The Great Transformation

by Karl Polanyi

  (f) Economic systems, as a rule, are embedded in social relations; distribution of material goods is ensured by noneconomic motives.

  Primitive economy is “a social affair, dealing with a number of persons as parts of an interlocking whole” (Thurnwald, Economics, p. xii). This is equally true of wealth, work, and barter. “Primitive wealth is not of an economic but of a social nature” (ibid.). Labor is capable of “effective work” because it is “integrated into an organized effort by social forces” (Malinowski, Argonauts, p. 157). “Barter of goods and services is carried on mostly within a standing partnership, or associated with definite social ties or coupled with a mutuality in non-economic matters” (Malinowski, Crime and Custom, p. 39).

  The two main principles which govern economic behavior appear to be reciprocity and storage-cum-redistribution:

  “The whole tribal life is permeated by a constant give and take” (Malinowski, Argonauts, p. 167). “To-day’s giving will be recompensed by to-morrow’s taking. This is the outcome of the principle of reciprocity which pervades every relation of primitive life.…” (Thurnwald, Economics, p. 106). In order to make such reciprocity possible, a certain “duality” of institutions or “symmetry of structure will be found in every savage society, as the indispensable basis of reciprocal obligations” (Malinowski, Crime and Custom, p. 25). “The symmetrical partition of their chambers of spirits is based with the Bánaro on the structure of their society, which is similarly symmetrical” (Thurnwald, Die Gemeinde der Bánaro, 1921, p. 378).

  Thurnwald discovered that apart from, and sometimes combined with, such reciprocating behavior, the practice of storage and redistribution was of the most general application from the primitive hunting tribe to the largest empires. Goods were centrally collected and then distributed to the members of the community, in a great variety of ways. Among Micronesian and Polynesian peoples, for instance, “the kings as the representatives of the first clan, receive the revenue, redistributing it later in the form of largesse among the population” (Thurnwald, Economics, p. xii). This distributive function is a prime source of the political power of central agencies (ibid., p. 107).

  (g) Individual food collection for the use of his own person and family does not form part of early man’s life.

  The classics assumed that pre-economic man had to take care of himself and his family. This assumption was revived by Karl Bücher in his pioneering work around the turn of the century and gained wide currency. Recent research has unanimously corrected Bücher on this point. (Firth, Primitive Economics of the New Zealand Maori, pp. 12, 206, 350; Thurnwald, Economics, pp. 170, 268, and Die menschliche Gesellschaft, Vol. III, p. 146; Herskovits, The Economic Life of Primitive Peoples, 1940, p. 34; Malinowski, Argonauts, p. 167, footnote.)

  (h) Reciprocity and redistribution are principles of economic behavior which apply not only to small primitive communities, but also to large and wealthy empires.

  “Distribution has its own particular history, starting from the most primitive life of the hunting tribes.” “The case is different with societies with a more recent and more pronounced stratification.…” “The most impressive example is furnished by the contact of herdsmen with agricultural people.” “The conditions in these societies differ considerably. But the distributive function increases with the growing political power of a few families and the rise of despots. The chief receives the gifts of the peasant, which have now become ‘taxes,’ and distributes them among his officials, especially those attached to his court.”

  “This development involved more complicated systems of distribution.… All archaic states—ancient China, the Empire of the Incas, the Indian kingdoms, Egypt, Babylonia—made use of a metal currency for taxes and salaries but relied mainly on payments in kind stored in granaries and warehouses … and distributed to officials, warriors, and the leisured classes, that is, to the non-producing part of the population. In this case distribution fulfils an essentially economic function” (Thurnwald, Economics, pp. 106–8).

  “When we speak of feudalism, we are usually thinking of the Middle Ages in Europe.… However, it is an institution, which very soon makes its appearance in stratified communities. The fact that most transactions are in kind and that the upper stratum claims all the land or cattle, are the economic causes of feudalism …” (ibid., p. 195).

  T O C H A P T E R F I V E

  7. Selected References to “Evolution of the Market Pattern”

  Economic liberalism labored under the delusion that its practices and methods were the natural outgrowth of a general law of progress. To make them fit the pattern, the principles underlying a self-regulating market were projected backward into the whole history of human civilization. As a result the true nature and origins of trade, markets, and money, of town life and national states were distorted almost beyond recognition.

  (a) Individual acts of “truck, barter, and exchange” are only exceptionally practiced in primitive society.

  “Barter is originally completely unknown. Far from being possessed with a craving for barter primitive man has an aversion to it” (Bücher, Die Entstehung der Volkswirtschaft, 1904, p. 109). “It is impossible, for example, to express the value of a bonito-hook in terms of a quantity of food, since no such exchange is ever made and would be regarded by the Tikopia as fantastic.… Each kind of object is appropriate to a particular kind of social situation” (Firth, op. cit., p. 340).

  (b) Trade does not arise within a community; it is an external affair involving different communities.

  “In its beginnings commerce is a transaction between ethnic groups; it does not take place between members of the same tribe or of the same community, but it is, in the oldest social communities an external phenomenon, being directed only towards foreign tribes” (M. Weber, General Economic History, p. 195). “Strange though it may seem, medieval commerce developed from the beginnings under the influence, not of local, but of export trade” (Pirenne, Economic and Social History of Medieval Europe, p. 142). “Trade over long distances was responsible for the economic revival of the Middle Ages” (Pirenne, Medieval Cities, p. 125).

  (c) Trade does not rely on markets; it springs from one-sided carrying, peaceful or otherwise.

  Thurnwald established the fact that the earliest forms of trade simply consisted in procuring and carrying objects from a distance. Essentially it is a hunting expedition. Whether the expedition is warlike as in a slave hunt or as in piracy, depends mainly on the resistance that is encountered (op. cit., pp. 145, 146). “Piracy was the initiator of maritime trade among the Greeks of the Homeric era, as among the Norse Vikings; for a long time the two vocations developed in concert” (Pirenne, Economic and Social History, p. 109).

  (d) The presence or absence of markets not an essential characteristic; local markets have no tendency to grow.

  “Economic systems, possessing no markets, need not on this account have any other characteristics in common” (Thurnwald, Die menschliche Gesellschaft, Vol. III, p. 137). On the early markets “only definite quantities of definite objects could be bartered for one another” (ibid., p. 137). “Thurnwald deserves special praise for his observation that primitive money and trade are essentially of social rather than of economic significance” (Loeb, “The Distribution and Function of Money in Early Society,” in Essays in Anthropology, p. 153). Local markets did not develop out of “armed trade” or “silent barter” or other forms of foreign trade, but out of the “peace” maintained on a meeting place for the limited purpose of neighborhood exchange. “The aim of the local market was to supply the provisions necessary for daily life to the population settled in the districts. This explains their being held weekly, the very limited circle of attraction and the restriction of their activity to small retail operations” (Pirenne, op. cit., Ch. 4, “Commerce to the End of the Thirteenth Century,” p. 97). Even at a later stage local markets, in contrast to fairs, showed no tendency to grow: “The market supplied the wants of the locality and was atten
ded only by the inhabitants of the neighbourhood; its commodities were country produce and the wares of every-day life” (Lipson, The Economic History of England, 1935, Vol. I, p. 221). Local trade “usually developed to begin with as an auxiliary occupation of peasants and persons engaged in house industry, and in general as a seasonal occupation.…” (Weber, op. cit., p. 195). “It would be natural to suppose, at first glance, that a merchant class grew up little by little in the midst of the agricultural population. Nothing, however, gives credence to this theory” (Pirenne, Medieval Cities, p. 111).

  (e) Division of labor does not originate in trade or exchange, but in geographical, biological, and other noneconomic facts.

  “The division of labour is by no means the result of complicated economics, as rationalistic theory will have it. It is principally due to physiological differences of sex and age” (Thurnwald, Economics, p. 212). “Almost the only division of labour is between men and women” (Herskovits, op. cit., p. 13). Another way in which division of labor may spring from biological facts is the case of the symbiosis of different ethnic groups. “The ethnic groups are transformed into professional-social ones” through the formation of “an upper layer” in society. “There is thus created an organization based, on the one hand, on the contributions and services of the dependent class, and, on the other, on the power of distribution possessed by the heads of families in the leading stratum” (Thurnwald, Economics, p. 86). Herein we meet one of the origins of the state (Thurnwald, Sozialpsyschische Abläufe, p. 387).

  (f) Money is not a decisive invention; its presence or absence need not make an essential difference to the type of economy.

  “The mere fact that a tribe used money differentiated it very little economically from other tribes who did not” (Loeb, op. cit., p. 154). “If money is used at all, its function is quite different from that fulfilled in our civilization. It never ceases to be concrete material, and it never becomes an entirely abstract representation of value” (Thurnwald, Economics, p. 107). The hardships of barter played no role in the “invention” of money. “This old view of the classical economists runs counter to ethnological investigations” (Loeb, op. cit., p. 167, footnote 6). On account of the specific utilities of the commodities which function as money as well as their symbolic significance as attributes of power, it is not possible to regard “economic possession from a one-sided rationalistic point of view” (Thurnwald, Economics). Money may, for instance, be in use for the payment of salaries and taxes only (ibid., p. 108) or it may be used to pay for a wife, for blood money, or for fines. “We can thus see that in these examples of pre-State conditions the evalution of objects of value results from the amount of the customary contributions, from the position held by the leading personages, and from the concrete relationship in which they stand to the commoners of their several communities” (Thurnwald, Economics, p. 263).

  Money, like markets, is in the main an external phenomenon, the significance of which to the community is determined primarily by trade relations. “The idea of money [is] usually introduced from outside” (Loeb, op. cit., p. 156). “The function of money as a general medium of exchange originated in foreign trade” (Weber, op. cit., p. 238).

  (g) Foreign trade originally not trade between individuals but between collectivities.

  Trade is a “group undertaking”; it concerns “articles obtained collectively.” Its origin lies in “collective trading journeys.” “In the arrangements for these expeditions which often bear the character of foreign trade the principle of collectivity makes its appearance” (Thurnwald, Economics, p. 145). “In any case the oldest commerce is an exchange relation between alien tribes” (Weber, op. cit., p. 195). Medieval trade was emphatically not trade between individuals. It was a “trade between certain towns, an inter-communal or inter-municipal commerce” (Ashley, An Introduction to English Economic History and Theory, Part I, “The Middle Ages,” p. 102).

  (h) The countryside was cut out of trade in the Middle Ages.

  “Up to and during the course of the fifteenth century the towns were the sole centres of commerce and industry to such an extent that none of it was allowed to escape into the open country” (Pirenne, Economic and Social History, p. 169). “The struggle against rural trading and against rural handicrafts lasted at least seven or eight hundred years” (Heckscher, Mercantilism, 1935, Vol. I, p. 129). “The severity of these measures increased with the growth of ‘democratic government.’ ” “All through the fourteenth century regular armed expeditions were sent out against all the villages in the neighbourhood and looms or fulling vats were broken or carried away” (Pirenne, op. cit., p. 211).

  (i) No indiscriminate trading between town and town was practiced in the Middle Ages.

  Intermunicipal trading implied preferential relationships between particular towns or groups of towns, such as, for instance, the Hanse of London and the Teutonic Hanse. Reciprocity and retaliation were the principles governing the relationships between such towns. In case of nonpayment of debts, for instance, the magistrates of the creditor’s town might turn to those of the debtor’s and request that justice be done in such manner as they would wish their folk to be treated “and threaten that, if the debt is not paid, reprisal will be taken upon the folk of that town” (Ashley, op. cit., Part I, p. 109).

  (j) National protectionism was unknown.

  “For economic purposes it is scarcely necessary to distinguish different countries from one another in the thirteenth century for there were fewer barriers to social intercourse within the limits of Christendom than we meet to-day” (Cunningham, Western Civilization in Its Economic Aspects, Vol. I, p. 3). Not until the fifteenth century are there tariffs on the political frontiers. “Before that there is no evidence of the slightest desire to favour national trade by protecting it from foreign competition” (Pirenne, Economic and Social History, p. 92). “International” trading was free in all trades (Power and Postan, Studies in English Trade in the Fifteenth Century).

  (k) Mercantilism forced freer trade upon towns and provinces within the national boundaries.

  The first volume of Heckscher’s Mercantilism (1935) bears the title Mercantilism as a Unifying System. As such, mercantilism “opposed everything that bound down economic life to a particular place and obstructed trade within the boundaries of the state” (Heckscher, op. cit., Vol. II, p. 273). “Both aspects of municipal policy, the suppression of the rural countryside and the struggle against the competition of foreign cities, were in conflict with the economic aims of the State” (ibid., Vol. I, p. 131). “Mercantilism ‘nationalized’ the countries through the action of commerce which extended local practices to the whole territory of the State” (Pantlen, “Handel,” in Handwörterbuch der Staatswissenschaften, Vol. VI, p. 281). “Competition was often artificially fostered by mercantilism, in order to organize markets with automatic regulation of supply and demand” (Heckscher). The first modern author to recognize the liberalizing tendency of the mercantile system was Schmoller (1884).

  (l) Medieval regulationism was highly successful.

  “The policy of the towns in the Middle Ages was probably the first attempt in Western Europe, after the decline of the ancient world, to regulate society on its economic side according to consistent principles. The attempt was crowned with unusual success.… Economic liberalism or laissez-faire, at the time of its unchallenged supremacy, is, perhaps, such an instance, but in regard to duration, liberalism was a small, evanescent episode in comparison with the persistent tenacity of the policy of the towns” (Heckscher, op. cit., p. 139). “They accomplished it by a system of regulations, so marvellously adapted to its purpose that it may be considered a masterpiece of its kind.… The city economy was worthy of the Gothic architecture with which it was contemporaneous” (Pirenne, Medieval Cities, p. 217).

  (m) Mercantilism extended municipal practices to the national territory.

  “The result would be a city policy, extended over a wider area—a kind of municipal policy
, superimposed on a state basis” (Heckscher, op. cit., Vol. I, p. 131).

  (n) Mercantilism, a most successful policy.

  “Mercantilism created a masterful system of complex and elaborate want-satisfaction” (Bücher, op. cit., p. 159). The achievement of Colbert’s Reglements, which worked for high quality in production as an end in itself, was “tremendous” (Heckscher, op. cit., Vol. I, p. 166). “Economic life on a national scale was mainly the result of political centralization” (Bücher, op. cit., p. 157). The regulative system of mercantilism must be credited “with the creation of a labour code and a labour discipline, much stricter than anything that the narrow particularism of medieval town governments was able to produce with their moral and technological limitations” (Brinkmann, “Das soziale System des Kapitalismus,” in Grundriss der Sozialökonomik, Vol. IV).