Karl Polanyi has been recognised as a prominent economic historian particularly with his work The Great Transformation written in 1944. Despite the time elapse of more

For Polanyi, "human beings and the natural environment be turned into pure commodities and this assures the destruction of both society and the natural environment." He defined land, labour, and money as fictitious commodities as they are not originally aimed to be sold at a market. Hence he believes what modern economists assume on the behaviour of these fictitious commodities is problematic because "it means that the economic theorising is based on a lie and the lie places human society at risk." The ultimate meaning of the market failure will, therefore, take place when the unrealistic market operations cannot build up the social orders that are embedded. He argues that disembedding the economy from society or politics is impossible by saying that "real market societies need the state to play an active role in managing markets, and that role requires political decision making; it cannot be reduced to some kind of technical or administrative function." 

For Polanyi, in particular, economic liberals can be defined as those who worship the system of the pure market economy, but economic liberals are not simply pro-market; "They have a simple utopian vision that has no place for any organising principle other than competitive markets. Market society is the outcome of an economic machine that they liken to clockwork." While Polanyi himself was not being an economic liberal, he believed that markets have such legitimate influence within societies. He also argues that humans are not motivated by material gain, but primarily by a quest for social standing. That is the reason why he thinks markets are a peripheral feature of a normal society. Especially, where wealth determines social status, the pursuit of material gain takes place. "Affluence is to be displayed rather than enjoyed."

Yet, economic liberals do not believe in the small government. Although they are not similar to anarchists, their view on government is rather fundamentally different from that of social democrats. Since Polanyi was sharply critical of liberal ideas on the market system, he states "there was nothing natural about laissez-faire; free markets could never have come into being merely by allowing things to take their course ∙∙∙ To the typical utilitarian, economic liberalism was a social project which should be put into effect for the greatest happiness of the greatest number; lasses-faire was not a method to achieve a thing, it was the thing to be achieved ∙∙∙ While laissez-faire was the product of deliberate State action, subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned; planning was not."

Furthermore, Polanyi insisted that "movement towards a laissez-faire economy needs the countermovement to create stability.", meaning that he suggests the term the 'double movement' to express the interaction between markets and societies. "For a century the dynamics of modern society was governed by a double movement: the market expanded continuously but this movement was met by a countermovement checking the expansion in definite directions. Vital thought such a countermovement was for the protection society, in the lat analysis it was incompatible with the self-regulation of the market, and thus with the market system itself." In other words, it clearly shows that Polanyi has a consistent desire to reconnect the economic relationships into social and political situations by using the concept of the 'double movement'.

Polanyi's writing is indeed an attractive piece of work that gains more attention in the 1990s than in earlier period. Even thought it is not easy to classify into certain categories, his work is best known both as conservative and socialist at the same time. In general, it is about the dichotomy of modern industrial capitalism: the clash between the politically imposed machinery of the 'self-regulating market economy' and the impulsive forces of 'national and social protection'. Polanyi's central insight is that governments have been in such a practical position for both initiating and seeking to maintain the pure market system. Moreover, his work is subsequently significant, particularly in terms of providing historical account with the fact that his work is very contemporary.

Bibliography

Block, Fred. (ed.) (2001) "Introduction", in Polanyi, K. The Great Transformation. Boston: Beacon Press.

Rankin, Keith. (1998) "Compulsory Freedom", in New Zealand Political Review 7(4): 12-15

Polanyi, Karl. (2001) The Great Transformation. Boston: Beacon Press

   

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