‘Karl Polanyi: The Limits of the Market’ reviewed by Pat Devine

Karl Polanyi: The Limits of the Market

Polity Press, Cambridge 2010. 309pp., £16.99 pb
ISBN 9780745640723

Reviewed by Pat Devine

About the reviewer

Pat Devine is an Honorary Research Fellow at the University of Manchester, working on the political …


Karl Polanyi has become an increasingly influential figure as neo-liberalism’s market fundamentalism gathered pace in the 1990s and 2000s. And his thesis that free-market capitalism is so destructive of society and nature that it calls forth a response from society has been placed firmly on the agenda by the financial and economic crisis that broke in 2008 and is still with us. His best known work, The Great Transformation: The Political and Economic Origins of Our Time (1944), is justly famous and celebrated for its concept of the ‘double movement’, developed in the course of his account of the establishment of laissez-faire capitalism in the nineteenth century and its transformation in the first half of the twentieth century into various forms of integrated societies, with the economy controlled in different ways and to different extents by the state. Much less well known is Polanyi’s early writing, in Budapest and then in inter-war Vienna, and also, apart perhaps from among social anthropologists, his later work in New York after the Second World War.

Gareth Dale’s Karl Polanyi: The Limits of the Market is the first full-length general introduction to the entire range of Polanyi’s work. It draws upon not only his published books and articles but also on the author’s comprehensive knowledge of Polanyi’s extensive unpublished work, archived at the Karl Polanyi Institute of Political Economy at Concordia University, Montreal. Dale situates his exposition of Polanyi’s thought against the background of the intellectual debates in which he took part and their historical antecedents. The book is lucidly written and is likely to remain the first place to which readers with a serious interest in Polanyi will turn for the foreseeable future. The first four chapters focus on Polanyi’s output: ‘The economics and ethics of socialism’ (inter-war years); The Great Transformation (1940s); ‘The descent of economic man’ and ‘Trade, markets and money in archaic societies’ (post World War II). The final two chapters focus on interpretations and applications of Polanyi’s work since his death: ‘“Disembedded” and “always embedded” economies’ and ‘At the brink of a “great transformation”? Neoliberalism and the countermovement today’. Given such a rich and comprehensive volume, this review will concentrate on the three issues raised in the book which are likely to be of most interest to Marxists.

The relationship of Polanyi to Marx

Dale makes it clear that ‘Polanyi, particularly in the inter-war period, was profoundly influenced by the Marxist tradition’ (241), notably in relation to alienation and commodity fetishism (ch. 1) and the degradation of human society and nature (ch. 2). However, the beginnings of a difference emerge with Polanyi’s use of the term ‘market economy’ or ‘market system’. As Dale puts it: ‘Where the market economy stands out from any previous economic system is that its functioning depends on the commodification of land, labour and money: “fictitious commodities” in Polanyi’s lexicon’ (49). But this is, of course, for Marx, the defining feature of the capitalist mode of production, when all inputs into the production of commodities have become commodities. Yet although Polanyi occasionally mentions capitalism, his argument is presented throughout in terms of market economy or market system, not capitalism.

This then paves the way for a fundamental difference – between Marx’s objective labour theory of value and Polanyi’s subjective marginalist theory of value, which Dale comments on as follows:

Given the force of his critique of the neoclassical framework, it is puzzling that Polanyi accepted marginalist value theory. In so doing, it seems to me, he was buying into a methodology that could not be assimilated into his broader philosophy.… Be that as it may, he stuck to his project of rejecting marginalism’s methodological integument while retaining its value theory. Although characteristically innovative, his attempt to chop the value-theoretic branch from the neoclassical trunk and to graft it onto a historicist stem yielded, as we shall see, not a little confusion (103).

An example of this confusion arises in relation to Polanyi’s concept of the ‘economistic fallacy’ – the assumption that any and all societies based on a division of labour are founded on explicit or implicit market-exchange-oriented individual action and should be modelled accordingly. In the context of the debate among anthropologists over the use of this ‘formalist’ analysis, rather than the historically and institutionally based ‘substantivist’ analysis, Dale notes that Polanyi (113), and some of his followers (125), accepted the relevance of the formalists’ analysis for modern market economies, thus fatally weakening his general critique of formalism’s neoclassical marginalist methodological individualism.

The relationship of capitalism to pre-capitalist societies

When discussing one of his central preoccupations – the relationship between freedom and ‘the reality of society’, Polanyi turned to Marx and particularly Engels for their concept of primitive communism, which appealed to him because of it’s supposed transparency of personal relations. However, there is a crucial difference between their positions. As Dale puts it:

While for Engels the absence of classes and political relations of class rule (such as states) demarcates “primitive communism” from all forms of class society, including those in which exploitative relations take a “face-to face, inter-personal” form, for Polanyi the fault line is between “impersonal-opaque” and “personal-transparent” modes of social interaction, and this, historically, translates into the distinction between market society and all previous formations in which Gemeinschaft-type relations prevailed – including European feudalism (34).

This difference makes itself felt again and again. Commenting on Polanyi’s analysis of Dahomey and the slave trade, Dale notes: ‘he displays a persistent blind spot towards the brutal, exploitative and acquisitive character of Dahomey’s ruling class’ (177). This blind spot is connected to Polanyi’s institutionalist method. In his analysis of archaic societies his focus is on the embeddedness of economic activity in social relations and institutions, compared to its disembeddedness in market (i.e., capitalist) society. He is interested in the reciprocal and redistributive forms of non-market integration that hold these societies together. But, Dale points out, this emphasis on integration has led Marxist critics, such as Gledhill and Larsen, and Godelier, to comment on the static and functionalist nature of the analysis, with no analysis of power, exploitation and conflict, no explicit concept of a mode of production, and thus no internal dynamic (122, 130, 132).

Polanyi has also been criticised for underestimating the extent to which market exchange, as a method of integration, along with money and banking, in fact existed in archaic societies. While Dale makes it clear that some of Polanyi’s historical claims were overstated (ch. 4), at a fundamental level what Polanyi was getting at was the difference between the existence of markets and the existence of a market economy or market system. Markets existed long before market systems and Polanyi’s market system comes into existence, as we have seen, when land, labour and money become, for him, fictitious commodities, as for Marx, simply commodities. Seen in this light, it can be argued that Polanyi was making use, at least partially, of an implicit capitalist mode of production.

Finally, in this section, there is the Dale’s discussion of the debate over ‘disembedded’ versus ‘always embedded’ interpretations of Polanyi (199-203). The disembeddied version is that the market system (capitalism) disembeds economy from society, ruptures the organic link between economic activity and the social and political dimensions of human activity. Block, on the other hand, argues that Polanyi’s thesis that the fully self-regulating market is a ‘utopian’ concept – in that it can never be fully realised because, as noted above, moves towards it are so destructive of society and nature that they call forth a counter-movement of society to regulate and contain it – means that the economy is always embedded to a greater or lesser extent. Dale does not accept this argument:

The novelty of the market economy is that its institutional embedding entails a diremption [forcible separation] from non-economic institutions in a manner that negates both social control over economic institutions and moral behaviour within them … To say that the liberal market is “embedded” in the sense of “instituted”, then, does not negate its “disembeddedness” at other levels. The term does not denote the economy’s separation from society but from non-economic institutions, a separation that produces a rift between individual and society and a consequent moral degeneration. … This is why it does make sense to speak of a disembedded economy, and even to conceive of it as one in which society is embedded (201-2).

The two conflicting interpretations, not surprisingly, have radically different political implications. For Block, the always embedded reading means that ‘there are no inherent systemic obstacles to restructuring market societies [i.e., capitalism] along more democratic and egalitarian lines …’ (quoted 200). By contrast, the disembedded reading points to the need to move beyond capitalism, to reinstitute the economy in ways that (re)embed it in society by establishing social control over it.

The relevance of the double movement to the post WWII era

After reviewing Polanyi’s discussion in The Great Transformation of the ‘Speenhamland’ system, in the light of historical studies that appeared after the book was written, Dale concludes: ‘In its analysis of the empirical facts this is the least sure-footed section of the book’ (57). For this reviewer, Dale’s discussion of the relevance of the countermovement today in chapter 6 is the least sure-footed section of his book. He argues that ‘in recent Polanyian theory the four-stage model of the double movement in TGT [The Great Transformation] – marketization, countermovement, disruptive strains, socialist resolution / fascist irruption – has tended to become a simpler and different perspective centred upon an undulation between regulating and commodifying trends, a perpetual to-and-fro between regimes that disembed and reembed the market.’ (227) He concludes:

Re-regulation in the interests of what Polanyi’s generation called “the common man” is a moral / political imperative but it should not be confused with a return to a “managed capitalism”. The danger of that dream is that it plays to the oscillation of free market and étatiste regimes, an infernal pendulum that leaves what might be called Polanyi’s maximum programme – the wholesale decommodification of labour and land – postponed ad infinitum (233).

Dale is surely right to warn of this danger. However, although not a straightforward extrapolation of Polanyi’s thesis, the concept of a double movement does not have to be used in this way. It can be used to illuminate the three distinct periods in the history of capitalism since 1945. First, a post-war settlement reflecting the changed balance of forces in the world and within the major capitalist countries that resulted in the ‘golden age’ of historically unprecedented high growth rates and low unemployment levels that prevailed mutatis mutandis during the 1950s and 1960s. Second, a transitional period of crisis during the 1970s when, as Kalecki predicted in 1944, full-employment proved dysfunctional for capitalism and gave rise to downward pressure on profit rates and accelerating inflation as capital sought to counter this. Third, the period of neoliberal globalisation, with its privatisation, marketisation, deregulation, and financialisation – ushered in by the victory of capital in the political and ideological struggles of the 1970s and made possible by the defeat of militant labourism in the 1980s.

Thus, the golden age can be viewed as the highpoint of the countermovement that Polanyi envisaged as culminating in socialism or fascism, but in fact resulted in varieties of the social democratic welfare state (interestingly, Dale notes that in his post-war writings Polanyi believed that the iniquities of the market economy could be overcome by institutional reform (248)). The 1970s and 1980s can then be seen as ultimately ‘utopian’ attempts to move in the direction of a fully self-regulating system that eventually resulted in the financial and economic crisis of 2008 onwards. This application of Polanyi’s concept of the double movement to today need not lead to the danger that Dale correctly warns us of. Instead, it should reinforce the argument that unless capitalism is transcended, there will sooner or later be a response to crises through a form of what Gramsci called ‘passive revolution’, and one way or another the conditions that enable continued capital accumulation will eventually be re-established.

Notwithstanding any misgivings over his interpretation of the post-war period (and he addresses and rejects the above account, contesting its empirical foundations), Dale has written a fine book in which his exposition and assessment of Polanyi’s life’s work is both highly illuminating and thoroughly convincing. It will long remain the standard authority. Although Dale is scrupulous in documenting the ambiguities and confusions that provide scope for other interpretations, his own interpretation of Polanyi is clearly an anti-capitalist one. As Polanyi himself put it:

For a century the dynamics of a modern society was [sic] governed by a double movement: the market expanded continuously but this movement was met by a countermovement checking the expansion in different directions. Vital though such a countermovement was for the protection of society, in the last analysis it was incompatible with the self-regulation of the market, and thus with the market system itself (Polanyi 1944, p. 136).

29 November 2010


  • Polanyi, Karl 1944/2001 The Great Transformation (Boston, Beacon Press).


  1. “Given the force of his critique of the neoclassical framework, it is puzzling that Polanyi accepted marginalist value theory.”

    Well, except for the fact that marginalist value theory is obviously correct, and the labour theory of value absurd, it is puzzling.

  2. It is not immediately obvious to me that anyone has been able to explain and convincingly defend the use of the term ‘VALUE’ in the phrase ‘marginalist value theory’. That said, the law of value or the labour theory of value, as it necessarily implies the existence of a self-regulating capitalist economy, can readily be defended, not by opposing marginalist concepts, but rather by drawing on the refinements introduced and popularized by the marginalists after Marx’s death. Thus, in the Marxian theory of profit, the market value or market production price of a capitalistically produced commodity is determined, not by the amount of labour actually spent per unit of that commodity, but rather by the amount of labour necessary to produce the marginal supply per unit of that commodity. See my book, Capitalism & the Dialectic or, better still, T. Th. Sekine’s An Outline of the Dialectic of Capital.

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