Universal Capitalism or Regional Planning?

From Karl Polanyi
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I

[8] Of all the great changes witnessed by our generation, none may prove more incisive than that which is transforming the organisation of the international life. Behind the routine of power politics which either serve or, more often, are served by ideologies, we can catch a glimpse of far-flung and meaningful policies which may, albeit incidentally, fulfil the deeply rooted aspirations of the common man. It is probable that the chances of democratic socialism (which most people, even quite recently, would have pronounced to be nil) are greatly improved, although by unexpected paths. But whatever may be the fate of domestic affairs, the political system of the world as a whole has undoubtedly reached a turning point and, as a consequence of this, Great Britain is now standing at the cross-roads. The event is still too close, and too vast, to be clearly discernible, but the sooner we take our bearings the better.

One comes to realise this when making the attempt to describe more precisely the tendencies underlying the foreign policies of Great Britain, Russian, and America; for here it is quite certain that the traditional pattern is not enough. What is at issue between the powers is not s much their place in a given pattern of power, as the pattern itself. Broadly speaking, the United States fits into one pattern, that of nineteenth century society, while all other powers, including Britain herself, belong to another, which is in course of transition to a new form. Each side will, or at least, in reason, should, favour that pattern which tends to keep its side of the balance secure. Obviously it is of paramount importance to read the meaning of these patterns aright.

The tremendous event of our age is the simultaneous downfall of liberal capitalism, world-revolutionary socialism and racial domination - the three competing forms of universalist societies. Their sudden exit followed upon drastic, unheard of changes in human affairs, and the beginning of a new era in international politics. World-revolutionary socialism was overcome by 'regional' socialism in the sufferings and glories of the Five Years Plans, the tribulations of the Trials, and the triumph of Stalingrad; liberal capitalism came to an end in the collapse of the gold standard, which left millions of unemployed and unparallelled social deprivation in its wake; Hitler's principle of domination is being crushed on a battlefield co-extensive with the planet he attempted to conquer; and out of the great mutation various forms of inherently limited existence emerge - new forms of socialism, of capitalism, of planned and semi-planned economics - cach of them, by their very nature, regional.

This process was almost exact replica of the establishment of the European states-system about the end of the 15th century. In both cases the change sprang from the collapse of the universal society of the period. In the Middle Ages that society was primarily religious, while in our time it was economic. It is obvious that the break-down of the nineteenth century system of world economy inevitably resulted in the immediate emergence of economic units of limited extent. In terms of the gold standard, that true symbol of universalist economy, this is self-evident since its passing forced every country to look after its own “foreign economy”, which had formerly “looked after itself”[1] New organs had to be developed, new institutions had to be set up to cope with the situations. The peoples of the world are now living under these new conditions, which are compelling them to evolve a new way [9] of life. Their “foreign economy” is the government's concern: their currency is managed; their foreign trade and foreign loans are controlled. Their domestic institutions may differ widely, but the institutions with the help of which they deal with their “foreign economy” are practically identical. The new permanent pattern of world affairs is one regional systems co-existing side by side.

There is one notable exception. The United States has remained the home of liberal capitalism and is powerful enough to pursue alone the Utopian line of policy involved in such a fateful dispensation - a Utopian lie since, ultimately, the attempt to restore the pre-1914 world-order, together with its gold standard and manifold sovereignties is inherently impossible. But the United States has no alternative. Americans almost unanimously identify their way of life with private enterprise and business competition - though not altogether with classical laissez-faire. This is what democracy means to them, rich and poor alike, involving, as it does, social equality for the vast majority of the population. The Great Depression of the early thirties left predilection unimpaired, and merely dimmed the aura of adulation which surrounded laissez-faire economics. Except for a new socialists, mainly of the world revolutionary type, and perhaps a somewhat greater number of conscious fascists, the stupendous achievements of liberal capitalism appear to Americans as the central fact in the realm of organized society. Factory legislation, social insurance tariffs, trade unions, and experiments in public services, even on the scale of the T.V.A., have affected the position of liberal capitalism as little as similar departures towards interventionism and socialism had done in Europe up to 1914. The New Deal may well prove the starting point of an independent - American - solution of the problem of an industrial society, and a real way out of the social impasse that destroyed the major part of Europe. That time, however, has not yet come.

With a free supply of land, unskilled labour and paper money, a liberal economy functioned in the United States, at least until the period beginning in 1890, without producing the lethal dangers to the fabric of society, to man and soil, which are otherwise inseparable from “self-adjusting” capitalism. That is why Americans still believe in a way of life no longer supported by the common people in the rest of the world, but which nevertheless implies a universality which commits those who believe in it to reconquer the globe on it behalf. On the crucial issue of foreign economy, America stands for the nineteenth century.

It follows that, potentially at least, Great Britain and the Soviet Union, together with the other countries, conform to one pattern, the United States to another. The British Commonwealth and the U.S.S.R. form part of a new system of regional powers, while the United States insists on a universalist conception of world affairs which tallies with her antiquated liberal economy. But reactionaries still hope that it is not yet too late for Britain's own system of foreign economy to be changed back so that it may fall in line with that of America. This is the real issue to-day.

II

It is from the regionalism to which she is committed that Russia draws her greatest strength. The victory of Stalinism over Trotskyism meant a change in her foreign policy from a rigid universalism, relying on the hope of a world revolution, to a regionalism of revolutionary policy, while Stalin was a daring innovator. By denying these facts, Communists caused hopeless confusion and made it unnecessarily difficult for us to realise the startling novelty of Stalin's policy.

To begin with, there is an entirely ne attitude towards the uses of social change. The victorious Russian empire takes its independence for granted, and its dominating interest is durable peace. (Given this, the U.S.S.R. might, by half a dozen Five Year Plans, reach the American level of industrial efficiency and standards of life, and, indeed, surpass it.) As it has excluded universalist solutions on the model of the League of Nations or of World Federation, peace depends merely on the foreign policies of its neighbours. The Russians are determined to have only friendly states on their western borders, but they are loth to extend their frontiers so as to [10] include those neighbours. The new constitutional changes are designed to assist Russia in this endeavour, since they allow smaller neighbours to harmonize their policies with their own immediate neighbours inside the U.S.S.R., without necessarily having to carry on negotiations with the colossus it itself. The U.S.S.R. offers them Slavonic solidarity against German aggression, and assumes that nothing but class interest would induce their rulers to side with Germany against herself. She wants, therefore, to destroy the political influence of the feudal class and “heavy” industrialists in these countries, and intends to use socio-economic means for this purpose, but for this purpose only. In other words, she wishes to put economic radicalism to the service of limited political ends. Such a basic reforms as she advocates, in Poland, for exemple, would not mean socialist revolutions in the usual sense - where socialism is an end in itself - but merely popular upheavals aimed at the destruction of the political power of the feudal classes, while eschewing any general transformation of the property system. Such revolutions are far safer than the traditional, unlimited socialist one which, at least in Eastern Europe, would either provoke a fascist counter-revolution, or else could maintain themselves only with the help of Russian bayonets, which Russia has no intention of providing.

Nothing could be less appealing to the conventional revolutionary than such a prospect. It is no exaggeration to say that he could not approve of it without mental reservations, and might find it difficult even to comprehend. Traditionally, he regards political action as a means of achieving socio-economic ends and to reverse this sequence by using socio-economic means, such as nationalization or agrarian reform, for political ends appears almost unnatural to him. In effect, the Russians themselves justly refuse to call these methods socialist since they are merely designed to safeguard their own security. For all, they may achieve a democratic socialist transformation more effectively than anything world-revolutionary socialists ever attempted.

From the ideological stratosphere socialism thus parachutes to earth. Our generation has learnt how overwhelmingly the people rally behind policies designed to protect the community from external danger. The Russians promise their neighbours a secure national existence on condition that they themselves of incurably reactionary classes and it is to end that hey suggest expropriations and eventually confiscations. No one ought to be surprised if such methods, unpopular elsewhere, should find strong support in communities which see in them the means to national security. It should be remembered that once the Reformation began to involve the secularization of Church property, its scene swiftly changed from the cells of monasteries to the council rooms of the Princes. Similarly, the people may decide with alacrity for socialist measures which deliver the political goods.

It follows that it is precisely the regional character of this socialism which ensures its success and prevents it from becoming a mere introduction to further wars and revolutions. These would necessarily result from the attempt to spread socialism, for its own sake, to neighbouring countries. Socialisation of the new kind is emphatically not an article for export. It is a foundation of national existence.

In Eastern Europe regionalism is also the cure for at least three endemic political diseases - intolerant nationalism -, petty sovereignties and economic non-co-operation.

All three are inevitable by-products of a market-economy in a region of racially mixed settlements. The virulent nationalism of the nineteenth century was unknown outside the confines of such economies and its geographical extension towards Central Europe, Eastern Europe and Asia coincided with the territories brought under the control of a credit system by autochthonous middle classes. In multinational areas, like the basins of the Vistula and the Danube, this resulted in hysterically chauvinistic states, who, unable to bring order into political chaos, merely infected others with their anarchy. Moreover, to the amazement of the utilitarian free)trader, with his naive outlook bounded by economics, the unresolved racial issues prevented the smooth functioning of markets across the disputed frontiers. The Bolsheviks must soon have found out that this type of nationalism was merely the result of nineteenth century economics in multi-national areas. Indeed, their experience, both within and without their frontiers, taught them that whenever [11] market methods were discarded for planned trading, intractable chauvinisms lost their viciousness, national sovereignty became less maniacal, and economic co-operation was regarded again as being of mutual help instead of being feared as a threat to the prosperity of the state. In effect, as soon as the credit system is based no longer on 'confidence' but on administration, finance, which rules by panic, is deposed, and sanity can prevail. It must be admitted that any type of economic regionalism - whether socialist or not - any planning - whether democratic or not - might have similar effect in the racial jigsaw puzzle of the Danube, the Vistula, the Vardar and the Struma. But, as happened, history offered the chance to the Russians, who naturally took what was proffered to them.

Regionalism is not a panacea. Many old, and perhaps many new, troubles will not yield to its treatment. Nevertheless, it is a remedy for many of the ills of Eastern Europe: and this accounts for the superiority of Russian policies in this region. If the Atlantic Charter really committed us to restore free markets where they have disappeared, we might thereby be opening the door to the reintroduction of a crazy nationalism into regions from which it has disappeared. We should not only be importing unemployment and starvation into the liberated regions simply by 'liberating' the local markets: we should also be burdening ourselves with the responsibility of having of having thrown back the people into the anarchy out which, by their own exertions, they had just emerged. Marshal Tito's partisans bid fair to solve the problem of Balkan hatreds simply because they start from the assumption of a system no longer market-ridden and no longer managed by the middle-class. This is the key to the Macedonian miracle. To-morrow Europe as a whole may yearn for the Balkan cure, and regionalism will be supreme.

III

Thus it becomes apparent that liberal capitalism is not to-day primarily a domestic issue. First and foremost it is a matter of foreign policies, since it is in the international field that the methods of private enterprise have broken down - as shown by the failure of the gold standard;


Text in English to type

[12] [13]

Polanyi's Notes

  1. By “foreign economy” we simply mean the movement of goods, loans and payments across the borders of a country.

Text Informations

Reference:
Original Publication: “Universal Capitalism or Regional Planning?”, The London Quarterly of World Affairs, January 1945, p. 1-6
KPA: 18/28
Recent Publications:

Lge Name
EN
DE „Universaler Kapitalismus oder regionale Planung?“, in POLANYI 2003, p. 338-350
FR « Capitalisme universel ou planification régionale ? », chap. 35 des Essais de Karl Polanyi, p. 485-494