The Great Transformation by Karl Polanyi
Polanyi traced the origins of the competitive market and asserted that the market economy we see in modern society today is the result of a ‘mercantile’ system imposed by state. Their aim was to end the non-competitive trade, which Polanyi termed ‘external’ and ‘local’ trade.
Frankly, I found that Polanyi paid too much homage to primitive societies. He tend to describe it as a utopia where trading is underpinned by redistribution and reciprocity. I find him committing a fallacy of false analogy. One cannot compare the primitive society to that of a modern capitalist economy. In chapter 4, he exalts the virtues of centrality, which we now know as central economic governance. However, there is a fundamental difference between primitive and modern society - size. The sheer amount of transactions and trade in modern economy cannot be supported by the social binding mechanism of trust. Indeed, if his studies of pre-modern societies are correct, tribes can and should have a central system of storage and distribution since economic information can be easily collected and then coordinated according to needs. However, how do governments of today gather information of demand and supply in the market today? We should bear in mind that humans have limited cognition.
His theory of state intervention as the main reason for today’s market competition also lacked nuance. He argues that society is becoming embedded within economic institutions, instead of the other way around as with pre-modern societies. I argue that our society has merely evolved into a separation of 3 spheres - social, economic and political. The 3 spheres are mutually influencing and are by large, not independent of one another. His argument of the societal mechanism of social power/prestige (involving reciprocity and redistribution) can be seen in the social arenas of our everyday lives. And I would also argue that it has major repercussions and implications on one’s economic power.