The Great Transformation

The Great Transformation, by Karl Polanyi, was first published in 1944 and is a nonfiction work of economic history. The most recent 2001 edition features a Foreword by renowned economist Joseph Stiglitz as well as an Introduction by sociology professor Fred Block, both of which tout the continued relevance of Polanyi’s work. Throughout the work itself, Polanyi discusses the social and economic changes—what he terms “the great transformation”—that occurred as a result of the Industrial Revolution. Polanyi describes the various fallacies associated with the idea of self-regulating markets, critiquing market liberalism for its utopian idealism. He dissects the arguments of market liberals, including the commodification of land, labor, and money, which he argues cannot be commodities.

Throughout the work, Polanyi argues that self-regulating markets are ineffective and actually necessitate government intervention, thereby preventing them from being self-regulating at all. In order to birth the self-regulating market, Polanyi argues that market liberals forced the government to intervene within the economy and society at large; the self-regulating market therefore becomes a kind of paradox. Polanyi describes the paradoxes and mythos associated with the self-regulating market as well as the social change that arose as a consequence. He adamantly argues that trickle-down economics does not work, as citizens must be protected from the natural instability of market forces. This, he asserts, is the role of the government. As such, he destroys market liberals’ assertions that society should be subordinated to the market, arguing that the market—like all economics—merely represents one aspect of society. Therefore, the whole cannot be subordinated to a part of itself. Polanyi also discusses the nature of freedom, moving beyond the classical sense to the idea of freedom as being free of fear and starvation, which Polanyi believes market liberalism requires. He sees fascism and socialism as being the necessary progressions from the destruction of the market system and subsequently contemplates what this bifurcation means for society.

The book itself is organized into three parts, which Block argues construct a kind of puzzle of the nature of 1940s society. The first section sets up the puzzle, asking why 100 years of peace and prosperity gave way to war and then economic collapse. It is within the second part that Polanyi attempts to answer this question through an analysis of both society and market liberalism. The second part—the meat of the work, as it were—is then also divided into two sections: the first section concerns the nature and discovery of society before and during the Industrial Revolution, and the second section considers the birth and effects of what Polanyi terms the liberal creed. The third part of the book concludes with a discussion of the nature of freedom as it emerged from knowledge of society, in which Polanyi considers how industrial society showed us the existence of society itself and subsequently compares the two alternate possibilities for society: fascism and socialism.

As an economic history, the historical context of the work itself is critical. Polanyi wrote this book during the rise of fascism in Europe and around the world; in fact, Polanyi left Austria and became a British citizen specifically because of the rising fascist tides in his home country. As such, this book questions how fascism could arise after or concurrently with universal suffrage in countries as developed as Austria and Germany. Polanyi seems deeply troubled by his home country’s turn towards fascism, a kind of social anxiety that weighs upon the book itself. The book then turns into a search for the answer to the question plaguing Polanyi’s mind: how did we—civilized nations—come to this? Throughout the book, Polanyi seeks to use history in order to attack this question in the hopes that civilization can see a kind of path to salvation, choosing socialism over fascism. Polanyi blames market liberals for their distinct disavowal of history and their refusal to see the hypocrisy of the utopia that is market liberalism.