Global Business and the Polanyian Moment

In his pathbreaking work on the great economic and political crises of the twentieth century, The Great Transformation, Karl Polanyi (2001[1944]) writes that the history of capitalism can be characterized by a “double movement” where the policies of economic liberalism result in economic crises, which in turn provoke a political response in the other direction: government intervention in the form of regulation aimed at taming the excesses and unsustainable consequences of liberalism. For Polanyi, the classic liberal ideal of a “self-adjusting market” is a “stark utopia” bound to fail because of the burden it imposed on society. At the core of this mistaken utopianism, Polanyi argues, is the notion that labor, land, and money are pure commodities, most efficiently valued and allocated through markets. He termed them “fictitious commodities.” Polanyi took this approach to economy to be both immoral and mistaken. The moral dimension refers to the burden – deprivation and insecurity – that labor (and the environment) must bear when they are subject to unregulated market forces. The mistake is not understanding that markets, especially for the fictitious commodities, invariably require government regulation and management for their functioning and stability.

Polanyi takes as his subject matter the rise of fascism in the wake of the economic liberalization of the nineteenth century and the Great Depression of the twentieth century. For him, it is impossible to imagine markets functioning in a pure sense, that is in the absence of the social and political foundation which creates markets and gives them legitimacy and stability. Therefore, he insists that markets never function in a pure sense, but are “embedded” in specific political and civil society institutions (Block 2001; Block and Evans 2005). The nature of embeddedness, of course, changes through history.