Polanyi on Market Economy and Ideology

Excerpts from Karl Polanyi's 1947 essay "Our Obsolete Market Mentality: Civilization must Find a New Thought Pattern" (Commentary 3, February). An earlier version of this view was elaborated with historical detail in his 1944 book The Great Transformation: The Political and Economic Origins of Our Time. Polanyi developed a set of ideas in comparative economics which had major influence in anthropological economics. Here, he makes the point that capitalism is not the inevitable outcome of human history, but is instead a special case.
    Aristotle was right: man is not an economic, but a social being. He does not aim at safeguarding his individual interest in the acquisition of material possessions, but rather at ensuring social good-will, social status, social assets. He values possessions primarily as a means to that end. His incentives are of that "mixed" character which we associate with the endeavor to gain social approval: productive efforts are no more than incidental to this. Man's economy is, as a rule, submerged in his social relations. The change from this to a society which was, on the contrary, submerged in the economic system was an entirely novel development....
    ...Markets occur in all kinds of societies, and the figure of the merchant is familiar to many types of civilization. But isolated markets do not link up into an economy. The motive of gain was specific to merchants, as was valor to the knight, piety to the priest, and pride to the craftsman. The notion of making the motive of gain universal never entered the heads of our ancestors. At no time prior to the second quarter of the 19th century were markets more than a subordinate feature in society.
    ...there was the startling abruptness of the change. Predominance of markets emerged not as a matter of degree, but of kind. Markets through which otherwise self-sufficient householders get rid of their surplus neither direct production nor provide the producer with his income. This is only the case in a market-economy where all incomes derive from sales, and commodities are obtainable exclusively by purchase. A free market for labor was born in England only about a century ago....
    ...Liberal capitalism was in effect man's initial response to the challenge of the Industrial Revolution. In order to allow scope to the use of elaborate, powerful machinery, we transformed human economy into a self-adjusting system of markets, and cast our thoughts and values in the mold of this unique innovation....
    ...our practical philosophy was overwhelmingly shaped by this spectacular episode. Novel notions about man and society became current and gained the status of axioms. Here they are:

--As regards man, we were made to accept the heresy that his motives can be described as "material" and "ideal", and that the incentives on which everyday life is organized spring from the "material" motives. Both utilitarian liberalism and popular Marxism favored such views.
--As regards society, the kindred doctrine was propounded that its institutions were "determined" by the economic system. This opinion was even more popular with Marxists than with liberals.

    Under a market economy both assertions were, of course, true. But only under such an economy. In regard to the past, such a view was no more than an anachronism. In regard to the future, it was a mere prejudice. Yet under the influence of current schools of thought, reinforced by the authority of science and religion, politics and business, these strictly time-bound phenomena came to be regarded as timeless, as transcending the age of the market....
    ...Single out whatever motive you please, and organize production in such a manner as to make that motive the individual's incentive to produce, and you will have induced a picture of man as altogether absorbed by that particular motive. Let that motive be religious, political, or aesthetic; let it be pride, prejudice, love, or envy; and man will appear as essentially religious, political, aesthetic, proud, prejudiced, engrossed in love or envy. Other motives, in contrast, will appear distant and shadowy since they cannot be relied upon to operate in the vital business of production. The particular motive selected will represent "real" man.
    As a matter of fact, human beings will labor for a large variety of reasons as long as things are arranged accordingly. Monks traded for religious reasons, and monasteries became the largest trading establishments in Europe. The Kula trade of the Trobriand Islanders, one of the most intricate barter arrangements known to man, is mainly an aesthetic pursuit. Feudal economy was run on customary lines. With the Kwakiutl, the chief claim to industry seems to be to satisfy a point of honor. Under mercantile despotism [=pre-capitalist Europe] industry was often planned so as to serve power and glory. Accordingly, we tend to think of monks or villeins, western Melanesians, the Kwakiutl, or 17th century statesmen, as ruled by religion, aesthetics, custom, honor, or politics, respectively....
    ...In actual fact, man was never as selfish as the [liberal capitalist] theory demanded. Though the market mechanism brought his dependence upon material goods to the fore, "economic" motives never formed with him the sole incentive to work. In vain was he exhorted by economists and utilitarian moralists alike to discount in business all other motives than "material" ones. On closer investigation, he was still found to be acting on remarkably "mixed" motives, not excluding those of duty towards himself and others -- and maybe, secretly, even enjoying work for its own sake.
    ...hunger and gain were defined as "economic" motives, and man was supposed to be acting on them in everyday life, while his other motives appeared more ethereal and removed from humdrum existence. Honor and pride, civic obligation and moral duty, even self-respect and common decency, were now deemed irrelevant to production, and were significantly summed up in the word "ideal." Hence man was believed to consist of two components, one more akin to hunger and gain, the other to honor and power. The one was "material," the other "ideal"; the one "economic", the other "non-economic"; the one "rational", the other "non-rational". The Utilitarians went as far as to identify the two sets of terms, thus endowing the "economic" side of man's character with the aura of rationality. He who would have refused to imagine that he was acting for gain alone was thus considered not only immoral, but also mad.

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