Karl Polanyi has been described as an “outdated” thinker, and not for purely chronological reasons.1 Born in Vienna in 1886 to a Hungarian father and brought up amid the intellectual fervor of Budapest,2 Polanyi was one of the most acute investigators of the disappearance of the “world of yesterday.” After serving in the Great War as an officer in the Austro-Hungarian army and witnessing the Hungarian Revolution, Polanyi took part in the extraordinary cultural and political laboratory of socialist Vienna before migrating to London after the rise of national socialism. He eventually settled permanently in North America, whence he observed the tensions of the Cold War.3 It is the ideas of Karl Polanyi rather than the man himself that seem outdated, mostly because of their distance from the ones that dominate the present age. They are, according to Michele Cangiani, ideas “of another time” and “of another place,” born of a now distant historical context and a singular life experience.4 Polanyi never interpreted his role as an intellectual to be that of a detached and impassive “historical notary”; he was instead animated by an intense civic passion and an anti-deterministic faith in the possibility of “shaping our social destiny”5 and making it respond to the needs of the human personality. The construction of a new West – centered on the values of freedom, pluralism, and social justice (the true heritage of the “cultural West,” wasted by the errors of the “political West”),6 and hence open to dialogue with other cultures rather than turned in on itself and on its economic monologue – represented, even in his final years, the central objective of Polanyi's intellectual and political efforts.7 As an adolescent, Polanyi already developed a firm belief in the possibility of making democracy real, thereby securing the effective liberation of the human being through socialism.8 This faith was the constant guiding force throughout his Lebensweg and served as a never-ending intellectual inspiration that guided and focused his research. Thanks to his passion and goals, that research often evinced a pioneering spirit.
Break with the peace within you
Break with the values of the world
You (cannot be) better than the times
But to be of the best…
These verses, taken from Hegel's poem “Entschluss” [literally “Unclosing”], were much loved and often quoted by Polanyi (if in abbreviated form).9 They reflect not only his ideals but also that tension between the value of human freedom and the “reality of society” that represents one of the dominant themes of his work.10 He was a scholar who swam against the current; hence he can seem even more out of synch with the spirit of the times today. And yet, over the past thirty years or so, his decidedly unorthodox ideas have attracted ever-growing interest and attention in the social sciences. The Great Transformation has become a classic and has been translated into over fifteen languages.11 Even his later works, most notably Trade and Markets in the Early Empires, have exerted a considerable influence in various fields – for example economic anthropology, historical sociology, or economic history.12
The rebirth of the intellectual legacy of Karl Polanyi should not come as a surprise. Few other analyses of modern society prove to be as original and profound as those of this Hungarian author; Polanyi has always demonstrated a marked ability to see beyond the confines of a particular field and to “read” reality from a variety of complex – and never reductionist – perspectives. Polanyi succeeded in maintaining an admirable balance between his different approaches, combining the sensibilities of the legal scholar (he studied jurisprudence at the Universities of Budapest and Kolozsvár),13 the economist (this discipline captured his attention already in Vienna, where he was co-director of the political and economic weekly Der Österreichische Volkswirt),14 the historian (a skill he refined most of all during his time in London)15 and the anthropologist (his interest in anthropology, already evident in The Great Transformation, became especially marked after his migration to North America).16 This methodological richness on the one hand exposed his work to some inevitable criticisms,17 on the other hand allowed him to develop a wider perspective on social phenomena, as well as certain instruments of analysis that are of indubitable significance even to contemporary thought, from the distinction between formal and substantive meaning in economics to the notion of embeddedness and the category of “double movement.” Yet, beyond these tools of analysis, it is the subjects he studied and the problems he raised that are still of central importance today, albeit within a greatly changed frame of reference (one need only think of the current importance of financial economics).18 Suffice it to list a few: the problem of the relationship between economy and democracy;19 the trend to universal commodification;20 the question of control over technology;21 the regulation of transnational trade.22 It comes as no surprise, then, that Joseph Stiglitz, in the foreword to the latest American edition of The Great Transformation, observes: “it often seems as if Polanyi is speaking directly to present-day issues”;23 or that Polanyi's warning about the destructive tendencies of a self-regulated economy resounds especially today, in the midst of a new and dramatic crisis of the capitalist economy – and that it does so with such intensity, from city squares to university classrooms, that it has inspired talk of a true “Polanyi's revenge.”24 The questions posed by Polanyi some seventy years ago have not lost their relevance – on the contrary, they reassert themselves with even greater intensity in the context of contemporary “supercapitalism”; the latter has indeed provided further evidence that the general loosening of market constraints represents a serious threat not only to the environment but to the fundamental feasibility of democracy.25
Whereas the persistence of the problems criticized by Polanyi adds to the evidence for his critique of “market society,” it could, conversely, represent a trap: there is a risk of trivializing the content of these problems by dissociating the author's arguments from their original context, thus losing sight of their original presuppositions and implications. As has been rightly observed, and as Polanyi himself taught in his lessons on historicism, both history and ideas from the past can “serve to better understand the present only so long as the differences are not smoothed over.”26 For this reason, when we approach the work of Polanyi today, it is important not to limit ourselves to his major works but to consider the entirety of his output: this consists of numerous essays, conference papers, and incidental writings that, while less known, contain much material of interest and contribute to a better understanding of his intellectual evolution. Italian readers find themselves in a particularly privileged position in this regard due to the wealth of collections of the minor writings of the author that have been published in recent years, mostly thanks to the efforts of Alfredo Salsano and Michele Cangiani.27
The writings presented in this volume constitute a new contribution to the ever growing collection of Polanyi's published works, making available a series of unpublished pieces taken from the archive of the Polanyi Institute for Political Economy in Montreal.28 They span the entire breadth of his career: from “The Crucial Issue Today,” written in German and dating back to 1919 and his time in Vienna, to the eponymous work of this volume, “For a New West,” composed a few years before his death in 1958 and intended as the opening chapter in a book of the same name, which Polanyi never completed.29
For a New West is a collection of heterogeneous works. With the exception of pieces originally intended for publication in books or periodicals, most of the works are lecture notes and addresses for conferences, together with lessons and university courses delivered in England, before the completion of The Great Transformation, and in the United States, following the last of Polanyi's many migrations. As the reader will quickly gather, the interest of these works extends well beyond simple intellectual curiosity. In them Polanyi not only anticipates and synthesizes ideas developed in his major works – like the short circuit between self-regulating markets and parliamentary democracy, or the distinction between formal and substantive concepts of “the economic” – but also pauses to dwell on questions elsewhere addressed only in passing. These include the relationship between class structure and the nature of English culture,30 or between public opinion and the art of governing;31 the relevance of the education system for the nature of American society;32 the problems of pacifism and war as “institutions”;33 and the idea of a sociology of knowledge.34 These pieces can serve to improve our understanding of Polanyi's thought, offering examples of the breadth of his interests, of his extraordinary ability to deconstruct the many sides of society, and at the same time of the internal coherence of his intellectual journey.35
In chronological order, the first work is “The Crucial Issue Today: A Response,” completed, according to the archives, in 1919. It was probably written in Vienna, as Polanyi refers to the Hungarian Soviet Republic as a concluded episode; and his migration to Austria coincided chronologically with the rise to power of the reactionary government of Miklós Horthy.36 That piece, though tightly bound up with the political events of the era, still merits rereading, as it prefigures certain ideas and questions he would develop more thoroughly in the 1920s; also, certain key elements of his philosophy of politics emerge here.37 In particular, Polanyi tracks the genealogy of liberal socialism – a movement to which he had been drawn since his Hungarian period38 – outlining how it differs from Marxism and identifying the unifying principle behind the assumption that “freedom is the foundation of all true harmony.”39 This presupposition constitutes the crux of Polanyi's own social philosophy: in this essay he already distances himself clearly from both “the anarchic market of the capitalist profit economy” and the communist centrally planned economies.40 His rejection of unregulated capitalism is based primarily on its dependence on the exploitation of labor, which, recalling the thesis of Eugen Dühring,41 he traces to “the political law of coercive property in land in land that actually prevails and nullifies free competition,”42 and hence to the absence of free access to arable land. Here the theme of enclosure crops up: this concept will be thoroughly investigated in Chapter 3 of The Great Transformation and will assume a crucial role in Polanyi's analysis of the rise of the market economy.43 Second, Polanyi finds unregulated capitalism unacceptable because its intrinsic dynamic leads it to “bring production into conflict with social need,”44 so that it would provide no protection for collective interests. The idea that self-regulated markets are structurally unsuited to create an economic environment that serves a social function – a concept encountered here in its embryonic state – would find fuller expression in his writings from the 1920s on the subject of socialist calculation. In that later work he develops the argument that “private economy, by its very nature, cannot recognize the adverse effects of production on the life of the community.”45 In the 1930s, moreover, he put forward the thesis that, barring some form of regulation (Übersicht) of the economic players regarding the consequences of their choices, the market economy will ignore personal responsibility, will fracture social cohesion, and will create disincentives to individual moral action.46 Yet he asserts with equal force his position on the second prospect – that of the nationalization of the means of production and of a centrally planned economy. This prospect conflicts, above all, with the ideal of freedom of choice, which Polanyi applies not only to individuals, but also to medium-sized groups. According to Polanyi,
Liberal socialism is fundamentally hostile to force. For liberal socialism, not only the state as an organism exercising domination over persons, but also the state as an administrator of things is, practically speaking, a necessary evil and, theoretically speaking, a superfluous and harmful construct. Any attempt to use state power to replace what can only arise through the life and activity of the individual inevitably has devastating consequences.47
Moreover, this solution was technically impractical for one fundamental reason: eliminating the system of free trade would make it impossible for economic processes to function. No method of statistical verification would be capable of creating an effect analogous to the free flow of supply and demand. In an observation that reveals Polanyi's affinity with the “Austrian” view of the market,48 he writes: “The economy is a living process that can by no means be replaced by a mechanical apparatus, however subtly and ingeniously conceived.” This particular kind of market is characterized as “a peculiar sense organ in the literal sense, and without it the circulatory system of the economy would collapse.”49 The economy envisioned by liberal socialism – and by Polanyi himself50 – is not, then, a centralized economy without free trade, but a cooperative economy in which labor, consumption, and production are all represented and problems are solved in concert:
This is why cooperative socialism is synonymous with market economy; not the anarchic market of the capitalist profit economy as a field in which the plunder of the surplus value concealed in the prices is realized, but the organically structured market of equivalent products of free labor.51
This text contains, then, two ideas that would be central in Polanyi's work: his critical view of self-regulating markets; and his insistence on the value of freedom as a suitable criterion for evaluating any political and economic system.
While the exploration of cooperative socialism would find a fuller exposition only a few years later, in Polanyi's rebuttal of von Mises' thesis regarding the unfeasibility of a socialist economy,52 the theme of freedom would remain central to Polanyi's thought.53 It was by means of this concept that the valorization of the uniqueness of the individual, in contrast to any type of social collectivism, married so well with a radical criticism of that form of liberalism that, as Giacomo Marramao has written,
presupposes the individual, that is, assumes the individual is already formed and is not instead the product of some outside process, and so renders the individual meaningless; by reducing him or her to an a-tomon – an in-dividuum – we sever those connections to the critical constitutive processes that alone can make him an individual.54
The unavoidable tension between the freedom of the individual and the “reality” of social boundaries constitutes one of the key problems faced by Polanyi and comes up often in his work. He says as much in “The Meaning of Peace”:
The recognition of the inescapable nature of society sets a limit to the imaginary freedom of an abstract personality. Power, economic value, coercion are inevitable in a complex society; there is no means for the individual to escape the responsibilities of choosing between alternatives. He or she cannot contract out of society. But the freedom we appear to lose through this knowledge is illusory, while the freedom we gain through it is valid. Man reaches maturity in the recognition of his loss and in the certainty of ultimate attainment of freedom in and through society.55
However, it is only in Polanyi's post-World War II writings that the problem of “freedom in a complex society” – the title of the last chapter of The Great Transformation – becomes absolutely central.56 Some of these writings are collected in this volume (“For a New West,” “Economics and the Freedom to Shape Our Social Destiny,” “Economic History and the Problem of Freedom,” “New Frontiers of Economic Thinking”). Among the myriad questions raised by Polanyi in these writings, two in particular merit closer consideration.
The first question regards controlling the forces of technology, economic organization, and science in an increasingly artificial social context, characterized by very real threats to the survival of the human race (we are now, after all, in an era of Cold War, with the impending risk of nuclear arms race). Polanyi's main concern is “restoring meaning and unity to life in a machine civilization”57 – a concern reinforced by his awareness of the historical responsibility of the West for the paths of industry, science, and economy, which have influenced worldwide development since the Industrial Revolution. That event, as he writes in “For a New West,” constitutes a watershed moment in the history of mankind:
Three forces – technology, economic organization, and science, in this sequence – each from separate and undistinguished parentage, linked up, inconspicuously at first, to form, hardly a hundred years ago, into a social maelstrom that is still engulfing new and new millions of people, in an irresistible rush.58
The sequence outlined by Polanyi (who here synthesizes in a few brush strokes the central analysis of The Great Transformation) is very precise: first came the introduction of new industrial machines; then followed the process of market organization – which, contrary to liberal doctrines, was not at all “natural,” but rather the result of deliberate institutional choices;59 finally, about a century later, science was added to the mix. “All three then gathered speed: technology and science formed a partnership, economic organization made use of its chance, forcing the efficiency principle in production (both by market and planning) to vertiginous heights.”60 Subordination of those forces (science, technology, and economic organization) “to the will for a progress that is human and to the fulfillment of a personality that is free has become a necessity of survival.” It falls to the West, then, the genitor of industrialized society, “to discipline its children.”61 And this not only because of its historical responsibility, but also because it is only in this way that the West can re-establish dialogue with the other cultures of the world and demonstrate a genuine concern for the problems of the entire human race. The alternative is to repeat the mistakes of the past, and in particular the mistaken assumptions that colonialism represents progress and capitalism represents democracy. Polanyi's fierce criticism of the “political West” (that is, of the collective choices made by capitalist states) does not spare the intellectuals; for he believes that, through their conformity and willingness to acquiesce in the impositions of government propaganda, they have betrayed the true patrimony of western civilization, namely personal universalism.62
It is on this point that Polanyi raises his second major question, namely the “dogmatic belief in economic determinism” as an ideological barrier to capitalist reforms that promise economic freedom and equality. Knowing full well that such a reform would necessitate “fulfilling the requirements of social justice, as a consciously pursued human aim,”63 Polanyi seeks, in “Economics and the Freedom to Shape Our Social Destiny,” to refute the thesis according to which any restriction of economic freedoms would automatically have a negative effect on civil liberties. This argument, as is well known, is central to The Road to Serfdom,64 where von Hayek maintains that the introduction of any economic planning will lead to the inevitable disappearance not only of the unregulated market, but also of freedom itself. But Polanyi equates this with the equivalent and opposite argument (adopted in Marxist trends) according to which a change in economic organization would bring with it the disappearance of free institutions – insofar as these are a “bourgeois fraud.”65 Both positions, the liberal and the Marxist, suffer from the same problematic assumption: dogmatic faith in economic determinism, or rather the belief that economic relations do not only limit but rather determine the cultural aspects of societies – the “institutions of freedom” among them.66
In order to illustrate the falsity of this assumption, Polanyi turns to history, demonstrating that, even if the determinist model may appear feasible in the context of nineteenth-century market society, where humans (labor) and their natural habitat (land) are reduced to commodities and bound by the powers of a self-regulating market, this is not the case in most situations. Even admitting that economic and technological factors play a large part in determining the cultural attitudes of a society, these attitudes are not determined by the means of production.
But the pattern of culture, the major cultural emphasis in society, is not determined by either technological or geographical factors. Whether a people develops a cooperative or a competitive attitude in everyday life, whether it prefers to work its technique of production collectively or individualistically, is in many cases strikingly independent of the utilitarian logic of the means of production, and even of the actual basic economic institutions of the community.67
The same can be said for the propensity of a community to guarantee civil liberties by means of specific institutions:
Emphasis on liberty, on personality, on independence of mind, on tolerance and freedom of conscience is precisely in the same category as cooperative and harmonious attitudes on the one hand, antagonistic and competitive attitudes on the other – it is a pervasive pattern of the mind expressed in innumerable ways, protected by custom and law, institutionalized in varied forms, but essentially independent of technique and even of economic organization.68
Here Polanyi emphasizes the intrinsic weakness of the thesis according to which the disappearance of civil liberties follows from the restriction of freedoms of the market. Citing various examples, Polanyi ably shows that “under private enterprise public opinion may lose all sense of tolerance and freedom,”69 while, in contrast, a satisfactory level of civil liberty can be guaranteed even in a heavily regulated economy. He concludes the analysis in “General Economic History” in no uncertain terms, by returning to the question of determinism:
In truth, we will have just as much freedom in the future as we desire to create and to safeguard. Institutional guarantees of personal freedom are in principle compatible with any economic system. In market society alone will the ‡…‡ economic mechanism lay down the law for us. Such a state of affairs is not characteristic of human society in general, but only of an unregulated market economy.70
At the heart of Polanyi's argument lies the recognition of the specificity of nineteenth-century market economy.71 In that particular case, the economic factor arguably played a determining role in relation to social institutions. Once the normative and cultural obstacles preventing inclusion of land and labor in competitive markets had been lifted, the basis was established for a completely autonomous economy and a radical overturning of the relationship between that economy and the other social spheres. This came about thanks to an institutional shift: the fear of hunger and the desire for wealth drove individuals to engage with the processes of production. This is the well-known thesis of the disembedded economy as a distinctive feature of the “market society” – a society where economic activity is no longer a constituent part of social, cultural, and religious institutions but society itself is instead absorbed in the network of economic activity. That thesis is developed in The Great Transformation and in two chapters in Part IV of this volume.72 For Polanyi, ignoring the historical or cultural specificity of that period and elevating the deterministic approach to a general rule leads to two fundamental errors. Applied to the future, the proposed model generates mere prejudice, as we have seen. But, applied to the past, it creates an unsustainable anachronism.73
This last position lies at the core of the research in economic history that Polanyi conducted after his move to the United States. It found expression in a series of books (Trade and Markets in the Early Empires; Dahomey and the Slave Trade; The Livelihood of Man) and articles that had notable influence in the fields of anthropology and sociology. The characteristic features of Polanyi's approach are outlined clearly in Parts II and III, especially in Chapters 5 (“The Contribution of Institutional Analysis to the Social Sciences”), 14 (“General Economic History”), and 15 (“Market Elements and Economic Planning in Antiquity”). Chapter 14 is of particular interest, insofar as it reproduces the introductory lessons of a course of the same name that Polanyi taught at Columbia University in the early 1950s; it contains a clear exposition of his methodological approach.74 Polanyi proposes that the fundamental objective of “economic history” is to study “the place occupied by the economy in society as a whole, in other words the changing relation of the economic to the noneconomic institutions in society” [p. 133]. If one is to pursue these goals, which Polanyi also identifies in the work of Max Weber, the analytical tools developed by neoclassical economics are of little help – indeed they risk falsifying irreparably our perception of observed phenomena. Instead, Polanyi intends to address the problem of theoretically analyzing “primitive” or archaic, pre-industrial economies through the adoption of an institutional method of investigation focused on uncovering the essential rather than the merely formal meaning of “economics.”75
As Polanyi explains in the 1950 essay “The Contribution of Institutional Analysis to the Social Sciences” (reproduced here as Chapter 5 in Part II), this means that economics has to be thought of as the interaction between humans and their environment, which takes place for the sake of satisfying the material needs of the former; economics is not only a set of choices linked to “the relationship between ends and scarce means that have alternative uses” – as it is according to the neoclassical paradigm.76 This insight, which is further elaborated upon in later works77 and constitutes one of the most enduring and notable elements of Polanyi's thought, is the most fitting antidote to the “economistic fallacy” – the logical error of “equating the human economy in general with its market form.”78 In this way Polanyi establishes the conditions for an authentically operational and dogma-free study of essentially every type of economy that has ever existed or currently exists (in doing so, he proves to be, along with Marcel Mauss, one of the finest interpreters of the comparative method in the social sciences).79 Empirical economies can then be described on the basis of the “manner in which the economic process is instituted at different times and places,” and hence also on the basis of the relationship that exists in every society between economic and noneconomic institutions.80 If a similar approach allows Polanyi to produce significant results in the fields of history and economic anthropology – beginning with the crucial distinction between the three forms of trade integration, reciprocity, and redistribution discussed here in Part III81 – it is also worth noting that his earlier studies, some of which are reproduced in Part II, demonstrate a marked sensibility for institutional perspectives.
Polanyi's insistence on the role of public or governmental power in relation to the emersion of the system of self-regulated markets, and hence in relation to the demystification of the liberal model of market economics as a “natural” process, is consistent with the postulates of the German historical school, in particular those of Schmoller and Bücher.82 In “Culture in a Democratic England of the Future,” instead, Polanyi repeatedly references the works of Thorstein Veblen and investigates, in a particularly acute and brilliant manner, the stratification into classes of English society and the relationship of that process with the establishment of a cultural “elite.”83 The broad scope of political and social history is outlined (with a particular focus on the rise of fascism) in a series five of lectures (gathered here under one chapter); in them Polanyi focuses on the intersection between models of democracy and forms of economic organization.84 On the other hand, the penetrating analysis of American society pays special attention to the relationship between the education system and economic processes in the United States.85
Polanyi, then, returns to proposing, in various ways, the fundamental theme of economy as a “cultural reality.” That concept is at once a main focus of Polanyi's thought and a litmus test for his own ideological distance from the central themes of American economic neo-institutionalism86 – a school of thought that originates with Douglass North and Oliver Williamson. These themes are only superficially convergent with his own.87 Neo-institutional analyses privilege the logic of an economic calculation made by competing individuals in conditions of scarcity; following Mauss' typical unidimensional view of the human being as an “economic animal,”88 they seek to explain the persistence and mutability of institutions, and also their impact on economic development.89 In contrast, Polanyi does not address institutions from the point of view of “economic functionalism,”90 according to which the sole purpose of institutions is the lowering of costs and the amassing of wealth. He considers institutions to be not so much factors that are important in terms of payoff and behavioral ties (of both individuals and organizations), but rather integral parts of a culture, and hence transmitters of meanings capable of orienting the values and desires of a community and its constituent parts.91 On the one hand, this line of thinking emphasizes – as the German historical school had already done – the interdependence between the economy and institutions, both economic and noneconomic: “For religion or government may be as important for the structure and functioning of the economy as monetary institutions or the availability of tools and machines themselves that lighten the toil of labor.”92 On the other hand, the idea of an economy as a cultural and institutional reality leads Polanyi – in contrast to the neo-institutionalists – to emphasize the specificity of the market economy and its ideological corollaries, which, far from presenting intrinsic truths about human nature and the order of things,93 seem to be exclusively the products of a contingent historical form and hence do not lend themselves to universalization.94
If it is true that “nothing obscures our social vision as effectively as the economistic prejudice,”95 then Polanyi's writings contain a sophisticated critique of that ideology and a demystification of each of the axioms of orthodox economics – in particular, utilitarian rationality, the paradigm of scarcity, and the distinction between economic and noneconomic matters. In fact his analysis sets out to establish, with the help of empirical material drawn from anthropological studies – the authors referenced include Thurnwald, Malinowski, and Boas – that the model of Homo economicus and its corollaries are cultural constructs that emerged in parallel with the nineteenth-century affirmation of a specific institutional arrangement, characterized by free and interdependent markets of land and labor.96 Institutions, then, create the underlying incentives for individual action and the attendant model of rationality, and not vice versa. Therefore, while it is possible to maintain that a market society gives rise to economic calculation,97 it is not possible to explain the institutional changes and the emersion of the system of the self-regulating market simply through the logic of maximizing utility.
The points raised by Polanyi are of particular relevance not only for sociologists and economic anthropologists, but also for legal scholars who have experienced firsthand what is usually referred to as economic imperialism:98 the tendency to present economic analysis as a general theory of human behavior or, in the words of Foucault, a “grid of intelligibility” encompassing all social interactions and individual behaviors, including those of a noneconomic nature.99 The encroachment of economics upon areas traditionally under the purview of other disciplines – such as individuality, familial interactions, and criminal behavior (consider the studies of Gary Becker) – has increased the contact and intersection between economics and law well beyond their traditional areas of overlap such as anti-trust legislation. Modern “law and economics” has demonstrated its analytic power first in a purely descriptive way, but then in a progressively normative fashion, by testing not simply the justice of laws and judicial institutions, but their efficiency as well100 – to the point of legitimizing the contemporary appeal to pseudo-scientific techniques for the quantitative measurement of judicial systems according to the criterion of efficiency.101 In this last case – and especially in the version proposed by the theory of legal origins, advanced by the World Bank in its celebrated Doing Business reports102 – the law has been reduced to a mere vector of economic development and is investigated from a purely functionalist standpoint: a questionable approach with regard to both its premises and its effects.103 If the plurality of the methods of investigation of social phenomena is something to appreciate and to welcome, we should exercise caution regarding the recent phenomenon of uncritically accepting that analytical models developed in other fields of study should solve different sorts of problems from the ones they were designed for: their careless use can give rise to reductionist and counterproductive results.
The works of Polanyi, particularly “How to Make Use of the Social Sciences” (most likely written in the 1930s),104 offer insight into this question as well. That piece is interesting above all for a reconstruction of the author's intellectual evolution, since it develops arguments about the relationship between nominalism and essentialism in the methodologies of the natural and social sciences. Karl Popper (known as “Karli” in Polanyi's family, who would often receive him at their apartment on the Vorgartenstrasse in Vienna)105 makes exact references to Polanyi's ideas in The Open Society and Its Enemies, but only mentions private conversations with him rather than any specific writings.106 More specifically, Polanyi emphasizes that the possibility of aggregating the various sciences is limited on account of the particularities of their different methods and of the relative “innate interest.”107 He also insists that there is a fundamental difference between the natural and social sciences, which has less to do with their different methods and more with the difference in the impact that their respective fields have on the shaping of tastes and the framework of human values: “man's attitude toward his material environment is directed by definite ends, which are but little influenced by the rise of [the natural] sciences,”108 while the social sciences instead “have a massive influence on man's wishes and purposes” – so much so that they impact his very existence “radically and immediately.”109 It follows, then, that the function of the social sciences is twofold and their usefulness must be judged by considering both aspects: “it is not enough to inquire how far they assist us in attaining our ends; we must also ask how far they help or hinder us in clarifying them.”110 Here the normative dimension of the social sciences becomes clear, and with it Polanyi's distance from more naive approaches, which focus on the Wertfreiheit [ethical neutrality] of those sciences. Polanyi's thesis is that, while the pursuit of methodological purity and the gradual elimination of “metaphysical remnants” from the field of inquiry of the social sciences “may have enhanced man's ability to attain his ends, they certainly diminished his faculty of knowing what they are.”111 There is, then, an intrinsic tension between the drive toward progress in the social sciences and that of preserving “the dignity of metaphysics in its insistence on the comprehensive character of common human awareness as the matrix of art, religion, morality, personal life, and science.”112 But is it possible to protect the matrix of science without interfering with its progress? “Is a creative compromise possible, which would leave scope for progress, while protecting us from the danger of losing our way in our search for it?”113 The conditions established by Polanyi for answering these questions are clear: the pitfalls attendant upon the scientific handling of human affairs can only be avoided by understanding the necessity of a “directed existence”114 – in other words, only by establishing a fairly stable consensus regarding certain guiding principles, which are “deliberately protected from corrosive influence as the Roentgen manipulator's hands are from the effects of X rays.”115 Use of the social sciences “is not a technical problem of science. It is a matter of providing such a definition of the meaning of human society as will maintain the sovereignty of man over all instruments of life, including science.”116
The points raised in these writings are demanding ones, which have not lost any relevance over the years. On the one hand, the development of the life sciences has greatly amplified the destabilizing tendencies of the natural sciences and has led to the rise of juridical rules and principles, for instance of dignity and precaution, which are intended to re-establish a strong foundation and to actualize a series of measures aimed at preserving human sovereignty over the manipulation of life.117 On the other hand, the universalization of economic reasoning as a sort of new secular religion renders ever more important a critical reflection on the impact that normative assumptions taken from the social sciences (in this case, from economic science) have on any system of human values and desires. All the shortcomings of the alleged Wertfreiheit of the social sciences come once again to the surface, and the importance of the critical, historical, and institutional perspectives presented by Polanyi is reconfirmed. Rereading these works today provides an excellent antidote not only against a naively “scientistic” attitude, but against reductionism of any kind; reductionism that – to cite Polanyi once more – has produced the “barrenness of the cultural West in its encounter with the world at large.”118
Translated by Carl Ipsen and Michael Ipsen
it lacks any mechanism to understand the need for health, repose and spiritual and moral fulfillment among the producers and those who inhabit the world of production; for by means of long-term retroactive effects the common good is either furthered or harmed by the different ways in which production and the means of production are organized. That economic model is even less capable of advancing the positive goals of the common good – the spiritual, cultural, and moral goals of the community – insofar as their realization depends upon material factors. Finally, that model is entirely incapable of responding when economic objectives touch upon the general goals of humanity, for example the need for international aid or maintaining peace between peoples. (Karl Polanyi, “La contabilità socialista,” in his La libertà in una società complessa, p. 19).
The market acts like an invisible boundary isolating all individuals in their day-to-day activities, as producers and consumers. They produce for the market, they are supplied from the market. Beyond it they cannot reach, however eagerly they may wish to serve their fellows. Any attempt to be helpful on their part is instantly frustrated by the market mechanism. Giving your goods away at less than the market price will benefit somebody for a short time, but it would also drive your neighbor out of business, and finally ruin your own, with consequent losses of employment for those dependent on your own factory or enterprise. Doing more than your due as a working man will make the conditions of work for your comrades worse. By refusing to spend on luxuries you will be throwing some people out of work, by refusing to save you will be doing the same to others. As long as you follow the rules of the market, buying at the lowest and selling at the highest price whatever you happen to be dealing in, you are comparatively safe. The damage you are doing to your fellows in order to serve your own interest is, then, unavoidable. The more completely, therefore, one discards the idea of serving one's fellows, the more successfully one can reduce one's responsibility for harm done to others. Under such a system, human beings are not allowed to be good, even though they wish to be so.
Hayekian economic liberalism confirms and approves the liberal nature of market society: markets are conceived as spontaneous orders that arise from the interaction of economically “free” individuals (bottom-up aspect), while any form of social interventionism is criticized as a coercive form of order (top-down aspect). Polanyi's liberal socialism gives a reversed image: while “self-regulating” markets are seen as artificial institutions imposed on “commodified” individuals (top-down aspect), social policies draw on the self-protective impulses of social movements (bottom-up aspect).