Scientism and the Market Economy

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The Power of Market Fundamentalism: Karl Polanyi’s Critique. Fred Block and Margaret R. Somers. Cambridge: Harvard University Press, 2014. 352 pp. Hardcover, $49.95.


Karl Polanyi is not an easy man to pigeonhole. He is best known as the author of The Great Transformation (hereafter GT). The hand which penned that story of transformation drew more vivid portraits of those he would vex and calumny than those whom he held closest to his breast. GT, we are told by the authors of The Power of Market Fundamentalism: Karl Polanyi’s Critique (hereafter TPMF), was privately praised in letters by his brother, Michael Polanyi (a very notable and systematic critic of Marx and of positivism), yet was widely ignored by the dominant ideological factions of the Cold War. Only much later was this work discovered and adopted in North America, more especially by parties and partisans of the left. Like some contemporary economic thinkers, including E.F. Schumacher, Polanyi shares the unique mark of a man whose core insights should, technically, brand him as an heretic among all the established economic faiths and creeds of the age. It is only recently that he has been granted a certain beatification.

In light of the irony of Polanyi’s reception, one would be tempted to say that, if there were a Hegelian Spirit haunting the Earth, its chief feature would almost certainly be Comedy rather than Cunning. If a single maxim could sum up Polanyi’s insight into political economy and economics, it would be “The economy is always and everywhere embedded in society”(7-8).

Setting aside maxims and the humor of history, Fred Block and Margaret Somers have set for themselves a fairly pragmatic task. TPMF was written with the purpose of clarifying, explaining, and, in part, correcting Polanyi’s GT, and also speaking about current political affairs. Reasonably enough then, the authors devote the first four chapters of their work to the task of commentary and exegesis, rightly observing that Polanyi’s oeuvre majeure bears many rough and unfinished edges in need of fine sanding. Moreover, to the uninitiated tastes of the average reader, GT may easily strike the palate as being heavily peppered with peculiar obsessions and idées fixes (e.g., Polanyi’s insistence on devoting many pages to 18th century Britain’s Speenhamland system, and his lauding of so obscure a thinker and philanthropist as Robert Owen). These certainly require explanation and better knowledge of context than could be expected of the average 21st century reader.

The three following chapters of TPMF are then split between the empirical tasks of correcting the historical record and conducting a retrospective analysis of economic policies in the 20th and 21st century United States and 18th and 19th century Britain in light of the authors’ intellectual framework, which is in essence a revision of Polanyi’s. The final chapter is devoted to the hoary task of rendering Polanyi’s idea of society with greater conceptual clarity. This idea is central to his project, yet one which sometimes hovers in a liminal space between the boundaries of a critical concept and a mere topos. Such clarification is certainly a necessity in order to expound upon the meaning of GT’s final chapter, entitled “Freedom in a Complex Society”.[1]

For the purposes of this review, I shall largely leave aside the issue of analyzing Block and Somers’ critique of American history and American federal policies (leaving this part of the book to those better acquainted with such matters). Instead, I shall restrict my comments to three principle strands of the warp and woof of TPMF – utopianism, Speenhamland, and reductionism. I will analyze these strands in light not only of Karl Polanyi’s original work, but also in light of my own understanding of two of Polanyi’s own contemporaries – his brother, Michael Polanyi, and Eric Voegelin.

The most laudable contribution of TPMF comes in the form of Block and Somers’ overview and analysis of the history surrounding England’s Poor Laws (which date to the Tudor era), the Speenhamland system (which arose in 1795), and the New Poor Law (passed by Parliament in 1834). Briefly, the Poor Law referred to a body of laws first promulgated by the Tudor monarchs, which commanded measures meant to alleviate the sufferings of the poor that were to be collected and distributed at the local, parish level. Speenhamland consisted in amendments to the mode of Poor Law relief measures, which sought to mitigate the impact of high grain prices that had arisen due, first, to drought, which had been compounded by both the demands of the Napoleonic Wars and the social dislocations instigated by unemployment cycles which arose from the twin effects of increased internal and external trade, and second to the increasingly urbanized, factory production of goods (134-135).

Like the administration of the older Poor Laws, administration of outdoor relief where the Speenhamland system was adopted (mostly in the south of England) continued to be a local, parish affair. However, it sought to add to previous arrangements a new, sliding scale wage supplement pegged to a scale of bread prices. The direct purpose of Speenhamland policies was thereby to insure a minimum income to poor laborers and workers and their families so as to insure the basic means of life and avoid artificial famines.

The New Poor Law, by contrast, was aimed at dismantling the diverse constellation of parish institutions in favor of a centrally mandated system of workhouses (i.e., “indoor relief”). Thus, parish solutions to local manifestations of poverty – whether due to the effect of internal migrations, to seasonal or cyclical unemployment, or to the effects of the fencing-off of common lands – were replaced with a single system. The intended effect of the new, centralized system was to curb the breeding of the poor (which Townsend and Malthus had scientistically adduced to be the inevitable, natural consequence of their unearned access to foodstuffs or other elements of commodious living), and to stimulate industry. The psychological methods used to encourage the poor were similarly simple. First, eliminate outdoor relief in order to stimulate men to industry by invoking the fear of starvation (the same motive which putatively had moved them in the state of nature, and which had been corrupted by the artifice of politics and government). Second, encourage them to accept a new lot in the cycles of industry and commerce by introducing the pricks of shame and the degradations intrinsic in the only remaining means of relief for the able-bodied poor – the Dickensian work-houses, with their menial work, long hours, and the dismemberment of families (118-119).

The new lot of the poor was also to be scientistically re-conceived in conformity with the truths of the new science. No longer were the poor to be understood as the imago Dei of medieval England, but as a new sort of creature: labor. This new being, unlike the old, was an eminently quantifiable commodity. Like the image of men painted by Hobbes, labour could be known in terms of its appetitive drives, and without undue regard or consideration of a summum bonum.

The new, enlightened minds of Townsend, Malthus, Ricardo, and their inheritors (which, for Polanyi, as well as Block and Somers, includes such men as John Dewey, F. Hayek, and Karl Marx) did Hobbes better, though, by further hypostatizing human existence. Hobbes himself was content only to efface from his palimpsest any genuine consideration of man’s eternal experience of tension and yearning in the direction of the ground of being, and to substitute for a philosophic or a mythological anthropology, an immanentist anthropology which presented men solely in terms of an apeironic libido. In Polanyi’s words, whereas Hobbes would say only that men were like beasts, Townsend preached that they were beasts – and it would be a Townsendian vision of men which would come to dominate policy and political thought in England (102-103, 118-120).

Once English political elites accepted the fact that “labor” was of such a nature, it followed that the masses, like any other commodity, required scientific management. Whereas a later generation of progressivist activists would see the solution to the pseudo-problem of “labor” in centrally managed utopias at the advent of the end of history, the older generation of scientistic thinkers (whom the authors dub the liberals, neo-liberals, or market fundamentalists) sought utopia in the deregulation of Nature-qua-market-society. Whereas neither GT nor TPMF raises the observation to conceptual clarity, it would be apparent to a student of Eric Voegelin or of Michael Polanyi that both creeds share the goal of a return to Nature, understood in reductionist fashion along immanentist lines.

The main scholarly contribution of Block and Somers to the matter of Speenhamland, the Royal Commission Report, and the New Poor Law that it informed, comes from their marshaling of a century’s worth of research. The authors also describe the historical context surrounding the shifts in policy, which allows the reader to gain an understanding of the significance that the period had for the development of economics as a discipline. They provide contextual details that GT does not fully cover.

Block and Somers advance four theses:

1) Liberal economists, Marxists, and Karl Polanyi himself take for granted the findings of the Royal Commission Report (125);

2) The findings of the Report have then been used to form general economic, social, and historical theories (114-117, 125);

3) The retrospective, critical analysis of the Report and the empirical record reveal that the methods and the findings which were used to generate the Report were systematically biased, and presented to fit the scientistic ideas of Malthus, Townsend, and Ricardo which were then current and settled opinion (133-149);

4) That generalizations based upon the Report’s findings are therefore intrinsically flawed (125).

Block and Somers can be read to conclude that the results are deeply damaging to the underpinnings of liberal economic policies, quite damaging to Marxist ideas, but only mildly bruising to Polanyi’s work.[2] This is so, by their reckoning, because the Report has been used to demonstrate the correctness of the reductive image of men as “labour” (or else as homo economicus) and therefore to justify universal economic policies. The chief of these have been policies meant to assert the autonomy of the economic sphere against the intrusion of politics, an idea based on the purported spontaneity and naturalness of market forces and relations versus the artifice and authoritarianism of politics and governance.

For our authors, the results of these illusions were the impossible attempts to decouple the economy from social and political life, resulting in massive social dislocations and disorders. This was then followed by defensive responses within society, originating from various classes in different societies at different times (including classes of business-owners, aristocrats, clergy, artisans, farmers, and labor unions, among others).[3] It just so happened, though, that the protective policies ran afoul of the commodity fictions upon which the mass production and trade of goods relied. The new form of business required mutually incompatible circumstances to be profitable – steady prices, cheap and precarious labor, expertise, and open markets and currency exchanges. The boom and bust cycle of production, demand, and prices, however, proved as deadly to business as it was to employment and social stability.

For Polanyi, the main dangers springing from these conditions were the deteriorating faith in the ability of politics and democratic governments to accomplish anything, and the sprouting of fascist movements amidst the corruption. Block and Somers refer to domestic welfare policies in the United States of America. Their given reasoning for that focus is that the ideas engendered by the liberal schools, and “proven” by the Royal Commission Report, dictate that all outdoor relief must necessarily give rise to perverse results, due to the nature of things and men. Only by leaving “labor”, nature (i.e. land and its products), and money to the market will utopia be created, or at least approximated. For their own part, the authors revisit the Speenhamland era in light of a heavily revised record of parish relief policies in the south of England. There they find that no fewer than eight species of commonly employed policies prevailed in the parishes, ranging from public works and work-fare programs, to seasonal unemployment insurance, child allowances, and minimum guaranteed income practices, in addition to uses of workhouses. To summarize their findings, local strategies varied according to locally assessed needs and conditions, and rarely had the perverse effects expected by Townsend. The poor, it seems, rarely bred like rabbits when given bread.

Polanyi identifies five fundamental illusions of liberal economics:

1) The belief that market relations are natural and spontaneous expressions of human nature;

2) The emergence of market society (i.e. societies in which all, or most relations, consisted in market transactions) and an autonomous economic sphere was a natural consequence of the progress of history;

3) Man’s essence is “labor”, a measurable commodity unit;

4) Nature can be reduced to the commodity dubbed “land”, and made an unrestricted object of trade and commerce;

5) Money too is a commodity, like any other.

Polanyi’s critique of those five points relies primarily on historical analysis, and what Block and Somers identify as an Aristotelian approach (30, 49, 58). His retorts can be summarized as follows:

1) Markets and market relations, where they have existed before the 19th century, have at best been peripheral to the economy, which was everywhere predominated by practices of reciprocity, redistributions, and exchange; and that commerce was traditionally secondary to practices of local autarchy and household oeconomia;

2) Neither men nor nature are reducible to commodities or things, and that attempts to imagine that they can be fly in the face of reality; and,

3) The treatment of money as a commodity like gold dangerously misconstrued its nature and function.

These points then summarize the logic underlying the maxim that the economy is always already, and necessarily, embedded in society. As Block and Somers do well to clarify, the central point is that 19th century market societies had to be created through government power, and thereafter needed to be continuously and energetically preserved by central governments. (93) Thus, far from being natural, market societies, by this reading, are as artificial as any other form of society, but, like communism and fascism, indulge in what Voegelin dubbed Second Realities – illusory, intellectual dream-worlds, often shot-through with eschatological expectations and ambitions.

As a summary, an interpretation, and an appendix to GT, TPMF is a valuable scholarly contribution. Its flaws are primarily theoretical and practical, some of which also distort our understanding of GT itself.

The first and most glaring flaw is the lack of any well-grounded philosophic anthropology. With regards to the nature “of men and society, Block and Somers write only:

Polanyi’s alternate conception of freedom begins with the recognition of the complex social interconnectedness of our society. Each individual act inevitably affects other people’s lives, often without the original actor even knowing. Polanyi refuses to privilege the freedom of the well-heeled at the expense of the unfreedom for anonymous others. While fully endorsing individual rights and liberties, he vigorously rejects the idea that they are “natural” and that their flourishing requires freedom from government. On the contrary, freedoms and rights are actually produced and sustained through politics and law. The only quality of human beings that can be considered natural is their relational sociality, and it is our work as human beings that will determine whether or not we have any rights at all.” (235-6)

They add that:

“As an increasingly complex division of labor requires that people acquire both complex cognitive skills and a capacity to question received wisdom, these new abilities have been joined with the old to produce recurrent solidaristic initiatives to reshape society itself.” (237-8)

What this amounts to is a mere declaration of faith in an immanentist, neo-cosmological creed all too reminiscent of a rather well worn Hegelianism. All of the declarations in the world, however, do not amount to scholarship, let alone to science or philosophy. One cannot lambast others for their reductionism, only then to engage in the same practice. Moreover, the reduction of men to nature-less products and members of societies (tacitly proposing society to be a collective entity – a miniature animus mundi) occludes any recognition of the participatory tensions and questioning passions of concrete human beings. We mature through our active engagement with our eternal desire to know, to live well, and to live justly. Block and Somers’ definition of human beings as social products effectively short-circuits any discussions of what it means to be just or unjust, to be wise or to be driven by folly.

While the authors might be forgiven the oversight if they had restricted their purposes to commenting on Polanyi’s own thoughts on the matter (all too vague in themselves), their apparent familiarity with both Aristotle and with Michael Polanyi’s writings (both of whom developed extremely robust anthropologies), and their all-too-confident pronouncements about human flourishing make this oversight somewhat less acceptable: even Hobbes, one of the bêtes noires of TPMF, explicitly remarks in the opening pages of Leviathan that it is a logical necessity to know who man is before attempting to speak of political life. For their parts, both Aristotle and Michael Polanyi make it clear that existence is concrete and personal, not collective and abstract, and that one participates in the demands of convivial life and is supported by it in turn – sometimes in great tension with it in the exercise of one’s responsibility, one’s passion, and one’s calling to wrestle with the profoundest mysteries. There is also, as Michael Polanyi would point out, a frank contradiction in play when one voices fury at injustices while implicitly denying that there are any principles of truth and justice beyond those abstractly produced by the collective workings of history and circumstance.

A second theoretic flaw is introduced into the book by the authors’ attempt to criticize the “social naturalism” of market fundamentalism while attempting to maintain that “naturalism” is a perfectly valid philosophy of science (102). By their account, the latter only requires that all studies of the structures and phenomena of reality adopt the methods and criteria of the natural sciences (presumably exemplified by physics and chemistry). Once again, a cursory reading of Aristotle or Michael Polanyi would explain why this is not only impossible but actually destructive of our ability to understand things of a higher nature than bosons. It will have to suffice here to say that people are not bosons, any more than they are “labor”; that the best methods for understanding life, existence, and society may therefore differ from those of physics and chemistry; and that it is a flat contradiction to critique reductionism as a genus while paying lip-service to a particular species of it. The authors would do well to untie themselves from that anchor, and throw it overboard.

A third weakness lies in a lack of epistemological clarity in the distinction between ideas, opinions, and higher levels of cognition such as concepts, theories, knowing, and understanding. I suspect that this arises as the necessary baggage of naturalism, but in itself it does not overly impair the authors’ analysis. For terminological clarity, once again, Aristotle and Michael Polanyi would be primary sources, as would Eric Voegelin. Particularly pertinent would be Voegelin’s essays “Reason: The Classic Experience”, “What is Nature?” and “What is Right by Nature?” from Anamnesis, as well as the transcript of his 1978 lecture at York University, “The Structures of Consciousness”. Pages 155 and 156 of TPMF are particularly messy, as are the completely opaque (and unnecessary) portmanteaus of “ideational embeddedness” and “theoretical realism” (39).

I would also suggest that the commentary on Karl Polanyi’s work would be gainfully supplemented by reference to E. F. Schumacher’s Small is Beautiful. At one quite revealing point in his history of urban industrialization in England, Polanyi briefly hits upon the insight that it was not the mechanization of production per se, but the almost accidental choice in the form, kind, and scale of industrial machines that necessitated the vicious employment and production cycles which came to characterize market societies. In brief: big technology required big financial investments, fixed costs, and perverse incentives to over-produce or to close down shops according to the unpredictable winds of market supply and demand. Whereas Polanyi, though, drops this thread of investigation, Schumacher develops it at length, ultimately pointing out that the fateful obsession with the scale and centralization of production gave rise to many of the economic problems which trouble Polanyi. He also advances the argument that intermediate-scale technology, simplification of the goods of life, and decentralization of production and responsibility would solve several seemingly intractable problems – most especially the degradation of skilled work into unskilled labor – and thereby alleviate one the most prevalent sources of the degradation of human life and self-respect.

On a more practical side, I would also observe that the authors sometimes wear their partisan colors a bit too flagrantly. For the most part, such things are all by-the-by. That said, their forays into American history are sometimes jarring enough in their biases and omissions to make even a foreigner with no horse in the race raise his eyebrows. In particular, some of the knee-jerk remarks on the history of Christianity could stand to be edited-out of the book entirely. Religious toleration is not only a virtue for liberals, nor is philia merely for the Greeks.

Finally, while it is understandable that the authors chose to focus their attention on the task of contrasting the domestic politics of 19th-20th century England and 20th-21st century America, it would be a welcome addition if a future edition added an analysis of the post-Bretton Woods systems of international finance. Specifically, if one grants that the money-commodity myth and the gold-standard were the key institutions of the 19th century economic regime and contributed directly to the economic meltdowns preceding the Second World War, it would be useful to readers to discuss what has changed, if anything, with the ascendance of the current, mixed system (e.g. of fixed and floating currencies, a financial system dominated by the American dollar, etc.).

All in all, it is an interesting read and one very well worth the time for students of Karl Polanyi, and for those looking to explore an alternative manner of thinking through matters of political economy. Nor is it intractably wed to one Second Reality or the other, or to apocalyptic vision of the end times.[4]



[1] It would be notable to Voegelin scholars or students of Michael Polanyi that Karl Polanyi ends The Great Transformation by abruptly veering into jarring apocalyptic pronouncements. On page 258a, he indulges in a tri-partite division of history, à la Joachim of Fiore, splitting history into three ages of knowledge: the ages of the knowledge of death, of freedom, and of society. The first corresponds with the revelations of Jewish legend, encapsulated in the Hebrew Bible. The second corresponds the revelation of Christ, as reflected in the New Testament. The third corresponds to the experience of living in industrial society, with Robert Owen as its prophet, and the revelation that freedom will only be made actual in a co-operative commonwealth society. Page 258b is particularly dense and dark, and would require an essay to unpack.

[2] See TPMF p. 113, 123. Karl Polanyi derived two main points from his reading of the history of the Royal Commission Report. First, that the Report’s findings were taken to be the crucial empirical evidence needed to sustain a liberal ideology based on the works of Malthus, Townsend, and Ricardo. Second, that the Speenhamland system had in fact degraded the English poor. Block and Somers’ research dispels the second point – the widespread degradation of the poor posited by the Report never occurred.

[3] It is worthwhile to note explicitly that Karl Polanyi’s use of the class concept varies completely from that of typical Marxist ideology. In substance, it is a fairly common-sensical, even Aristotelian, usage, meaning a group of like-minded persons of similar position or interests within a society.

[4] Cf. footnote 1. By my own reading of GT, Polanyi’s end remarks are so much rhetorical flourish, meant to make an impression upon his intended audience among the victorious Allied governments. However, I leave it as an open question as to whether and to what extent his work is actually reflective of apocalyptic thinking, rather than enthusiasm. That said, ‘Ei incumbit probatio qui dicit, non qui negat’.

Colin Cordner

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Colin Cordner is an Associate Editor of VoegelinView and completed his Ph.D. at Carleton University in Ottawa, Canada in 2016, where he is an instructor and occasional poet in the Department of Political Science. He is also owner of Fall's Edge Editing. His recent research focuses upon the works Plato and Michael Polanyi on scientism qua sophism, and the origins and therapies for the attendant spiritual crises and political disorders.