2 page essay ---- analyze Kenya's Standard Gauge Railway Project with polanyi's economic theory --- due within 12 hours

Open Posted By: surajrudrajnv33 Date: 26/04/2021 High School Homework Writing

I need to add 600 words to my current essay analyze Kenya's Standard Gauge Railway Project with Polanyi's economic theory 

I'll attach my current essay and please add 600 words to the " How Karl Polanyi Political and Economic Origins Applies to the Kenya’s Standard Gauge Railway Project" section. 

Category: Mathematics & Physics Subjects: Physics Deadline: 24 Hours Budget: $80 - $120 Pages: 2-3 Pages (Short Assignment)

Attachment 1

4/20/2021 Country Project: Contemporary Development Project

https://bcourses.berkeley.edu/courses/1502344/assignments/8215825 1/5

Country Project: Contemporary Development Project

Due Monday by 11:59pm Points 25 Submitting a file upload (Turnitin enabled) Available after Mar 18 at 12am

Start Assignment

Objective: Write a 6-8-page double-spaced paper that uses one or more key concepts/theories from the class as a framework for understanding a specific development project currently taking place in your country.

Format: 6-8-page paper, 1-inch margins on all sides, double-spaced. If any graphics, charts, or images are used, they must be labeled in a clear and understandable way--you can either place them in the text of your paper or at the end in an appendix and refer to them in the text of your paper. These will not count toward your page totals. 

A bibliography is required and is not part of the page count. The bibliography should be included at the end with full citations of where you got all the information. See ASA citation guide for more details on the bibliography (in the Files section of our bCourses site). You may also consult the Purdue OWL website (https://owl.purdue.edu/owl/research_and_citation/using_research/formatting_in_sociology_asa_style/references_page_formatting.html) .

You may cite lectures parenthetically as well. For example: (Lin, Title of Lecture, Date of lecture). In the works cited page, you may cite this as the following: Lin, Edwin. "Title or subject of lecture" (Course Name, College Name, Location, Date).

Detailed Explanation of Assignment:

Step 1: Do some research about recent/current development projects going on in your country and choose one issue that interests you. The project you are looking to write about for this assignment should be specific, empirical, and tangible. In other words, you are not just looking for a general idea, like the environment, but rather a specific event, policy (or set of policies), dispute, or project that is of ongoing debate, discussion, controversy, or implementation in your country. Examples of a concrete, specific development project include a dam construction project, new policies/laws about a free trade zone, a new education policy or reform, new labor laws, a new political party allowing deforestation, an ongoing protest movement, etc.

The development project/issue you choose should be either ongoing (current) or very recent (within the last 5 years). It can be something that began several years ago, but continues to have ongoing and recent updates. You can also choose a social development issue (e.g. education, democracy, free speech, etc.), but be sure to incorporate the correct readings to connect the issue to development--in other words, some readings will likely be necessary to help situate and explain how the issue you've chosen is relevant in contemporary development discussions.

Step 2: Once you have chosen a contemporary development project in your country, review the syllabus and consider what are some appropriate development concepts, theories, and readings that apply to the case you've chosen. In other words, treat the development project you've chosen as a case study that can be interpreted and understood through the framework of some of the readings and ideas of the course. Perhaps, for example, you could use multiple competing concepts to understand the development project you have chosen (e.g. Smith vs. Marx or modernization theory vs. dependency theory or sustainable development vs. post- development).

Step 3: Do more research! Look for reliable sources such as reports (from NGOs, international institutions, and government agencies), government websites, and mass (published) media. You might also look at some academic journal articles or law reviews--but there may be a lower emphasis on these sources because of the current/contemporary nature of your topic. This will heavily depend on what you've chosen to write about.

Look for how these sources analyze and understand the development project you have chosen. What are the key issues of debate? What are the goals of the project? What are the different sides or groups that are for and against the project?

Step 4: Write an argumentative paper. Your thesis/argument will be centered around the application of the one or more theories and concepts you've chosen to integrate as a framework for understanding your case study/development project. You have some freedom and flexibility in what you argue, but this argument should reflect 1) some analysis or articulation of the development project and 2) application of course ideas, concepts, and theories to help understand, articulate, and convincingly make your argument.

4/20/2021 Country Project: Contemporary Development Project

https://bcourses.berkeley.edu/courses/1502344/assignments/8215825 2/5

Like the previous paper, make sure that you provide in-text citations to any sentence that is based on an idea that you are taking from one of your sources. Please OVER CITE (cite too much) rather than under cite (cite too little) (i.e. when in doubt, please cite). Again, refer to ASA citation guides (under Files in bCourses) or Purdue OWL linked above.

Your paper should consist of an interworking of the sources you found about your specific development project and course ideas (most likely including citations from course readings and lecture).

Finish off the assignment with your bibliography in ASA format.


1. How do we integrate course ideas and theories into the contemporary development project that we've chosen?

One way to think of this is that the ideas and theories act as a framework from which to understand your development project through. For example, to take neoliberalism and use that as a frame of reference to explain what is going on in your project. You can also use course ideas to help you analyze your country's development project. For example, you can apply Marx ideas or dependency theory or post-development or Stiglitz's critiques or Friedman's flat world idea and argue how these perspectives would analyze and understand the development project you've chosen. You may also use multiple course theories and compare and contrast them and the different ways they would see the development project. You can even use examples from lectures and readings and compare the development project happening in your country to those examples. Overall, you get to determine what you think is an interesting and engaging argument using course content and what you learn about your development project.

I expect that you will be utilizing resources you found on the specific development project you chose and connect those sources to course content. In other words, you might use media sources that explain what is going on and connect those events to course content. Or you might use how a report by the UN or Human Rights Watch and show how it reflects certain values discussed in the class regarding development and how that may affect the development project. Again, you have flexibility on how you connect your sources with each other--just be sure that you are staying focused on your thesis and proving your argument. In other words, no random connections that aren't really trying to substantiate your main argument.

2. I've chosen a development project that is not traditionally economic development. It's more cultural or social. Is that okay? How should I approach this?

Yes, this is absolutely fine--in fact, you should choose something that personally interests you. It does mean that you will need to apply different course content to situate this more cultural or social developmental issue in light of development and the development narrative/discourse (i.e. consider sustainable development, basic needs, and/or post-development). As long as the framework helps us see the connection between your development project and course themes and concepts, it should be no problem and you can make whatever argument you think is meaningful and interesting to make.

3. How recent is recent? Or how contemporary are we talking here? Is something that started X years ago still contemporary?

Refer to the above instructions for some feedback on this. Essentially, as long as it is still an ongoing issue with updates in the past two years or so, this shouldn't be a problem.

4. I don't really know how to use the library (or I haven't really had a chance to use the library before). I am also having trouble finding information. What should I do?

If you start your research early, then this really will not be a problem (see our bCourses page on research tips). The easiest answer to this is for you to reach out to a research librarian. You can do that on our library website: http://www.lib.berkeley.edu/help/research-help (http://www.lib.berkeley.edu/help/research-help) . You can also look up a subject librarian and reach out to them: http://www.lib.berkeley.edu/help/subject-specialists (http://www.lib.berkeley.edu/help/subject- specialists) . These librarians are absolutely incredible--they know where everything is and if they do not know, they know how to find out where things are! You can also go in-person to the reference center, where there are reference staff and librarians who can help you without any appointment. You can find information about them here: http://www.lib.berkeley.edu/libraries/doe- library/reference-center (http://www.lib.berkeley.edu/libraries/doe-library/reference-center) .

4/20/2021 Country Project: Contemporary Development Project

https://bcourses.berkeley.edu/courses/1502344/assignments/8215825 3/5

Contemporary Development Project

Also, librarians are also aware of the online resources that are available and can provide advice for contemporary development projects too! They are not limited to just "old" information, so please seek them out if you are having trouble.

Between all these resources, I am absolutely confident you will have no trouble completing this assignment!

5. Can I use X resource in my paper? Is it a good source?

Do NOT cite random websites, blogs, or encyclopedic type sources. Instead, any information needs to be resourced from a reputable, published source. If a blog or website has some information that you used, find out where they got it and cite that source.

4/20/2021 Country Project: Contemporary Development Project

https://bcourses.berkeley.edu/courses/1502344/assignments/8215825 4/5

Criteria Ratings Pts

12.5 pts


How clear is the argument (in the beginning of the paper as well as throughout the paper)? Does the argument show a strong understanding of both course material and the development project they've chosen? How convincing has the student proven the thesis of the paper?

12.5 pts Perfection

Can't find anything wrong and it is absolutely outstanding work. Goes above and beyond as the argument is deep, interesting, and effective-- you learned something new and it is very convincing.

11.88 pts Excellent

Overall, the argument is clear and well argued. You are convinced, but perhaps there are times where things aren't perfectly clear or persuasive. Yet overall, everything is great, you can track the argument throughout the paper, and it shows a very strong understanding of course concepts and their case of development.

11.25 pts Solid but room for improvement

Solid argument and most of the time, you know how the paper is contributing to the argument. Sometimes, however, it feels a little unclear and you may get a bit lost, but still overall the argument was argued well, adequately, and convincing enough, showing a good sense of the course material and the development project they have chosen.

10.63 pts Average with potential

At times, the argument is obscured or unclear, but most of the paper is related to the argument. You feel less sure that the argument shows a meaningful understanding of course content and its application to the development project they chose--this makes you feel a bit uneasy of the students' course understanding.

10 pts Average at best

There's a feeling that a lot of the paper is just retelling information, rather than arguing to prove their thesis. In this way, the thesis and argument of the paper is often obscured and lost and you have to spend extra time trying to figure out what and why the author is spending time talking about certain parts of the paper. This does not give you confidence in a deep understanding of course material and its application.

8.75 pts Passing

Effort was made to try and have an argument and thesis, but beyond just a couple paragraphs, much was missing and the argument was mostly unclear. Almost all of the paper read like pure information or summarizing readings, rather than proving any points.

6.25 pts Failed

Thesis is completely unclear from the beginning. You are concerned that any real effort was put into making an argument. Instead, the entire paper read more like retelling random information and summarizing readings and course content.

4/20/2021 Country Project: Contemporary Development Project

https://bcourses.berkeley.edu/courses/1502344/assignments/8215825 5/5

Total Points: 25

Criteria Ratings Pts

12.5 pts

Use/Analysis of Course Content and Outside Sources

Did the student utilize course content to its full effect in understanding, framing, and/or analyzing the development project in their country? Were outside sources appropriate, cited well, and adequately used?

12.5 pts Perfection

Course content used brilliantly and exceptionally. You are hard pressed to find anything wrong with how course ideas, theories, and readings were applied to the case discussed in the paper. The application was of real interest and truly brought out deep insight from the chosen development project. Citations and sources were all appropriate and had no problems.

11.88 pts Excellent

Excellent use of course content to bring out interesting insights of the development project. Depth of analysis was strong and compelling. Perhaps some areas felt like there was a deeper step they could have taken, but overall everything was strong. No major problems with sources or use of course material.

11.25 pts Solid but room for improvement

Use of course content and analysis of the development project is all generally good, but you can identify some clear areas of improvement- -this might be in how something is discussed consistently throughout the paper or the application of course material feels shallow at times or requiring better interaction and engagement with the development project. Still overall a good paper, just with clear areas of improvement. No huge problems with sources-- maybe missing some citations at times when they should have probably cited but nothing major.

10.63 pts Average with potential

Basic elements are there regarding use of course content, analysis, and citations/sourcing. Some areas, however, showed a rather consistent lack, for example a lack of using course content to its full potential, a lack of analysis where discussions needed to get deeper to be more meaningful, or a lack of details in describing the case study and using outside sources to do so. Could also have some problems of using citations or of having appropriate sources.

10 pts Average at best

Feels like the level of research, application of course content, and analytical depth is lacking. Some of the course ideas are simply incorrect or applied wrong. You can very easily think of better approaches to analysis and discussion. The paper felt like it needed more outside sources to discuss the development project they chose in more detail and with more critical understanding. It feels as though the student needed more time to research and put in more diligent work.

8.75 pts Passing

Minimal requirements are met, but not much else is going on. Course ideas were referred to and some information about a contemporary development project were used, but the interactions are weak or almost non- existent and the paper feels like it desperately needs more attention to detail and deeper analysis.

6.25 pts Failed

Missing certain components of either use of course content, analysis, or sources. More than just a couple sources were inappropriate, revealing a lack of effort and attentiveness to detail as well as a lack of reliable sources of information. Course content application was done in a fleeting manner.

Attachment 2

Karl Polanyi

The Ĉ reat Transformation

The Political and Economic Origins

of Our Time


Joseph E.Stiglitz I N T R O D U C T I O N B Y

Fred Block


To my beloved wife Ilona Duczynska

I dedicate this book which owes all to her help and criticism

Beacon Press 25 Beacon Street Boston, Massachusetts 02108-2892 www.beacon.org

Beacon Press books are published under the auspices of the Unitarian Universalist Association of Congregations.

© 1944) 1957) 2001 by Karl Polanyi First Beacon Paperback edition published in 1957 Second Beacon Paperback edition published in 2001 All rights reserved Printed in the United States of America

05 04 03 02 01 00 8 7 6 5 4 3 2 1

This book is printed on acid-free paper that meets the uncoated paper ANSI/NISO specifications for permanence as revised in 1992.

Text design by Dan Ochsner Composition by Wilsted & Taylor Publishing Services

Library of Congress Cataloging-in-Publication Data

Polanyi, Karl, 1886-1964. The great transformation: the political and economic origins of our time / Karl

Polanyi; foreword by Joseph E. Stiglitz; with a new introd. by Fred Block.—2nd Beacon Paperback ed.

p. cm. Originally published: New York: Farrar & Rinehart, 1944 and reprinted in 1957

by Beacon in Boston. Includes bibliographical references and index. ISBN 0-8070-5643-x (pa: alk. paper) 1. Economic history. 2. Social history. 3. Economics—History. I. Title.

HC53 .P6 2001 330.9—dc2i



Birth of the Liberal Creed

conomic liberalism was the organizing principle of society en- gaged in creating a market system. Born as a mere penchant for

nonbureaucratic methods, it evolved into a veritable faith in man's secular salvation through a self-regulating market. Such fanaticism was the result of the sudden aggravation of the task it found itself com- mitted to: the magnitude of the sufferings that had to be inflicted on innocent persons as well as the vast scope of the interlocking changes involved in the establishment of the new order. The liberal creed as- sumed its evangelical fervor only in response to the needs of a fully de- ployed market economy.

To antedate the policy of laissez-faire, as is often done, to the time when this catchword was first used in France in the middle of the eigh- teenth century would be entirely unhistorical; it can be safely said that not until two generations later was economic liberalism more than a spasmodic tendency. Only by the 1820s did it stand for the three classi- cal tenets: that labor should find its price on the market; that the cre- ation of money should be subject to an automatic mechanism; that goods should be free to flow from country to country without hin- drance or preference; in short, for a labor market, the gold standard, and free trade.

To credit Francois Quesnay with having envisaged such a state of affairs would be little short of fantastic. All that the Physiocrats de- manded in a mercantilistic world was the free export of grain in order to ensure a better income to farmers, tenants, and landlords. For the rest their ordre naturel was no more than a directive principle for the regulation of industry and agriculture by a supposedly all-powerful and omniscient government. Quesnay's Maximes were intended to provide such a government with the viewpoints needed to translate into practical policy the principles of the Tableau on the basis of statis-

[ Hi ]


[ 142 ] The Great Transformation

tical data which he offered to have furnished periodically. The idea of a self-regulating system of markets had never as much as entered his mind.

In England, too, laissez-faire was interpreted narrowly; it meant freedom from regulation in production; trade was not comprised. Cotton manufactures, the marvel of the time, had grown from insig- nificance into the leading export industry of the country—yet the im- port of printed cottons remained forbidden by positive statute. Not- withstanding the traditional monopoly of the home market an export bounty for calico or muslin was granted. Protectionism was so in- grained that Manchester cotton manufacturers demanded, in 1800, the prohibition of the export of yarn, though they were conscious of the fact that this meant loss of business to them. An act passed in 1791 extended the penalties for the export of tools used in manufacturing cotton goods to the export of models or specifications. The free-trade origins of the cotton industry are a myth. Freedom from regulation in the sphere of production was all the industry wanted; freedom in the sphere of exchange was still deemed a danger.

One might suppose that freedom of production would naturally spread from the purely technological field to that of the employment of labor. However, only comparatively late did Manchester raise the demand for free labor. The cotton industry had never been subject to the Statute of Artificers and was consequently not hampered either by yearly wage assessments or by rules of apprenticeship. The Old Poor Law, on the other hand, to which latter-day liberals so fiercely ob- j ected, was a help to the manufacturers; it not only supplied them with parish apprentices, but also permitted them to divest themselves of re- sponsibility towards their dismissed employees, thus throwing much of the burden of unemployment on public funds. Not even the Speen- hamland system was at first unpopular with the cotton manufactur- ers; as long as the moral effect of allowances did not reduce the pro- ductive capacity of the laborer, the industry might have well regarded family endowment as a help in sustaining that reserve army of labour which was urgently required to meet the tremendous fluctuations of trade. At a time when employment in agriculture was still on a year's term, it was of great importance that such a fund of mobile labor should be available to industry in periods of expansion. Hence the at- tacks of the manufacturers on the Act of Settlement which hampered the physical mobility of labor. Yet not before 1795 was the reform of

Birth of the Liberal Creed [ 143 ]

that act carried—only to be replaced by more, not less, paternalism in regard to the Poor Law. Pauperism still remained the concern of squire and countryside; and even harsh critics of Speenhamland like Burke, Bentham, and Malthus regarded themselves less as representatives of industrial progress than as propounders of sound principles of rural administration.

Not until the 1830s did economic liberalism burst forth as a cru- sading passion and laissez-faire become a militant creed. The manu- facturing class was pressing for the amendment of the Poor Law, since it prevented the rise of an industrial working class which depended for its income on achievement. The magnitude of the venture implied in the creation of a free labor market now became apparent, as well as the extent of the misery to be inflicted on the victims of improvement. Ac- cordingly, by the early 1830s a sharp change of mood was manifest. An 1817 reprint of Townsend's Dissertation contained a preface in praise of the foresight with which the author had borne down on the Poor Laws and demanded their complete abandonment; but the editors warned of his "rash and precipitate" suggestion that outdoor relief to the poor should be abolished within so short a term as ten years. Ricardo's Prin- ciples, which appeared in the same year, insisted on the necessity of abolishing the allowance system, but urged strongly that this should be done only very gradually. Pitt, a disciple of Adam Smith, had re- jected such a course on account of the innocent suffering it would en- tail. And as late as 1829, Peel "doubted whether the allowance system could be safely removed otherwise than gradually."* Yet after the polit- ical victory of the middle class, in 1832, the Poor Law Amendment Bill was carried in its most extreme form and rushed into effect without any period of grace. Laissez-faire had been catalyzed into a drive of un- compromising ferocity.

A similar keying up of economic liberalism from academic inter- est to boundless activism occurred in the two other fields of industrial organization: currency and trade. In respect to both, laissez-faire waxed into a fervently held creed when the uselessness of any other but extreme solutions became apparent.

The currency issued was first brought home to the English com- munity in the form of a general rise in the cost of living. Between 1790 and 1815 prices doubled. Real wages fell and business was hit by a

* Webb, S. and B„ op. cit.

[144] The Great Transformation

slump in foreign exchanges. Yet not until the 1825 panic did sound cur- rency become a tenet of economic liberalism, i.e., only when Ricar- dian principles were already so deeply impressed on the minds of poli- ticians and businessmen alike that the "standard" was maintained in spite of the enormous number of financial casualties. This was the be- ginning of that unshakable belief in the automatic steering mecha- nism of the gold standard without which the market system could never have got under way.

International free trade involved no less an act of faith. Its implica- tions were entirely extravagant. It meant that England would depend for her food supply upon overseas sources; would sacrifice her agricul- ture, if necessary, and enter on a new form of life under which she would be part and parcel of some vaguely conceived world unity of the future: that this planetary community would have to be a peaceful one, or, if not, would have to be made safe for Great Britain by the power of the Navy; and that the English nation would face the pros- pects of continuous industrial dislocations in the firm belief in its su- perior inventive and productive ability. However, it was believed that if only the grain of all the world could flow freely to Britain, then her factories would be able to undersell all the world. Again, the measure of the determination needed was set by the magnitude of the proposi- tion and the vastness of the risks involved in complete acceptance. Yet less than complete acceptance spelled certain ruin.

The Utopian springs of the dogma of laissez-faire are but incom- pletely understood as long as they are viewed separately. The three te- nets—competitive labor market, automatic gold standard, and inter- national free trade—formed one whole. The sacrifices involved in achieving any one of them were useless, if not worse, unless the other two were equally secured. It was everything or nothing.

Anybody could see that the gold standard, for instance, meant danger of deadly deflation and, maybe, of fatal monetary stringency in a panic. The manufacturer could, therefore, hope to hold his own only if he was assured of an increasing scale of production at remunerative prices (in other words, only if wages fell at least in proportion to the general fall in prices, so as to allow the exploitation of an ever- expanding world market). Thus the Anti-Corn Law Bill of 1846 was the corollary of Peel's Bank Act of 1844, and both assumed a laboring class which, since the Poor Law Amendment Act of 1834, was forced to

Birth of the Liberal Creed [ 145 ]

give its best under the threat of hunger, so that wages were regulated by the price of grain. The three great measures formed a coherent whole.

The true implications of economic liberalism can now be taken in at a glance. Nothing less than a self-regulating market on a world scale could ensure the functioning of this stupendous mechanism. Unless the price of labor was dependent upon the cheapest grain available, there was no guarantee that the unprotected industries would not suc- cumb in the grip of the voluntarily accepted taskmaster, gold. The expansion of the market system in the nineteenth century was synony- mous with the simultaneous spreading of international free trade, competitive labor market, and gold standard; they belonged together. No wonder that economic liberalism turned almost into a religion once the great perils of this venture were evident.

There was nothing natural about laissez-faire; free markets could never have come into being merely by allowing things to take their course. Just as cotton manufactures—the leading free trade indus- try—were created by the help of protective tariffs, export bounties, and indirect wage subsidies, laissez-faire itself was enforced by the state. The thirties and forties saw not only an outburst of legislation repealing restrictive regulations, but also an enormous increase in the administrative functions of the state, which was now being endowed with a central bureaucracy able to fulfil the tasks set by the adherents of liberalism. To the typical utilitarian, economic liberalism was a so- cial project which should be put into effect for the greatest happiness of the greatest number; laissez-faire was not a method to achieve a thing, it was the thing to be achieved. True, legislation could do noth- ing directly, except by repealing harmful restrictions. But that did not mean that government could do nothing, especially indirectly. On the contrary, the utilitarian liberal saw in government the great agency for achieving happiness. In respect to material welfare, Bentham believed, the influence of legislation "is as nothing" in comparison with the un- conscious contribution of the "minister of the police." Of the three things needed for economic success—inclination, knowledge, and power—the private person possessed only inclination. Knowledge and power, Bentham taught, can be administered much cheaper by government than by private persons. It was the task of the executive to collect statistics and information, to foster science and experiment, as

[146] The Great Transformation

well as to supply the innumerable instruments of final realization in the field of government. Benthamite liberalism meant the replacing of parliamentary action by action through administrative organs.

For this there was ample scope. Reaction in England had not gov- erned—as it did in France—through administrative methods but used exclusively Parliamentary legislation to put political repression into effect. "The revolutionary movements of 1785 and of 1815-1820 were combated, not by departmental action, but by Parliamentary leg- islation. The suspension of the Habeas Corpus Act, the passing of the Libel Act, and of the 'Six Acts' of 1819, were severely coercive measures; but they contain no evidence of any attempt to give a Continental character to administration. In so far as individual liberty was de- stroyed, it was destroyed by and in pursuance of Acts of Parliament."* Economic liberals had hardly gained influence on government, in 1832, when the position changed completely in favor of administrative methods. "The net result of the legislative activity which has charac- terized, though with different degrees of intensity, the period since 1832, has been the building up piecemeal of an administrative ma- chine of great complexity which stands in as constant need of repair, renewal, reconstruction, and adaptation to new requirements as the plant of a modern manufactory"1 This growth of administration re- flected the spirit of utilitarianism. Bentham's fabulous Panopticon, his most personal Utopia, was a star-shaped building from the center of which prison wardens could keep the greatest number of jailbirds under the most effective supervision at the smallest cost to the public. Similarly, in the utilitarian state his favorite principle of "inspectabil- ity" ensured that the minister at the top should keep effective control over all local administration.

The road to the free market was opened and kept open by an enor- mous increase in continuous, centrally organized and controlled in- terventionism. To make Adam Smith's "simple and natural liberty" compatible with the needs of a human society was a most complicated affair. Witness the complexity of the provisions in the innumerable enclosure laws; the amount of bureaucratic control involved in the ad- ministration of the New Poor Laws which for the first time since Queen Elizabeth's reign were effectively supervised by central author -

* Redlich and Hirst, J., Local Government in England, Vol. II, p. 240, quoted Dicey, A. V., Law and Opinion in England, p. 305.

1 Ilbert, Legislative Methods, pp. 212-13, quoted Dicey, A. V., op. cit.

Birth of the Liberal Creed [147]

ity; or the increase in governmental administration entailed in the meritorious task of municipal reform. And yet all these strongholds of governmental interference were erected with a view to the organizing of some simple freedom—such as that of land, labor, or municipal ad- ministration. Just as, contrary to expectation, the invention of labor- saving machinery had not diminished but actually increased the uses of human labor, the introduction of free markets, far from doing away with the need for control, regulation, and intervention, enormously increased their range. Administrators had to be constantly on the watch to ensure the free working of the system. Thus even those who wished most ardently to free the state from all unnecessary duties, and whose whole philosophy demanded the restriction of state activities, could not but entrust the self-same state with the new powers, organs, and instruments required for the establishment of laissez-faire.

This paradox was topped by another. While laissez-faire economy was the product of deliberate State action, subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned; planning was not. The first half of this assertion was shown above to be true, if ever there was conscious use of the executive in the service of a deliberate government-controlled policy, it was on the part of the Benthamites in the heroic period of laissez-faire. The other half was first mooted by that eminent Liberal, Dicey, who made it his task to in- quire into the origins of the "anti-laissez-faire" or, as he called it, the "collectivist" trend in English public opinion, the existence of which was manifest since the late 1860s. He was surprised to find that no evi- dence of the existence of such a trend could be traced save the acts of legislation themselves. More exactly, no evidence of a "collectivist trend" in public opinion prior to the laws which appeared to represent such a trend could be found. As to later "collectivist" opinion, Dicey inferred that the "collectivist" legislation itself might have been its prime source. The upshot of his penetrating inquiry was that there had been complete absence of any deliberate intention to extend the functions of the state, or to restrict the freedom of the individual, on the part of those who were directly responsible for the restrictive en- actments of the 1870s and 1880s. The legislative spearhead of the coun- termovement against a self-regulating market as it developed in the half century following i860 turned out to be spontaneous, undirected by opinion, and actuated by a purely pragmatic spirit.

Economic liberals must strongly take exception to such a view.

[148] The Great Transformation

Their whole social philosophy hinges on the idea that laissez-faire was a natural development, while subsequent anti-laissez-faire legislation was the result of purposeful action on the part of the opponents of lib- eral principles. In these two mutually exclusive interpretations of the double movement, it is not too much to say, the truth or untruth of the liberal creed is involved today.

Liberal writers like Spencer and Sumner, Mises and Lippmann offer an account of the double movement substantially similar to our own, but they put an entirely different interpretation on it. While in our view the concept of a self-regulating market was Utopian, and its progress was stopped by the realistic self-protection of society, in their view all protectionism was a mistake due to impatience, greed, and shortsightedness, but for which the market would have resolved its difficulties. The question as to which of these two views is correct is perhaps the most important problem of recent social history, involv- ing as it does no less than a decision on the claim of economic liberal- ism to be the basic organizing principle in society. Before we turn to the testimony of the facts, a more precise formulation of the issue is needed.

Undoubtedly, our age will be credited with having seen the end of the self-regulating market. The 1920s saw the prestige of economic lib- eralism at its height. Hundreds of millions of people had been afflicted by the scourge of inflation; whole social classes, whole nations had been expropriated. Stabilization of currencies became the focal point in the political thought of peoples and governments; the restoration of the gold standard became the supreme aim of all organized effort in the economic field. The repayment of foreign loans and the return to stable currencies were recognized as the touchstone of rationality in politics; and no private suffering, no restriction of sovereignty, was deemed too great a sacrifice for the recovery of monetary integrity. The privations of the unemployed made jobless by deflation; the desti- tution of public servants dismissed without a pittance; even the relin- quishment of national rights and the loss of constitutional liberties were judged a fair price to pay for the fulfillment of the requirement of sound budgets and sound currencies, these a priori of economic lib- eralism.

The 1930s lived to see the absolutes of the 1920s called in question. After several years during which currencies were practically restored and budgets balanced, the two most powerful countries, Great Britain

Birth of the Liberal Creed [149]

and the United States, found themselves in difficulties, dismissed the gold standard, and started out on the management of their currencies. International debts were repudiated wholesale and the tenets of eco- nomic liberalism were disregarded by the wealthiest and most respect- able. By the middle of the 1930s France and some other states still ad- hering to gold were actually forced off the standard by the Treasuries of Great Britian and the United States, formerly jealous guardians of the liberal creed.

In the 1940s economic liberalism suffered an even worse defeat. Al- though Great Britain and the United States departed from monetary orthodoxy, they retained the principles and methods of liberalism in industry and commerce, the general organization of their economic life. This was to prove a factor in precipitating the war and a handicap in fighting it, since economic liberalism had created and fostered the illusion that dictatorships were bound for economic catastrophe. By virtue of this creed, democratic governments were the last to under- stand the implications of managed currencies and directed trade, even when they happened by force of circumstances to be practicing these methods themselves; also, the legacy of economic liberalism barred the way to timely rearmament in the name of balanced budgets and stable exchanges, which were supposed to provide the only secure foundations of economic strength in war. In Great Britain budgetary and monetary orthodoxy induced adherence to the traditional strate- gic principle of limited commitments upon a country actually faced with total war; in the United States vested interests—such as oil and aluminium—entrenched themselves behind the taboos of liberal business and successfully resisted preparations for an industrial emer- gency. But for the stubborn and impassioned insistence of economic liberals on their fallacies, the leaders of the race as well as the masses of free men would have been better equipped for the ordeal of the age and might perhaps even have been able to avoid it altogether.

But secular tenets of social organization embracing the whole civi- lized world are not dislodged by the events of a decade. Both in Great Britain and in the United States millions of independent business units derived their existence from the principle of laissez-faire. Its spectacular failure in one field did not destroy its authority in all. In- deed, its partial eclipse may have even strengthened its hold since it en- abled its defenders to argue that the incomplete application of its prin- ciples was the reason for every and any difficulty laid to its charge.

[ J50 ] The Great Transformation

This, indeed, is the last remaining argument of economic liberal- ism today. Its apologists are repeating in endless variations that but for the policies advocated by its critics, liberalism would have delivered the goods; that not the competitive system and the self-regulating market, but interference with that system and interventions with that market are responsible for our ills. And this argument does not find support in innumerable recent infringements of economic freedom only, but also in the indubitable fact that the movement to spread the system of self-regulating markets was met in the second half of the nineteenth century by a persistent countermove obstructing the free working of such an economy.

The economic liberal is thus enabled to formulate a case which links the present with the past in one coherent whole. For who could deny that government intervention in business may undermine con- fidence? Who could deny that unemployment would sometimes be less if it were not for out-of-work benefit provided by law? That private business is injured by the competition of public works? That deficit finance may endanger private investments? That paternalism tends to damp business initiative? This being so in the present, surely it was no different in the past. When around the 1870s a general protectionist movement—social and national—started in Europe, who can doubt that it hampered and restricted trade? Who can doubt that factory laws, social insurance, municipal trading, health services, public utili- ties, tariffs, bounties and subsidies, cartels and trusts, embargoes on immigration, on capital movements, on imports—not to speak of less-open restrictions on the movements of men, goods, and payments —must have acted as so many hindrances to the functioning of the competitive system, protracting business depressions, aggravating unemployment, deepening financial slumps, diminishing trade, and damaging severely the self-regulating mechanism of the market? The root of all evil, the liberal insists, was precisely this interference with the freedom of employment, trade and currencies practiced by the various schools of social, national, and monopolistic protectionism since the third quarter of the nineteenth century; but for the unholy alliance of trade unions and labor parties with monopolistic manu- facturers and agrarian interests, which in their shortsighted greed joined forces to frustrate economic liberty, the world would be en- joying today the fruits of an almost automatic system of creating ma- terial welfare. Liberal leaders never weary of repeating that the tragedy

Birth of the Liberal Creed [151]

of the nineteenth century sprang from the incapacity of man to re- main faithful to the inspiration of the early liberals; that the generous initiative of our ancestors was frustrated by the passions of national- ism and class war, vested interests, and monopolists, and above all, by the blindness of the working people to the ultimate beneficence of un- restricted economic freedom to all human interests, including their own. A great intellectual and moral advance was thus, it is claimed; frustrated by the intellectual and moral weaknesses of the mass of the people; what the spirit of Enlightenment had achieved was put to nought by the forces of selfishness. In a nutshell this is the economic liberal's defense. Unless it is refuted, he will continue to hold the floor in the contest of arguments.

Let us focus the issue. It is agreed that the liberal movement, intent on the spreading of the market system, was met by a protective coun- termovement tending toward its restriction; such an assumption, in- deed, underlies our own thesis of the double movement. But while we assert that the application of the absurd notion of a self-regulating market system would have inevitably destroyed society, the liberal ac- cuses the most various elements of having wrecked a great initiative. Unable to adduce evidence of any such concerted effort to thwart the liberal movement, he falls back on the practically irrefutable hypothe- sis of covert action. This is the myth of the anti-liberal conspiracy which in one form or another is common to all liberal interpretations of the events of the 1870s and 1880s. Commonly the rise of nationalism and of socialism is credited with having been the chief agent in that shifting of the scene; manufacturers' associations and monopolists, agrarian interests and trade unions are the villains of the piece. Thus in its most spiritualized form the liberal doctrine hypostasizes the working of some dialectical law in modern society stultifying the …

Attachment 3

Karl Polanyi

The Ĉ reat Transformation

The Political and Economic Origins

of Our Time


Joseph E.Stiglitz I N T R O D U C T I O N B Y

Fred Block


To my beloved wife Ilona Duczynska

I dedicate this book which owes all to her help and criticism

Beacon Press 25 Beacon Street Boston, Massachusetts 02108-2892 www.beacon.org

Beacon Press books are published under the auspices of the Unitarian Universalist Association of Congregations.

© 1944) 1957) 2001 by Karl Polanyi First Beacon Paperback edition published in 1957 Second Beacon Paperback edition published in 2001 All rights reserved Printed in the United States of America

05 04 03 02 01 00 8 7 6 5 4 3 2 1

This book is printed on acid-free paper that meets the uncoated paper ANSI/NISO specifications for permanence as revised in 1992.

Text design by Dan Ochsner Composition by Wilsted & Taylor Publishing Services

Library of Congress Cataloging-in-Publication Data

Polanyi, Karl, 1886-1964. The great transformation: the political and economic origins of our time / Karl

Polanyi; foreword by Joseph E. Stiglitz; with a new introd. by Fred Block.—2nd Beacon Paperback ed.

p. cm. Originally published: New York: Farrar & Rinehart, 1944 and reprinted in 1957

by Beacon in Boston. Includes bibliographical references and index. ISBN 0-8070-5643-x (pa: alk. paper) 1. Economic history. 2. Social history. 3. Economics—History. I. Title.

HC53 .P6 2001 330.9—dc2i



The Self-Regulating Market and the Fictitious Commodities:

Labor, Land, and Money

This cursory outline of the economic system and markets, taken separately, shows that never before our own time were markets more than accessories of economic life. As a rule, the economic system was absorbed in the social system, and whatever principle of behavior predominated in the economy, the presence of the market pattern was found to be compatible with it. The principle of barter or exchange, which underlies this pattern, revealed no tendency to expand at the expense of the rest. Where markets were most highly developed, as un- der the mercantile system, they throve under the control of a central- ized administration which fostered autarchy both in the household of the peasantry and in respect to national life. Regulation and markets, in effect, grew up together. The self-regulating market was unknown; indeed the emergence of the idea of self-regulation was a complete re- versal of the trend of development. It is in the light of these facts that the extraordinary assumptions underlying a market economy can alone be fully comprehended.

A market economy is an economic system controlled, regulated, and directed by market prices; order in the production and distribu- tion of goods is entrusted to this self-regulating mechanism. An econ- omy of this kind derives from the expectation that human beings be- have in such a way as to achieve maximum money gains. It assumes markets in which the supply of goods (including services) available at a definite price will equal the demand at that price. It assumes the presence of money, which functions as purchasing power in the hands of its owners. Production will then be controlled by prices, for the profits of those who direct production will depend upon them; the distribution of the goods also will depend upon prices, for prices form incomes, and it is with the help of these incomes that the goods pro- duced are distributed amongst the members of society. Under these


[ 72 ] The Great Transformation

assumptions order in the production and distribution of goods is en- sured by prices alone.

Self-regulation implies that all production is for sale on the market and that all incomes derive from such sales. Accordingly, there are markets for all elements of industry, not only for goods (always in- cluding services) but also for labor, land, and money, their prices be- ing called respectively commodity prices, wages, rent, and interest. The very terms indicate that prices form incomes: interest is the price for the use of money and forms the income of those who are in the po- sition to provide it; rent is the price for the use of land and forms the income of those who supply it; wages are the price for the use of labor power and form the income of those who sell it; commodity prices, finally, contribute to the incomes of those who sell their entrepreneur- ial services, the income called profit being actually the difference be- tween two sets of prices, the price of the goods produced and their cost, i.e., the price of the goods necessary to produce them. If these conditions are fulfilled, all incomes derive from sales on the market, and incomes will be just sufficient to buy all the goods produced.

A further group of assumptions follows in respect to the state and its policy. Nothing must be allowed to inhibit the formation of mar- kets, nor must incomes be permitted to be formed otherwise than through sales. Neither must there be any interference with the adjust- ment of prices to changed market conditions—whether the prices are those of goods, labor, land, or money. Hence there must not only be markets for all elements of industry, but no measure or policy must be countenanced that would influence the action of these markets. Nei- ther price, nor supply, nor demand must be fixed or regulated; only such policies and measures are in order which help to ensure the self- regulation of the market by creating conditions which make the mar- ket the only organizing power in the economic sphere.*

To realize fully what this means, let us return for a moment to the mercantile system and the national markets which it did so much to develop. Under feudalism and the guild system land and labor formed part of the social organization itself (money had yet hardly developed into a major element of industry). Land, the pivotal element in the feudal order, was the basis of the military, judicial, administrative, and

* Henderson, H. D., Supply and Demand, 1922. The function of the market is two- fold: the apportionment of factors between different uses and the organizing of the forces influencing aggregate supplies of factors.

The Self-Regulating Market and the Fictitious Commodities [ 73 ]

political system; its status and function were determined by legal and customary rules. Whether its possession was transferable or not, and if so, to whom and under what restrictions; what the rights of property entailed; to what uses some types of land might be put—all these questions were removed from the organization of buying and selling, and subjected to an entirely different set of institutional regulations.

The same was true of the organization of labor. Under the guild system, as under every other economic system in previous history, the motives and circumstances of productive activities were embedded in the general organization of society. The relations of master, journey- man, and apprentice; the terms of the craft; the number of appren- tices; the wages of the workers were all regulated by the custom and rule of the guild and the town. What the mercantile system did was merely to unify these conditions either through statute as in England, or through the "nationalization" of the guilds as in France. As to land, its feudal status was abolished only insofar as it was linked with pro- vincial privileges; for the rest, land remained extra commercium, in England as in France. Up to the time of the Great Revolution of 1789, landed estate remained the source of social privilege in France, and even after that time in England Common Law on land was essentially medieval. Mercantilism, with all its tendency toward commercializa- tion, never attacked the safeguards which protected these two basic el- ements of production—labor and land—from becoming the objects of commerce. In England the "nationalization" of labor legislation through the Statute of Artificers (1563) and the Poor Law (1601) re- moved labor from the danger zone, and the anti-enclosure policy of the Tudors and early Stuarts was one consistent protest against the principle of the gainful use of landed property.

That mercantilism, however emphatically it insisted on commer- cialization as a national policy, thought of markets in a way exactly contrary to market economy, is best shown by its vast extension of state intervention in industry. On this point there was no difference between mercantilists and feudalists, between crowned planners and vested interests, between centralizing bureaucrats and conservative particularists. They disagreed only on the methods of regulation: guilds, towns, and provinces appealed to the force of custom and tra- dition, while the new state authority favored statute and ordinance. But they were all equally averse to the idea of commercializing labor and land—the precondition of market economy. Craft guilds and feu-

[ 74 ] The Great Transformation

dal privileges were abolished in France only in 1790; in England the Statute of Artificers was repealed only in 1813-14, the Elizabethan Poor Law in 1834. Not before the last decade of the eighteenth century was, in either country, the establishment of a free labor market even dis- cussed; and the idea of the self-regulation of economic life was utterly beyond the horizon of the age. The mercantilist was concerned with the development of the resources of the country, including full em- ployment, through trade and commerce; the traditional organization of land and labor he took for granted. He was in this respect as far re- moved from modern concepts as he was in the realm of politics, where his belief in the absolute powers of an enlightened despot was tem- pered by no intimations of democracy. And just as the transition to a democratic system and representative politics involved a complete re- versal of the trend of the age, the change from regulated to self- regulating markets at the end of the eighteenth century represented a complete transformation in the structure of society.

A self-regulating market demands nothing less than the institu- tional separation of society into an economic and a political sphere. Such a dichotomy is, in effect, merely the restatement, from the point of view of society as a whole, of the existence of a self-regulating mar- ket. It might be argued that the separateness of the two spheres obtains in every type of society at all times. Such an inference, however, would be based on a fallacy. True, no society can exist without a system of some kind which ensures order in the production and distribution of goods. But that does not imply the existence of separate economic in- stitutions; normally, the economic order is merely a function of the social order. Neither under tribal nor under feudal nor under mercan- tile conditions was there, as we saw, a separate economic system in so- ciety. Nineteenth-century society, in which economic activity was iso- lated and imputed to a distinctive economic motive, was a singular departure.

Such an institutional pattern could not have functioned unless so- ciety was somehow subordinated to its requirements. A market econ- omy can exist only in a market society. We reached this conclusion on general grounds in our analysis of the market pattern. We can now specify the reasons for this assertion. A market economy must com- prise all elements of industry, including labor, land, and money. (In a market economy money also is an essential element of industrial life and its inclusion in the market mechanism has, as we will see, far-

The Self-Regulating Market and the Fictitious Commodities [ 75 ]

reaching institutional consequences.) But labor and land are no other than the human beings themselves of which every society consists and the natural surroundings in which it exists. To include them in the market mechanism means to subordinate the substance of society it- self to the laws of the market.

We are now in the position to develop in a more concrete form the institutional nature of a market economy, and the perils to society which it involves. We will, first, describe the methods by which the market mechanism is enabled to control and direct the actual ele- ments of industrial life; secondly, we will try to gauge the nature of the effects of such a mechanism on the society which is subjected to its action.

It is with the help of the commodity concept that the mechanism of the market is geared to the various elements of industrial life. Com- modities are here empirically defined as objects produced for sale on the market; markets, again, are empirically defined as actual contacts between buyers and sellers. Accordingly, every element of industry is regarded as having been produced for sale, as then and then only will it be subject to the supply-and-demand mechanism interacting with price. In practice this means that there must be markets for every ele- ment of industry; that in these markets each of these elements is orga- nized into a supply and a demand group; and that each element has a price which interacts with demand and supply. These markets—and they are numberless—are interconnected and form One Big Market.*

The crucial point is this: labor, land, and money are essential ele- ments of industry; they also must be organized in markets; in fact, these markets form an absolutely vital part of the economic system. But labor, land, and money are obviously not commodities; the postu- late that anything that is bought and sold must have been produced for sale is emphatically untrue in regard to them. In other words, ac- cording to the empirical definition of a commodity they are not com- modities. Labor is only another name for a human activity which goes with life itself, which in its turn is not produced for sale but for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized; land is only another name for nature, which is not produced by man; actual money, finally, is merely a token of pur- chasing power which, as a rule, is not produced at all, but comes into

* Hawtrey, G. R., op. cit. Its function is seen by Hawtrey in making "the relative market values of all commodities mutually consistent."

[ 76 ] The Great Transformation

being through the mechanism of banking or state finance. None of them is produced for sale. The commodity description of labor, land, and money is entirely fictitious.

Nevertheless, it is with the help of this fiction that the actual mar- kets for labor, land, and money are organized*; these are being actually bought and sold on the market; their demand and supply are real mag- nitudes; and any measures or policies that would inhibit the forma- tion of such markets would ipso facto endanger the self-regulation of the system. The commodity fiction, therefore, supplies a vital orga- nizing principle in regard to the whole of society affecting almost all its institutions in the most varied way, namely, the principle according to which no arrangement or behavior should be allowed to exist that might prevent the actual functioning of the market mechanism on the lines of the commodity fiction.

Now, in regard to labor, land, and money such a postulate cannot be upheld. To allow the market mechanism to be sole director of the fate of human beings and their natural environment indeed, even of the amount and use of purchasing power, would result in the demoli- tion of society. For the alleged commodity "labor power" cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the bearer of this peculiar commodity. In disposing of a man's labor power the sys- tem would, incidentally, dispose of the physical, psychological, and moral entity "man" attached to that tag. Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes de- filed, rivers polluted, military safety jeopardized, the power to pro- duce food and raw materials destroyed. Finally, the market adminis- tration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disas- trous to business as floods and droughts in primitive society. Un- doubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human

* Marx's assertion of the fetish character of the value of commodities refers to the exchange value of genuine commodities and has nothing in common with the ficti- tious commodities mentioned in the text.

The Self-Regulating Market and the Fictitious Commodities [ 77 ]

and natural substance as well as its business organization was pro- tected against the ravages of this satanic mill.

The extreme artificiality of market economy is rooted in the fact that the process of production itself is here organized in the form of buying and selling. No other way of organizing production for the market is possible in a commercial society* During the late Middle Ages industrial production for export was organized by wealthy bur- gesses, and carried on under their direct supervision in the home town. Later, in the mercantile society, production was organized by merchants and was not restricted any more to the towns; this was the age of "putting out" when domestic industry was provided with raw materials by the merchant capitalist, who controlled the process of production as a purely commercial enterprise. It was then that indus- trial production was definitely and on a large scale put under the orga- nizing leadership of the merchant. He knew the market, the volume as well as the quality of the demand; and he could vouch also for the sup- plies which, incidentally, consisted merely of wool, woad, and, some- times, the looms or the knitting frames used by the cottage industry. If supplies failed it was the cottager who was worst hit, for his employ- ment was gone for the time; but no expensive plant was involved and the merchant incurred no serious risk in shouldering the responsibil- ity for production. For centuries this system grew in power and scope until in a country like England the wool industry, the national staple, covered large sectors of the country where production was organized by the clothier. He who bought and sold, incidentally, provided for production—no separate motive was required. The creation of goods involved neither the reciprocating attitudes of mutual aid; nor the concern of the householder for those whose needs are left to his care; nor the craftsman's pride in the exercise of his trade; nor the satisfac- tion of public praise—nothing but the plain motive of gain so familiar to the man whose profession is buying and selling. Up to the end of the eighteenth century, industrial production in Western Europe was a mere accessory to commerce.

As long as the machine was an inexpensive and unspecific tool there was no change in this position. The mere fact that the cottager could produce larger amounts than before within the same time might induce him to use machines to increase earnings, but this fact

* Cunningham, W., "Economic Change," in Cambridge Modern History, Vol. I.

[ 78 ] The Great Transformation

in itself did not necessarily affect the organization of production. Whether the cheap machinery was owned by the worker or by the merchant made some difference in the social position of the parties and almost certainly made a difference in the earnings of the worker, who was better off as long as he owned his tools; but it did not force the merchant to become an industrial capitalist, or to restrict himself to lending his money to such persons as were. The vent of goods rarely gave out; the greater difficulty continued to be on the side of supply of raw materials, which was sometimes unavoidably interrupted. But, even in such cases, the loss to the merchant who owned the machines was not substantial. It was not the coming of the machine as such but the invention of elaborate and therefore specific machinery and plant which completely changed the relationship of the merchant to pro- duction. Although the new productive organization was introduced by the merchant—a fact which determined the whole course of the transformation—the use of elaborate machinery and plant involved the development of the factory system and therewith a decisive shift in the relative importance of commerce and industry in favor of the lat- ter. Industrial production ceased to be an accessory of commerce or- ganized by the merchant as a buying and selling proposition; it now involved long-term investment with corresponding risks. Unless the, continuance of production was reasonably assured, such a risk was not bearable.

But the more complicated industrial production became, the more numerous were the elements of industry the supply of which had to be safeguarded. Three of these, of course, were of outstanding im- portance: labor, land, and money. In a commercial society their supply could be organized in one way only: by being made available for pur- chase. Hence, they would have to be organized for sale on the mar- ket—in other words, as commodities. The extension of the market mechanism to the elements of industry—labor, land, and money— was the inevitable consequence of the introduction of the factory sys- tem in a commercial society. The elements of industry had to be on sale.

This was synonymous with the demand for a market system. We know that profits are ensured under such a system only if self- regulation is safeguarded through interdependent competitive mar- kets. As the development of the factory system had been organized as

The Self-Regulating Market and the Fictitious Commodities [ 79 ]

part of a process of buying and selling, therefore labor, land, and money had to be transformed into commodities in order to keep pro- duction going. They could, of course, not be really transformed into commodities, as actually they were not produced for sale on the mar- ket. But the fiction of their being so produced became the organizing principle of society. Of the three, one stands out: labor is the technical term used for human beings, insofar as they are not employers but em- ployed; it follows that henceforth the organization of labor would change concurrently with the organization of the market system. But as the organization of labor is only another word for the forms of life of the common people, this means that the development of the market system would be accompanied by a change in the organization of soci- ety itself. All along the line, human society had become an accessory of the economic system.

We recall our parallel between the ravages of the enclosures in En- glish history and the social catastrophe which followed the Industrial Revolution. Improvements, we said, are, as a rule, bought at the price of social dislocation. If the rate of dislocation is too great, the commu- nity must succumb in the process. The Tudors and early Stuarts saved England from the fate of Spain by regulating the course of change so that it became bearable and its effects could be canalized into less de- structive avenues. But nothing saved the common people of England from the impact of the Industrial Revolution. A blind faith in sponta- neous progress had taken hold of people's minds, and with the fanati- cism of sectarians the most enlightened pressed forward for boundless and unregulated change in society. The effects on the lives of the peo- ple were awful beyond description. Indeed, human society would have been annihilated but for protective counter-moves which blunted the action of this self-destructive mechanism.

Social history in the nineteenth century was thus the result of a double movement: the extension of the market organization in respect to genuine commodities was accompanied by its restriction in respect to fictitious ones. While on the one hand markets spread all over the face of the globe and the amount of goods involved grew to unbeliev- able dimensions, on the other hand a network of measures and poli- cies was integrated into powerful institutions designed to check the action of the market relative to labor, land, and money. While the or- ganization of world commodity markets, world capital markets, and

[ 80 ] The Great Transformation

world currency markets under the aegis of the gold standard gave an unparalleled momentum to the mechanism of markets, a deep-seated movement sprang into being to resist the pernicious effects of a market-controlled economy Society protected itself against the perils inherent in a self-regulating market system—this was the one com- prehensive feature in the history of the age.