Friday, March 08, 2013

Further Thoughts on Polanyi's "Great Transformation"

My comments of Polanyi’s theories of “markets” and the “destruction of civilization” are deeper than pointing to the multi-millennia history of exchange among humans and its dominance of all sectors of social life since the Homo sapiens speciation from the proto-human forms that appeared from the common ancestor of chimpanzees and humans millions of years ago.
Polanyi cannot be excused for his just accepting the modern economists’ miss-presentation of 19th century economics, particularly as it developed among 20th-century classical economists as they hastened to ‘harden’ economic science with calculus from the 1870s.  This amounted to taking economics away from political economy – that is, what actually happens in society – to what is imagined to happen in a theoretical society dominated by equations.  Polanyi appears to have swiftly accepted modern economics without checking to see how much it conforms to Smith’s specific writings where he used the IH and other metaphors. Interestingly, these imaginary processes took even ‘harder’ forms following Samuelson from 1947 into full-blown neoclassical economic theory, largely divorced from reality (Samuelson was also the source for other damaging myths about Smith). 
Not surprisingly, Polanyi linked 19th-century developments of economic theory to Adam Smith, and I might add to the 19th-century ‘idolization’ of myths about Adam Smith, who was a far more modest man than his epigones ever understood, largely from their not studying his works. I put this secondarily consequence down to their not understanding the role of metaphors in the English language. I refer here predominantly, though not only, to Smith’s alleged views on “laissez-faire” (words he never used), “night-watchman’s” limited roles for the state (an assertion properly belonging to socialist fire-brand, Ferdinand Lassalle, when mocking the classical economists), and Smith’s use (twice only) of the “invisible hand metaphor”, as meaning in modern interpretations allegedly and variously (it keeps changing), the “market”, the “price system”, “supply and demand”, “miracles of competition”, and so on.  Smith never referred to any of these. 
Polanyi’s criticism of Smith aside (for views he never held) is compounded by his assertions about the unique (catastrophic) role about markets and his disregard for the totality of economy in mankind’s whole history. 
He disregards for instance the role of human social “exchange”, presented in Smith’s use of 18th-century language as “truck, barter, and exchange”.   I also found a similar disdain for the explicit nature of Smithian exchange in Graeber’s ‘5000 years of Debt’ (he too is overly misled by modern interpretations of Smith's thinking).
Nothing was more total throughout human history than the constant tyranny of daily subsistence.  Socially, this was expressed in human social interactions (“hermit” alternatives were biologically unproductive – those trying it, died out in one generation).  Only in cooperation have humans continued their propagation through the generations.  This requires, as Smith pointed out, the mediation of self-interest (not the ‘dictatorship’ a la Ayn Rand over others) in human contact, as represented by the classic common howlers in the neoclassical misreading of Smith’s “butcher, brewer, baker” example as “Max U” (see Deirdre McCloskey’s” brilliant rebuttal of ‘Max U’ thinking).  To which we can add the almost total unfamiliarity of modern theorists with Smith’s “Moral Sentiments” (how carefully did Polanyi read TMS?).
Markets are but one form of social and individual exchange, and not the only one today, nor throughout human history.  Smith understood that.  He wrote about markets because his book’s title was aimed at explaining the “nature and cause of the wealth of nations”, particularly since the 5th century and the fall of the Western Roman Empire in Europe.   He did not have enough detail about all of human history to write a “universal history” as was popular in 18th-century France.  He admitted to using a degree of "conjecture".  Nor was it within the scope of his 12-year task in writing about the “Wealth of Nations”.  In this work he addressed contemporary readers on the failures of modern European states under ‘mercantile’ suppositions, the output of which was competitive ‘jealousy of trade’, ‘restrictive tariff and prohibitions’ policies, and long wars, mixed with the dynastic quarrels that were so evident.
Smith also wrote an earlier work which was published posthumously in 1795 by his executors, Joseph Black and James Hutton on Smith’s explicit instructions from his death bed (they were also instructed to “burn” the rest of the c.14 volumes of his subsequent, unpublished manuscript). That earlier work – actually his first long essay written in 1744 and completed before 1758 – is known today as his “History of Astronomy”, though the first parts are more interesting.  In Section III, Smith discusses the ‘Origins of Philosophy’ and includes the following lines:
Mankind, in the first ages of society, before the establishment of law, order, and security, have little curiosity to find out those hidden chains of events which bind together the seemingly disjointed appearances of nature. A savage, whose subsistence is precarious, whose life is every day exposed to the rudest dangers, has no inclination to amuse himself with searching out what, when discovered, seems to serve no other purpose than to render the theatre of nature a more connected spectacle to his imagination. Many of these smaller incoherences, which in the course of things perplex philosophers, entirely escape his attention. Those more magnificent irregularities, whose grandeur he cannot overlook, call forth his amazement. Comets, eclipses, thunder, lightning, and other meteors, by their greatness, naturally overawe him, and he views them with a reverence that approaches to fear. His inexperience and uncertainty with regard to every thing about them, how they came, how they are to go, what went before, what is to come after them, exasperate his sentiment into terror and consternation.” (Smith “Of the Origin of Philosophy, III.1.48)
In the line: “A savage, whose subsistence is precarious, whose life is every day exposed to the rudest dangers”, we see the economy of the early hunter-gatherer’s (more likely “scavenger-gatherer’s”) utter dependence on Nature’s bounty, much like that of our related species of chimpanzees and other animals.  An economy is about co-operatively laboring in search of subsistence.  In much of the history humans, the search for subsistence dominated every day of their lives.  Everything in early savage societies was subordinate to obtaining daily subsistence as is common among animals in nature.
Smith concludes “in the first ages of the world, the lowest and most pusillanimous superstition supplied the place of philosophy… but when law has established order and security …the leisure which they enjoy renders them more attentive to the appearances of nature” (Smith: HoA: III: 1795, posthumous).
In short, the history of civilizations, those that survived and those that stagnated or declined, is about the decline in the evident dominance of the economy in the minds and attention of, at first, a minority of the ruling humans, and later of successive layers of their subordinate populations, who are drawn to increasing individual consumption of “necessities, conveniences and amusements”.   This process reached unprecedented heights of per capita income as from around the 1800s from around $1 a day towards the $100 a day reached in the 20th century in the democratic capitalist-type countries.
Polanyi believed he witnessed a “great transformation” in the emergence of an all dominant market with mysterious powers that was subordinating humans to its mystical powers that were not explained by Smith, nor Marx, or anybody else, except himself.  What he was actually witnessing was a consumer society of unparalleled actual (and potential) subsistence in the history of mankind and which contains all the foibles and failures of humans since the “first ages of society” when human subsistence was (and today still is for a large slice of humanity outside market societies) “precarious”.  Only market-oriented states, i.e, all known market economies, have achieved mass subsistence on unprecedented levels.  That modern economic models and theories do not recognise the actuality of modern-state run market economies is a failing of the models, not Smithian political-economy.


Blogger David said...

You write: "Not surprisingly, Polanyi linked 19th-century developments of economic theory to Adam Smith..."

Sorry, but this is simply flatly wrong. Polanyi explicitly distinguished 19th century political economy from Smith's, seeing Smith's as much superior and the 19th century as a disturbing departure. See the first two pages of The Great Transformation, Chapter 10.

For instance: "There was no intimation in [Smith's] work that the economic interests of the capitalists laid down the law to society... A broad optimism pervades Smith's thinking. ... No hidden hand tries to impose upon us the rites of cannibalism in the name of self-interest. The dignity of man is that of a moral being..." All of this by way of contrast to 19th century thinkng.

9:25 pm  
Blogger Gavin Kennedy said...

We com at Polamyi and Smith from different stances. Below is something I wrote on Lost Legacy in 2007 (when I was engaged in Smith-Polanyi debate more intensely.
"Polanyi came at Smith with the prejudices of a person who had taken on board the market economy, as described by Chicago, aligned it with a few quotations from Smith, and then proceeded to attack his perceptions of Smith’s political economy, as if Chicago Smith was Adam Smith inside the guise of the neoclassical paradigm. Given that the neoclassical paradigm does not even describe existing economic relationships, I remain confident that Smith emerged unscathed from Polanyi's polemics against Chicago.
Polanyi’s version of the division of labour is almost laughable. Consider the simple everyday facts of life in ancient times: city states had ports; ports have ships; ships have crews; crews eat food; other people produce the food; ships carry cargo; other people produce the cargo; other people eat food; families shelter in houses; people build house; people use tools; other people make tools; tools and cargo are transported; other people transport goods, using carriages (built by others) and animals tended by others; who visit temples, built by others and managed by priests; others guard the cities; they eat food; other produce the food; and ….
[Intellectuals were separated from those aspects of the economy and wrote of other things.]
There is also the extensive monetisation present in all the economies of the ancient world, and that, is the crowning evidence for the existence of the widespread division of labour: for what conceivable purpose would money exist if there was no division of labour? And before money there was barter and the same applies: 'truck, barter, and exchange' causes barter and, eventually, money, and both, eventually cause the commercial age that Smith identified, and the commercial age, in its second manfestation after the recovery of Europe from the Fall of Rome, led to the capitalist phenomenon from the mid-19th century.
The absence of a division of labour (which may have been preceded by the divisions associated with the sexes) describes a primitive pre-human existence (the ‘brutes’ in 18th century lore), combining absolute equality (a totem of orgasmic Marxism), with absolute poverty (another totem consequence of the socialist states of the 20th century, plus North Korea in the 21st).

1:20 pm  

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