The Great Transformation

by Karl Polanyi

  James, Isaac, Providence Displayed (London, 1800), p. 20.

  Jones, Edw., The Prevention of Poverty (1796).

  Luson, Hewling, Inferior Politics: or, Considerations on the Wretchedness and Profligacy of the Poor (1786).

  M’Farlane, John, D. D., Enquiries Concerning the Poor (1782).

  Martineau, H., The Parish (1833).

  ———, The Hamlet (1833).

  ———, The History of the Thirty Years’ Peace (1849), 3 vols.

  ———, Illustrations of Political Economy (1832–34), 9 vols.

  Massie, J., A Plan … Penitent Prostitutes. Foundling Hospital, Poor and Poor Laws (1758).

  Nasmith, James, D. D., A Charge, Isle of Ely (1799).

  Owen, Robert, Report of the Committee of the Association for the Relief of the Manufacturing and Labouring Poor (1818).

  Paine, Th., Agrarian Justice (1797).

  Pew, Rich., Observations (1783).

  Pitt, Wm. Morton, An Address to the Landed Interest of the defic. of Habitation and Fuel for the Use of the Poor (1797).

  Plan of a Public Charity, A (1790), “On Starving,” a sketch.

  First Report of the Society for Bettering the Condition and Increasing the Comforts of the Poor.

  Second Report of the Society for Bettering the Condition of the Poor (1797).

  Ruggles, Tho., The History of the Poor (1793), 2 vols.

  Sabatier, Wm., Esq., A Treatise on Poverty (1793).

  Saunders, Robert, Observations.

  Sherer, Rev. J. G., Present State of the Poor (1796).

  Spitalfields institution, Good Meat Soup (1799).

  St. Giles in the Field, Vestry of the United Parishes of, Criticism of “Bill for the Better Support and Maintenance of the Poor” (1797).

  Suffolk Gentleman, A Letter on the Poor Rates and the High Price of Provisions (1795).

  [Townsend, Joseph], Dissertation on the Poor Laws 1786 by A Well-Wisher of Mankind.

  Vancouver, John, Causes and Production of Poverty (1796).

  Wilson, Rev. Edw., Observations on the Present State of the Poor (1795).

  Wood, J., Letter to Sir William Pulteney (on Pitt’s Bill) (1797).

  Young, Sir W., Poor Houses and Work-Houses (1796).

  Some Modern Writings

  Ashley, Sir W. J., An Introduction to English Economic History and Theory (1931).

  Belasco, Ph. S., “John Bellers, 1654–1725,” Economica, June 1925.

  ———, “The Labour Exchange Idea in the Seventeenth Century,” Ec. J., Vol. I, p. 275.

  Blackmore, J. S., and Mellonie, F. C., Family Endowment and the Birthrate in the Early Nineteenth Century, Vol. I.

  Clapham, J. H., Economic History of Modern Britain, Vol. I, 1926.

  Marshall, Dorothy, “The Old Poor Law, 1662–1795,” in The Ec. Hist. Rev., Vol. VIII, 1937–8, p. 38.

  Palgrave’s Dictionary of Political Economy, Art. “Poor Law,” 1925.

  Webb, S. and B., English Local Government, Vol. 7–9, “Poor Law History,” 1927–29.

  Webb, Sidney, “Social Movements,” C.M.H., Vol. XII, pp. 730–65.

  10. Speenhamland and Vienna

  The author was first drawn to the study of Speenhamland and its effects on the classical economists by the highly suggestive social and economic situation in Austria as it developed after the Great War.

  Here, in a purely capitalistic surrounding, a socialist municipality established a regime which was bitterly attacked by economic liberals. No doubt some of the interventionist policies practiced by the municipality were incompatible with the mechanism of a market economy. But purely economic arguments did not exhaust an issue which was primarily social, not economic.

  The main facts about Vienna were these. During most of the fifteen years following the Great War, 1914–18, unemployment insurance in Austria was heavily subsidized from public funds, thus extending outdoor relief indefinitely; rents were fixed at a minute fraction of their former level, and the municipality of Vienna built large tenement houses on a nonprofit basis, raising the required capital by taxation. While no aid-in-wages was given, all-round provision of social services, modest though they were, might have actually allowed wages to drop excessively, but for a developed trade union movement which found, of course, strong support in extended unemployment benefit. Economically, such a system was certainly anomalous. Rents, restricted to a quite unremunerative level, were incompatible with the existing system of private enterprise, notably in the building trade. Also, during the earlier years, social protection in the impoverished country interfered with the stability of the currency—inflationist and interventionist policies had gone hand in hand.

  Eventually Vienna, like Speenhamland, succumbed under the attack of political forces powerfully sustained by the purely economic argument. The political upheavals in 1832 in England and 1934 in Austria were designed to free the labor market from protectionist intervention. Neither the squire’s village nor working-class Vienna could indefinitely isolate itself from its environment.

  Yet obviously there was a very big difference between the two interventionist periods. The English village, in 1795, had to be sheltered from a dislocation caused by economic progress—a tremendous advance of urban manufactures; the industrial laboring class of Vienna, in 1918, had to be protected against the effects of economic retrogression, resulting from war, defeat, and industrial chaos. Eventually, Speenhamland led to a crisis of the organization of labor, which opened up the road to a new era of prosperity; while the Heimwehr victory in Austria formed part of a total catastrophe of the national and social system.

  What we wish to stress here is the enormous difference in the cultural and moral effects of the two types of intervention: the attempt of Speenhamland to prevent the coming of market economy and the experiment of Vienna trying to transcend such an economy altogether. While Speenhamland caused a veritable disaster of the common people, Vienna achieved one of the most spectacular cultural triumphs of Western history. The year 1795 led to an unprecedented debasement of the laboring classes, which were prevented from attaining the new status of industrial workers; 1918 initiated an equally unexampled moral and intellectual rise in the condition of a highly developed industrial working class which, protected by the Vienna system, withstood the degrading effects of grave economic dislocation and achieved a level never reached before by the masses of the people in any industrial society.

  Clearly, this was due to the social, as distinct from the economic, aspects of the matter. But did the orthodox economists have a proper grasp of the economics of interventionism? The economic liberals were, in effect, arguing that the Vienna regime was another “maladministration of the Poor Law” another “allowance system” which needed the iron broom of the classical economists. But had not the classics themselves been misled by the comparatively lasting conditions created by Speenhamland? They were often correct about the future, which their deep insight helped to shape, but utterly mistaken about their own time. Modern research has proved their reputation for sound practical judgment to have been undeserved. Malthus misread the needs of his time completely; had his tendentious warnings of overpopulation been effective with the brides to whom he delivered them personally, this “might have shot economic progress dead in its tracks,” says T. H. Marshall. Ricardo misstated the facts of the currency controversy as well as the role of the Bank of England, and failed to grasp the true causes of currency depreciation which, as we know today, consisted primarily in political payments and difficulties of transfer. Had his advice on the Bullion Report been followed, Britain would have lost the Napoleonic War, and “the Empire would not exist to-day.”

  Thus the Vienna experience and its similarities to Speenhamland, which sent some back to the classical economists, turned others doubtful of them.

  T O C H A P T E R E I G H T

  11. Why Not Whitbread’s Bill?

  The only alternative to the Speenhamland policy seemed to have been Whitbread’s Bill, brought
in in the winter of 1795. It demanded extension of the Statute of Artificers of 1563, so as to include the fixing of minimum wages by yearly assessment. Such a measure, its author argued, would maintain the Elizabethan rule of wage assessment, while extending it from maximum to minimum wages, and thus prevent starvation in the countryside. Undoubtedly, it would have met the needs of the emergency, and it is worth noting that members for Suffolk, for instance, supported Whitbread’s Bill, while their magistrates had also endorsed the Speenhamland principle in a meeting at which Arthur Young himself was present; to the lay mind the difference between the two measures could not have been strikingly great. This is not surprising. One hundred and thirty years later, when the Mond Plan (1926) proposed to use the unemployment fund to supplement wages in industry, the public still found it difficult to comprehend the decisive economic difference between aid to the unemployed and aid-in-wages to the employed.

  However, the choice in 1795 was between minimum wages and aid-in-wages. The difference between the two policies can be best discerned by relating them to the simultaneous repeal of the Act of Settlement of 1662. The repeal of this Act created the possibility of a national labor market, the main purpose of which was to allow wages “to find their own level.” The tendency of Whitbread’s Minimum Wage Bill was contrary to that of the repeal of the Act of Settlement, while the tendency of the Speenhamland Law was not. By extending the application of the Poor Law of 1601 instead of that of the Statute of Artificers of 1563 (as Whitbread suggested), the squires reverted to paternalism primarily in respect to the village only and in such forms as involved a minimum of interference with the play of the market, while actually making its wage-fixing mechanism inoperative. That this so-called application of the Poor Law was in reality a complete overthrow of the Elizabethan principle of enforced labor was never openly admitted.

  With the sponsors of the Speenhamland Law pragmatic considerations were paramount. The Rev. Edward Wilson, Canon of Windsor, and J. P. for Berkshire, who may have been the proponent, set out his views in a pamphlet in which he declared categorically for laissez-faire. “Labour, like everything else brought to the market, had in all ages found its level, without the interference of law,” he said. It might have been more appropriate for an English magistrate to say, that, on the contrary, never in all the ages had labor found its level without the intervention of law. However, figures showed, Canon Wilson went on, that wages did not increase as fast as the price of corn, whereupon he proceeded respectfully to submit to the consideration of the magistracy “A Measure for the quantum of relief to be granted to the poor.” The relief added up to five shillings a week for a family of man, wife, and child. An “Advertisement” to his booklet ran: “The substance of the following Tract was suggested at the County Meeting at Newbury, on sixth of last May.” The magistracy, as we know, went further than the Canon: it unanimously allowed a scale of six shillings (if the first child was counted).

  T O C H A P T E R T H I R T E E N

  12. Disraeli’s “Two Nations” and the Problem of Colored Races

  Several authors have insisted on the similarity between colonial problems and those of early capitalism. But they failed to follow up the analogy the other way, that is, to throw light on the condition of the poorer classes of England a century ago by picturing them as what they were—the detribalized, degraded natives of their time.

  The reason why this obvious resemblance was missed lay in our belief in the liberalistic prejudice which gave undue prominence to the economic aspects of what were essentially noneconomic processes. For neither racial degradation in some colonial areas today nor the analogous dehumanization of the laboring people a century ago was economic in essence.

  (a) Destructive culture contact is not primarily an economic phenomenon.

  Most native societies are now undergoing a process of rapid and forcible transformation comparable only to the violent changes of a revolution, says L. P. Mair. Although the invaders’ motives are definitely economic, and the collapse of primitive society is certainly often caused by the destruction of its economic institutions, the salient fact is that the new economic institutions fail to be assimilated by the native culture which consequently disintegrates without being replaced by any other coherent value system.

  First among the destructive tendencies inherent in Western institutions stands “peace over a vast area,” which shatters “clan life, patriarchal authority, the military training of the youth; it is almost prohibitive to migration of clans or tribes” (Thurnwald, Black and White in East Africa; The Fabric of a New Civilization, 1935, p. 394). “War must have given a keenness to native life which is sadly lacking in these times of peace.…” The abolition of fighting decreases population, since war resulted in very few casualties, while its absence means the loss of vitalizing customs and ceremonies and a consequent unwholesome dullness and apathy of village life (F. E. Williams, Depopulation of the Suan District, 1933, “Anthropology” Report, No. 13, p. 43). Compare with this the “lusty, animated, excited existence” of the native in his traditional cultural environment (Goldenweiser, Loose Ends, p. 99).

  The real danger, in Goldenweiser’s words, is that of a “cultural in-between” (Goldenweiser, Anthropology, 1937, p. 429). On this point there is practical unanimity. “The old barriers are dwindling and no kind of new guiding lines are offered” (Thurnwald, Black and White, p. 111). “To maintain a community in which the accumulation of goods is regarded as anti-social and integrate the same with contemporary white culture is to try to harmonize two incompatible institutional systems” (Wissel in Introduction to M. Mead, The Changing Culture of an Indian Tribe, 1932). “Immigrant culture-bearers may succeed in extinguishing an aboriginal culture, but yet fail either to extinguish or to assimilate its bearers” (Pitt-Rivers, “The Effect on Native Races of Contact with European Civilization,” in Man, Vol. XXVII, 1927). Or, in Lesser’s pungent phrase of yet another victim of industrial civilization: “From cultural maturity as Pawnee they were reduced to cultural infancy as white men” (The Pawnee Ghost Dance Hand Game, p. 44).

  This condition of living death is not due to economic exploitation in the accepted sense in which exploitation means an economic advantage of one partner at the cost of the other, though it is certainly intimately linked with changes in the economic conditions connected with land tenure, war, marriage, and so on, each of which affects a vast number of social habits, customs, and traditions of all descriptions. When a money economy is forcibly introduced into sparsely populated regions of Western Africa, it is not the insufficiency of wages which results in the fact that the natives “cannot buy food to replace that which has not been grown, for nobody else has grown a surplus of food to sell to them” (Mair, An African People in the Twentieth Century, 1934, p. 5). Their institutions imply a different value scale; they are both thrifty and at the same time non-market-minded. “They will ask the same price when the market is glutted as prevailed when there was great scarcity, and yet they will travel long distances at considerable cost of time and energy to save a small sum on their purchases” (Mary H. Kingsley, West African Studies, p. 339). A rise in wages often leads to absenteeism. Zapotec Indians in Tehuantepec were said to work half as well at 50 centavos as at 25 centavos a day. This paradox was fairly general during the early days of the Industrial Revolution in England.

  The economic index of population rates serves us no better than wages. Goldenweiser confirms the well-known observation Rivers made in Melanesia that culturally destitute natives maybe “dying of boredom.” F. E. Williams, himself a missionary working in that region, writes that the “influence of the psychological factor on the death rate” is easily understood. “Many observers have drawn attention to the remarkable ease or readiness with which a native may die.” “The restriction of former interests and activities seems fatal to his spirits. The result is that the native’s power of resistance is impaired, and he easily goes under to any kind of sickness” (op. cit., p. 43). This has nothing to d
o with the pressure of economic want. “Thus an extremely high rate of natural increase may be a symptom either of cultural vitality or cultural degradation” (Frank Lorimer, Observations on the Trend of Indian Population in the United States, p. 11).

  Cultural degradation can be stopped only by social measures, incommensurable with economic standards of life, such as the restoration of tribal land tenure or the isolation of the community from the influence of capitalistic market methods. “Separation of the Indian from his land was the ONE death blow,” writes John Collier in 1942. The General Allotment Act of 1887 “individualized” the Indian’s land; the disintegration of his culture which resulted lost him some three quarters, or ninety million acres, of this land. The Indian Reorganization Act of 1934 reintegrated tribal holdings, and saved the Indian community, by revitalizing his culture.

  The same story comes from Africa. Forms of land tenure occupy the center of interest, because it is on them that social organization most directly depends. What appear as economic conflicts—high taxes and rents, low wages—are almost exclusively veiled forms of pressure to induce the natives to give up their traditional culture and thus compel them to adjust to the methods of market economy, i.e., to work for wages and procure their goods on the market. It was in this process that some of the native tribes like the Kaffirs and those who had migrated to town lost their ancestral virtues and became a shiftless crowd, “semi-domesticated animals,” among them loafers, thieves, and prostitutes—an institution unknown among them before—resembling nothing more than the mass of the pauperized population of England about 1795–1834.