into a social con-
tract, conceded a portion of their power to a government they
set up, and assigned to this government the task of protecting
their life and property and the freedoms they needed to
pursue their interests. Rational material self-interest, then,
grounds the liberal state, just as it defines the capitalist system.
In liberal society people no longer live in fear. They may not
love their neighbours nor be loved by them, but they are no
longer afraid of them since their civil rights are protected by
government.
Charles Taylor has made the point that utilitarian self-
interest does not account for the ethical passion with which
John Locke and like-minded philosophers sought to reform
society.1 Locke passionately defended tolerance and pluralism
against the absolute claims made by the Tudor monarchy, an
intellectual activity for which he suffered persecution and
went several times into exile. The utilitarian philosophers of
the nineteenth century, such as Jeremy Bentham and John
Stuart Mill, were also deeply involved in reforming their
society and thereby transcended their own philosophical
theory. Mill even tried to find utilitarian arguments for self-
sacrifice and social solidarity: he attempted to demonstrate
that it is advantageous for people in the long run to support
the greatest good for the greatest number. Yet Mill's arguments
were weak. If one begins with a concept of man as defined
by the conatus and of the good defined as the "useful," it is
impossible to arrive at an ethic of universal solidarity and
personal self-transcendence.2
68
Still, from the end of the nineteenth century on, progressive

liberals in Britain offered utilitarian arguments for the welfare
state. They argued, for instance, that an excessive gap between
rich and poor destabilized society and disturbed the social
peace, which was needed for the advancement of industry and
commerce, and that it was therefore imperative to achieve a
certain redistribution of wealth. They also argued that, since
industrial technology had greatly increased the production of
goods, workers should be paid higher wages so that they too
can become customers and thus support the economy. In
liberal society governments must legitimize the welfare legis-
lation they introduce with utilitarian arguments demonstrat-
ing that the new laws serve the material well-being of society
as a whole and hence indirectly also the interests of the middle
class.
TOWARD A NEW ETHICS
Polanyi upheld an ethics of social solidarity, respect for nature,

and personal responsibility transcending utilitarianism. Yet
Polanyi was not a Kantian inasmuch as he did not regard
material self-interest as unethical. Following classical philoso-
phy and the Catholic tradition, he thought that there was
nothing wrong with self-interested activity. People have every
right to struggle for improvement in the material conditions
of their lives. Utility is ethically problematic and culturally
dangerous only when it is the sole motivating force in people's
lives. Polanyi agreed with Max Weber that people tend to act
from a variety of motives and that collective social action is
most effective when the motives of the actors include material
self-interest, ethical vision, and strong feeling.
It is not without interest that Catholic theology looks upon
self-interest or self-love as ethically acceptable since the self is
created, accepted, and loved by God. What is sinful, in this
69
theology, is exaggerated self-love, for self-centredness violates

the demands of other-love and the norms of justice. To clarify
the concept of self-love or self-realization, some Catholic and
humanistic philosophers distinguish between "utilitarian self-
interest" and "eudaemonistic self-interest," the latter referring
to the universal human quest for happiness and fulfilment.
This quest, they argue, actually leads to self-transcendence and
gratuitous love because human beings find their happiness and
self-realization precisely in forgetting themselves, turning
towards another in love, and surrendering themselves to a
transcendent value, even to God. Polanyi would have found
this philosophy congenial. He too believed that people were
led by an ethical summons to an ever wider sense of solidarity
and responsibility, and that in resisting this call people become
superficial, restless, and unfaithful to the best in themselves.
Confronted as we are by the enormous problems of ecolog-
ical disaster, world hunger, massive unemployment, and seem-
ingly unappeasable armed conflicts, many concerned thinkers
propose that we are in need of a new ethics of solidarity, respon-
sibility, and respect for nature.3 For Polanyi, this new ethics is
actually the old ethics responding to the new conditions of the
present. Yet in a society dominated by capitalist culture and
characterized by individualism, utilitarianism, and relativism,
where do we find the spiritual recourses for a new ethics?
The authors who propose the new ethics usually do not
reply to this question. Yet ethics is more than a set of good
ideas; ethics also communicates a sense of obligation. Ethics
is grounded in the imperative, not the indicative. Polanyi
believed that the spiritual resources for an ethics of solidarity
are available in people's daily lives through the cultural impact
of religious tradition and also through the call of their con-
science, which is a dimension of human existence itself.
Is Polanyi excessively hopeful? Is it reasonable to expect
the emergence of a new ethics in todays pluralistic market-
70
societies? In this chapter I name several cultural and institu-

tional forces in contemporary society that do promote an
ethos beyond utilitarian individualism. Whether they will be
strong enough to resist the dominant trend, I do not know.
But human resources are available that can inspire people to
move beyond the logic of the market and display solidarity,
responsibility, and respect of nature. I see especially three
factors that deserve attention: cultural resources for a more
communal ethics; collective experiences that generate new
ethical responses; and political and social institutions that give
rise to social solidarity.
CULTURAL RESOURCES
Polanyi had great confidence in the world religions. Though

these traditions are highly ambiguous, fostering cooperation
as well as hostility, they do contain values that offer support
for solidarity, responsibility, and respect for nature. This is
demonstrated, for instance, by the joint declarations of the
World Conference on Religion and Peace, an organization
created in the 1970s.4 In these declarations the representatives
of the world religions recognize that their traditions have often
fostered injustice and violence in human history, but that on
a deeper level they are also bearers of the ideals of justice and
peace which are destined to reconcile the human family. That
the latter ideals acquire a new centrality in the practice of the
world religions is the aim and purpose of the World Confer-
ence on Religion and Peace.
The turn of the Christian churches to solidarity, responsi-
bility, and respect for nature is documented at the Geneva-
based World Council of Churches and in the more recent
social teaching of the Catholic Church. In each of the
churches there exist significant movements that support and
promote the new ethics.
71
There are also secular humanistic traditions that commu-

nicate values beyong utility and produce generous reactions to
contemporary problems. Some humanists still retain the clas-
sical notion that humans are by nature oriented towards the
true, the good, and the beautiful. They are deeply troubled
by John Locke's liberal and capitalist concept of the human
as defined by the conatus. Some of these humanists see them-
selves as heirs of Plato: well-known names among this group
are Simone Weil and George Grant. Others locate themselves
in the Aristotelian tradition: this is true especially but not
exclusively of Catholic social philosophers. Alasdair Maclntyre
also stands in that tradition. Some thinkers, especially the
Frankfurt School of Critical Theory, attach great importance
to Kant's understanding of practical reason, according to
which people validly postulate as true those principles of
reality without which their collective existence could not be
truly human. For Kant, practical reason offers an entry into
metaphysics, affirming, for instance, the existence of the soul.
For some contemporary thinkers, practical reason opens the
door to a substantive ethics. Intellectual heirs of Hegel and
the Romantic philosophers also hold that people constitute a
single human family, are responsible for one another, and hear
the call to universal solidarity. In his celebrated Sources of the
Self, Charles Taylor rereads the modern philosophers to show
that the ethics brought forth by the Enlightenment greatly
transcends the utilitarian perspective associated with the cap-
italist market and a certain kind of empiricism.
Whereas religious traditions are sustained by ordinary
people and embodied in their lives, philosophers influence
only an elite. Still, philosophical ideas have cultural power if
they confirm people's lived experiences. Some social scientists
- especially those influenced by Emile Durkheim - claim that
despite the dominant utilitarianism people continue to relate
to another on the most basic level through trust, gratitude,
72
and friendship.5 They argue, with Polanyi, that without virtue

in peoples personal lives society could not be sustained for
long. If this analysis is correct, then the philosophical tradi-
tions mentioned above exert cultural influence because they
support people in their exercise of love and generosity.
The cultural resources for an ethics of solidarity also incude
the symbols and stories that dwell in a culture and affect
peoples ethical vision. On the whole, sociologists recognize
more clearly than political scientists that each society cele-
brates a myth of its origin and that people are more deeply
attached than they realize to the images of their collective
identity. Regional, national, and continental collectivities are
often bearers of rites and symbols that communicate a social
vision and a communal ethics. What tradition allows an
American president to plead with his people not to ask, "What
can my country do for me?" but radier to transcend the ethics
of utility and ask, "What can I do for my country?" The
authority behind this appeal is surely derived from the Amer-
ican nation's myth of origin, from what Robert Bellah has
called America's "civil religion,"6 which includes the call to
solidarity and collective responsibility.
No one knows how strong these symbols and stories are in
a society that is now marked by economic decline. Yet one
must not exclude the possibility that in times of great distress
these myths acquire a new effectiveness and enable people to
make sacrifices for the common good.
NEW COLLECTIVE EXPERIENCES
Another source of the new ethic are the creative, collective

responses to new historical developments. One startling exam-
ple of this is the Universal Declaration of Human Rights,
promulgated by the United Nations in 1948. The declaration
offers no religious or philosophical arguments for the high
73
dignity of individual persons and their communities, upon

which human rights are based. Metaphysical arguments would
only have divided the national communities. What the decla-
ration proclaims is that, after the devastation and crimes
against humanity that marked the Second World War, the
nations of the world pledge themselves to uphold the personal
and collective rights of all human beings. Here the response
to outrage is a new ethical stance.
The reaction to massive evil is not necessarily outrage and
a new sense of solidarity. Some people respond to historical
disaster by becoming fragmented, depressed, or even cynical,
desperately attached to their own survival or even willing to
support an authoritarian regime. Still, theologians have
attached importance to people's creative reactions to massive
evil. Thus Edward Schillebeeckx has argued that there exist
among vast numbers of people profound experiences of an
ethical nature that consist of revulsion from evil and the
impulse to help.7 The passionate revulsion from actions that
cause human suffering is joined by the strong conviction that
such actions can and must be stopped. At certain moments
of history, these so-called "contrast experiences" have raised
humanity's threshold of moral awareness.
An often-cited example is the abolition of slavery. At one
time slavery was recognized in Western history as ethically
acceptable: classical Greek philosophy defended it and even
the Bible did not repudiate it unambiguously. Though church
authorities occasionally expressed their disapproval of slavery,
it was only in the eighteenth century that certain secular and
religious humanists were so outraged by the institution of sla-
very that they started a social movement that would eventually
lead to its abolition. In this instance, "contrast experiences"
shared by many produced a new ethic that, joined by political
struggles and favoured by changing economic conditions, was
destined to transform the moral awareness of Western society.
74
What is the foundation of such contrast experiences? On

this point, philosophers differ. Is there a moral sense woven
into human nature itself that reaches our consciousness
through important historical experiences? Are these experi-
ences cultural consequences of the Enlightenment, the age of
critical reason? Has humanity a hidden divine orientation that
reveals its deepest meaning only in historical struggles for the
good life? Does the warmth, love, and ecstasy experienced by
babies in their mothers' arms lay the psychological foundation
for the quest of a global society based on universal solidarity?
Since this chapter is concerned with ethics in modern,
pluralistic society, the theoretical answer people give to such
questions is not important. What counts is the existence of
these contrast experiences as ethical resources in contemporary
society.
Moral outrage is a response to great evil, past, present, or
approaching. The human response to the threat of future evil
is at times also capable of creating a sense of sacrifice and
solidarity. An example is the experience of the people of
England during the Second World War. When threatened by
the superior force of the enemy, English people were gripped
by an uncommon spirit of sacrifice and solidarity which tran-
scended even the clearly drawn class divisions of their society.
Similarly, an approaching environmental disaster may summon
forth an ethical commitment on the part of society to create
an alternative culture of simplicity and self-limitation.
Besides moral outrage and response to catastrophe, there
seems to exist a universal impulse to support the weak, an
impulse that in a new situation may generate a new ethics.
Confucian philosophers think that people are spontaneously
generous.8 They argue that someone seeing a child drowning in
a lake instinctively reaches out to rescue the little person.
Research done on the motives of men and women who hid Jews
fleeing Nazi persecution has revealed that in most instances
75
these courageous people could not articulate the reasons for

their action. Their response, they said, was spontaneous: there
was no other choice, they simply followed their impulse.
Paul Ricoeur has offered a brilliant analysis of the impera-
tive experienced by people to assume responsibility for "the
fragile,"9 by whom he means persons threatened by natural
weakness or endangered by violence. People recognize this
imperative, he argues, through a certain feeling affecting them
on a fundamental level. We feel ourselves enjoined by the
fragile to care, to offer help, and, more important, to foster
growth and sustain fulfilment. In the presence of the weak
and the threatened we are addressed by a summons to take
care of them and assume responsibility for them, even if we
are unable or unwilling to do so. This ethical imperative
accounts for the ordinary experience of people as they spon-
taneously reach out to hold the person who stumbles at their
side, and it explains the extraordinary experience of people
who decide upon an impulse to rescue others in moments of
great danger, even if they risk their own security in doing so.
For Paul Ricoeur, our instinctive compassion for the fragile
reveals that human beings are inter-independent, not isolated,
individuals. We are open to each other and, in heeding the
call of our fellow human beings for care and love, we realize
our own potential and become more truly faithful to ourselves.
In the present historical situation, Paul Ricoeur proposes,
responsibility for the fragile has a new and special meaning.
What has become fragile is humanity itself, rendered insecure
and profoundly threatened by major calamities, especially the
ongoing deterioration of the environment and the creation
of a single world economy that pushes ever greater sectors
of humanity into misery and death. To assume responsibility
for the natural environment and create an economic frame-
work that allows all people to thrive will demand not only
inventiveness but also an ethical commitment on the part of
76
society to selflessness and self-limitation. This new ethics,

Ricoeur argues, is within our reach because of our natural
impulse to care for the fragile.
INSTITUTIONAL FACTORS
So far we have looked at cultural resources and new social

responses capable of promoting the new ethics - the old ethics
from Polanyi's point of view. Yet, since people's self-understanding
and moral vision are to a large extent created by the institutions
to which they belong and in which they participate, I wish to
examine whether there are institutions in modern society that
generate an ethic that transcends utilitarianism.
The primary institution to which we belong and which
affects our mental outlook is the market. In its simplest form
the market is a game where each person tries to advance his or
her own material advantage. When the market became the
dominant institution in society, people grew increasingly indi-
vidualistic and began to view their neighbours as rivals and
competitors. The classical economists believed that the market
revealed the very nature of human beings, that people were
utility maximizers rational calculators of their material bene-
fit. Because people's economic behaviour was predictable, these
economists regarded economics as a science in the strict sense.
Recently some economists have argued that the complex
modern market actually prompts people to make choices of a
different kind. These economists call their discipline "social
ecomomics." Charles Wilber, professor of social economics at
Notre Dame University in the United States, has argued that
under conditions of interdependence and imperfect informa-
tion, rational self-interest frequently leads to economically irra-
tional results.10 In the past, economists supposed that each
player was independent and had perfect information about the
conditions of the game. But in the complex market of indus-
77
trial society, the success of economic ventures depends on the

cooperation of many players and hence is endangered by
purely self-interested choices. Choices defined by material self-
interest alone undermine the willingess of the other players to
cooperate. More than that, since their willingness to cooperate
can never be predicted scientifically, economic ventures are
entered upon with imperfect information and undemonstrable
assumptions. The assumptions one makes about the behaviour
of other people influence how they will actually behave so that
self-interested choices, assuming that the others are also maxi-
mizers of their own advantage, actually create conditions of
conflict rather than cooperation. Therefore, economic under-
takings demand "strategic," not self-interested, action.
Particularly in periods of economic decline, people have a
common interest in improving their material position. But if
each group of economic actors - employers and their employ-
ees focuses on what wil bring it the greatest advantage, they
will create a conflict situation and neither will reach the
common goal they desire. Thus, Adam Smith's "invisible
hand" not only fails to serve the common good but in fact
undermines it. Today's complex market calls for strategic
choices, choices based on the awareness of interdependence
and the indeterminate nature of the response of others. Stra-
tegic actions take into consideration the advantage of others.
Through strategic actions persons support the goals of others
for the sake of realizing their own proper ends. At the same
time, strategic actions as here defined involve more than a
redefinition of rational self-interest because they rest on the
assumption that other people are cooperators. There is an
element of hope in strategic economic decisions and hence a
moral hazard, an openness to failure, which demands a spririt
of generosity to create and sustain a climate of cooperation.
These theoretical reflections are confirmed by the emergence
of the new corporatism in many European countries, sup-
78
ported by labour unions, management, and social-democratic

governments. In chapter 3 we saw that neo-corporatist exper-
iments are being tried in Quebec and Canada. Though the
Lockean theory that humans are by nature competitors, each
bent on his or her own material advantage, is still accepted by
many social and economic theorists and above all by the
decision makers in society, our complex market actually calls
for and in many instances produces economic behaviour that
reflects a more cooperative understanding of humankind.
Also present in society are democratic institutions. They
too affect people's values, dreams, and aspirations. John Locke
grounded democratic theory purely and simply in the rational
self-interest of individual citizens. By way of contrast, I wish
to argue that democracy, whatever its theoretical foundation,
is an institution that creates a desire among people to partic-
ipate in the making of the decisions that affect their lives. The
democratic process, involving public debate, freedom of
speech, civil liberties, representative government, and trans-
parent procedures of governmental decision making, has given
rise to a yearning among people to become responsible agents
of their society. While the early forms of Western democracy
confined the vote and responsible citizenship to the property-
owning burghers, the democratic process created popular aspi-
rations and historical forces that sought to extend democratic
rights to the excluded: the propertyless, the workers, and,
eventually, women. The democratic revolution could not be
stopped. Democracy became stable, at least for a while, only
when participation was offered to all citizens.
Because in contemporary culture people desire to be
responsible subjects of their social world, they are frustrated
when their democratic governments act undemocratically. In
fact, people increasingly believe that the present form of
democracy does not provide them with sufficient opportunity
to influence the making of public policy. In contemporary
79
society, people feel uncomfortable in any institutions that

exclude them from sharing in the decisions that affect their
lives. That is why the American sociologist C. Wright Mills
argued that there is a contradiction between democracy and
capitalism. The capitalist organizations he knew were hierar-
chically structured and excluded, on principle, workers and
employees from the policy-making process. That is also the
reason why Catholics in democratic societies are restless within
their own church, where they are excluded from participating
in decisions that closely touch their personal lives.
Owing to the cultural impact of democracy, people believe
that they are meant to be responsible agents of the institutions
to which they belong. They desire such responsibility not
simply because it will allow them to protect their own interests
but also and especially because it is demanded by their own
self-respect. The democratic process initiates people to a new
self-perception, one that transcends the purely utilitarian per-
spective. The practice of democracy inspires a sense of the
dignity of men and women, a dignity that entitles them to be
the subjects of their social world. When institutions prevent
people from acting as responsible subjects, they suffer grave
injustice, are kept from their human destiny, and become
victims of alienation. This radical conviction, articulated in
the writings of the young Marx, has since been almost uni-
versally endorsed in democratic cultures. Among its defenders
is Pope John Paul II."
Whereas the feudal order with its inherited hierarchies
ascribed different degrees of honour to the various estates in
society, the democratic order created the belief that citizens
have equal dignity. From the nineteenth century on, political
struggles forced democratic governments to offer assistance to
the poor and protect workers from the heavy burdens inflicted
on them by their capitalist employers. Eventually there
emerged in society an awareness that the dignity of men and
80
women entitled them to the satisfaction of their basic needs,

especially food, shelter, health care, and education. An ethical
conviction began to spread in democratic societies that, in
addition to civil rights, citizens also enjoy socio-economic
rights. With the arrival of social democracy, a certain ethos of
solidarity became almost universally acknowledged in western
Europe and Canada and gradually in the United States.
We now come to doctors, nurses, teachers, engineers,
judges, and so on - all of them organized in institutions with
codes of behaviour assuring that these professionals serve the
well-being of their clients and the good of society. Of course,
while the professions are services to society, they are also
sources of income and forms of business for those who practise
them. There is a certain conflict in the professions between
the altruistic ethos defined by their official codes and the
material self-interest that tempts professionals to regard their
work simply as a source of wealth and status in society. Yet to
claim that professionals as a rule behave as self-promoters
would be excessively cynical. Despite evidence for a certain
decline of the professional ethos, I am prepared to argue that
the professions still encourage an ethic of service among the
greater part of their members and thus make an important
contribition to the creation of the culture of solidarity.
Finally an ethic promoting the common good is also created
by social movements: labour unions, cooperatives, women's
organizations, regional development bodies, religious commu-
nities, citizens' associations, environmental forums, peace
organizations, and so on. There exists in Canada an entire net-
work of groups and communities critical of the established
institutions. These groups and communities express and
communicate an ethos that includes a utilitarian dimension
but extends beyond it to strive for social solidarity. The new
spirit is symbolized in the Action Canada Network, mentioned
in chapter 3, a large, nation-wide cooperative association
81
supported by labour unions, popular groups of various kinds,

and church committees. The impact of social movements upon
peoples consciousness should not be underestimated. They
generate an ethic of solidarity among a significant sector of
society.
SUMMATION
This inquiry has dealt with the questions raised by Polanyi's

social theory. Is there, as Polanyi and many other social think-
ers held, an ethic of solidarity and responsibility implicit in
history that summons people in times of crises to defend their
community, their habitation, and the natural environment?
Polanyi believed that such an ethic of solidarity, combined
with peoples desire to survive and live dignified lives, was the
social source of what he called the double movement. He
found historical evidence for such a counter-current in the
successful effort, beginning in the second part of the nine-
teenth century, to impose limits on the self-regulating market
system. And he demonstrated that, in the history of humanity
prior to the arrival of industrial capitalism and the self-
regulating market, people's economic activities were embedded
in their society and thus served to strengthen their social
bonds, their cultural matrix, and their collective identity. The
rootedness of humanity in its history and the growing strength
of the counter-current after the Great Depression convinced
Polanyi that a great transformation would take place following
the Second World War. This transformation would create a
social-democratic consciousness in the Western world and
begin to re-embed people's economic activities into their cul-
tural and social existence.
Recent decades have shown that Polanyi was wrong. But
the question remains whether the current globalization of the
free market system will again be challenged by a counter-
82
movement based on peoples collective desire to protect their

community, their land, and their habitation. What I have tried
to show in this book is that Polanyi's theory of the double
movement is not the result of wishful thinking. A counter-
movement is evident in todays world. Found primarily in the
disadvantaged sectors of society, this counter-movement mobi-
lizes people to create alternative, small-scale models of eco-
nomic development that help them to lighten their economic
burden and at the same time produce a sense of community
and social solidarity. Admittedly, the movement is small but
it does exist and who is to say that it will not grow?
I have tried to show that, despite the individualism and
utilitarianism that dominate contemporary society, our world
is not bereft of traditional values, historical symbols, and social
institutions that generate corrective cultural currents and bring
forth an ethic of communal concern and social solidarity. Even
if this is no scientific proof of Polanyi's proposal, it sustains
its credibility.
Polanyi realized that a prediction about future develop-
ments can never be proven valid. For the reaction of people
to such a prediction, whether they affirm or reject it, becomes
itself an historical factor that influences future development.
The hope produced by Polanyi's theory delivers people from
a sense of powerlessness and strengthens the counter-move-
ment in their society. It is precisely the absence of "necessity"
in Polanyi's theory and his recognition of human agency that
make his ideas persuasive and liberating. Polanyi believed that
in pursuing his research and writing his books he made a
practical contribution to the counter-movement that sought
to rescue people from the social disintegration and economic
ills produced by the self-regulating market system. In a modest
way, the purpose of this book is the same.
83
Notes
PREFACE
I Thomas Hueglin, "Have We Read the Wrong Authors: On

the Relevance of Johannes Althusius," Studies in Political
Thought, vol. I (1992) 75-93.
2 For an introduction to Polanyi's thought, see two collections
of essays: Kari Polanyi-Levitt, ed., The Life and Work of Karl
Polanyi (Montreal: Black Rose Books 1990); and Marguerite
Mendell and Daniel Salee, eds., The Legacy of Karl Polanyi
(New York: St Martins Press 1991).
3 I wish to mention two papers: Christopher Lind, "How Karl
Polanyi's Moral Economy Can Help Religious and Other
Social Critics," given at the 3rd International Karl Polanyi
Conference, Milan, 1990; and Jordan Bishops, "Karl Polanyi
and Christian Socialism," given at the 4th International Karl
Polanyi Conference, Montreal, 1992.
CHAPTER I
I Karl Polanyi, The Great Transformation (Boston: Beacon Press,

1957), 73.
2 Ibid., 83.
Notes to pages 6-12
3 The title of chapter 3 in The Great Transformation is "Habita-

tion versus Improvement" (33). See also 249.
4 My article "L'origine de la crise ecologique: la contribution de
Karl Polanyi," in Jose Prades, ed., Environnement et developpe-
ment (Montreal: Fides 1991), 14763, contains much of the
material of this first chapter. Yet in that article I still won-
dered whether Polanyi was a functionalist thinker.
5 The Great Transformation, 46.
6 Ibid., ch. 7, 77-85.
7 Ibid., 78.
8 Polanyi's analysis of the Speedhamland Settlement is more
complex than set down in this abbreviated account.
9 The Great Transformation, 138.
10 Ibid., 146.
11 Ibid., 132.
12 Ibid., 178.
13 Ibid.
14 Ibid., 181.
15 Ibid., 184.
CHAPTER 2
I See Gyorgy Litvan, "Democratic and Socialist Values in Karl

Polanyi's Thought," in Mendell and Selee, eds. The Legacy of
Karl Polanyi, 251-71, 253.
2 Abraham Rotstein (and Gerald Berthoud), "The Seductive
Market," a paper given at the 3rd International Karl Polanyi
Conference, Milan, 1990.
3 These papers are available in the archives of the Karl Polanyi
Institute of Montreal at Concordia University's School of
Community and Public Administration.
4 "Polanyi sur Marx et le marxisme: Textes inedits de Karl
Polanyi," presentation de Marguerite Mendell, Interventions
economiques, no. 18 (fall 1987), 241-53.
86
Notes to pages 24-33
5 Prior to the 1920s, theologians of social justice constituted a

minority in the Protestant churches. In German-speaking lands,
they included thinkers such as Christoph Blumhardt, Leonard
Ragaz, and Karl Barth; in Great Britain, they were a small band
of Anglican theologians involved in what they called Christian
Socialism; and in the United States and Canada, theologians of
the "social gospel" foreshadowed later social-justice theory. As
for the Catholic Church, papal teaching on social justice, begin-
ning with Pope Leo XIII's encyclical Rerum novarum in 1891,
offered an ethical critique of liberal capitalism, but it lacked the
egalitarian perspective found in Polanyi and the Protestant
thinkers mentioned above. See John Cort, Christian Socialism
(Maryknoll, N.Y.: Orbis Books 1988).
6 See Daniel Salee, "Explaining Social Change," a paper given
at the 3rd International Karl Polanyi Conference, which shows
that Polanyi transcended the agency-structure dilemma. A
corrective emphasis on agency is returning in contemporary
sociology. See Anthony Giddens, Central Problems in Social
Theory (Berkeley, Calif: University of California Press 1983),
and Alain Touraine, Return of the Actor: Social Theory in Post-
industrial Society (Minneapolis, Minn.: University of Minne-
sota Press 1988).
7 Abraham Rotstein, "The Reality of Society: Karl Polanyi's
Philosophical Perspective," in Polanyi-Levitt, ed. The Life and
Work of Karl Polanyi, 98-109, 109.
8 Karl Polanyi, "The Essence of Fascism," in John Lewis, Karl
Polanyi, and Donald D. Kitchin, eds., Christianity and the
Social Revolution (New York: Charles Scribner's 1936), 359-96.
The German version is published in Karl Polanyi, Oekonomie
und Gesellschaft (Frankfurt: Suhrkamp 1979), 91-128.
9 The Great Transformation, 127-8.
10 For an introductory essay to Macmurray's work, see Jack Cos-
tello, "John Macmurray: Freedom in Community," The Ecu-
menist (second series), vol. I (Jan./Feb. 1994), 25-9.
87
II See the article "Personalism" in The Westminster Dictionary of

Christian Ethics (Philadelphia: Westminster Press 1986).
12 Abraham Rotstein wrestles with this topic in "The Reality of
Society: Karl Polanyi's Philosophical Perspective."
13 John Paul II, Sollicitudo rei socialis (1987), numbered para-
graphs 15, 25, 44. For the English text and commentary, see
Gregory Baum and Robert Ellsberg, eds., The Logic of Solidar-
ity (Maryknoll, N.Y.: Orbis Books 1989), 13, 25, 49, 80-1.
CHAPTER 3
I The most recent attack on the use of social science in theolog-

ical ethics is John Milbank's brilliant Theology and Social
Theory (Oxford, England: Blackwell 1991). For a critical
response to John Milbank, see my Essays in Critical Theology
(Kansas City, Mo.: Sheed and Ward 1994).
2 See Martin Jay, The Dialectical Imagination (Boston: Little,
Brown 1973), 253-80.
3 See Andre Gunder Frank, Latin America: Underdevelopment or
Revolution (New York: Modern Reader 1969).
4 Jacques Godbout, "The Self-Regulating State," in Mendell
and Salee, eds., The Legacy of Karl Polanyi, 11932.
5 This quotation comes from a letter written by Polanyi in 1943,
cited in an unpublished paper, "Polanyi: A Theory of Needs,"
given by Marguerite Mendell at the Conference "La radicalite
du quotidien," Universite du Quebec a Montreal, 1987.
6 Ibid.
7 In his recent book L'esprit du don (Montreal: Boreal 1992)
Jacques Godbout explores Polanyi's intuition of the ongoing
power of reciprocity in modern society.
8 U.S. Catholic Bishops, "Economic Justice for All" (1986), in
David O'Brien and Thomas Shannon, eds., Catholic Social
Thought: The Documentary Heritage (Maryknoll, N.Y.: Orbis
Books 1992), 572-680.
88
Notes to pages 52-8
9 See E.F. Sheridan, ed., Do Justice! The Social Teaching of the

Canadian Catholic Bishops (Toronto: Jesuit Centre for Social
Faith and Justice 1987), especially the statement "Ethical
Reflections on the Economic Crisis" (1982), 399-410. For an
analysis of the Canadian bishops' social teaching, see Gregory
Baum, Theology and Society, "Toward a Canadian Catholic
Social Theory" (New York: Paulist Press 1987), pp 66-87.
10 Alain Touraine, The Post-Industrial Society (New York:
Random House 1971).
II Claus Offe, Contradictions of the Welfare State (London:
Hutchinson Education 1984).
12 Manfred Bienefeld, "Karl Polanyi and the Contradictions of
the 1980s," in Mendell and Selee, eds., The Legacy of Karl Pola-
nyi, 328.
13 Marguerite Mendell and Daniel Salee, "Introduction," The
Legacy of Karl Polanyi, viii-xxix. The contributors to the same
book who recognize the counter-movement are Brent McClin-
ton, J. Ron Stanfield, Trent Schroyer, and Bjorn Hettne. Also,
see the articles by J. Ron Stanfield and Bjorn Hettne in
Polanyi-Levitt, ed., The Life and Work of Karl Polanyi.
14 See Louis Favreau, Mouvements populaires et interventions com-
munautaires de 1960 a nos jours: continuites et rupture (Mon-
treal: Les editions du fleuve 1989); and, by the same author,
"The 'Backyard Revolution' in Quebec: People and Commu-
nity in a Liberal Democracy," in Colin Leys and Marguerite
Mendell, eds., Culture and Social Change (Montreal: Black
Rose Books 1992), 200-11.
15 Economic Council of Canada, From the Bottom Up: The Com-
munity Economic Development Approach (Ottawa, 1990).
16 Bjorn Hettne, "The Contemporary Crisis: The Rise of Reci-
procity," in Polanyi-Levitt, ed., The Life and Work of Karl
Polanyi, 208-20.
17 For the proceedings of the colloquium, see Benoit Levesque et
al, eds., L'autre economic (Presses de 1'Universite du Quebec
89
1989). See also "Le dossier: 1'economie alternative," Relations,

no. 548 (March 1989), 40-54.
18 See Gregor Murray, "Union Culture and Organizational
Change in Ontario and Quebec," and Mona-Josee Gagnon,
"Trade Unions in Quebec: New Stakes," in Leys and Mendell,
eds., Culture and Social Change, 3961 and 62-74.
19 Louis Fournier, Solidarite Inc. (Montreal, Editions Quebec/Ame-
rique 1991); and Diane Gabrielle Tremblay and Vincet Van Schen-
del, Economie du Quebec (Montreal: Editions Saint-Martin 1991).
In Quebec, "le forum pour I'emploi" has been established by rep-
resentatives of labour, business, and government to discuss the
possibility of multiplying projects of concertation. The expression
'Quebec Inc.' was used by Gerald Tremblay, minister of industry,
trade, and commerce, to designate his proposal of industrial clus-
ters ("des grappes industrielles") distributed over the province.
20 The Quebec Conference of Bishops, "Pour vivre la democratie
economique," in Eglise canadienne, no. 25 (14 May 1992), 199-
204. For an English translation, see "A Letter from Quebec," in
Denise Carmody and John Carmody, eds., The Future of Prophetic
Christianity (Maryknoll, New York: Orbis Books 1993), 94-9.
21 See Relations: "Le dossier: Un Quebec casse en deux," no. 545
(Nov. 1988), 264-76; "Le dossier: Pas de pays sans regions,"
no. 579 (April 1992), 72-84; "Le dossier: Repenser le travail,"
no. 650 (May 1992), 10416; "Le dossier: Oil va 1'economie?"
no. 587 (Jan./Feb. 1993), 8-20; "Le dossier: L'avenir de la
gauche," no. 594 (Oct. 1993), 23244; "Le dossier: Habiter la
foret," no. 598 (March 1994), 39-52.
22 Gregory Baum, "The Catholic Left in Quebec," in Leys and
Mendell, eds. Culture and Social Change, 140-54, esp. 14750.
CHAPTER 4
I Charles Taylor, Sources of the Self (Cambridge, Mass.: Harvard

University Press 1989), 31.
90
2 See Alain Caille, "Notes sur le concept d'utilitarisme," a paper

given at the 3rd International Karl Polanyi Conference, Milan,
1990.
3 Hans Kiing, Global Responsibility: In Search of a New World
Ethic (New York: Crossroads 1991); Jacques Robin, Changer
d'ere (Paris: Le seuil 1989).
4 The international secretariat of the World Conference on Reli-
gion and Peace is located at 777 United Nations Plaza, New
York, N.Y. 10017.
5 See Jacques Godbout, L'esprit du don.
6 For Robert Bellah's article, "Civil Religion in America," and
the debate it stirred up, see Russel Richey and Donald Jones,
eds., American Civil Religion (New York: Harper and Row
I974)-
7 See Edward Schillebeeckx, The Schillebeeckx Reader (New
York: Crossroad 1987), 54-6.
8 Mencius, one of the best known Confucian philosophers,
developed the theme that "all men have the mind that cannot
bear to see the suffering of others." See Wing-tsit, ed., A
Source Book in Chinese Philosophy (Princeton, N.J.: Princeton
University Press 1963), 65.
9 Paul Ricoeur, "Responsibility and Fragility: An Ethical Reflec-
tion," Arc, vol. 31 (Spring 1993), 7-10.
10 Charles Wilber, "Incentives and the Organization of Work,"
in John Coleman, ed., One Hundred Years of Catholic Social
Teaching (Maryknoll, N.Y.: Orbis Books 1991), 212-23.
II See chapter 2, n. 13, above.
9I
Index
Catholic social teaching, 523

Christian ethics, 23, 39
community-based economy, 57-8
democracy, 80-1
ethics of solidarity, 69-73
Frankfurt School, 41-2
Godbout, Jacques, 45
human rights, 74
John Paul II, 36
liberation theology, 43
Mendell, Marguerite, 48
Owen, Robert, 3, 24, 32, 50
Polanyi, Karl: Christian ethics, 32, 33; counter-movement, 9,10,12; cre-
ation of market system, 4-6,14-15,17; dis-embedding the econ-
omy, 4, 7, 43; ethics of civil conscience, 257, 30, 31; ethics of the
Lebensweg, 22-3, 35, 65; Marxism, 3, 10-II, 21, 22, 24, 34, 35;
nature of human beings, 28, 46, 47-9, 64; the new socialism, 21,
25, 67; not a functionalist, 6, 12, 63; personal freedom, 29; protec-
tion of the land, 15-19; reciprocity, redistribution and household-
ing, 13-14; re-embedding the economy, 50-2; St Augustine, 34;
social freedom, 27, 28; substantive economy, 47; teaching of
Jesus, 31, 33
Index
positivism, 21, 28
Ricceur, Paul, 76
social movements, 55, 81
Taylor, Charles, 68, 72
Third World, 9, 16, 43
Wilber, Charles, 77-8
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Karl Polanyi on Ethics and Economics

Breaking new ground in Polanyi scholarship, Gregory

GREGORY BAUM is professor emeritus of theological ethics

McGill-Queen's University Press

Legal deposit first quarter 1996

Printed in Canada on acid-free paper

McGill-Queens University Press is grateful

Cataloguing in Publication Data

Baum, Gregory, 1923-

Typeset in Adobe Garamond 10.5/13

Foreword by Marguerite Mendell vii

There is currently widespread interest in the work of Karl

ommitted to the universality of the principles underlying

birth. Papers were presented by historians, economists, political

discourse of the right led to the establishment in 1988 of the

which can be found in Polanyi's ethics applied to present

So much has happened in the world over the last decade

in the world. On what wisdom should they draw in their

contemporary relevance of Karl Polanyi's work. The present

In The Great Transformation, Karl Polanyi analyses the crisis

cultural framework which constituted the matrix of their

the communist Soviet Union. Yet he distinguishes between

ways and so devastating in its consequences that it provoked

development is predictable, and that the human enterprise is

THE HISTORICAL ARGUMENT

In his treatment of English economic history, Polanyi

reasons, had claimed. Polanyi regards this argument as mis-

In 1860, authority was given to provide "analysts of food and drink

What was taking place, according to Polanyi, was the self-

capitalist class. He rejects the idea that the political order, in

can be personified as the action of two organizing principles in

Here it becomes quite clear that Polanyi is not a function-

THE ANTHROPOLOGICAL ARGUMENT

Let us now turn to Polanyi's second argument for the double

that a society challenged by the self-regulating market will

and that modem market-capitalism is simply the evolutionary

The structuring of regional markets into a single, indepen-

PROTECTING THE ENVIRONMENT

Karl Polanyi was among the first social thinkers to recognize

nature inextricably interwoven with man's institutions. To

remove traditional rules - entails, unalienable endowments,

defence against the commodification of the land and the

The defence of society's relation to nature is, for Polanyi,

The Ethical Foundations

In this chapter I study Karl Polanyi's reflection on the role of

In "Behemoth" Polanyi laments the indifference to ethics dem-

mentioning, however, that in the 1930s when Marx's early

The third question comes from another angle. Is there being

"UBER DIE FREIHEIT"

In a remarkable essay, "Uber die Freiheit," Polanyi used his

had spirits dwelling within them, so people in the present age

unjustly assigns one sector of the population to subservience,

ethical decisions to the extra-societal aspects of life, that is,

mechanistic or structuralist understanding of society. Accord-

the individual person, Polanyi insists that, even in a society

When Polanyi moved to England in the early 1930s, he found

essence, its profound opposition to humanism, its philosophy

movement and its ethical inspiration, cannot in the long run

confronted by the threat of German fascism, he comes to