5 February 2015
The Great Transformation: The Political and Economic Origins of Our Time by Karl
Polanyi is a work that is still highly respected, recognized, and used by politicians and economists in today’s society. In the introduction, critic Fred Block writes, “The Great
Transformation provides the most powerful critique yet produced of market liberalism- the belief that both national societies and the global economy can and should be organized through selfregulating markets” (Block xviii). Market liberalism and self-regulating markets can be understood through the many examples and sections in the novel. Many concepts are traced back through history and origin then explained. The book is broken down into three main sections, Part One: The International System, Part Two: Rise and Fall of Market Economy, and
Part Three: Transformation in Progress. Through written history, how a person perceives economics changes through advancements. These advancements occurred over time through many worldly affairs. A brief example of an influential economic change would be the United
States stock market crash in the 1920s. In each section, Polanyi outlines different aspects of the human population, history, and the economy, combining all three to create a novel that summarizes the United States' and Europe's economic history and social theory.
Before an understanding of Polanyi’s ideas can be formed, the emphasis and importance of embeddedness and economic thought must be understood. Modern economic theory “rests on
Campbell 2 of 7 the concept of the economy as an interlocking system of markets that automatically adjusts supply and demand through the price mechanism” (Block xxiii). The central point that the author would like to get across “is to show how sharply this concept [economic thought] differs from the reality of human societies throughout recorded human history” (Block xxiii).
Parts one and three of the novel are very similar in their organizational styles. Both sections “focus on the immediate circumstances that produced the First World War, the Great
Depression, the rise of fascism in Congenital Europe, the New Deal in the United States, and their first five-year plan in the Soviet Union” (Block xxii). The novel begins with a summary of historical events that influenced the author’s ideas and theories. Starting in the 19th century and working to the present, the author begins with the Hundred Years’ War. Over time, a new era of ideas can be seen due to the balance of power system, the international gold standard, selfregulating markets, and the liberal state. Before “the great transformation” took place, the markets were very different in their organization and operation. The markets did not yet play a significant role in society, but the market was limited to long-distance trading and bartering
(Polanyi 56). The author writes, “Adam Smith suggested that the division of labor in society was dependent upon the existence of markets, or, as he put it, upon man’s ‘propensity to barter, truck and exchange one thing for another’” (Polanyi 45). Through history, advancements in economic systems have been made to create easier and more efficient ways to exchange products.
Through these changes in society, a “competitive capitalist economy” was formed
(Polanyi 59). A competitive capitalist economy can be explained through the theory of capitalism. The significant changes in the economy were that land and labor were now able to have a price and be involved in the market itself. Both land and labor are to be sold at market
Campbell 3 of 7 prices that are determined by the market at the time. The international gold standard also played a large part in the creation of the economy. Polanyi writes, “Since the establishment of the gold standard, the currency is just as much endangered by a rising wage level as by direct inflationboth might diminish exports and