The Great Transformation

by Karl Polanyi

  In some cases at least, the opposite of exploitation, if we may say so, started the disintegrating culture contact. The forced land allotment made to the American Indians, in 1887, benefited them individually, according to our financial scale of reckoning. Yet the measure all but destroyed the race in its physical existence—the outstanding case of cultural degeneration on record. The moral genius of a John Collier retrieved the position almost half a century later by insisting on the need for a return to tribal land holdings. Today the North American Indian is in some places, at least, a live community again; not economic betterment, but social restoration wrought the miracle. The shock of a devastating culture contact was recorded by the pathetic birth of the famous Ghost Dance version of the Pawnee Hand Game about 1890, exactly at the time when improving economic conditions made the aboriginal culture of these Red Indians anachronistic. Furthermore, the fact that not even an increasing population—the other economic index—need exclude a cultural catastrophe is equally borne out by anthropological research. Natural rates of increase of population may actually be an index either of cultural vitality or of cultural degradation. The original meaning of the word “proletarian,” linking fertility and mendicity, is a striking expression of this ambivalence.

  Economistic prejudice was the source both of the crude exploitation theory of early capitalism and of the no less crude, though more scholarly, misapprehension which later denied the existence of a social catastrophe. The significant implication of this latter and more recent interpretation of history was the rehabilitation of laissez-faire economy. For if liberal economics did not cause disaster, then protectionism, which robbed the world of the benefits of free markets, was a wanton crime. The very term “Industrial Revolution” was now frowned upon as conveying an exaggerated idea of what was essentially a slow process of change. No more had happened, these scholars insisted, than that a gradual unfolding of the forces of technological progress transformed the lives of the people; undoubtedly, many suffered in the course of the change but on the whole the story was one of continuous improvement. This happy outcome was the result of the almost unconscious working of economic forces which did their beneficial work in spite of the interference of impatient parties who exaggerated the unavoidable difficulties of the time. The inference was no less than a denial that danger threatened society from the new economy. Had the revised history of the Industrial Revolution been true to fact, the protectionist movement would have lacked objective justification and laissez-faire would have been vindicated. The materialistic fallacy in regard to the nature of social and cultural catastrophe thus bolstered the legend that all the ills of the time had been caused by our lapse from economic liberalism.

  Briefly, not single groups or classes were the source of the so-called collectivist movement, though the outcome was decisively influenced by the character of the class interests involved. Ultimately, what made things happen were the interests of society though their defense—and exploitation!—fell to one section of the population in preference to another. It appears reasonable to group our account of the protective movement not around class interests, but around the social interests imperilled by the market.

  The danger points were given by the main directions of the attack. The competitive labor market hit the bearer of labor power, namely, man. International free trade was primarily a threat to the largest industry dependent upon nature, namely, agriculture. The gold standard imperiled productive organizations depending for their functioning on the relative movement of prices. In each of these fields markets were developed, which implied a latent threat to society in some vital aspects of its existence.

  Markets for labor, land, and money are easy to distinguish; but it is not so easy to distinguish those parts of a culture the nucleus of which is formed by human beings, their natural surroundings, and productive organizations, respectively. Man and nature are practically one in the cultural sphere; and the money aspect of productive enterprise enters only into one socially vital interest, namely, the unity and cohesion of the nation. Thus, while the markets for the fictitious commodities labor, land, and money were distinct and separate, the threats to society which they involved were not always strictly separable.

  In spite of this an outline of the institutional development of Western society during the critical eighty years (1834–1914) may refer to each of these danger points in similar terms. For whether man, nature, or productive organization was concerned, market organization grew into a peril, and definite groups or classes pressed for protection. In each case the considerable time lag between English, Continental, and American development had important bearings, and yet by the turn of the century the protectionist countermove had created an analogous situation in all Western countries.

  Accordingly, we will deal separately with the defense of man, nature, and productive organization—a movement of self-preservation as the result of which a more closely knit type of society emerged, yet one which stood in danger of total disruption.

  * Marx, K., “Nationalökonomie und Philosophie,” in Der Historische Materialismus, 1932.

  * Millin, Mrs. S. G., The South Africans, 1926.

  † Goldenweiser, A., Anthropology, 1937.

  ‡ Goldenweiser, A., ibid.

  * Thurnwald, R. C., Black and White in East Africa; The Fabric of a New Civilization, 1935.

  C H A P T E R F O U R T E E N

  Market and Man

  To separate labor from other activities of life and to subject it to the laws of the market was to annihilate all organic forms of existence and to replace them by a different type of organization, an atomistic and individualistic one.

  Such a scheme of destruction was best served by the application of the principle of freedom of contract. In practice this meant that the noncontractual organizations of kinship, neighborhood, profession, and creed were to be liquidated since they claimed the allegiance of the individual and thus restrained his freedom. To represent this principle as one of noninterference, as economic liberals were wont to do, was merely the expression of an ingrained prejudice in favor of a definite kind of interference, namely, such as would destroy noncontractual relations between individuals and prevent their spontaneous reformation.

  This effect of the establishment of a labor market is conspicuously apparent in colonial regions today. The natives are to be forced to make a living by selling their labor. To this end their traditional institutions must be destroyed, and prevented from reforming, since, as a rule, the individual in primitive society is not threatened by starvation unless the community as a whole is in a like predicament. Under the kraal-land system of the Kaffirs, for instance, “destitution is impossible: whosoever needs assistance receives it unquestioningly.”* No Kwakiutl “ever ran the least risk of going hungry.”† “There is no starvation in societies living on the subsistence margin.”‡ The principle of freedom from want was equally acknowledged in the Indian village community and, we might add, under almost every and any type of social organization up to about the beginning of sixteenth-century Europe, when the modern ideas on the poor put forth by the humanist Vives were argued before the Sorbonne. It is the absence of the threat of individual starvation which makes primitive society, in a sense, more humane than market economy, and at the same time less economic. Ironically, the white man’s initial contribution to the black man’s world mainly consisted in introducing him to the uses of the scourge of hunger. Thus the colonists may decide to cut the breadfruit trees down in order to create an artificial food scarcity or may impose a hut tax on the native to force him to barter away his labor. In either case the effect is similar to that of Tudor enclosures with their wake of vagrant hordes. A League of Nations report mentioned with due horror the recent appearance of that ominous figure of the sixteenth-century European scene, the “masterless man,” in the African bush.* During the late Middle Ages he had been found only in the “interstices” of society.† Yet he was the forerunner of the nomadic laborer of the nineteenth c
entury.‡

  Now, what the white man may still occasionally practice in remote regions today, namely, the smashing up of social structures in order to extract the element of labor from them, was done in the eighteenth century to white populations by white men for similar purposes. Hobbes’s grotesque vision of the state—a human Leviathan whose vast body was made up of an infinite number of human bodies—was dwarfed by the Ricardian construct of the labor market: a flow of human lives the supply of which was regulated by the amount of food put at their disposal. Although it was acknowledged that there existed a customary standard below which no laborer’s wages could sink, this limitation was thought to become effective only if the laborer was reduced to the choice of being left without food or of offering his labor in the market for the price it would fetch. This explains, incidentally, an otherwise inexplicable omission of the classical economists, namely, why only the penalty of starvation, not also the allurement of high wages, was deemed capable of creating a functioning labor market. Here also colonial experience confirmed their own. For the higher the wages the smaller the inducement to exertion on the part of the native, who unlike the white man was not compelled by his cultural standards to make as much money as he possibly could. The analogy was all the more striking as the early laborer, too, abhorred the factory, where he felt degraded and tortured, like the native who often resigned himself to work in our fashion only when threatened with corporal punishment, if not physical mutilation. The Lyons manufacturers of the eighteenth century urged low wages primarily for social reasons.* Only an overworked and downtrodden laborer would forgo to associate with his like in order to escape from that state of personal servitude under which he could be made to do whatever his master required from him. Legal compulsion and parish serfdom as in England, the rigors of an absolutist labor police as on the Continent, indentured labor as in the early Americas were the prerequisite of the “willing worker.” But the final stage was reached with the application of “nature’s penalty,” hunger. In order to release it, it was necessary to liquidate organic society, which refused to let the individual starve.

  The protection of society, in the first instance, falls to the rulers, who can directly enforce their will. However, it is all too easily assumed by economic liberals that economic rulers tend to be beneficial, while political rulers do not. Adam Smith did not seem to think so when he urged that direct British rule should replace administration through a chartered company in India. Political rulers, he argued, would have parallel interests with the ruled whose wealth would swell their revenue, while the merchant’s interests were naturally antagonistic to those of his customers.

  By interest and inclination it fell to the landlords of England to protect the lives of the common people from the onrush of the Industrial Revolution. Speenhamland was a moat erected in defence of the traditional rural organization, when the turmoil of change was sweeping the countryside, and, incidentally, making agriculture a precarious industry. In their natural reluctance to bow to the needs of the manufacturing towns, the squires were the first to make a stand in what proved to be a century’s losing fight. Yet their resistance was not in vain; it averted ruin for several generations and allowed time for almost complete readjustment. Over a critical span of forty years it retarded economic progress, and when, in 1834, the Reform Parliament abolished Speenhamland, the landlords shifted their resistance to the factory laws. The church and the manor were now rousing the people against the mill-owner whose predominance would make the cry for cheap food irresistible, and thus, indirectly, threaten to sap rents and tithes. Oastler, for one, was “a Churchman, a Tory, and a Protectionist”*, moreover, he was also a Humanitarian. So were also, with varying mixtures of these ingredients of Tory socialism, the other great fighters in the factory movement: Sadler, Southey, and Lord Shaftesbury. But the premonition of threatening pecuniary losses which prompted the bulk of their followers proved only too well grounded: Manchester exporters were soon clamoring for lower wages involving cheaper grain—the repeal of Speenhamland and the growth of the factories actually prepared the way for the success of the Anti-Corn Law agitation, in 1846. Yet, for adventitious reasons, the ruin of agriculture was postponed in England for a whole generation. Meanwhile Disraeli grounded Tory socialism on a protest against the Poor Law Reform Act, and the conservative landlords of England forced radically new techniques of life upon an industrial society. The Ten Hours Bill of 1847, which Karl Marx hailed as the first victory of socialism, was the work of enlightened reactionaries.

  The laboring people themselves were hardly a factor in this great movement the effect of which was, figuratively speaking, to allow them to survive the Middle Passage. They had almost as little to say in the determination of their own fate as the black cargo of Hawkins’s ships. Yet it was precisely this lack of active participation on the part of the British working class in deciding its own fate that determined the course of English social history and made it, for better or for worse, so different from that of the Continent.

  There is a peculiar touch about the undirected excitements, the fumblings and blunders of a nascent class, the true nature of which history has long since revealed. Politically, the British working class was defined by the Parliamentary Reform Act of 1832, which refused them the vote; economically, by the Poor Law Reform Act of 1834, which excluded them from relief and distinguished them from the pauper. For some time to come the industrial working-class-to-be was uncertain whether its salvation did not lie after all in a return to rural existence and conditions of handicraft. In the two decades following Speenhamland its endeavors were focused on the stopping of the free use of machinery either by the enforcement of the apprenticeship clauses of the Statute of Artificers or by direct action as in Luddism. This backward-looking attitude lingered on as an undercurrent all through the Owenite movement till the end of the forties, when the Ten Hours Bill, the eclipse of Chartism, and the beginning of the Golden Age of capitalism obliterated the vision of the past. Up to that time the British working class in statu nascendi was a riddle unto itself; and only if one follows with understanding its half-unconscious stirrings is it possible to gauge the immensity of the loss England suffered through the exclusion of the working class from an equal share in national life. When Owenism and Chartism had burned themselves out, England had become poorer by that substance out of which the Anglo-Saxon ideal of a free society could have drawn its strength for centuries to come.

  Even if the Owenite movement had resulted only in inconsiderable local activities, it would have formed a monument to the creative imagination of the race, and even if Chartism had never penetrated beyond the confines of that nucleus which conceived of the idea of a “national holiday” to gain the rights of the people, it would have shown that some of the people were still able to dream their own dreams, and were taking the measure of a society which had forgotten the shape of man. Yet neither the one nor the other was the case. Owenism was not the inspiration of a minute sect, nor was Chartism restricted to a political élite; both movements comprised hundreds of thousands of craftsmen and artisans, laborers and working people, and with their vast following ranked among the biggest social movements in modern history. And yet different as they were and similar only in the measure of their failure, they served to prove how inevitable from the first the necessity was of protecting man against the market.

  The Owenite Movement originally was neither political nor working class. It represented the cravings of the common people, smitten by the coming of the factory, to discover a form of existence which would make man master of the machine. Essentially, it aimed at what would appear to us as a bypassing of capitalism. Such a formula would, of course, be bound to be somewhat misleading, since the organizing role of capital and the nature of a self-regulating market were still undisclosed. Yet it expresses perhaps best the spirit of Owen, who emphatically was not an enemy of the machine. In spite of the machine, he believed, man should remain his own employer; the principle of cooperati
on or “union” would solve the problem of the machine without sacrificing either individual freedom or social solidarity, either man’s dignity or his sympathy with his fellows.

  The strength of Owenism was that its inspiration was eminently practical, and yet its methods were based on an appreciation of man as a whole. Although the problems were intrinsically those of everyday life such as the quality of food, housing, and education, the level of wages, the avoidance of unemployment, support in sickness and the like, the issues involved were as broad as the moral forces they appealed to. The conviction that, if only the right method was found, man’s existence could be restored enabled the roots of the movement to penetrate into that deeper layer where personality itself is formed. There rarely was a less intellectualized social movement of a similar scope; the convictions of those engaged in it imbued even their seemingly most trivial activities with meaning, so that no set creed was needed. Indeed their faith was prophetic, since they insisted on methods of reconstruction which transcended market economy.

  Owenism was a religion of industry the bearer of which was the working class.* Its wealth of forms and initiatives was unrivaled. Practically, it was the beginning of the modern trade union movement. Cooperative societies were founded, mainly engaged in retail to their members. These were not, of course, regular consumers’ cooperatives, but rather stores backed by enthusiasts determined to devote the profits of the venture to the furtherance of Owenite plans, preferably to the establishment of Villages of Cooperation. “Their activities were quite as much educational and propagandist as commercial; their aim was the creation of the New Society by their associated effort.” The “Union Shops” erected by members of trade unions were more in the nature of producers’ cooperatives, unemployed artisans could find work there, or, in case of strikes, earn some money in lieu of strike pay. In the Owenite “Labor Exchange” the idea of the cooperative store was developed into an institution sui generis. At the heart of the Exchange or Bazaar there was reliance on the complementary nature of the crafts; by providing for one another’s needs, artisans would emancipate themselves, it was thought, from the ups and downs of the market; this was, later, accompanied by the use of labor notes which had a considerable circulation. Such a device might seem fantastic today; but in Owen’s time the character not only of wage labor, but also of banknotes, was still unexplored. Socialism was not essentially different from those projects and inventions with which the Benthamite movement was teeming. Not only the rebellious opposition, but also the respectable middle class was still in an experimentative mood. Jeremy Bentham himself invested in Owen’s futuristic education scheme in New Lanark, and earned a dividend. The Owenite Societies proper were associations or clubs designed to support plans of Villages of Cooperation such as we described in connection with the relief of the poor; this was the origin of the agricultural producers’ cooperative, an idea which had a long and distinguished career. The first national producers’ organization with syndicalist aims was the Operative Builders’ Union, which attempted to regulate the building trade directly by creating “buildings upon the most extensive scale,” introducing a currency of its own, and exhibiting the means of realizing “the great association for the emancipation of the productive classes.” The industrial producers’ cooperatives of the nineteenth century date from this venture. It was from the Builders’ Union or Guild and its “Parliament” that the even more ambitious Consolidated Trades Union sprang, which for a short time comprised almost a million workers and artisans in its loose federation of trade unions and cooperative societies. Its idea was industrial revolt by peaceful means, which will appear as no contradiction once we remember that in the messianistic dawn of their movement the mere consciousness of their mission was supposed to make the aspirations of the working people irresistible. The martyrs of Tolpuddle belonged to a rural branch of this organization. Propaganda for factory legislation was carried on by Regeneration Societies; while later on ethical societies were founded, the forerunners of the secularist movement. The idea of nonviolent resistance was fully developed in their midst. Like Saint-Simonianism in France, Owenism in England showed all the characteristics of spiritual inspiration; but while Saint-Simon worked for a renaissance of Christianity, Owen was the first opponent of Christianity amongst modern working-class leaders. The consumers’ cooperatives of Great Britain which found imitators all over the world were, of course, the most eminently practical offshoot of Owenism. That its impetus was lost—or, rather, was maintained only in the peripheric sphere of the consumers’ movement—was the greatest single defeat of spiritual forces in the history of industrial England. Yet a people, which after the moral debasement of the Speenhamland period, still possessed the resilience required for a creative effort so imaginative and sustained, must have disposed of almost boundless intellectual and emotional vigor.