Polanyi’s two transformations revisited: a ‘bottom up’ perspective

ABSTRACT

In The Great Transformation, Karl Polanyi offers a ‘top-down’ analysis of the rise and demise of Europe’s unregulated market system. He assumes that changes in the organization of the international economy provide particular kinds of opportunities for states to act which, in turn, shapes the extent to which social forces will be able to influence state policy. Consequently, his analysis focuses, first, on the international institutions created by the self-regulating market system; then on the ‘liberal state’ which these made possible; and finally on how the system impacts ‘society as a whole’. The account which this analysis produces systematically underplays the social struggles which propelled and emerged from the rise of Europe’s nineteenth century system and which ultimately led to its demise. In revisiting the two periods that are the focus of Polanyi’s analysis, this article assumes that states and interstate systems reflect the interests of powerful social forces. Thus, working from the ‘bottom up’, it focuses on the class interests that produced Europe’s market system, the state and international structures which reflected and supported them, and the social struggles that ultimately brought about the collapse of the system. What this ‘bottom up’ account reveals is the centrality of a ‘double movement’, not of market expansion and a protective countermove on the part of ‘society as a whole’, but of dominant classes monopolizing economic opportunities from global expansion, and a rising ‘red tide’ of disaffected workers. This double movement, it argues, better explains the demise of the system and the changes that ensued from it.

KEYWORDS:

• Class conflict
• ‘double movement’
• industrial capitalism
• markets
• Polanyi

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. A year after the publication of The Great Transformation, Polanyi invoked this analytical schema in an article on the transformation of liberal capitalism. To understand the transformation of liberal capitalism, he argued, we must look, first, to the international environment, ‘since it is in the international field that the methods of private enterprise have broken down—as shown by the failure of the gold standard; and it is in that field that adherence to such methods constitutes a direct obstacle to practical solutions’ (Polanyi, 1945, p. 89).

2. The hybrid system that this created was later characterized by John Ruggie as one of ‘embedded liberalism’ (Ruggie, 1982).

3. See Polanyi’s article, ‘Our obsolete market mentality’ (1947), reprinted in Polanyi (1971, pp. 59–57). For insightful analyses of U.S. policies at this time, see, e.g. Block (1977), van Der Pijl (1984, pp. 50–137).

4. While endeavouring to write class struggles back into the analytical narrative, the focus is not on working classes and labour mobilization, but on the broad configuration of class forces and structures which included both dominant and working classes.

5. Some argue that England did not have an absolute monarchy because it was constrained by parliament. But, as Brian Manning points out, England’s parliament played an essential part in the establishment of the absolute state under Henry VIII and Elizabeth I, and was an integral part of it (Manning, 1965, pp. 250–251; see, also, Anderson, 1979, pp. 113–142).

6. In England, state regulations prevented middlemen merchants from bypassing or cornering the market, ensured quality control, a ‘just price’, and an adequate domestic supply of goods; and market courts enforced them (Lie, 1993, p. 282).

7. This approximates to what Polanyi characterizes as ‘embedded’ markets. For a comprehensive discussion of the various interpretations of what, for Polanyi, ‘embedding’ and ‘disembedding’ constitute, see Dale (2011).

8. In her study of this system, Pat Thane concludes that ‘There is a real question as to whether the vastly richer Britain of the twentieth century is relatively more or less generous to its poor than the England of the seventeenth and eighteenth centuries’ (Thane, 1998, p. 55).

9. The legal measures were never fully implemented, however, because of resistance from aristocratic office-holders whose job was to apply them

10. Initially, the impetus to industrial growth in Britain was the home market. ‘Between 1750 and 1780, the overseas market did not play a major role in providing the justification of the expansion for the country as a whole. If for some sectors, and some areas, exports were already vitally important, this certainly was not known to those responsible for the conduct of other sectors’ (Eversley, 1967, p. 221; see, also, Mathias, 1983, p. 16, 94).

11. During the eighteenth century, Britain’s industrial output quadrupled, and the bulk of this output was mass consumption goods. As McKendrick, Brewer, and Plumb have argued, it is ‘extremely improbable that all this extra consumption could be absorbed by the top layers of income’ (McKendrick et al., 1982, p. 29).

12. Sumptuary laws, official documents, records of elite complaints, and public pronouncements about excessive popular consumption attest to the ubiquity of this concern throughout the world.

13. These reforms were similar to those which, today, we associate with the welfare state and with progressive liberalism. Attempts to capture this contradiction in terms are seen in such phrases as ‘enlightened despotism’ and ‘liberal absolutism’. However, the word survives as a key analytic term in the study of early modern Europe, together with its negative connotations and the hostility that it was originally meant to express.

14. Between 1830 and 1914 about 50 million Europeans, 30 per cent of Europe's population in 1830, immigrated to the Americas. The Americas provided markets for European products overseas, rather than locally, thus enabling Europeans to expand production without dangerously impacting social relations at home.

15. The building industries grew by expanding employment rather than by introducing innovations in organization or technology. In the 1930s, half the industry’s workforce still practiced ‘their traditional handicrafts, especially in house building, largely untouched by mechanization’ (Benson, 1989, p. 20). By 1913 the output of Britain’s electrical industry was little more than a third of Germany’s (Hobsbawm, 1968, p. 180). Before World War II, the great majority of those employed in the transport sector worked for a small employer or were self-employed (Benson, 1989, pp. 22–23). It was only in the 1890s that automatic machine-tools production was introduced there and as a result of the desire of employers ‘to break down the hold of the skilled craftsmen in the industry’ (Hobsbawm, 1968, p. 181). Gas manufacture was mechanized late and as a result of pressure from trade unions. Coal production increased—from 49 million tons in 1850 to 147 million in 1880—not by introducing labour saving techniques, but by increasing the numbers of coalminers. In the 1930s, ‘more than 40% of British coal was cut and practically 50% conveyed without the aid of machinery’ (Benson, 1989, p. 16). Though Britain had pioneered major innovations in steel production, she was slow to apply the new methods and failed to keep up with subsequent improvements. Though British industrialization was based on the expansion of capital goods production for railway building, rapid technical improvement came, even here, only when compelled by military competition and the modernizing armaments industry.

16. The absence of agrarian reform, the social and political isolation of agrarian labour, low agricultural land taxes (which offset price controls and taxes on agricultural exports when they were unavoidable), the monopolization of domestic industry and international trade through the creation of cartels and syndicates, attest to this.

17. Externally-oriented expansion requires a system of stable exchange rates, and the gold standard system was developed to provide this. It was stable, between 1871 and 1914, because the absence of effective democratic representation in European societies meant that working classes were unable to put pressure on governments when restrictive monetary policies created unemployment.

18. It was this concern that motivated it to sponsor numerous anti-revolutionary military actions in Europe.

19. And at the same time, trade-union movements increased exponentially. This occurred not only in Europe, but in Africa, the Americas, Asia, and the Middle East. European workers, found in all the large cities of the world, cooperated with indigenous workers and promoted trade unionism, see Stoler (1989), Comaroff and Comaroff (1985, 1986), Gordon and Meggitt (1985), Breman (1987), Callaway (1987), Kennedy (1987), Ingelson (1981), Orr (1966).

20. The scope of these expansionist ambitions was detailed in the set of treaties concluded by all the belligerents in the war that began in 1914, treaties which clearly expressed their hope of achieving vast extensions of their territories, both within and outside Europe, as a result of the war. These treaties were published in the official journal of the Soviets, and in the Manchester Guardian. A good summary is found in Baker (1922, I, Chapter 2).

21. See, Marwick (1980, Chapter 11), Titmuss (1958, p. 86), Andreski (1968, pp. 33–38), Sorokin (1927).

22. See Braunthal (1967, p. 355), Schumpeter (1950/1976, p. 353), Carr (1945, pp. 20–21) and, for other works, Doyle (1997, pp. 317–319 and especially 318n.9).

23. Trade union membership doubled in Britain from 4 to 8 million (Geary, 1981, pp. 151–155), in Italy, having doubled during the war, it nearly doubled again by 1920 (Maier, 1975, p. 47).

24. Fascism and the sacrifices entailed in defeating it effectively discredited the old right throughout Europe. Thus, even where workers were not mobilized for the war effort as, for instance, in France, the balance of political power after the war shifted in their favour.

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Sandra Halperin

Sandra Halperin is Professor of International Relations and Director of the Centre for Islamic and West Asian Studies at Royal Holloway, University of London. Her main research areas include global development, the historical sociology of global relations, the causes and conditions of war and peace, and Middle East politics. Her research has focused primarily on the nature and shape of global development and its impact on different parts of the world. Its principal concern has been to understand how societies develop through essentially trans-national, cross-regional processes. She is the author of three cross-regional and trans-historical comparative studies: In the mirror of the Third World: Capitalist development in modern Europe (Cornell University Press, 1997), War and social change in modern Europe: The great transformation revisited (Cambridge University Press, 2004); and Re-envisioning global development: A ‘horizontal’ perspective (Routledge, 2014); co-editor (with Ronen Palan) of Legacies of empire (Cambridge University Press, 2015), and author of articles on globalization, development theory, historical sociology, nationalism, ethnic conflict, Islam, and democracy in the Middle East.