Nadjib Abdelkader¹ 

A summary of The Great Transformation

– about Karl Polanyi’s major work published in 1944 – 

Published in 1944, as the Second World War was drawing to a close, this book is considered to be Karl Polanyi’s major work. If one question could suffice to set the scene, it would be: « How did we get here? In a short first part that serves as an introduction, he outlines the main features of international politics in the nineteenth and early twentieth centuries, highlighting four institutions:

1. The gold standard (which acted as the international currency and represented a single organisation of the economy)
2. The liberal State (whose role was to ensure the smooth operation and protection of the self-regulating market system)
3. The balance of power (i.e. the industrial powers do not wage war against each other directly, but by proxy, or embark on campaigns of colonial conquest)
4. The self-regulating market system (which is at the heart of the book)

At the end of this part, he poses his problem: “In order to comprehend German fascism, we must revert to Ricardian England”. The second part is the heart of the book. It recounts the construction of the self-regulating market system, describing the replacement by the market society of the old English civilisation (its society, its institutions and its functioning). Society becomes a self-regulating system operating around the market.

Describing the movement of enclosures and the social dislocations that accompanied it, he explained that the economic transformations marked by the notion of Improvement (i.e. the improvement of production capacities) could only disrupt society and people’s lives (Habitation). Improvement is not just about perfecting the tools of production, but also about putting human beings and nature at the service of the new production system. In other words, Human and Nature become « fictitious commodities ». By this phrase, Polanyi means that these entities are not created to be subject to the « supply-demand-price mechanism« , but are nevertheless placed on markets set up for this purpose. Thus, the expression ‘self-regulating market system’ suggests that what is at issue is not so much the self-regulating market itself as a society, taken as a whole, organized around the market.

The commodification of man and nature is an anthropological revolution. Land and labour are not commodities, but institutions, and therefore social entities. But in order to transform them into commodities – which classical economic analysis calls factors of production – these entities had to be torn from the cultural complex in which they were embedded; they then became negotiable on a market. As no society can live without the means that sustain it, this new organisation makes the rest of society dependent on a purely economic mechanism. In short, the market society is the institutionalisation of economism, i.e. the global determination of the human community by the economy. It is an absolutely extraordinary revolution.

And yet, in principle, human beings produce society in order to live, while ensuring the reproduction of their social conditions of existence. The « commodification » of human beings and nature tends to dissolve solidarity and destroys many values, as the young Marx already noted. Polanyi also points out that poverty is more the product of the destruction of cultures that ensured social cohesion than the result of capitalist competition, colonial exploitation or imperial domination. In this sense, Polanyi integrates and surpasses Marx.

The dislocation of society leads to reactions that Polanyi calls « counter-movements ». This is a schema for understanding fascism: society, through the political game, tends to elect governments mandated to protect it from the harmful effects of the economic system. But, unable to accept being constrained, the economic forces do everything in their power to sabotage « social protection » policies (in the sense of protecting society). The result is paralysis. It is in this « deadlock » that the « fascist solution » emerges, to use Polanyi’s own words. Fascism is a solution for the ruler class to protect the economic system from social revolution. In other words, it is a counter-revolution.

This raises the question of « freedom in a complex society ». Polanyi developed a still optimistic vision of the post-war world: he still believed that States would learn from the mistakes of the past, drawing the conclusion that liberalism reduced freedom to economic freedom alone, which was detrimental to other freedoms (particularly civic freedoms). It therefore advocates a balanced view of freedoms and the limits that allow each of them to exist. In other words, liberalism denies the « reality of society ».

Fascism and socialism, on the other hand, recognise it, but in two opposite directions. Fascism wants to crush the individual and annihilate freedom in order to glorify power; socialism wants to flourish the individual and consecrate his freedom. To achieve this, Polanyi, as a socialist, advocates recognition of the tragic and awareness of the spiritual (and not just physical) dimension of man.

Further reading

Nadjib Abdelkader,  Jérôme Maucourant and Sébastien Plociniczak, Karl Polanyi et l’imaginaire économique, Le passager clandestin, 2020.

Nadjib Abdelkader, Jérôme Maucourant, « Karl Polanyi pense-t-il la technique? », Indiscipline: rivista di scienze sociali, 2024, IV (7), pp.108-117. ⟨halshs-04573120⟩

Jerome Maucourant and Sebastien Plociniczak, « The Institution, the Economy and the Market: Karl Polanyi’s Institutional Thought for Economists », Review of Political Economy, 2013, vol. 25, issue 3, pp. 512-531.

¹Doctoral student in economics, LEFMI (Amiens)