Felix Schafer, Some Links Between the Early and Later Work of Karl Polanyi

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A. Introduction

[…] [2/109] We are going to discuss here mainly four links from Polanyi’s early thoughts to his later work viz.,
(1) The postulate for transparency of human relations
(2) Price formation and money in general and in particular in Polanyi’s socialist market model
(3) The place of the economy in society and
(4) The “inverted perspective” i.e. the bias of seeing every economy as capitalist market economy.

These links must be seen in connection with Polanyi’s socialist outlook. “All his life a socialist although not a Marxist” as his daughter Professor Kari Levitt wrote (8), Polanyi accepted Marxismus as far as is was compatible with on own work. One main point of disagreement was Polanyi’s emphasis on the importance of the non-economic factors. On this issue Robert Owen was a great inspiration to him. Hence our note will end with a few remarks on Polanyi’s position with regard to Marx and Owen.

B. The postulate for Transparency of Human Relations

(a) The Marxian concept of the “Commodity Fetishism”

The postulate for transparency in human relations can be traced throughout Polanyi’s writings. It is based upon Marx’s concept of the “commodity fetishism”. If two producers exchange their products, a quantity relation between the exchanged products results. “There is” says Marx “a definite social relation between men, that assumes in their eyes the fantastic form of a relation between men and things.” (10) Subsequently “their” (the producers’) “own social action takes the form of the action of objects which rule the producers instead of being ruled by them”. (11) Marx called this “the fetishism of commodities” (12). In a “community of free individuals (13)” – Marx refers here to socialism – “the social relations are perfectly simple and intelligible”. (14) The fetishism has disappeared. In this context it irrelevant, how this has happened. Important is this context is, that Marx being a socialist, approved of its disappearance. Thus Marx arrived at the postulate for transparent human relations. ↑

(b) Socialist Accountancy (1922)

This postulate is among the reasons Polanyi wrote the “Socialist Accountancy”. For in the early years after world war I, new socialist administrations experienced sometimes disputes with their employees, though both the socialist employer and the unionized employees belonged to the same socialist political party. Polanyi’s guild socialist model designed in “Socialist Accountancy” (15) has the purpose to avoid these difficulties by showing that such disputes are not between different individuals because of their different status as employers and employees, but that the conflict is between different functions of the same individuals, viz. their function as members of the community and consumers and as producers represented by their trade unions. Thus Polanyi’s guild socialism model consists of two associations viz., of the “Commune” (Kommune) representing the individuals as members of the community as well as consumers and of the “producers’ Association” (Produktionsverband) representing the individuals as producers. Prices and wages are negotiated between these two organisations. “They must eventually arrive to an agreement” says Polanyi “because functional representatives of identical persons can never slide into a conflict of interest which cannot be resolved” (16) The relationship between these two functions of the identical individuals is obvious and hence, as postulated, transparent. ↑

(c) The Essence of Fascism (1935)

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(d) The Great Transformation (1944)

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(e) Anthropological Writings

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C. Price Formation and Money

[9/116] […] But in view of the then frequently made assertion that lack of economic calculus made a socialist economy unthinkable (Mises) Polanyi felt the need to give as a supplement to the “Socialist Accountancy” a theory of a socialist economy with a price system. Rejecting for this purpose the “objective theory” of the classical and Marxism he turn towards the “subjective theory”, as presented above all by Böhm-Bawerk. He wanted to use this theory for socialist economics and looked in particular for a form of a market which would be as he said later in the “Great Transformation”, “a subordinate trait in a free society” (35) (a) Polanyi’s Model of Socialist Price Formation ↑

(b) Comments on Polanyi’s Model

1. Justification of the Assumptions of the Model

Polanyi justified the assumptions of his model as applications of the assumptions underlying the economic analysis. This led via these assumptions to the distinction between substantive and formal economics, the latter being confined virtually to a market economy. ↑

2. Prices as a priori given quantity relations

[12/119] Polanyi illustrated this on the price theory of Böhm-Bawerk. […][14/121] The conclusion Polanyi’s was a special “imputation problem” did not exist. Böhm-Bawerk confirmed Polanyi for Böhm-Bawerk prefers instead of the term ‘imputation’ the more general term ‘value of complementary goods’, because the problem as Böhm-Bawerk says, “must include not only the imputation to the complementary production factors, but also the coordinate case of the relationship between complementary consumers’ goods.” (41) Polanyi commented on this proposition because of the interdependency of utilities no commodity can be considered isolated and that therefore every commodity is complementary. He pointed this out, when discussing Hans Mayer’s solution of the imputation problem published in 1928. (42) Polanyi also found an analogy in Hans Kelsen’s theory of law, where the juridical imputation problem is rejected as a special problem. However some of them have been published connected with Polanyi’s name. (43) ↑

3. Links from the Purchasing Power in Polanyi’s Price Formation Model

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4. The conceptual pattern “Exchange Economy” and “Purchasing Power Economy”

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5. “Exchange Economy” and “Purchasing Power Economy” as “Theoretical Places” for Different Problems

(a) Self-regulation vs. Regulate Money Market

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(b) Microphenomena vs. Macrophenomena

[19/126] In working out the concept of one supply comprising all the goods in society Polanyi found himself confirmed in particular by Böhm-Bawerk’s socety-wide reservoir of the originar factors, a concept already mentioned above. ↑

6. Purchasing Power Economy and Exchange Economy as complementary conceptual patterns

Der Uebergang vom isolerten Wirt zur Gesellschaft kann … ↑

[…] Both Exchange Economy and Purchasing Power Economy contain the problems of the economic analysis as economies under the assumptions of scarcity. The two conceptual patterns indicate a bifurcation of the economic analysis which reaches to its very fundament, the construction of the “isolated economic subject” with its three elements economic subject, scarce means and alternative uses for them. This construction connects the two conceptual patterns of social economy, viz. Exchange Economy and Purchasing Power Economy. ↑

7. Transition to “Formal” and “Substantive” Meaning of ‘Economic’

(a) The Marxian Labour Value Theory

Polanyi adopting the economic analysis based upon the principle of scarcity of goods for his model of price formation had to reject the classical price theories and hence also Marxia labour theory, where value and price are explained by qualities intrinsic to the goods, such as e.g. the number of working hours spent on their production without any reference to their scarcity. However Polanyi still maintend the Marxian labour value theory as a mirror of employer ideology in a private enterprise economy, where some employers might believe that no shortage of labour exists for them. For the treat of lacking means of subsistence ensures that there is always somebody to take the place of an employee who leaves or is dismissed. This proposition confine the Marxian labour value theory to the free enterprise economy and links it with Polanyi’s later work, where he showed that Marxian applies largely to capitalism only or as Polanyi called it, to the “market economy” ↑

(b) Economic History

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(c) “Formal” and “Substantive” Meaning of ‘Economic’

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D. The Changing Place of Economy in Society

(a) Socialist Accountancy

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(b) Later Writings

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E. Inverted Perspective

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F. Polanyi’s Position to Marx and Owen

(a) Ideology vs. Reality

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(b) Marxian Thoughts with Polanyi

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(c) Disagreement with Marx

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(d) Owen

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Text Informations

Reference: Schafer 1973b
KPA: 29/10, 108-143