Karl Polanyi Explains It All

In November 1933, less than a year after Hitler assumed power in Berlin, a 47-year-old socialist writer on Vienna’s leading economics weekly was advised by his publisher that it was too risky to keep him on the staff. It would be best both for the Österreichische Volkswirt and his own safety if Karl Polanyi left the magazine. Thus began a circuitous odyssey via London, Oxford, and Bennington, Vermont, that led to the publication in 1944 of what many consider the 20th century’s most prophetic work of political economy, The Great Transformation: The Political and Economic Origins of Our Time.

Polanyi, with no academic base, was already a blend of journalist and public intellectual, a major critic of the Austrian School of free-market economics and its cultish leaders, Ludwig von Mises and Friedrich Hayek. Polanyi and Hayek would cross swords for four decades—Hayek becoming more influential as an icon of the free-market right but history increasingly vindicating Polanyi.

Reluctantly, Polanyi left Vienna for London. Two of his British admirers, the Fabian socialist intellectuals G.D.H. Cole and Richard Tawney, found him a post at an Oxford—sponsored extension school for workers. Polanyi’s assignment was to teach English social and economic history. His research for the course informed the core thesis of his great book; his lecture notes became the working draft. This month marks the 70th anniversary of the book’s publication and also the 50th anniversary of Polanyi’s death in 1964.

Looking backward from 1944 to the 18th century, Polanyi saw the catastrophe of the interwar period, the Great Depression, fascism, and World War II as the logical culmination of laissez-faire taken to an extreme. “The origins of the cataclysm,” he wrote, “lay in the Utopian endeavor of economic liberalism to set up a self-regulating market system.” Others, such as John Maynard Keynes, had linked the policy mistakes of the interwar period to fascism and a second war. No one had connected the dots all the way back to the industrial revolution.

The more famous critic of capitalism is of course Karl Marx, who predicted its collapse from internal contradictions. But a century after Marx wrote, at the apex of the post–World War II boom in both Europe and the United States, a contented bourgeoisie was huge and growing. The proletariat enjoyed steady income gains. The political energy of aroused workers that Marx had imagined as revolutionary instead went to support progressive parliamentary parties that built a welfare state, to housebreak but not supplant capitalism. Nations that celebrated Marx, meanwhile, were economic failures that repressed their working classes.

Half a century later, the world looks more Marxian. The middle class is beleaguered. A global reserve army of the unemployed batters wages and marginalizes labor’s political power. Even elite professions are becoming proletarianized. Ideologically, the view that markets are good and states are bad is close to hegemonic. With finance still supreme despite the 2008 collapse, it is no longer risible to use “capital” as a collective noun. The two leading treasury secretaries during the run-up to the 2008 financial crash, Democrat Robert Rubin and Republican Henry Paulson, were both former CEOs of Goldman Sachs. If the state is not quite the executive committee of the ruling class, it is doing a pretty fair imitation.

Yet Marx, for all of his stubbornly apt insights about capitalism, is an unreliable guide to its remediation. Polanyi, with the benefit of nearly a century’s worth more evidence, has a surer sense of how markets interact with society. More humanist than materialist, Polanyi did not believe in iron laws. His hope was that democratic leaders might learn from history and not repeat the calamitous mistakes of the 19th and early 20th centuries. Polanyi lived long enough to see his wish fulfilled for a few decades. In hindsight, however, the brief period between the book’s publication and Polanyi’s demise is looking like a respite in the socially destructive tendencies of rampant markets. In seeking to understand the dynamics of our own time, we can do no better than to revisit Polanyi.

 

The Great Transformation, written for a broad audience, is witty and passionate as well as erudite. The prose is lyrical, despite the fact that English was Polanyi’s third language after Hungarian and German.

Contrary to libertarian economists from Adam Smith to Hayek, Polanyi argued, there was nothing “natural” about the free market. Primitive economies were built on social obligations. Modern commercial society depended on “deliberate State action” by and for elites. “Laissez-faire” he writes, savoring the oxymoron, “was planned.”

Libertarian economists, who treat the market as universal—disengaged from local cultures and historic time—are fanatics whose ideas end in tragedy. Their prescription 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.”

Like Marx, Polanyi begins in England, the first fully capitalist nation. In Polanyi’s telling, the slow shift from a post-feudal to a capitalist economic system accelerated in the 18th century, when the enclosure movement (“a revolution of the rich against the poor”) deprived the rural people of historic rights to supplement incomes by grazing domestic animals on common land, and the industrial revolution began to undermine craft occupations.

For a time, social cushions left over from feudalism sheltered ordinary people from the turbulence of markets. “England withstood without grave damage the calamity of the enclosures,” Polanyi wrote, because protections guaranteed by the Crown could “slow down the process of economic improvement until it became socially bearable.” Conservatives understood this better than economic liberals. Polanyi invokes the views of George Canning,* a Tory who served as foreign secretary and later prime minister, that the poor laws—traditional relief payments that protected the rural working class from periodic destitution—“saved England from a revolution.” But in the early 19th century, the rising merchant class, the emergent Liberal Party, and the ideology of laissez-faire together produced a social order based on a self--regulating market.

The old poor laws were abolished in 1834 in favor of the poorhouse, an institution designed to be so degrading that workers would accept the dismal labor-market wages in William Blake’s dark, satanic mills. Meanwhile, free trade became the norm, meaning lower grain prices in the short run (and depressed wages) but increased volatility in the price of food. In the same period, the rise of a rigidly enforced gold standard limited the state’s ability to temper periodic downturns.

An economy oblivious to social consequences had to engender backlash. The sponsors of protective measures were often conservatives concerned about social stability, such as the English Tory Benjamin Disraeli and the Prussian Iron Chancellor Otto von Bismarck. “The [English] Ten Hours Bill of 1847,” Polanyi writes, “which Karl Marx hailed as the first victory of socialism, was the work of enlightened reactionaries.” But by the late 19th century, periodic financial panics and depressions menaced both society and the market system. This got displaced into nationalism, culminating in World War I.

After that war, the victorious nations tried to restore the trinity of free trade, the gold standard, and unprotected labor markets. Obsessed with sound currency, market ideologues and bankers demanded austerity policies leading to both mass unemployment and episodes of hyperinflation. Given the legacy of war debts and dislocations, all this was more than the economy or society could bear. Market institutions, Polanyi writes, “broke down in the twenties everywhere—in Germany, Italy, or Austria, the event was merely more political and more dramatic.”

In a few places, politics produced a third way—neither the hegemony of the turbulent market nor the grim security of the total state. Social-democratic Sweden and New Deal America devised a mixed economy that civilized the brute energy of capitalism. At the time Polanyi was writing, others converged on the same aspiration. In Britain, Lord Beveridge was composing his blueprint for a postwar welfare state. Part II, published in 1944, carried the Polanyian title Full Employment in a Free Society. At Bretton Woods, also in 1944, John Maynard Keynes and Harry Dexter White were inventing a postwar international financial system that made room for domestic social democracy freed from the pressures of gold and deflation. A few months after Polanyi’s book went to press urging that “rights of the citizen hitherto unacknowledged must be added to the Bill of Rights” including “the right of the individual to a job,” Franklin Roosevelt delivered his “Second Bill of Rights” speech in January 1944, calling for exactly that. Polanyi was not formally a player in the planning for Bretton Woods; he does not cite Beveridge, nor could he have known about FDR’s coming speech. But in the aftermath of depression, dictatorship, and war, the shared vision of managed capitalism was in the air. Nobody gave it context and gravitas better than Polanyi.

For three decades, the success of a social settlement between labor and capital seemed to vindicate both Polanyi’s critique and his hopes. But the compromise did not stick. The path of capitalism since the 1970s has repeated the 19th-century hegemony of the market and is beginning to resemble the darker history of the 1920s and 1930s.

 

How did Karl Polanyi become the great non-Marxian synthesizer of the tragic interplay of markets, society, and politics? He was born in Vienna in 1886 during a short era known as the “Great Generation,” when the decaying Austro-Hungarian Empire was a center of intellectual and political enlightenment. His Hungarian father, Mihaly Pollacsek, with a Swiss engineering degree, was a designer of Vienna’s rail system. The family’s surname, of Polish-Jewish origin, was magyarized to Polanyi after Mihaly’s death in 1905,** and the family ceased identifying as Jews. Polanyi grew up mostly in Budapest, where his Russian-born mother, Cecile, ran a literary and political salon, and he attended the elite Trefort Street Gymnasium. The illustrious family included his younger brother Michael, a chemist who became a libertarian political philosopher, and Michael’s son, John, who won the Nobel in Chemistry, as well as the artist Eva Zeisel.

Expelled from the University of Budapest in 1907 after a brawl in which anti-Semitic right-wingers harassed a popular socialist professor and Polanyi and his friends rushed to his defense, he repaired to the provincial University of Kolozsvar (today Cluj in Romania) to finish a doctor of law degree. While still a student, Polanyi helped found the left-wing Galilei Circle, serving as its first president and editor of its magazine. After a flirtation with Marx, Polanyi was drawn to the more temperate Socialism of Robert Owen, Richard Tawney, and G.D.H. Cole and the British Fabians. In today’s language, he was a social democrat.

Polanyi served in the world war as a cavalry officer. He contracted typhus and came home to find Budapest torn between nationalist right and far left. At the time of the aborted Hungarian Soviet revolution of 1919 (which he opposed), Polanyi left Budapest for Vienna. His war experience, illness, and the destruction of liberal Budapest left him frail and emotionally exhausted. But in 1920, he met the love of his life, a petite firebrand named Ilona Duczynska. Her biographer called their union “a marriage between an anarchist world revolutionary and a reclusive liberal scholar.” Ilona was expelled from the Communist Party that year for her independent views. The couple had their only child, Kari, in 1923. Soon, Polanyi was contributing to local journals and running an informal economics seminar from the family apartment on the Vorgartenstrasse.

To provide a counterweight to neoliberal dystopia, Polanyi believed the working class needed to be mobilized politically, in a robust democracy. He arrived at this conclusion not merely from theory but from his worker-education efforts at the Galilei Circle and by living in one of the most successful social-democratic epochs of the European experience, Red Vienna in the 1920s and early 1930s—red as in social-democratic, not communist. There, after World War I, socialist municipal governments in power for 15 years built model low-rent housing financed by taxation. Parents received kindergartens, day care, and a family allowance in the form of a “clothes package.” Gas, water, and electricity were provided by publicly owned utilities. Taxes on the wealthy included surcharges on the use of servants. Generous unemployment insurance strengthened workers’ bargaining power.

Polanyi viewed Red Vienna as a hopeful counterpoint to the Dickensian poorhouse on one extreme and fascism on the other. The perverse reforms of early-19th-century England were products of the weakness of the working class, he wrote, but Red Vienna was a badge of its strength: “While [English poor-law reform] caused a veritable disaster of the common people, Vienna achieved one of the most spectacular cultural triumphs of Western history.” But as Polanyi appreciated, an island of municipal socialism could not survive larger market dislocations and rising fascism. Four months after he departed Vienna in 1933, the right took over.

The nature of the times caused Polanyi and his wife Ilona to be twice separated, first when he moved to England and she stayed behind as part of the anti-fascist underground until 1936 and again for more than a year, when Polanyi backed into a wartime stay in America. He had been on a lecture tour of U.S. colleges, his third such visit. Peter Drucker, a friend from Vienna and later an influential theorist of corporate management, invited Polanyi to spend the summer of 1940 in southern Vermont with him and his wife. With the support of Drucker and another émigré scholar and friend, economist Jacob Marschak, then teaching at the New School, Polanyi applied for a Rockefeller Foundation fellowship to stay at Bennington to complete his book. Among his references were prominent London acquaintances, including a young war correspondent named Edward R. Murrow.

In the 1944 catalog of publisher Farrar & Rinehart, the entry for The Great Transformation appropriately compares it to Keynes’s succinct 1919 classic, The Economic Consequences of the Peace. But while Keynes’s book was a best-seller, turning its author into a celebrity, The Great Transformation sold just 1,701 copies in 1944 and 1945.

The New York Times reviewer, John Chamberlain, was savage: “This beautifully written essay in the revaluation of a hundred and fifty years of history adds up to a subtle appeal for a new feudalism, a new slavery, a new status of economy that will tie men to their places of abode and their jobs.” If that sounds just like Polanyi’s nemesis, Hayek, it was for good reason. Chamberlain had just written the foreword to Hayek’s The Road to Serfdom, also published in 1944. While Hayek’s book was adapted in Reader’s Digest and became a best-seller, Polanyi’s languished.

By 1946, however, Polanyi had been reviewed, mostly favorably, in major newspapers and social-science journals, and he was slowly attracting a following. At 61, Polanyi was offered his first real academic job in 1947 at Columbia, where he taught until 1953. But in the Cold War chill, the State Department refused to give a permanent visa to Ilona, and she relocated to Canada. After attempting to commute from Toronto, Polanyi spent his final years settled there, returning to an early scholarly interest in economic anthropology.

Temperamentally, he was both a work obsessive and a romantic. His habit of phoning former students at odd hours to discuss arcane ideas was part of his charm. Polanyi’s letters to his wife and daughter are filled with tenderness. One of his great essays is on Hamlet, and his last work, published in 1963, was a jointly edited book with Ilona, The Plough and the Pen, with an introduction by W.H. Auden, on the struggles of modern Hungary as rendered by Hungarian poets and essayists.

 

Fred Block and Margaret Somers, both economic sociologists, have been Polanyi admirers for more than three decades. In The Power of Market Fundamentalism: Karl Polanyi’s Critique, they aim to reintroduce him in an era of resurgent laissez-faire and political blockage that he could have scripted. “Our focus,” they write, “is on the rebirth in the 1970s and 1980s of the same free market ideas that were widely assumed to have died in the Great Depression.”

Block and Somers provide a thorough reprise of Polanyi for readers new to him and careful analysis for specialists. The best part of their book is its introductory chapter, a well—integrated and brisk summary of the man and his ideas. Other chapters provide useful discussions of what Polanyi’s social history gets right and slightly wrong, as well as astute comparisons of Polanyi with Keynes and Marx.

Unlike Marx, Polanyi viewed the transformation of a more balanced commercial society into a market-dominated one as neither natural nor inevitable. For Polanyi, as Block and Somers observe, “progress could only come through conscious human action based on moral principles.” Though there was a logical pattern to capitalism’s overwhelming social structures, we were not doomed to repeat our mistakes. Polanyi was a huge fan of Roosevelt’s New Deal, which he saw as the sane alternative to laissez-faire dystopia on the one side and totalitarian anti-politics on the other. “The eclipse of Wall Street in the 1930s,” he wrote, “saved the United States from a social catastrophe of the Continental type.”

Polanyi rejected both Marxists and economic libertarians for their shared premise that the state should or could wither away. Marxists assumed the state would be redundant after the workers’ revolution. Libertarians saw (and see) the state as interfering with the genius of the market. Polanyi embraced democratic politics, both as an end in itself and as the necessary precondition for taming the economy. Despite his gloomy rendering of history, Polanyi remained an optimist.

Block and Somers also re-examine Polanyi’s research. A key section of The Great Transformation pivots on a local English ordinance known as the Speenhamland law, which Polanyi treats as an emblematic shift in emergent capitalism. Approved by the justices of Berkshire County at a May 6, 1795, meeting, Speenhamland increased the worker protections of the old Elizabethan Poor Law of 1601. With wages falling, pauperism spreading, unrest increasing, and the English gentry all too aware of revolutionary events across the Channel in France, the law provided that any worker who could not earn enough to feed his family was entitled to supplemental relief from the local parish tied to the price of bread—“a minimum income should be assured to the poor irrespective of their earning.”

But the law, like a badly designed modern welfare program, backfired. Many employers reduced wages, knowing that the parish would make up the difference. Some workers, disdaining the wretched pay on offer, became idlers. Costs to taxpayers increased. The dysfunctional system led to outcries from welfare reformers of the day, culminating in the infamous report of the 1832 Royal Commission, which, in turn, led directly to the reform of 1834 and the poorhouse.

Block and Somers find that Polanyi overstated the ubiquity of the Speenhamland system. In practice, poor-relief formulas in England varied widely. What Polanyi did not overstate was the dislocation of the working poor—first by the enclosure movement, then by the industrial revolution—and the perverse response of economic liberals.

A weakness of the Block-Somers book is that several chapters are based on published journal articles, insufficiently blended into a new whole. As a consequence, the tone is uneven, and the book has a fair amount of repetition. Nor do Block and Somers offer much on Polanyi’s personal journey. They include just four pages of summary on his life. The British social scientist Gareth Dale, author of the fine 2010 book Karl Polanyi: The Limits of the Market, and Berkeley Fleming of Mount Allison University in Canada are currently working on the first comprehensive Polanyi biographies.

Fortunately, a good deal on the connection between Polanyi’s life and his work has already been written by his daughter and literary executor, Kari Polanyi Levitt, an emerita professor at McGill University in Montreal. In Polanyi Levitt’s most recent book, From the Great Transformation to the Great Financialization, she provides fascinating new material on Polanyi’s debate with Mises and Hayek. From the time he worked at the Österreichische Volkswirt in the mid-1920s, Polanyi engaged Mises and Hayek both ideologically and technically, arguing over pricing mechanisms under democratic socialism and the emergent dangers of the libertarian system then strangling Europe’s postwar recovery. Polanyi viewed Mises and Hayek as modern counterparts of Adam Smith, David Ricardo, and the social Darwinist Herbert Spencer, punishers of the poor in the name of market incentives. “Inside and outside England,” he wrote in The Great Transformation, “from Macaulay to Mises, from Spencer to Sumner, there was not a militant [free-market] liberal who did not express his conviction that popular democracy was a danger to capitalism.”

Hayek contended in The Road to Serfdom that even democratic forms of state planning were bound to end in the totalitarianism of a Stalin or a Hitler. But 70 years later, there is not a single case of social democracy leading to dictatorship, while there are dozens of tragic episodes of market excess destroying democracy. “The fascist solution of the impasse reached by liberal capitalism,” Polanyi wrote, “can be described as a reform of market economy achieved at the price of the extirpation of all democratic institutions.” Polanyi surely had the better of the argument. But Hayek had more influence over prevailing ideology and practice. Polanyi and Marx might converge on the inference that Hayek’s views were more useful to the ruling class.

 

Though slow to win recognition, The Great Transformation became a modern classic. After the neoliberal assault on the grand compromise of the late 1940s, Polanyi seemed not just prescient but prophetic. Because he was a political organizer, journalist, self-taught historian, and economist, Polanyi, in moral philosopher Albert Hirschman’s metaphor, could be a trespasser across academic disciplines. Though Polanyi is one of the most cited of social scientists, he is not widely read among economists. The mainstream of the profession has largely stopped teaching the history of economic ideas. Nor do most economists today study the relationship of economics to politics and social history.

Like other free spirits such as Hirschman, Joseph Schumpeter, or John Kenneth Galbraith, Polanyi had relatively few graduate students, and there is no formal Polanyi “school.” Rather, a wide spectrum of thinkers found their way to him. He’s prized by social historians and economic sociologists, and his brand of inquiry fits squarely into the tradition of American institutional economics associated with John R. Commons and the great debunker of free-market cant, Thorstein Veblen. Since 1988, thanks to the efforts of his daughter Kari and her colleague Marguerite Mendell, there has been an active Karl Polanyi Institute of Political Economy, which holds regular conferences, including an anniversary event planned for this fall.

A 1982 article by the international-relations scholar John Gerard Ruggie helped rekindle interest in The Great Transformation. Ruggie, paying homage to Polanyi, refers to the great postwar social compromise as “embedded liberalism,” meaning it squared the circle of a basically capitalist (liberal) economy with plenty of social protections (embedded). A few social scientists of the first rank, including the late sociologist Daniel Bell, political historians Ira Katznelson and Jacob Hacker, and economists Joseph Stiglitz, Dani Rodrik, and Herman Daly, explicitly cite their intellectual debt to Polanyi. Paradoxically, Polanyi also appeals to some Burkean conservatives, with their regard for the social order. John Gray, a recovering Thatcherite and author of the best-selling critique of neoliberalism False Dawn: The Delusions of Global Capitalism, is effusive in his praise of Polanyi. Martin Anderson, advising Ronald Reagan on welfare reform, drew extensively (if misleadingly) on Polanyi to warn that the wrong sort of poor relief backfires. Yale political scientist and anthropologist James C. Scott, author of notable books on the failures of grandiose state projects, said in a 2010 interview that he read The Great Transformation the summer before starting graduate school, “and I think it is, in some ways, the most important book I’ve ever read. … The struggle that Polanyi points to is a struggle that we’re still engaged in.”

At the same time, many public intellectuals working in the tradition of Polanyi don’t have him on their conceptual maps. Michael Walzer’s classic Spheres of Justice, on necessary boundaries between market and non-market institutions, is quintessential Polanyi, but Walzer never mentions him. Elinor Ostrom, a political scientist whose work on strategies to avoid environmental catastrophe—the modern tragedy of the commons—made her among the first non-economists to win the Nobel Prize in Economics, echoes Polanyi but doesn’t invoke him. In reading the works of Galbraith, the consummate historical and institutional economist of the 20th century, one searches in vain for Polanyi.

As more of us are having second thoughts about the second coming of the primal market, it is as if Polanyi is somewhere in the ether. Rereading Polanyi at a time when events vindicate his vision, one has to be struck with the eerie contemporary ring. Polanyi is startlingly 21st-century in addressing how the private rule of global finance puts public policy in a straitjacket. Back in the era of the gold standard, if a government tried to combat unemployment, Polanyi wrote, “any governmental measure that caused a budgetary deficit might start a depreciation of the currency.” That analysis could describe contemporary Argentina or Indonesia, except that the discipline of today’s bond market is even more relentless than the classical gold standard.

Polanyi also sounds like today’s news when he explains how the state’s doing the bidding of private capital (rather than providing a democratic counterweight) undermines politics. In the 1830s, he explains, the British state served the interests of the rising merchant class. The result, he wrote, was “the hatred of public relief, the distrust of state action, the insistence on respectability and self-reliance” on the part of the English working class. He could be describing members of the Tea Party, the same demographic that once voted in large numbers for FDR, and the tendency of citizens throughout the West to give up on governments in the pockets of the rich.

The European Union’s austerity follies are recapitulating the perverse policies of the 1920s and inviting the same brand of know-nothing backlash. In the upcoming elections to the European Parliament, voters disgusted with the failure of politics to remedy the prolonged recession are poised to deliver big gains to nationalist far-right parties. In Polanyi’s beloved Budapest, where he and Ilona are buried, the right already governs.

His discussion of the influence of ideas, likewise, is all too contemporary. In the 1920s, as in the 1830s, the intellectual dominance of free-market economists gave elites pseudo—scientific cover to pursue brutal and perverse policies, with a studied myopia about real-world consequences. In our own time, market fundamentalism is again the dominant ideology. The latest great transformation, from a balanced social market economy to a dictatorship of the invisible hand, has weakened the power of the polity to restore balance and undermined the confidence of the working and middle classes in the use of the democratic state to counter market excess. One must hope, with the optimistic Polanyi, that capitalism can be fixed.

*CORRECTION: An earlier version of this piece referred to George Canning as "Lord Canning." George Canning's wife was given the title of "Lady" after his death, and thus he was not referred to as "Lord" during his lifetime.

**CORRECTION: An earlier version of this piece stated that the family’s surname was magyarized in the 1890s; it was magyarized in 1905 after Mihaly Pollacsek's death.

Comments

Are we doing anyone any favors by calling Adam Smith a libertarian? It seems like getting that wrong hinders rather than helps liberal policy advance.

My look at economists' look at economics -- for now -- hoping to expand this to something really useful -- it's mostly about how attitudes about very important issues may be molded quite unconsciously:
Academic economists tend to see economies as a galaxy of utilities balancing perfectly (or almost) at the margin (according to their utility).

I see economies as made of the same wheels within wheels feedback architecture — but resulting in something more like the process of evolution, the survival of the fittest — where whoever grows the biggest fangs first gets to eat everybody else for dinner; or in the economic case, everyone else’s dinner. Think Tyrannosaurus Rich. :-)
* * * * * *
No reform will take place without reforming the labor market trough legally mandated, CENTRALIZED COLLECTIVE BARGAINING (all employees doing the same job in the same locale work negotiate one unified contract) — automatically balancing middle class political (and think tank — did someone say hack tank in the Repub case?) financing against ownership -- plus -- most all the votes.

Add confiscatory taxation. Think of profit the same way we think of patent incentive. Jack Welch would work just as hard to “win” at $20 million a year as $200 million. Would be oligarchs will work just as hard if their children are only going to get half and theirs half, etc. And efficiency is all we should care about — no need to identify emotionally with winners.

Unionized truck drivers earn much more (than double?) what um-unionized _regional_ airline pilots earn. The latter pay as much as $100,000 to train (some much more renting planes to build up necessary airtime -- recently raised to 1500 hours) -- all in the hope of moving up to the majors some day. A couple or three years back, major Northwest squeezed a billion dollars a year in givebacks out of its unionized flight crews -- following year gave a billion dollars in bonuses to a thousand execs. Centralized bargaining only _mechanically_ viable answer. Teamster Union truck drivers have their own (unique in the US as far as I know) version of centralized bargaining: the National Master Agreement.
http://teamster.org/content/ups-supplements-2013-2018

Germany which is the world's envy of centralized bargaining has some of the worst inequality of accumulated wealth -- which always leads to unwanted power concentration. Really need to do confiscatory taxation.

I was a Personnel Sergeant in the Army. DA Pamphlet 611-21 was two thick books. I don't remember exactly how many Military Occupational Specialties they listed, but I believe it was over 2,000. Civilian life has many more jobs than that. I agree we need to find a way to improve labor's power to bargain, but this proposal isn't going to work as it stands. The existing unions evolved over centuries of oppression, abuse, and murder. In the end they fell victim to their own complacency and corruption. Face it, as much as we need unions most people came to believe that unions were not good for them. Between stealing from the pension fund and taking bribes for sweetheart contracts, union leaders disillusioned and disenchanted their membership. We need to find a way to prevent those abuses and restore workers' confidence in the union. I don't know what the answer is, but it's about time smart people started looking for it.

"The more famous critic of capitalism is of course Karl Marx, who predicted its collapse from internal contradictions." -R. Kuttner

This is, of course, nonsense. Marx never predicted capitalism would collapse. No mode of production naturally gives way to another one however weakened. It must be overthrown.

It's really sad that people consistently misrepresent what Marx wrote. I suppose it's because they never took the time to actually study his work.

Marx on collapse: "On the other hand pressure on society's available productive capital. Since elements of productive capital
are for ever being withdrawn from the market and only an equivalent in money is thrown on the market
in their place, the effective demand rises without itself furnishing any element of supply. Hence a rise in
the prices of productive materials as well as means of subsistence. To this must be added that
stock-jobbing is a regular practice and capital is transferred on a large scale. A band of speculators,
contractors, engineers, lawyers, etc., enrich themselves. They create a strong demand for articles of
consumption on the market, wages rising at the same time. So far as foodstuffs are involved, agriculture
too is stimulated. But as these foodstuffs cannot be suddenly increased in the course of the year, their
import grows, just as that of exotic foods in general (coffee, sugar, wine, etc.) and of articles of luxury.
Hence excessive imports and speculation in this line of the import business. Meanwhile, in those
branches of industry in which production can be rapidly expanded (manufacture proper, mining, etc.),
climbing prices give rise to sudden expansion soon followed by collapse. The same effect is produced in
the labour-market, attracting great numbers of the latent relative surplus-population, and even of the
employed labourers, to the new lines of business. In general such large-scale undertakings as railways
withdraw a definite quantity of labour-power from the labour-market, which can come only from such
lines of business as agriculture, etc., where only strong lads are needed. This still continues even after the
new enterprises have become established lines of business and the migratory working-class needed for
them has already been formed, as for instance in the case of temporary rise above the average in the scale
of railway construction. A portion of the reserve army of labourers, which keep wages down, is absorbed.
A general rise in wages ensues, even in the hitherto well employed sections of the labour-market. This
lasts until the inevitable crash again releases the reserve army of labour and wages are once more
depressed to their minimum, and lower." Capital Volume II, Chapter 16

Volume 2 is devoted to the possibility of capitalism's reproduction over time. We're using "collapse" in two different senses. Marx isn't referring to the collapse of capitalism in your quote from Volume 2. He's referring to what are now called business cycles, i.e., declines in total output (collapse) and expansion in the same.

I'm using collapse in the sense of the economic system ceases to function. There's nothing in your quote about capitalism's death throes. You're going to have to do better than finding a quote with the word "collapse" in it to support your conclusion.

Marx on collapse: "On the other hand pressure on society's available productive capital. Since elements of productive capital
are for ever being withdrawn from the market and only an equivalent in money is thrown on the market
in their place, the effective demand rises without itself furnishing any element of supply. Hence a rise in
the prices of productive materials as well as means of subsistence. To this must be added that
stock-jobbing is a regular practice and capital is transferred on a large scale. A band of speculators,
contractors, engineers, lawyers, etc., enrich themselves. They create a strong demand for articles of
consumption on the market, wages rising at the same time. So far as foodstuffs are involved, agriculture
too is stimulated. But as these foodstuffs cannot be suddenly increased in the course of the year, their
import grows, just as that of exotic foods in general (coffee, sugar, wine, etc.) and of articles of luxury.
Hence excessive imports and speculation in this line of the import business. Meanwhile, in those
branches of industry in which production can be rapidly expanded (manufacture proper, mining, etc.),
climbing prices give rise to sudden expansion soon followed by collapse. The same effect is produced in
the labour-market, attracting great numbers of the latent relative surplus-population, and even of the
employed labourers, to the new lines of business. In general such large-scale undertakings as railways
withdraw a definite quantity of labour-power from the labour-market, which can come only from such
lines of business as agriculture, etc., where only strong lads are needed. This still continues even after the
new enterprises have become established lines of business and the migratory working-class needed for
them has already been formed, as for instance in the case of temporary rise above the average in the scale
of railway construction. A portion of the reserve army of labourers, which keep wages down, is absorbed.
A general rise in wages ensues, even in the hitherto well employed sections of the labour-market. This
lasts until the inevitable crash again releases the reserve army of labour and wages are once more
depressed to their minimum, and lower." Capital Volume II, Chapter 16

Sorry bout the double post! Can't delete it.

Or consider the discussion of falling rate of profit in Volume III:

"Three cardinal facts of capitalist production:
1) Concentration of means of production in few hands, whereby they cease to appear as the property of the immediate labourers and turn into social production capacities. Even if initially they are the private
property of capitalists. These are the trustees of bourgeois society, but they pocket all the proceeds of this
trusteeship.
2) Organisation of labour itself into social labour: through co-operation, division of labour, and the
uniting of labour with the natural sciences.
In these two senses, the capitalist mode of production abolishes private property and private labour, even
though in contradictory forms.
3) Creation of the world-market.
The stupendous productivity developing under the capitalist mode of production relative to population,
and the increase, if not in the same proportion, of capital-values (not just of their material substance),
which grow much more rapidly than the population, contradict the basis, which constantly narrows in
relation to the expanding wealth, and for which all this immense productiveness works. They also
contradict the conditions under which this swelling capital augments its value. Hence the crises."

Volume III, Chapters 13 to 15. This from the end of Chapter 15.

You're on firmer ground here. The law of the tendency of the profit rate to fall leads to severe economic crises like the current one. However, wouldn't you be the first to admit that capitalism didn't collapse? It's reestablishing the conditions of profitability to continue on its crises laden path. The secular fall in the profit rate leads to severe periodic crises. These are objective revolutionary situations. However, these opportunities must be seized by the working class to transform the entire mode of production. Thus, the recurrence of capitalist crises doesn't cause its automatic collapse. Capitalism's overthrow depends on the agency of the working class.

What about "contradictions" is unclear. It is clear to me that Marx thought that the contradictions of capitalism would lead to its collapse. As you note, it is still going strong.

You're projecting. There's nothing in Capital about capitalism's collapse. What about Capital don't you understand?

I have goaded you, but I think your basic point is correct. Of course, capitalists entrenched in a State which they control will not relinquish power on their own. When people say that Marx thought that capitalism would collapse on its own I think they are meaning that things will get so bad for workers that they will wake up to Condorcet's quip that tyrants really have no power. And why did Marx emphasize falling rate of profit? He didn't invent this "law". Adam Smith said much the same thing. It worried Smith, but encouraged Marx. But the both under emphasized, perhaps, the ability of capitalists to get more and more out of S/V. And combined with the state they keep hegemony. Is this why revolutions happened in Russia and China and not in Germany or Britain? In Russia and China the capitalist structure was so weak that a popular revolution could occur? If so, this does not seem to be not hopeful news for the rest of us. I think this is the attitude of T Piketty, whose new "Capital" came out last month.

Why would you goad me? That seems kind of silly.

"And why did Marx emphasize falling rate of profit? He didn't invent this "law"."

The answer is that Capital's purpose is to "lay bare the economic law of motion of modern society." The secular fall in the profit rate is one of those laws of motion. Marx went where his analysis took him. He called it the "most important law of political economy." From the Grundrisse, "Here, therefore, we once again stand on firm ground, where, without entering into the competition of the many capitals, we can derive the general law directly from the general nature of capital as so far developed. This law, and it is the most important law of political economy, is that the rate of profit has a tendency to fall with the progress of capitalist production."

There's a saying that the long run profit rate would fall even if workers could live on air. The value profit rate is r = S/V/C/V + 1. Thus, even if S/V tends to infinity if C/V rises then the value profit rate falls.

There's a question about measurement here. My guess is that Piketty's conclusion that the profit rate doesn't fall is based on Keynesian national income accounting and not Marxian accounts. The Marxian accounting developed in Measuring the Wealth of Nations by Anwar Shaikh and E. Ahmet Tonak show the profit rate falling over the long term.

"When people say that Marx thought that capitalism would collapse on its own I think they are meaning that things will get so bad for workers that they will wake up to Condorcet's quip that tyrants really have no power."

This is probably correct. And this is what we're seeing right now. Restoring the conditions of profitability requires privatizing government services, attacks on workers wages and working conditions, the government programs supporting them environmental regulations, in short anything that raises costs and lowers profitability.

The question is: How much will the working class take? What is their limit?

"Why would you goad me?"

Well, how would you react to a correspondent who published these comments:
"It's really sad that people consistently misrepresent what Marx wrote. I suppose it's because they never took the time to actually study his work."
"You're projecting. There's nothing in Capital about capitalism's collapse. What about Capital don't you understand?"
"You're 100% wrong."
"It seems you have a conclusion that is flailing about for a justification."
"It's a curious phenomenon when someone doesn't know jack all about Marx, but pontificates on him like s/he does."
"Geez! Now you're getting ridiculous here!"
"It's rough isn't it coming up against someone who has studied Marx's economic analysis?"

"The value profit rate is r = S/V/C/V + 1. " This is the same formula that I have quoted earlier from Volume III. Actually, if S/V is rising faster than C/V as investment is increased, the rate of profit goes UP, not down. Seems like that is part of what is happening in our globalized economy today. And as useful as this formula is, it is a great simplification when applied to real economies. It was not intended to apply to monopolies, for example. If this is an iron clad law of capitalism, why are capitalists doing better than ever today, 150 years after Marx's Grundrisse and almost 250 years after Smith, who said much the same thing?

"My guess is that Piketty's conclusion that the profit rate doesn't fall is based on Keynesian national income accounting and not Marxian accounts." Picketty's conclusion is based on neither. Here you will have to read his book. His research methods are explained there.

The "working class" is really a hot button term for many people who are not devoted Marx readers like yourself. The working class is not just industrial workers, as it mostly was in Marx's Victorian England (I am not saying that you have said this. Please don't go off on me here). Today it includes professionals, white collar workers, food service workers, small business owners, the indigent, the gangs and imprisoned, and the mentally challenged; all adding up to a the dominant (+99%) part of the rest of us. All of these have an interest in an expansion of the public space up to and including public ownership of major productive enterprises. I think this large group of people who would benefit from this public expansion are more effectively influenced by local cooperative experiences and compassionate dialogue than fiery Marxist rhetoric and insults. But even this will not cause a change in the international grip that private capital has on our economies. That is why the response needs to be international as well as local. Let's hope it comes soon and do what we can to bring it about.

"Well, how would you react to a correspondent who published these comments..."

I would react truthfully. That is, I would admit I don't know Marx, but only what other people write about him. I would quit while I was behind and go back to reading Capital.

You don't get it. If V tends to zero then the numerator is as high as it can be. Thus, given the numerator is as high as it can be, if C/V rises, then the ratio falls.

I'm dealing with some self satisfied smugness here. You need to read Shaikh and Tonak if you think Piketty's got something. Unless Piketty translated national income accounts into Marxian accounts, then his profit rate calculations are suspect. Apparently, but unsurprisingly, you're not aware that S/C + V is the value profit rate. This is the essence of the price or money profit rate visible on the surface of capitalist society. I'll apologize if Piketty's using the latter. I'm sure he's not. The book's on order. I'm not privileged enough to receive an advance copy.

"I think this large group of people who would benefit from this public expansion are more effectively influenced by local cooperative experiences and compassionate dialogue than fiery Marxist rhetoric and insults."

I didn't direct any insults at the working class. I directed them at you because you apparently have a superficial understanding of Marx, but act like you know him well. Your misunderstanding is clearly evident in your examples of professions as somehow contradicting my working class comment.

Do you have a fully worked out political program for the working class? Publish it.

"You don't get it. If V tends to zero then the numerator is as high as it can be. Thus, given the numerator is as high as it can be, if C/V rises, then the ratio falls."

Consider the case where the wages bill, v, is constant; but the rate of surplus varies with the amount of investment. In Chapter II of Volume III, Marx
presents the formula p' = s/C = s/(v +c). Dividing the numerator and denominator by v we get the form of the formula that we have been discussing, p' = s/v / (1 + c/v). In Chapter XIII of Volume III, Marx initially considers the case where the rate of exploitation (s/v) is constant. Here he finds that the rate of profit falls as c is increased. Later on in the chapter he considers other cases, but he never considers the case where, as investment (c) increases, s/v is greater than c/v; not because wages fall, but because productivity increases. And why whould a capitalist invest, if not to achieve greater productivity? In this case, and you can work this out for yourself, rather than relying on Marx or anyone else, the rate of profit increases as investment is increased. So as useful as this formula is it does NOT lead to the conclusion that under all circumstances will the rate of profit fall as investment increases.

Picketty casts his fundamental laws in a different form. He takes a macroscopic view, rather than Marx's microscopic view. His "first fundamental law of capitalism" is alpha = r X beta, where alpha is the ratio of capital's share in national income, r is the rate of return of capital, and beta is the capital / income ratio. For example, if r is 5% and beta = 6.0, then alpha is 30%. Piketty looks at tax and other records for several countries to determine beta and alpha, hence r; especially France and Britain where there are the longest-term records. He finds that over the period from 1770 to 2010 in Britain, the observed average rate of return is on the order of 5% for almost all of the period, peaks at as much as 9% in 1950 and then falls back off to the a rate of around 5% by 2010. He finds a similar pattern in France, but more ragged. His ultimate conclusion is that if r > g, that is, the rate of return on capital over the long term is greater than the economy's growth rate, a rentier society results with increasing returns to a small capital-owning elite. This is what he sees as an inevitable result of capitalist evolution. He sees no reason why r should necessarily fall. We have had r for a very long time. Recall the money lenders in the New Testament and Shakespeare's Shylock. He thinks the long-term average in the future will be around 4-5%. This is an average. He finds that the more money one has, the more likely that the rate of return will be higher. He finds a rate of return on Harvard, Yale, and Princeton's endowment funds, for example, at over 10% over the period from 1980 to 2010.

So, while Marx's formulas are useful in highlighting the exploitative nature of capitalist production, they do not necessarily doom capitalism. And isn't this what you were saying in your initial comment on this post?

"If this is an iron clad law of capitalism, why are capitalists doing better than ever today, 150 years after Marx's Grundrisse and almost 250 years after Smith, who said much the same thing?"

What about Ricardo? If memory serves Smith's explanation for a falling profit rate was due to the superfluity of capital, its oversupply. It wasn't due to the extension of farming to less productive land as in Ricardo. Marx's falling profit rate is due to the nature of capital.

Well, a falling profit rate and "capitalists doing better than ever today" are two entirely different things. I'm sure you know this. You must be goading me again. Falling profit rates don't mean falling total profits, Geez!

Addendum to the falling profit rate comment.

Marx wrote in Volume 3, "On the other hand, the rate of self-expansion of the total capital, or the rate of profit, being the goad of capitalist production (just as self-expansion of capital is its only purpose), its fall checks the formation of new independent capitals and thus appears as a threat to the development of the capitalist production process. It breeds over-production, speculation, crises, and surplus-capital alongside surplus-population. Those economists, therefore, who, like Ricardo, regard the capitalist mode of production as absolute, feel at this point that it creates a barrier itself, and for this reason attribute the barrier to Nature (in the theory of rent), not to production. But the main thing about their horror of the falling rate of profit is the feeling that capitalist production meets in the development of its productive forces a barrier which has nothing to do with the production of wealth as such; and this peculiar barrier testifies to the limitations and to the merely historical, transitory character of the capitalist mode of production; testifies that for the production of wealth, it is not an absolute mode, moreover, that at a certain stage it rather conflicts with its further development."

Also, "Capitalist production seeks continually to overcome these immanent barriers, but overcomes them only by means which again place these barriers in its way and on a more formidable scale...The real barrier of capitalist production is capital itself."

Also, note how all of what you quote is based on Marx's scientific economic analysis and not his personal politics. Compare this to Polanyi's treatment which is apparently based on superficial observation of politics and sociology.

Polanyi was a Robert Owen socialist. You have apparently not read him. You will recall that Marx was quite sympathetic to Owen in Theories of Surplus Value, for example. Economics is not a science, Marxian or otherwise! Your compartmentalizations seem pure dogmatism.

Well, we need not carry this discussion further since we fundamentally disagree. Marx's economics is the scientific analysis of the capitalist mode of production. The reason why it's scientific is because there's a clear distinction in Marx between capitalism's appearances and its underlying determinants. Marx's scientific analysis peels back capitalism's appearances and analyzes its underlying essences, e.g., value and surplus value. For goodness sakes, this is what Marx means by science.

His Kugelmann letter criticism of Ricardo's methodology. "Science consists precisely in demonstrating how the law of value asserts itself. So that if one wanted at the very beginning to "explain" all the phenomenon which seemingly contradict that law, one would have to present science before science. It is precisely Ricardo's mistake that in his first chapter on value [ On the Principles of Political Economy, and Taxation , Page 479] he takes as given all possible and still to be developed categories in order to prove their conformity with the law of value."

If the point isn't made clearly enough from the same letter. "And then the vulgar economist thinks he has made a great discovery when, as against the revelation of the inner interconnection, he proudly claims that in appearance things look different. In fact, he boasts that he holds fast to appearance, and takes it for the ultimate. Why, then, have any science at all?"

Yes, I agree that our conversation has come to an end, but you may be surprised to learn that I do consider Marx's fundamental theorem, p' = S/V / (1+ C/V) to be probably the most valuable contribution to economic thought in the Ninetenth Century. This turned the tables on Ricardo and the other conservative classical economists by revealing the exploitation at the heart of capitalism, as you have said. And I think that the "marginal revolution" was in many respects an attempt to re-bury that discovery. But Marx was really a scholar and activist, not an economist, even though he was smarter than almost all of them before or since. As for his "science," I think it seems to be an Hegelian science, rather than Galilean. I think his error, which he shares with almost all subsequent economists is to underestimate uncertainty in human affairs.

You have said below that you "read Marx." Well, if Marx were alive today, I think he would be reading a lot more, Polanyi for example. He read everyone from Aristotle to Mill. IMHO we should do likewise.

Thanks for the quote from the letters. I hadn't seen that.

Best regards.

You're right. The discussion has come to an end. I would be declared the winner were there a referee. You're 100% wrong. Marx was perhaps the best political economist that ever lived. He spent at least 22 years of his life intensively studying every economist that came before him. Capital is an unparalleled economic scientific achievement. Hell, his labor theory of value is the apex of scientific political economy.

"I think his error, which he shares with almost all subsequent economists is to underestimate uncertainty in human affairs." It seems you have a conclusion that is flailing about for a justification.

Ronald Meek once wrote that Marx's labor theory of value was a methodological manifesto. He should have written that Capital is a methodological manifesto. It's really not possible to profoundly understand it without its historical materialist methodological background.

Funny thing about dogmatism. It is always 100% right in its own mind.

It's a curious phenomenon when someone doesn't know jack all about Marx, but pontificates on him like s/he does. His/her understanding is always shown to be superficial, incomplete and therefore wrong when someone who has studied his economics enters the debate.

It's mind boggling that someone who doesn't know Marx acts like s/he does. When critically evaluated, this person's understanding is found wanting. Then s/he resorts to ad hominem attacks which are no substitute for substantive analysis. Ad hominem attacks are the first refuge of a scoundrel.

No, I didn't read Owen. I know Marx called him and his ilk utopian socialists BECAUSE they didn't have a scientific analysis of capitalism.

The comparison between Polyani and Marx is inappropriate. Marx was arguably the greatest economist that ever lived. His scientific analysis of capitalism exposed its inherently exploitative nature. It's significant that Polyani wasn't an economist and certainly not a Marxian economist. No one with Marx's insight into capitalism's exploitative nature would ever, could ever argue for its reform as does Polanyi.

Terry Eagleton doesn't agree: "Marx had a passionate faith in the individual and a deep suspicion of abstract dogma. He had no time for the concept of a perfect society, was wary of the notion of equality, and did not dream of a future in which we would all wear boiler suits with our National Insurance numbers stamped on our backs. It was diversity, not uniformity, that he hoped to see. Nor did he teach that men and women were the helpless playthings of history. He was even more hostile to the state than right-wing conservatives are, and saw socialism as a deepening of democracy, not as an enemy of it. His model of the good life was based on the idea of artistic self-expression. He believed that some revolutions might be peacefully accomplished, and was in no sense opposed to social reform. He did not focus narrowly on the manual working class. Nor did he see society in terms of two starkly polarized classes.” From Why Marx Was Right.

How is this a reply to what I wrote immediately above?

Your comment: "No one with Marx's insight into capitalism's exploitative nature would ever, could ever argue for its reform as does Polanyi."
My (Eagleton's) reply: "He believed that some revolutions might be peacefully accomplished, and was in no sense opposed to social reform. "

Reform isn't revolution. Reform does nothing to eliminate the exploitative nature of capitalism. it just manages it more in the working class's interest than is usually the case.

There's another point here. Eagleton's argument isn't based on Marx's economics, but on his personal politics. Of course Marx supported measures improving the working class's lot. However, improving their lives isn't the same as doing away with exploitation which can only come through a transformation of the current economic system to a non-exploitative one. That point is the difference between basing an argument on personal politics rather than on Marx's scientific analysis of capitalism.

Do you seriously consider it possible that capitalists who complain about verbal assaults would voluntarily surrender their private ownership of means of production?

"Nor did he see society in terms of two starkly polarized classes.”

Respectfully, this statement is pure ignorance of Marx's economic analysis. Who could read Capital and argue Marx didn't understand capitalist society as divided between two irreconcilably opposed classes? The capital social relation is EXACTLY that. It's society divided into a capitalist class and a working class along the lines of private ownership or non-ownership of the means of production.

Geez! Now you're getting ridiculous here!

You will have to correspond with Eagleton here (or read his book!)

I read Marx. I know what his economic analysis is. I fail to see how reading your recommendation will enhance my understanding of Marx.

But how about this, from Volume II Chapter 16: "To this must be added that stock-jobbing is a regular practice and capital is transferred on a large scale. A band of speculators, contractors, engineers, lawyers, etc., enrich themselves. They create a strong demand for articles of consumption on the market, wages rising at the same time." !!!

And? What does this have to do with collapse?

This has to do with your insistence that Marx only recognized two classes, workers and capitalists. It seems he also recognized that there were contractors, engineers, etc. hanging around!

And are those stock jobbers, contractors, engineers and so on wage laborers? Or do they privately own means of production. Effin' Heck! I'm dealing with a pedant! Your superficial analysis rears its ugly head again. For goodness sakes!

There is some gray area between the capitalist class and the working class. Some people have a foot in both camps. However, the litmus test for determining which class one belongs is this. Does one HAVE to sell labor power for wages in order to live? If yes, then one is a member of the large working class. Geez!

Here again is an example of someone who browsed Capital, but didn't intensively study it. Then his/her superficial comprehension is projected back onto Marx's analysis as being dated, incorrect or somehow incomplete.

It's rough isn't it coming up against someone who has studied Marx's economic analysis?

But how about this, from Volume II Chapter 16: "To this must be added that stock-jobbing is a regular practice and capital is transferred on a large scale. A band of speculators, contractors, engineers, lawyers, etc., enrich themselves. They create a strong demand for articles of consumption on the market, wages rising at the same time." !!!

Again, sorry for the double (triple) posting. IchPad challenged!

Polanyi, unlike his brother, the Chemist, was a stupid worthless Karl Kraussian feuilletonist. He got the Speenhamland system more wrong than even Marx. He praised the worst monarchy, barring that of King Leopold, ever on African soil. Even if he didn't actually think Adam Smith invented the free market, still, that is the current academic availability cascade associated with his name.
I recall Moynihan, at one point turning to Polyani (coz the guy was actually a neo-con disguised as a Leftist nutjob) , but, thankfully sanity prevailed.
What a worthless article you guys have published!
But why drag in Polyani's name? Why not just admit that you are stupid, Academically Credentialized, Careerist gobshites?

"Their (the economic free market liberals) prescription 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.”" Popular consensus has to replace the John Wayne gun slinger with a socially conscious mature adult. While John Wayne is carving out his dynasty, security and fame in a mythological battle against fate, the environment, hostile Indians and other gun slingers, a more responsible heroic tale has to unfold and replace the tired-out action suspense drama that gives John's life meaning -- unfortunately.
Polyani's counter-force to the oppression of utopian free-market Tea Party economics is an active, informed democratic opposition that values social relations above one's own private estate growth, and replaces the growth of GDP with a Genuine Progress Index or the like.

A good summary. My take on Polanyi is here: http://notesfrommylibrary.wordpress.com/2012/06/21/karl-polanyis-great-transformation/.

It's great to see a plug for Karl Polanyi's take on political economy. One minor historical nit, though. The George Canning who was Prime Minister was never "Lord Canning". His wife was given a title after George died and their son was later known as Lord Canning.

But how about this, from Volume II Chapter 16: "To this must be added that stock-jobbing is a regular practice and capital is transferred on a large scale. A band of speculators, contractors, engineers, lawyers, etc., enrich themselves. They create a strong demand for articles of consumption on the market, wages rising at the same time." !!!

In free-market capitalism, capital generates income for the owners of the capital which in turn is used to create additional capital. This is very good. Sometimes, it can be actually too good. As capital continues to accumulate, its owners find it more and more difficult to deploy it efficiently. The business sector generally must interact with the household sector by selling goods and services or lending to them. When capital accumulates too rapidly, the productive capacity of the business sector can outpace the ability of the household sector to absorb the increasing production.

The capitalists, or if you prefer, job creators use their increasing wealth and income to reinvest, thus increasing the productive capacity of the business they own. They also lend their accumulated wealth to other business as well as other entities after they have exhausted opportunities within business they own. As they seek to deploy ever more capital, excess factories, housing and shopping centers are built and more and more dubious loans are made. This is overinvestment. As one banker described the events leading up to 2008 – First the banks lent all they could to those who could pay them back and then they started to lend to those could not pay them back. As cash poured into banks in ever increasing amounts, caution was thrown to the wind. For a while consumers can use credit to buy more goods and services than their incomes can sustain. Ultimately, the overinvestment results in a financial crisis that causes unemployment, reductions in factory utilization and bankruptcies all of which reduce the value of investments.

If the economy was suffering from accumulated chronic underinvestment, shifting income from the non-rich to the rich would make sense. Underinvestment would mean there was a shortage of shopping centers, hotels, housing and factories were operating at 100% of capacity but still not able to produce as many cars and other goods as people needed. It might not seem fair, but the quickest way to build up capital is to take income away from the middle class who have a high propensity to consume and give to the rich who have a propensity to save (and invest). Except for periods in the 1950s and 1960s and possibly the 1990’s when tax rates on the rich just happened to be high enough to prevent overinvestment, the economy has generally suffered from periodic overinvestment cycles.

It is not just a coincidence that tax cuts for the rich have preceded both the 1929 and 2007 depressions. The Revenue acts of 1926 and 1928 worked exactly as the Republican Congresses that pushed them through promised. The dramatic reductions in taxes on the upper income brackets and estates of the wealthy did indeed result in increases in savings and investment. However, overinvestment (by 1929 there were over 600 automobile manufacturing companies in the USA) caused the depression that made the rich, and most everyone else, ultimately much poorer.

Since 1969 there has been a tremendous shift in the tax burdens away from the rich on onto the middle class. Corporate income tax receipts, whose incidence falls entirely on the owners of corporations, were 4% of GDP then and are now less than 1%. During that same period, payroll tax rates as percent of GDP have increased dramatically. The overinvestment problem caused by the reduction in taxes on the wealthy is exacerbated by the increased tax burden on the middle class. While overinvestment creates more factories, housing and shopping centers; higher payroll taxes reduces the purchasing power of middle-class consumers. ..."
http://seekingalpha.com/article/1543642

I believe shrinks call this "splitting:" for Polanyi to be acceptable as a "good" socialist he must contrasted to the "bad" Karl Marx.

It won't wash: in the first place, Polanyi has long been taken up by any number of recent Marxist thinkers (Ellen Meiksins Wood, Michael Harrington in particular). In the second place, though Polanyi has some critical things to say about Marx, he most certainly does not fantasize that Marxism is a form of determinism.

That would be absurd in view of the fact that the social-democrats who ruled "Red Vienna" were openly Marxist - they referred to themselves as "Austro-Marxists." And they were deeply split over the issue of revolution vs. evolution, so deeply split, in fact, that the movement collapsed out of its inability (or unwillingness) to stand up to Austro-Fascism in armed conflict unlike Ilona Duczynska, the "petite firebrand " [oink, oink, sexist alert] who wrote the classic treatise on the last-minute armed resistance in Vienna.

Paul Werner
Editor, WOID, a journal of visual language.

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