by Karl Polanyi
And yet the consequences were no less real for not being consciously recognized. In effect, the great influence wielded by landed interests in Western Europe and the survival of feudal forms of life in Central and Eastern Europe during the nineteenth century were readily explained by the vital protective function of these forces in retarding the mobilization of the land. The question was often raised: What enabled the feudal aristocracy of the Continent to maintain their sway in the middle-class state once they had shed the military, judicial, and administrative functions to which they owed their ascendency? The theory of “survivals” was sometimes adduced as an explanation, according to which functionless institutions or traits may continue to exist by virtue of inertia. Yet it would be truer to say that no institution ever survives its function—when it seems to do so, it is because it serves in some other function, or functions, which need not include the original one. Thus feudalism and landed conservatism retained their strength as long as they served a purpose that happened to be that of restricting the disastrous effects of the mobilization of land. By this time it had been forgotten by free traders that land formed part of the territory of the country, and that the territorial character of sovereignty was not merely a result of sentimental associations, but of massive facts, including economic ones. “In contrast to the nomadic peoples, the cultivator commits himself to improvements fixed in a particular place. Without such improvements human life must remain elementary, and little removed from that of animals. And how large a role have these fixtures played in human history! It is they, the cleared and cultivated lands, the houses, and the other buildings, the means of communication, the multifarious plant necessary for production, including industry and mining, all the permanent and immovable improvements that tie a human community to the locality where it is. They cannot be improvised, but must be built up gradually by generations of patient effort, and the community cannot afford to sacrifice them and start afresh elsewhere. Hence that territorial character of sovereignty, which permeates our political conceptions.”* For a century these obvious truths were ridiculed.
The economic argument could be easily expanded so as to include the conditions of safety and security attached to the integrity of the soil and its resources—such as the vigor and stamina of the population, the abundance of food supplies, the amount and character of defence materials, even the climate of the country which might suffer from the denudation of forests, from erosions and dust bowls, all of which, ultimately, depend upon the factor land, yet none of which respond to the supply-and-demand mechanism of the market. Given a system entirely dependent upon market functions for the safeguarding of its existential needs, confidence will naturally turn to such forces outside the market system which are capable of ensuring common interests jeopardized by that system. Such a view is in keeping with our appreciation of the true sources of class influence: instead of trying to explain developments that run counter to the general trend of the time by the (unexplained) influence of reactionary classes, we prefer to explain the influence of such classes by the fact that they, even though incidentally, stand for developments only seemingly contrary to the general interest of the community. That their own interests are often all too well served by such a policy offers only another illustration of the truth that classes manage to profit disproportionately from the services they may happen to render to the commonalty.
An instance was offered by Speenhamland. The squire who ruled the village struck upon a way of slowing down the rise in rural wages and the threatening dislocation of the traditional structure of village life. In the long run, the method chosen was bound to have the most nefarious results. Yet the squires would not have been able to maintain their practices, unless by doing so they had assisted the country as a whole to meet the landslide of the Industrial Revolution.
On the continent of Europe, again, agrarian protectionism was a necessity. But the most active intellectual forces of the age were engaged in an adventure which happened to shift their angle of vision so as to hide from them the true significance of the agrarian plight. Under the circumstances, a group able to represent the endangered rural interests could gain an influence out of proportion to their numbers. The protectionist countermovement actually succeeded in stabilizing the European countryside and in weakening that drift toward the towns which was the scourge of the time. Reaction was the beneficiary of a socially useful function which it happened to perform. The identical function which allowed reactionary classes in Europe to make play with traditional sentiments in their fight for agrarian tariffs was responsible in America about a half-century later for the success of the TVA and other progressive social techniques. The same needs of society which benefited democracy in the New World strengthened the influence of the aristocracy in the Old.
Opposition to mobilization of the land was the sociological background of that struggle between liberalism and reaction that made up the political history of Continental Europe in the nineteenth century. In this struggle the military and the higher clergy were allies of the landed classes, who had almost completely lost their more immediate functions in society. These classes were now available for any reactionary solution of the impasse to which market economy and its corollary, constitutional government, threatened to lead since they were not bound by tradition and ideology to public liberties and parliamentary rule.
Briefly, economic liberalism was wedded to the liberal state, while landed interests were not—this was the source of their permanent political significance on the Continent, which produced the crosscurrents of Prussian politics under Bismarck, fed clerical and militarist revanche in France, ensured court influence for the aristocracy in the Hapsburg empire, and made church and army the guardians of crumbling thrones. Since the connection outlasted the critical two generations laid down by John Maynard Keynes as the practical alternative to eternity, land and landed property were now credited with a congenital bias for reaction. Eighteenth-century England with its Tory free traders and agrarian pioneers was forgotten as were the Tudor engrossers and their revolutionary methods of making money from the land; the Physiocratic landlords of France and Germany with their enthusiasm for free trade were obliterated in the public mind by the modern prejudice of the everlasting backwardness of the rural scene. Herbert Spencer, with whom one generation sufficed as a sample of eternity, simply identified militarism with reaction. The social and technological adaptability recently shown by the Nipponese, the Russian, or the Nazi army would have been inconceivable to him.
Such thoughts were narrowly time-bound. The stupendous industrial achievements of market economy had been bought at the price of great harm to the substance of society. The feudal classes found therein an occasion of retrieving some of their lost prestige by turning advocates of the virtues of the land and its cultivators. In literary romanticism nature had made its alliance with the past; in the agrarian movement of the nineteenth-century feudalism was trying not unsuccessfully to recover its past by presenting itself as the guardian of man’s natural habitat, the soil. Had the danger not been genuine, the stratagem could not have worked.
But army and church gained prestige also by being available for the “defence of law and order,” which now became highly vulnerable, while the ruling middle class was not fitted to ensure this requirement of the new economy. The market system was more allergic to rioting than any other economic system we know. Tudor governments relied on riots to call attention to local complaints; a few ringleaders might be hanged, otherwise no harm was done. The rise of the financial market meant a complete break with such an attitude; after 1797 rioting ceases to be a popular feature of London life, its place is gradually taken by meetings at which, at least in principle, the hands are counted which otherwise would be raining blows.* The Prussian king who proclaimed that to keep the peace was the subject’s first and foremost duty, became famous for this paradox; yet very soon it was a commonplace. In the nineteenth century, breaches of the peace, if committed by armed crowds, were
deemed an incipient rebellion and an acute danger to the state; stocks collapsed and there was no bottom in prices. A shooting affray in the streets of the metropolis might destroy a substantial part of the nominal national capital. And yet the middle classes were now unsoldierly; popular democracy prided itself on making the masses vocal; and, on the Continent, the bourgeoisie still clung to the recollections of its revolutionary youth when it had boldly faced a tyrannic aristocracy on the barricades. Eventually, the peasantry, least contaminated by the liberal virus, were reckoned the only stratum that would stand in their persons “for law and order.” One of the functions of reaction was understood to be to keep the working classes in their place, so that markets should not be thrown into a panic. Though this service was only very infrequently required, the availability of the peasantry as the defenders of property rights was an asset to the agrarian camp.
The history of the 1920s would be otherwise inexplicable. When, in Central Europe, the social structure broke down under the strain of war and defeat, the working class alone was available for the task of keeping things going. Everywhere power was thrust upon the trade unions and Social Democratic parties: Austria, Hungary, even Germany, were declared republics although no active republican party had ever been known to exist in any of these countries before. But hardly had the acute danger of dissolution passed and the services of the trade unions become superfluous than the middle classes tried to exclude the working class from all influence on public life. This is known as the counterrevolutionary phase of the postwar period. Actually, there was never any serious danger of a Communist regime since the workers were organized in parties and unions actively hostile to the Communists. (Hungary had a Bolshevik episode literally forced upon the country when defense against French invasion left no alternative to the nation.) The peril was not Bolshevism, but disregard of the rules of market economy on the part of trade unions and workingclass parties, in an emergency. For under a market economy otherwise harmless interruptions of public order and trading habits might constitute a lethal threat* since they could cause the breakdown of the economic regime upon which society depended for its daily bread. This explained the remarkable shift in some countries from a supposedly imminent dictatorship of the industrial workers to the actual dictatorship of the peasantry. Right through the 1920s the peasantry determined economic policy in a number of states in which they normally played but a modest role. They now happened to be the only class available to maintain law and order in the modern high-strung sense of the term.
The fierce agrarianism of postwar Europe was a side light on the preferential treatment accorded to the peasant class for political reasons. From the Lappo movement in Finland to the Austrian Heimwehr the peasants proved the champions of market economy; this made them politically indispensable. The scarcity of food in the first postwar years to which their ascendency was sometimes credited had little to do with this. Austria, for instance, in order to benefit the peasants financially, had to lower her food standards by maintaining duties for grain, though she was heavily dependent upon imports for her food requirements. But the peasant interest had to be safeguarded at all cost even though agrarian protectionism might mean misery to the towndwellers and an unreasonably high cost of production to the exporting industries. The formerly uninfluential class of peasants gained in this manner an ascendency quite disproportionate to their economic importance. Fear of Bolshevism was the force which made their political position impregnable. And yet that fear, as we saw, was not fear of a working-class dictatorship—nothing faintly similar was on the horizon—but rather the dread of a paralysis of market economy, unless all forces were eliminated from the political scene that, under duress, might set aside the rules of the market game. As long as the peasants were the only class able to eliminate these forces, their prestige stood high and they could hold the urban middle class in ransom. As soon as the consolidation of the power of the state and—even before that—the forming of the urban lower middle class into storm troops by the fascists, freed the bourgeoisie from dependence upon the peasantry, the latter’s prestige was quickly deflated. Once the “internal enemy” in town and factory had been neutralized or subdued, the peasantry was relegated to its former modest position in industrial society.
The big landowners’ influence did not share in this eclipse. A more constant factor worked in their favor—the increasing military importance of agricultural self-sufficiency. The Great War had brought the basic strategic facts home to the public, and thoughtless reliance on the world market gave way to a panicky hoarding of food-producing capacity. The “re-agrarianization” of Central Europe started by the Bolshevik scare was completed in the sign of autarchy. Besides the argument of the “internal enemy” there was now the argument of the “external enemy.” Liberal economists, as usual, saw merely a romantic aberration induced by unsound economic doctrines, where in reality towering political events were awakening even the simplest minds to the irrelevance of economic considerations in the face of the approaching dissolution of the international system. Geneva continued its futile attempts to convince the peoples that they were hoarding against imaginary perils, and that if only all acted in unison free trade could be restored and would benefit all. In the curiously credulous atmosphere of the time many took for granted that the solution of the economic problem (whatever that may mean) would not only assuage the threat of war but actually avert that threat forever. A hundred years’ peace had created an insurmountable wall of illusions which hid the facts. The writers of that period excelled in lack of realism. The nation-state was deemed a parochial prejudice by A. J. Toynbee, sovereignty a ridiculous illusion by Ludwig von Mises, war a mistaken calculation in business by Norman Angell. Awareness of the essential nature of the problems of politics sank to an unprecedented low point.
Free trade which, in 1846, had been fought and won on the Corn Laws, was eighty years later fought over again and this time lost on the same issue. The problem of autarchy haunted market economy from the start. Accordingly, economic liberals exorcised the specter of war and naïvely based their case on the assumption of an indestructible market economy. It went unnoticed that their arguments merely showed how great was the peril of a people which relied for its safety on an institution as frail as the self-regulating market. The autarchy movement of the 1920s was essentially prophetic: it pointed to the need for adjustment to the fact of a vanishing order. The Great War had shown up the danger and men acted accordingly; but since they acted ten years later, the connection between cause and effect was discounted as unreasonable. “Why protect oneself against passed dangers?” was the comment of many contemporaries. This faulty logic befogged not only an understanding of autarchy but, even more important, that of fascism. Actually, both were explained by the fact that, once the common mind has received the impress of an acute danger, fear remains latent, as long as its ultimate cause is not removed.
We claimed that the nations of Europe never overcame the shock of the war experience which unexpectedly confronted them with the perils of interdependence. In vain was trade resumed, in vain did swarms of international conferences display the idylls of peace, and dozens of governments declare for the principle of freedom of trade—no people could forget that unless they owned their food and raw material sources themselves or were certain of military access to them, neither sound currency nor unassailable credit would rescue them from helplessness. Nothing could be more logical than the consistency with which this fundamental consideration shaped the policy of communities. The source of the peril was not removed. Why then expect fear to subside?
A similiar fallacy tricked those critics of fascism—they formed the great majority—who described fascism as a freak devoid of political rationale. Mussolini, it was said, claimed to have averted Bolshevism in Italy, while statistics proved that for more than a year before the March on Rome the strike wave had subsided. Armed workers, it was conceded, occupied the factories in 1921. But was that a reason for disarming them i
n 1923, when they had long climbed down again from the walls where they had mounted guard? Hitler claimed he had saved Germany from Bolshevism. But could it not be shown that the flood of unemployment which preceded his chancellorship had ebbed away before his rise to power? To claim that he averted that which no longer existed when he came, it was argued, was contrary to the law of cause and effect, which must also hold in politics.
Actually, in Germany as in Italy, the story of the immediate postwar period proved that Bolshevism had not the slightest chance of success. But it also showed conclusively that in an emergency the working class, its trade unions and parties, might disregard the rules of the market which established freedom of contract and the sanctity of private property as absolutes—a possibility which must have the most deleterious effects on society, discouraging investments, preventing the accumulation of capital, keeping wages on an unremunerative level, endangering the currency, undermining foreign credit, weakening confidence and paralyzing enterprise. Not the illusionary danger of a communist revolution, but the undeniable fact that the working classes were in the position to force possibly ruinous interventions, was the source of the latent fear which, at a crucial juncture, burst forth in the fascist panic.
The dangers to man and nature cannot be neatly separated. The reactions of the working class and the peasantry to market economy both led to protectionism, the former mainly in the form of social legislation and factory laws, the latter in agrarian tariffs and land laws. Yet there was this important difference: in an emergency, the farmers and peasants of Europe defended the market system, which working-class policies endangered. While the crisis of the inherently unstable system was brought on by both wings of the protectionist movement, the social strata connected with the land were inclined to compromise with the market system, while the broad class of labor did not shrink from breaking its rules and challenging it outright.