by Karl Polanyi
The Continental worker needed protection not so much against the impact of the Industrial Revolution—in the social sense there never was such a thing on the Continent—as against the normal action of factory and labor market conditions. He achieved it mainly by the help of legislation, while his British comrades relied more on voluntary association—trade unions—and their power to monopolize labor. Social insurance came, relatively, very much sooner on the Continent than in England. The difference was readily explained by the Continental’s political bent, and by the comparatively early extension of the vote to the working masses on the Continent. While economically the difference between compulsory and voluntary methods of protection—legislation versus unionism—can be easily overrated, politically its consequences were great. On the Continent trade unions were a creation of the political party of the working class; in England the political party was a creation of the trade unions. While on the Continent unionism became more or less socialist, in England even political socialism remained essentially trade unionist. Universal suffrage, therefore, which in England tended to increase national unity, had sometimes the opposite effect on the Continent. There, rather than in England, did Pitt’s and Peel’s, Tocqueville’s and Macaulay’s prophecies come true that popular government would involve a danger to the economic system.
Economically, English and Continental methods of social protection led to almost identical results. They achieved what had been intended: the disruption of the market for the factor of production known as labor power. Such a market could serve its purpose only if wages fell together with prices. In human terms such a postulate implied for the worker extreme instability of earnings, utter absence of professional standards, abject readiness to be shoved and pushed about indiscriminately, complete dependence on the whims of the market. Mises justly argued that if workers “did not act as trade unionists, but reduced their demands and changed their locations and occupations according to the requirements of the labour market, they could eventually find work.” This sums up the position under a system based on the postulate of the commodity character of labor. It is not for the commodity to decide where it should be offered for sale, to what purpose it should be used, at what price it should be allowed to change hands, and in what manner it should be consumed or destroyed. “It has occurred to no one,” this consistent liberal wrote, “that lack of wages would be a better term than lack of employment, for what the unemployed person misses is not work but the remuneration of work.” Mises was right, though he should not have claimed originality; 150 years prior to him Bishop Whately said: “When a man begs for work he asks not for work but for wages.” Yet, it is true that technically speaking “unemployment in the capitalist countries is due to the fact that the policy both of the government and of the trade unions aims at maintaining a level of wages which is out of harmony with the existing productivity of labour.” For how could there be unemployment, Mises asked, but for the fact that the workers are “not willing to work at the wages they could get in the labour market for the particular work they were able and willing to perform?” This makes clear what the employers’ demand for mobility of labor and flexibility of wages really means: precisely that which we circumscribed above as a market in which human labor is a commodity.
The natural aim of all social protection was to destroy such an institution and make its existence impossible. Actually, the labor market was allowed to retain its main function only on condition that wages and conditions of work, standards and regulations should be such as would safeguard the human character of the alleged commodity, labor. To argue that social legislation, factory laws, unemployment insurance, and, above all, trade unions have not interfered with the mobility of labor and the flexibility of wages, as is sometimes done, is to imply that those institutions have entirely failed in their purpose, which was exactly that of interfering with the laws of supply and demand in respect to human labor, and removing it from the orbit of the market.
* Mair, L. P., An African People in the Twentieth Century, 1934.
† Loeb, E. M., “The Distribution and Function of Money in Early Society,” in Essays in Anthropology, 1936.
‡ Herskovits, M. J., The Economic Life of Primitive Peoples, 1940.
* Thurnwald, R. C., op. cit.
† Brinkmann, C., “Das soziale System des Kapitalismus,” in Grundriss der Sozialökonomik, 1924.
‡ Toynbee, A., Lectures on the Industrial Revolution, 1887, p. 98.
* Heckscher, E. F., op. cit., Vol. II, p. 168.
* Dicey, A. V., op. cit., p. 226.
* Cole, G. D. H., Robert Owen, 1925, a work on which we have heavily drawn.
* More, H., The Lancashire Colliery Girl, May, 1795; cf. Hammond, J. L. and B., The Town Labourer, 1917, p. 230.
* Cf. Drucker, P. F., The End of Economic Man, 1939, p. 93, on the English Evangelicals; and The Future of Industrial Man, 1942, pp. 21 and 194, on status and function.
* Knowles, L., Industrial and Commercial Revolutions in Great Britain during the Nineteenth Century, 1926.
C H A P T E R F I F T E E N
Market and Nature
What we call land is an element of nature inextricably interwoven with man’s institutions. To isolate it and form a market for it was perhaps the weirdest of all the undertakings of our ancestors.
Traditionally, land and labor are not separated; labor forms part of life, land remains part of nature, life and nature form an articulate whole. Land is thus tied up with the organizations of kinship, neighborhood, craft, and creed—with tribe and temple, village, guild, and church. One Big Market, on the other hand, is an arrangement of economic life which includes markets for the factors of production. Since these factors happen to be indistinguishable from the elements of human institutions, man and nature, it can be readily seen that market economy involves a society the institutions of which are subordinated to the requirements of the market mechanism.
The proposition is as utopian in respect to land as in respect to labor. The economic function is but one of many vital functions of land. It invests man’s life with stability; it is the site of his habitation; it is a condition of his physical safety; it is the landscape and the seasons. We might as well imagine his being born without hands and feet as carrying on his life without land. And yet to separate land from man and to organize society in such a way as to satisfy the requirements of a real-estate market was a vital part of the utopian concept of a market economy.
Again, it is in the field of modern colonization that the true significance of such a venture becomes manifest. Whether the colonist needs land as a site for the sake of the wealth buried in it, or whether he merely wishes to constrain the native to produce a surplus of food and raw materials, is often irrelevant; nor does it make much difference whether the native works under the direct supervision of the colonist or only under some form of indirect compulsion, for in every and any case the social and cultural system of native life must be first shattered.
There is close analogy between the colonial situation today and that of Western Europe a century or two ago. But the mobilization of land which in exotic regions may be compressed into a few years or decades may have taken as many centuries in Western Europe.
The challenge came from the growth of other than purely commercial forms of capitalism. There was, starting in England with the Tudors, agricultural capitalism with its need for an individualized treatment of the land, including conversions and enclosures. There was industrial capitalism which—in France as in England—was primarily rural and needed sites for its mills and laborers’ settlements, since the beginning of the eighteenth century. Most powerful of all, though affecting more the use of the land than its ownership, there was the rise of industrial towns with their need for practically unlimited food and raw material supplies in the nineteenth century.
Superficially, there was little likeness in the responses to these challenges, yet they were merely stages in the subjection of the surface of the planet
to the needs of an industrial society. The first stage was the commercialization of the soil, mobilizing the feudal revenue of the land. The second was the forcing up of the production of food and organic raw materials to serve the needs of a rapidly growing industrial population on a national scale. The third was the extension of such a system of surplus production to overseas and colonial territories. With this last step land and its produce were finally fitted into the scheme of a self-regulating world market.
Commercialization of the soil was only another name for the liquidation of feudalism which started in Western urban centers as well as in England in the fourteenth century and was concluded some five hundred years later in the course of the European revolutions, when the remnants of villeinage were abolished. To detach man from the soil meant the dissolution of the body economic into its elements so that each element could fit into that part of the system where it was most useful. The new system was first established alongside the old which it tried to assimilate and absorb, by securing a grip on such soil as was still bound up in precapitalistic ties. The feudal sequestration of the land was abolished. “The aim was the elimination of all claims on the part of neighbourhood or kinship organizations, especially those of virile aristocratic stock, as well as of the church—claims, which exempted land from commerce or mortgage.”* Some of this was achieved by individual force and violence, some by revolution from above or below, some by war and conquest, some by legislative action, some by administrative pressure, some by spontaneous small-scale action of private persons over long stretches of time. Whether the dislocation was swiftly healed or whether it caused an open wound in the body social depended primarily on the measures taken to regulate the process. Powerful factors of change and adjustment were introduced by the governments themselves. Secularization of church lands, for instance, was one of the fundaments of the modern state up to the time of the Italian Risorgimento and, incidentally, one of the chief means of the ordered transference of land into the hands of private individuals.
The biggest single steps were taken by the French Revolution and by the Benthamite reforms of the 1830s and 1840s. “The condition most favourable to the prosperity of agriculture exists,” wrote Bentham, “when there are no entails, no unalienable endowments, no common lands, no right or redemptions, no tithes.…” Such freedom in dealing with property, and especially property in land, formed an essential part of the Benthamite conception of individual liberty. To extend this freedom in one way or another was the aim and effect of legislation such as the Prescriptions Acts, the Inheritance Act, the Fines and Recoveries Act, the Real Property Act, the general Enclosure Act of 1801 and its successors,† as well as the Copyhold Acts from 1841 up to 1926. In France and parts of the Continent the Code Napoléon instituted middle-class forms of property, making land a commerciable good and making mortgage a private civil contract.
The second step, overlapping the first, was the subordination of land to the needs of a swiftly expanding urban population. Although the soil cannot be physically mobilized, its produce can, if transportation facilities and the law permit. “Thus the mobility of goods to some extent compensates the lack of interregional mobility of the factors; or (what is really the same thing) trade mitigates the disadvantages of the unsuitable geographical distribution of the productive facilities.” ‡ Such a notion was entirely foreign to the traditional outlook. “Neither with the ancients, nor during the early Middle Ages—this should be emphatically asserted—were the goods of every day life regularly bought and sold.”* Surpluses of grain were supposed to provision the neighborhood, especially the local town; corn markets up to the fifteenth century had a strictly local organization. But the growth of towns induced landlords to produce primarily for sale on the market and—in England—the growth of the metropolis compelled authorities to loosen the restrictions on the corn trade and allow it to become regional, though never national.
Eventually agglomeration of the population in the industrial towns of the second half of the eighteenth century changed the situation completely—first on a national, then on a world scale.
To effect this change was the true meaning of free trade. The mobilization of the produce of the land was extended from the neighboring countryside to tropical and subtropical regions—the industrial-agricultural division of labor was applied to the planet. As a result, peoples of distant zones were drawn into the vortex of change the origins of which were obscure to them, while the European nations became dependent for their everyday activities upon a not yet ensured integration of the life of mankind. With free trade the new and tremendous hazards of planetary interdependence sprang into being.
The scope of social defense against all-round dislocation was as broad as the front of attack. Though common law and legislation speeded up change at times, at others they slowed it down. However, common law and statute law were not necessarily acting in the same direction at any given time.
In the advent of the labor market common law played mainly a positive part—the commodity theory of labor was first stated emphatically not by economists but by lawyers. On the issue of labor combinations and the law of conspiracy, too, the common law favored a free labor market, though this meant restricting the freedom of association of organized workers.
But, in respect to land, the common law shifted its role; it first encouraged, later opposed change. During the sixteenth and seventeenth centuries, more often than not common law insisted on the owner’s right to improve his land profitably even if this involved grave dislocation in habitations and employment. On the Continent this process of mobilization involved, as we know, the reception of Roman law, while in England common law held its own and succeeded in bridging the gap between restricted medieval property rights and modern individual property without sacrificing the principle of judge-made law vital to constitutional liberty. Since the eighteenth century, on the other hand, common law in land acted as a conserver of the past in the face of modernizing legislation. But eventually, the Benthamites had their way, and, between 1830 and 1860, freedom of contract was extended to the land. This powerful trend was reversed only in the 1870s when legislation altered its course radically. The “collectivist” period had begun.
The inertia of the common law was now deliberately enhanced by statutes expressly passed in order to protect the habitations and occupations of the rural classes against the effects of freedom of contract. A comprehensive effort was launched to ensure some degree of health and salubrity in the housing of the poor, providing them with allotments, giving them a chance to escape from the slums and to breathe the fresh air of nature, the “gentleman’s park.” Wretched Irish tenants and London slum-dwellers were rescued from the grip of the laws of the market by legislative acts designed to protect their habitation against the juggernaut, improvement. On the Continent it was mainly statute law and administrative action that saved the tenant, the peasant, the agricultural laborer from the most violent effects of urbanization. Prussian conservatives such as Rodbertus, whose Junker socialism influenced Marx, were blood brothers to the Tory-Democrats of England.
Presently, the problem of protection arose in regard to the agricultural populations of whole countries and continents. International free trade, if unchecked, must necessarily eliminate ever-larger compact bodies of agricultural producers.* This inevitable process of destruction was very much aggravated by the inherent discontinuity in the development of modern means of transportation, which are too expensive to be extended into new regions of the planet unless the prize to be gained is high. Once the great investments involved in the building of steamships and railroads came to fruition, whole continents were opened up and an avalanche of grain descended upon unhappy Europe. This was contrary to classical prognostication. Ricardo had erected it into an axiom that the most fertile land was settled first. This was turned to scorn in a spectacular manner when the railways found more fertile land in the antipodes. Central Europe, facing utter destruction of its rural society, was forced
to protect its peasantry by introducing corn laws.
But if the organized states of Europe could protect themselves against the backwash of international free trade, the politically unorganized colonial peoples could not. The revolt against imperialism was mainly an attempt on the part of the exotic peoples to achieve the political status necessary to shelter themselves from the social dislocations caused by European trade policies. The protection that the white man could easily secure for himself through the sovereign status of his communities was out of the reach of the colored man as long as he lacked the prerequisite, political government.
The trading classes sponsored the demand for mobilization of the land. Cobden set the landlords of England aghast with his discovery that farming was “business” and that those who were broke must clear out. The working classes were won over to free trade as soon as it became apparent that it made food cheaper. Trade unions became the bastion of anti-agrarianism and revolutionary socialism branded the peasantry of the world an indiscriminate mass of reactionaries. International division of labor was undoubtedly a progressive creed; and its opponents were often recruited from amongst those whose judgment was vitiated by vested interests or lack of natural intelligence. The few independent and disinterested minds who discovered the fallacies of unrestricted free trade were too few to make an impression.