Karl Polanyi struggled with the question of whether economy and society were related in terms of one being embedded in the other. His struggle with the concept of embeddedness in his book The Great Transformation: the political and economic origins of our time (1944) formed the basis for later work by others on this. All future work on Embeddedness – from Mark Granovetter (1973) to Gareth Dale as well as in the preceding two posts by Fred Block and Margaret Somers, all owe their origins to Polanyi’s discussion in his book, as the extract below illustrates:
“The market pattern, on the other hand, being related to a peculiar motive of its own, the motive of truck or barter, is capable of creating a specific institution, namely, the market. Ultimately, that is why the control of the economic system by the market is of overwhelming consequence to the whole organization of society: it means no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system. The vital importance of the economic factor to the existence of society precludes any other result.” (p. 57, my emphasis).
Polanyi returns to the concept of embeddedness throughout his book. There is a very large literature on Polanyi’s work on embeddedness, and I do not propose to review it. But it is worth making two points about the circumstances in which Polanyi was writing.
(1) The author’s acknowledgements – at the start of the book – begin like this:
“T H I S B O O K was written in America during the Second World War. But it was begun and finished in England, where the author was Lecturer for the Extramural Delegacy of the University of Oxford and the corresponding institutions of the University of London. Its main thesis was developed during the academic year 1939-40 in conjunction with his work in Tutorial Classes, organized by the Workers’ Educational Association, at Morley College, London, at Canterbury and at Bexhill.”
(2) Fred Block has an interesting internet item Introduction to the 2001 edition of Polanyi’s book where he examines the thesis. This is a draft of his introduction to the 2001 Beacon Press edition. Well worth reading, he suggests that the establishment of Reaganomics and Thatcherism in the 1970s entrenched neoliberalism in world politics, in the alliance between US global hegemony and the British Empire, or as Block puts it “the acceptance of the Anglo-American model of free market capitalism…is indispensable for understanding the dilemmas facing global society at the beginning of the twenty-first century. Since the 1980s, and particularly with the end of the Cold War in the early 1990’s, this doctrine of market liberalism, under the labels of “Thatcherism,” “Reaganism,” “Neoliberalism,” and “the Washington Consensus,”has come to dominate global politics.”
Block continues (pp. 6-7):
“The logical starting point for explaining Polanyi’s thinking is his concept of embeddedness. Perhaps his most famous contribution to social thought, it has also been a source of enormous confusion in understanding his argument. Polanyi starts by emphasising that the entire tradition of modern economic thought, continuing up to the present moment, rests on the conception of the economy as an interlocking system of markets that automatically adjust supply and demand through the price mechanism.
Even when economists acknowledge that the market system sometimes need help from government to overcome market failure, they still rely on this conceptualization of the economy as an equilibrating system of integrated markets. Polanyi’s intent is to show how sharply this conceptualization differs from the reality of human societies throughout recorded human history. Prior to the nineteenth century, he insists, the human economy was always embedded in society.
The term “embeddedness” expresses the idea that the economy is not autonomous as it must be in economic theory, but subordinated to politics, religion, and social relations. Polanyi’s use of the term suggests more than the now familiar idea that market transactions depend on trust, mutual understanding, and legal enforcement of contracts. He uses the concept to highlight how radical a break the classical economists, especially Malthus and Ricardo, made with previous thinkers. Instead of the historically normal pattern of subordinating the economy to society, their system of self-regulating markets required subordinating society to the logic of the market”
Fred Block goes further, arguing that:
“But as the consequences of unrestrained markets become apparent, people resist; they refuse to act like lemmings marching over a cliff to their own destruction. Instead, they retreat from the tenets of market self-regulation in order to save society and nature from destruction. In this sense, one might say that disembedding the market is similar to stretching a giant elastic band.”
“Efforts to bring about greater autonomy of the market increase the level of tension. With further stretching, either the band will snap – representing social disintegration – or the economy will revert to a more embedded position.” (p.8, my emphasis)
This can be seen clearly in the interwar literature on how ordinary people respond to markets. Toward the end of Steinbeck The Grapes of Wrath (Viking Press, 1939) destitute farmers, many from the Oklahoma Dustbowl, went to California to pick fruit. The book is worth reading for the various means used by fruit farmers to reduce wages below subsistence levels and the ways in which the destitute farmers tried to counteract this.
The point that Fred Block makes about people resisting and refusing to march over the cliff like mindless lemmings to their own destruction underlies my arguments about the cyclical nature of neoliberalism. It may seem we are trapped in an eternal nightmare of ever more damaging boom-slump cycles but people do and can resist and will do so if there is a risk of social disintegration. I am reminded of the article commissioned by the International Journal of Housing Policy that I completed, submitted but give the changes I was asked to make, I then withdrew, so it was never published. The title was “Following the US Pied Piper: class and gender costs of monotenural home ownership”.