Karl Polyani's "The Great Transformation" - Introduction, Chapters 1 and 2

Polanyi's Concept of Embeddedness:

In seeking to subordinate political, social, and cultural life to the logic of the free market, advocates of self-regulating markets engage in a utopian fantasy. Trust, mutual understanding, and the enforcement of contracts are pivitol to the success of a capitalist system: the market needs the state to survive.

Why Disembedding Cannot Be Successful:

Modern economics rests on the incorrect assumption that land, labor, and money are commodities like any other good produced for sale on the market. From a moral perspective, it is wrong to treat human beings and nature as commodities. Unfettered capitalism also provokes resistance from people when it pushes society too close to a breakdown of the natural environment and the destruction of normal human relations. The state, an entity composed of greater forces than the market, is necessary to facilitate any success in a capitalist system: for capitalism to flourish the state must stress to the many alienated by the free market to bear the costs.

The Consequences of Impossibility:

The structures existing to inhibit the free market are the residue of market failures and represent the desire of many disparate groups to curb against a crash of the financial systems. This marks a departure from Marxist analysis and market liberalism who see the contest between capital and labor as a clash between incompatible ideologies. That markets crash when states intervene provides the laissez-faire school an air-tight argument for their theroy: had the state not acted, the market would have solved the problem. Polyani contends market socialism can create a synthesis from the democratic and efficient aspects of market liberalism and communism.

The Centrality of the Global Regime:

Market liberals desiring a world open for commerce needed a system where people with different currencies could freely engage in transactions with one another. Therefore, nations fixed their currencies in relation to gold and commit to buy and sell gold at that price, based their domestic money supply on the amount of gold that it held in its reserves and its circulating currency would be based in gold, giving its residents ample opportunities to trade abroad. This permitted the markets to operate globally without a state or world organization overseeing them.

The Consequences of the Gold Standard:

Adopted globally, states became more important as deflationary measures drove down wages to reduce consumption leading to sharp jumps in unemployment and bank and farm failures. Nations began colluding to offset the impact of the gold standard: tariffs emerged and states acquired colonies. Exploiting people abroad allows for a higher standard living domestically. Societies under duress from the manipulations of international finance often chose revoking freedom in favor of security: fascism.

Contemporary Relevance:

Neoliberal economists and their followers employ a dangerous confidence in the efficacy of free markets to resolve the world's problems. Absent a universal government, or a lender of last resort, the global market will not resolve crises. Even more, free market liberalism makes demands on people that are simply not sustainable. People will mobilize to protect themselves and the state, seeking to hold on to order, will find scapegoats. Domestic uprisings are deeply tied to the impersonal forces of the global marketplace.

Democratic Alternatives:

Polanyi feels democratic societies will engage in socialism to protect man and nature from the market while permitting markets to operate in an efficient manner.

The Hundred Years' Peace:

Nineteenth century civilization rested on balance of power politics, liberal states, the self-regulating market made possible by the gold standard which permitted the spread of trade. The self-regulating market could not exist without destroying man and the world, yet no society wished to curb it which led to further strife.