Describe the relationship between economy and society through Karl Polanyi’s concept of Embeddedness.
Karl Polanyi is best known for his book The Great Transformation which describes the great transformation of European civilization from preindustrial world to the era of industrialization, and the shifts in ideas, ideologies, and social and economic policies accompanying it. Going back to the English Industrial Revolution, in the 19th century, Polanyi shows how English thinkers responded to the disruption of early industrialisation by developing the theory of market liberalism, with its core belief that human society should be subordinated to self-regulating markets. As a part of the England’s leading role as ‘workshop of the world’, the beliefs of self-regulating market or free market became the organizing principle for the world economy. He advocates moving away from neoclassical economics.
Polanyi maintains that the concept of economic rationality is a very specific historical construct that applies chiefly to the forms of market society that emerged in Western Europe in the early modern period. Thus Polanyi maintains that it is socially motivated behavior — behavior motivated toward the interests of one’s family, clan, or village” — rather than self-interested behavior that is “natural” for human beings; rational self-interest is rather a feature of a highly specific society: market society. In place of economic rationality and the market mechanism providing the basis for organization of the premarket economy, Polanyi argues that communitarian patterns of organization are to be found in a range of traditional societies. Polanyi is asserting that history and ethnography provide a wealth of variety of fundamental economic and social institutions. Market institutions are historically specific…[and] themselves show substantial variation across time and place. That said — trade, artisanship, commodities, and production for the market appear to be activities that have very ancient roots in human societies. These kinds of economic exchanges are well documented in ancient China, Europe, and the Americas, and we can understand very well how they would emerge again and again out of ordinary human activityand interaction. So markets are surely not the nearly unique historical creation that Polanyi maintains them to be. Moreover, we can distinguish among “market” institutions (as Marx and Weber both do) according to whether they are organized around use or around accumulation; consumption or profit. Polanyi takes issue with a vulgar economism, according to which the most fundamental human motivation is rational self-interest. On the contrary, Polanyi maintains, this social psychology of “possessive individualism”…is itself a very specific historical product — not a permanent feature of human nature. In fact, Polanyi goes a step further and argues that the “social motivations” are more fundamental than rational self-interest.
Karl Polanyi, a substantivist, discusses the relationship between economy and society through the concept of embeddedness. The concept of embeddedness is his most famous conribution to social thought. He argues that the term economic is a compound of two meanings that have independent roots: substantive and the formal meaning. His concept of embeddedness actually stands for a critique of capitalist economy in which society and economy appear as two distinct spheres, disembedded from each other.
Polanyi starts by emphasizing that the entire tradition of modern economic thought or formal economy, continuing up to the present moment, rests on the concept of the economy as an interlocking system of markets that automatically adjusts supply and demand through the price mechanism. Even when economists acknowledge that the market system sometimes need help from government to overcome market failure, they still rely on this concept of the economy as an equilibrating system of integrated markets. In The...
Please join StudyMode to read the full document