The Always Instituted Economy and the Disembedded Market: Polanyi’s Dual Critique of Market Capitalism

Abstract

Polanyi’s concept of “embeddedness” has been the subject of debate. Various authors have argued that it reveals a contradiction. They contend that Polanyi states that all economies are always embedded, while simultaneously maintaining that the modern market economy is exceptional because it is disembedded. Others claim that there is no contradiction in Polanyi’s thought but that he is merely describing a contradiction of the market economy. In this text, I argue that both sides fail to discern two different concepts: “institutedness” and “embeddedness.” “Institutedness” denotes the idea that economic behavior is always dependent on and the result of certain forms of social organization. In turn, the distinction between embeddedness and disembeddedness is inspired by the Aristotelian distinction between natural and unnatural economic behavior. This distinction refers to the finality of economic behavior: is it directed at the thriving of an ethical community or is it instead directed at wealth acquisition as an end in itself? I argue that both institutedness and (dis)embeddedness fulfill a crucial, though different, role in Polanyi’s critique of market capitalism. I conclude by giving a preliminary outline of what could be the implications for a (neo-)Polanyian political economy of my analysis.

Keywords:

• embeddedness
• Karl Polanyi
• Aristotle
• capitalism
• neo-Polanyianism

JEL Classification Codes:

• A13
• B20
• B31
• B52

Notes

1 Block also tends to this interpretation, in the introduction to the 2001 edition of The Great Transformation. There, Block claims that Polanyi has often been misread, as if Polanyi is stating that an economy can become completely disembedded. According to Block, we should conceive of disembeddedness as a chimerical tendency, that can never be fully released (2001, xxiii–xxix). And in the 2003 article, there are also passages which support this interpretation (2003, 282–284). However, in the latter text he also unambiguously claims that there is a contradiction in Polanyi’s concept of disembeddedness.

2 As different commentators have argued (Lacher 2019; Polanyi-Levitt 2006, 386–389), there is little evidence of Polanyi going through a paradigm shift during the writing of The Great Transformation.

3 In The Great Transformation, Polanyi does not mention exchange as a principle of behavior. There, he discusses reciprocity, redistribution, and householding as principles of behavior. He also claims that the market pattern is much more specific than reciprocity, redistribution, and householding and thus cannot be considered to be at the same level as the latter three (cf. 2001, 45–70). In “The Economy as Instituted Process” and The Livelihood of Man, Polanyi considers reciprocity, redistribution, and exchange as forms of integration, and claims that householding is a form of redistribution (1957b, 250–255; 1977, 35–42). I decided to follow Polanyi’s most recent texts.

4 Reciprocity is the broadest form of integration and it can take on many shapes. Here, I visualized the economy of the Trobriand Islands, as it is discussed below.

5 I borrowed the phrase “necessary contingency” from French philosopher Quentin Meillassoux (2009).

6 According to Polanyi, economic liberalism is the tendency in society “aiming at the establishment of a self-regulating market” (2001, 138). Consequently, I define an economic liberal as someone who believes that the economy has to be organized via the self-regulated market.

7 Lionel Robbins was directly influenced by Carl Menger in his famous definition. This is proven by the fact that, immediately following his definition, there is a footnote which references Menger’s Principles of Economics (Robbins 1932, 15n).

8 I would like to thank an anonymous reviewer for pointing out the similarity between Polanyi’s account and the one given in Stanfield’s (1991) article “The Dichotomized State.”

9 Douglass North (1977) even explicitly conceived his project as a way to avoid Polanyi’s radical implications.

10 All translations cited are those of C. D. C. Reeve (see Aristotle 2014; 2017; 2018).

11 The translation used is that of W. R. M. Lamb (see Lysias 1930). It could be remarked that Lysias here is speaking of non-citizen residents of Athens (Lysias 22, 5). And thus that these people are not part of the community and, hence, cannot be said to undermine the community of which they are part. However, as Gallagher asserts, nowhere in his exposition of the development of commercial trade (Aristotle, Politics book I chapter 9), Aristotle speaks of commercial traders as foreigners, but instead describes how commercial trade arises from within the community. This suggests that unnatural chrēmastikē has, in fourth century Athens, become a practice, in which at least some of the Athenian citizenry has indulged (Gallagher 2018, 97–98; cf. Polanyi 1957a, 83). Hence, it is entirely conceivable that in Aristotle’s time, corn speculation had become something in which some parts of the Athenian citizenry takes part. Even if this particular form of unnatural chrēmastikē (corn speculation) did not occur from within the community, it is at least useful as a way to think about how it could play out in an ancient community with a form of unnatural chrēmastikē that did exist in the ancient world.

12 A thorough analysis of how Polanyi’s conception of social freedom converges with that of Honneth would require an article of its own. Such undertaking remains outside of the scope of this text. In this text I can only point the similarity out.

Additional information

Notes on contributors

Louis Mosar

Louis Mosar is a PhD researcher at the RIPPLE research group (KU Leuven). Since November 2020 he has been working on his Research Foundation – Flanders (FWO) funded PhD project about (neo)republicanism and domination in the market. This article is a substantially revised version of a paper presented at the International Karl Polanyi Conference 2019 in Vienna. The author would like to thank Matthias Lievens (KU Leuven) for his useful comments that helped to vastly improve this text, two anonymous reviewers for their helpful comments that further enhanced the text and the JEI Production Editor Susan Evans for the final polishing of this text before publication. All shortcomings remain his own.