Economics And The Freedom To Shape Our Social Destiny
by Karl Polanyi

Dogmatic belief in economic determinism in its different forms has become a chief obstacle to the progress of mankind. The total view from which pessimism results is this: All thinking persons recognize the precariousness of the human condition today. Man is not a simple being, and he can die in more than one way. War or no war - man, in the material and moral cast for the sake of which we cherish our humanity, may be unable to maintain himself in the future in the technological environment which he has created. The Moscow Trials, Oswiecim, Hiroshima are portents.

Since the venture of a progressively artificial surrounding cannot - and indeed should not - be voluntarily discarded, we must adapt life in such a surrounding to the requirements of human existence. The problem of restoring meaning and unity to life in a machine civilization must be faced. But, on whatever level we approach the question - whether that of cultural unity or emotional balance, or even only that of bare national survival - adjustment implies fulfilling the requirements of social justice, as a consciously pursued human aim. It is here that grave doubts set in. For, among the requisites of meaningful purpose, the safeguarding of the freedom of conscience stands out for us - a demand that cannot be compromised without voiding all our other aims as well. Yet justice appears unattainable except at the cost of freedom, and this is so for reasons that seem to be rooted in economics. Laissez-faire appears therefore as the price we pay fora freedom. For the freedoms we cherish - and this cannot be gainsaid - grew up in the interstices of our economy and must (it is argued) necessarily disappear with it. Behind this and rigid ominous economic determinism, which we meet more and more often, there stand strong convictions, both as to the preeminent role of the economic agent in our present world and as to its decisiveness in human history in general.

This appreciation of our total situation contains, I submit, both an essential truth and a radical fallacy. Justly, we deem our institutions to be determined by the economic aspect of life; but, quite mistakenly, we ascribe this fact to some immanent and timeless quality of the economic as such.

The society we live in: In contrast to tribal, ancestral, or feudal societies, ours is a market society. The institution of the market is here the basic organization of the community. Blood tie, ancestor worship, or feudal allegiance is replaced by market relations. Such a state of affairs is new; for an institutionalized supply-demand-price mechanism - a market - was never more than a subordinate feature of social life. On the contrary, the elements of the economic system were found, as a rule, imbedded in other than economic relations, such as kin, religion, or charisma. The motives for which individuals participated in economic institutions were not usually themselves "economic," that is, they did not arise from fear of otherwise going without the necessities of life. It is precisely such a fear of individual starvation as an inducement to hunt, catch, till, or harvest that was unknown in the majority of societies - in effect, in all except the society of classical laissez-faire, or such as were modeled upon it.

For never before the nineteenth century was the production and distribution of material goods and services in society organized through a market system. This stupendous innovation was achieved by drawing the factors of production, labor, and land into that system. Labor and land were themselves made into commodities; that is, they were treated as if they were produced for sale. Of course they were not actually commodities, since they were either not produced at all (as land), or, if they were, this was not for sale (as labor).

The true scope of such a step can be gauged if we remember that labor is only another name for man, and land for nature. The commodity fiction handed over the fate of man and nature to the play of an automaton running in its own grooves and governed by its own laws.

Market economy thus created a new type of society. The economic or productive system was entrusted to a self-acting device. An institutional mechanism controlled the resources of nature as well as the human beings in their everyday activities.

In this way an "economic sphere" came into existence that was sharply delimited from other institutions in society. Since no human aggregation can survive without a functioning productive apparatus, this had the effect of making the "rest" of society a mere appendage to that sphere. This autonomous sphere, again, was regulated by a mechanism that controlled its functioning. As a result, that controlling mechanism became determinative of the life of the whole body social. No wonder that the emergent human aggregation was "economic" to a degree previously never even approximated. "Economic motives" now reigned supreme in a world of their own, and the individual was made to act on them under penalty of extinction.

In actual fact, man was never as selfish as the theory demanded. Though the market mechanism brought his dependence upon material goods to the fore "economic" motives never formed with him the sole incentive to work. In vain was he exhorted, by economists and utilitarian moralists alike, to discount, in business, all other motives but material ones. On closer investigation he was still found to be acting on remarkably "mixed" motives, not excluding those of duty towards himself and others - and maybe secretly even enjoying his work for its own sake.

However, we are not here concerned with actual, but only with assumed motives. For views on man's nature are built not on the psychology, but on the ideology of everyday life. Accordingly, hunger and gain were singled out as "economic motives" and man was supposed to be acting on them in practice, while his other motives appeared more ethereal and remote from the humdrum existence. Honor and pride, civic obligation and moral duty, even self-respect and common decency were not deemed irrelevant to production and were significantly summed up in the word "ideal." Hence man was believed to consist of two components, one more akin to hunger and gain, the other to honor and power. The one was "material," the other "ideal"; the one "economic," the other "non-economic"; the one "rational," the other "non-rational." Utilitarian philosophers went so far as to identify the two sets of terms, thus endowing the "economic" with the aura of rationality. He who would have refused to imagine that he was acting for gain alone was thus considered not only immoral, but also insane.

The picture of man and society that was induced by this condition of affairs was this:

As regards man, we were made to accept the notion that his motives can be described as "material" and "ideal," and that the incentives on which everyday life is organized spring from the "material" motives.

As regards society, the kindred doctrine was propounded that its institutions were "determined" by the economic system.

Under a market economy both assertions were, of course, true. But only under such an economy. In regard to the past, such a view was no more than an anachronism. In regard to the future, it was a mere prejudice. For this new world of "economic motives" was based on a fallacy. Intrinsically, hunger and gain are not more "economic" than love or hate, pride or prejudice. No human motive is, per se, economic. There is no such a thing as a sui generis experience - in the sense in which one may have a religious, aesthetic, or sexual experience. These latter give rise to motives that broadly aim at evoking similar experiences. In regard to material production, these terms lack self-evident meaning.

The economic factor, which underlines all social life, no more gives rise to definite incentives than the equally universal law of gravitation.

Assuredly, if we do not eat, we must perish, as much as if we were crushed under the weight of a falling rock. But the pangs of hunger are not an individual, but a collective affair. If an individual is hungry, there is nothing definite for him to do. Made desperate, he might rob or steal, but such an action can hardly be called productive. With man - the political animal - everything is given not by natural, but by social circumstances. What made the nineteenth century think of hunger and gain as "economic" was simply the highly artificial and deliberate organization of production under a market economy.

But the market mechanism also created a delusion of economic determinism as a general law.

Under a market economy, again, such determinism holds good. Indeed the working of the economic system here not only "influences" the rest of society, but determines it - just as, in a triangle, the sides not merely influence but determine the angles.

Take the stratification of classes in society. Supply and demand in the labor market were identical with the classes of workers and employers which personified them. The social classes of capitalists, landowners, tenants, merchants, brokers, professionals, and so on were delimited by the corresponding markets for land, money, capital; for their uses; or for various services. For the income of these classes was fixed by the market, their rank and position by their income.

While social classes were directly, other institutions were indirectly determined by the market mechanism. The forms of state and government, marriage and the rearing of children, the organization of science and education, religion and the arts, the choice of profession, habitation, settlements, the very aesthetics of private life had to comply with the utilitarian pattern or at least not interfere with the working of the market mechanism, on which the livelihood of all depended. It was almost impossible to avoid the erroneous conclusion that, as "economic" man was the "real" man, so the economic system was "really" society.

The stringency with which the market mechanism works was falsely imputed to the strength of economic motivation. As a matter of fact there was no connection between the two. The market mechanism knows nothing but rigid alternatives, whatever the motives of the individuals who participate in the market. The supply-demand- price system works the same way whether the motives of individuals are weak or strong, rational or irrational, utilitarian, political, or religious. The discovery of economic determinism by nineteenthcentury thinkers was nothing but the discovery of the market and of the formal necessity by which it moves between inevitable alternatives, whether these are geared to the economic system or notc - in other words, whatever the real or fictitious commodities transacted in the market. Economic determinism as a sociological phenomenon is coterminous with the market, outside of which it can exist only in a shadowy form.

So spurious are the foundations of economic determinism. Economic factors affect the social process in innumerable ways (and vice versa), but nowhere except under a market system are the effects more than limiting. Neither sociology nor history contradicts this thesis. And anthropologists rightly deny that the emphasis embodied in a culture is dependent upon technological - or even economic - organization. Attitudes as opposite as cooperation and competition have been found to be prevalent in different societies endowed with almost identical tools and a very similar economic environment. What could be more vital to the whole cultural and moral atmosphere of a community than the predominance of cooperative or competitive attitudes? What could prove to go deeper into the substance of humanity's ideal heritage than the distinction between the principles of solidarity and self-assertion? And yet even such extreme ideological divergences are unaffected by economic factors.

Now free institutions, I submit, are nothing but expressions of persuasive principles such as cooperation and competition, which, until proof to the contrary, should be deemed independent of the technological and organizational aspects of the economy. Freedom finds its institutional expression in the prize set on personality, integrity, character, and nonconformity. Free institutions depend upon the valuation set on civic liberties. And, as John Stuart Mill wrote, the organization of trade, whether public or private, is not a question of individual freedom as he meant it. The freedoms involved in the organization of trade and business have but little to do with the valuation of the freedom of conscience and its institutional safeguarding. The latter is a matter of the total culture of a society, and where emphasis lies in such a culture is not determined by economic factors.

It is not for the economist, but for the moralist and the philosopher to decide what kind of society we should deem desirable. An industrial society has one thing in abundance, and that is material welfare more than is good for it. If, to uphold justice and the freedom to restore meaning and unity in life, we should ever be called upon to sacrifice some efficiency in production, economy in consumption, or rationality of administration, an industrial civilization can afford it. The economic historians' message to philosophers today should be: we can afford to be both just and free.

End of Economics And Freedom by Karl Polanyi