Karl Polanyi and the Writing of "The Great Transformation": Essay by Fred Block

Polanyi’s Historical Moment

Karl Polanyi wrote The Great Transformation during World War II, a period marked by global crisis including the Great Depression and the rise of fascism and socialism. Polanyi aimed to explain how the failures of 19th-century laissez-faire capitalism led directly to these turbulent political and economic upheavals. He connected the Industrial Revolution’s social dislocations to the catastrophic outcomes in the early 20th century, challenging the dominant economic ideas of his time.

Intellectual and Methodological Foundations

Polanyi’s work departs from classical economics through its deep integration of social, political, and economic analysis, treating these spheres as inseparable. His methodology, though not explicitly laid out, emphasizes human agency and historical contingency, rejecting the assumption of self-regulating markets as natural or inevitable. Drawing from his background as a Hungarian intellectual and political activist, Polanyi was influenced by Hegelian Marxism but developed a unique theoretical system that critiques the commodification of land, labor, and money. His critique challenges the classical economic model by showing how market society emerged through deliberate institutional changes rather than natural economic laws.

Theoretical Contradictions and Legacy

Fred Block highlights that Polanyi’s thought contains contradictory elements, reflecting his transitional intellectual position between older Marxist frameworks and emerging social theories. Polanyi combines a functionalist view that sees industrialism as foundational to modern history with a more individualistic, contingent approach to social agency. He never fully resolved these tensions, which can be seen as part of his lasting legacy. This ambivalence allows Polanyi’s analysis to remain relevant across disciplines, providing a rich framework to critique market fundamentalism and understand the social dynamics underpinning capitalism.

Key themes

• Critique of self-regulating markets as an impossible ideal.
• Interaction between market forces and political power shapes economic systems.
• The market economy’s rise led to social dislocation and political crises.
• Historical analysis connecting the Industrial Revolution to 20th-century turmoil.
• Democratic gains correlate with periods of prosperity and social protection.
• Importance of protecting society from market fundamentalism.

Motifs & problems

Polanyi’s work repeatedly contrasts the market as an autonomous force with the embeddedness of the economy in society and politics, highlighting ambiguity: the market is both a product of political decisions and a driver of social change. Key motifs include protectionism versus liberalism, social dislocation caused by commodification of labor and land, and the tension between democracy and market freedoms. These illustrate the recurring problem of how societies balance economic freedom with social welfare, a central interpretive challenge in understanding his argument.

Study questions

• How does Polanyi define the relationship between economy and society?
• Why does Polanyi argue that a self-regulating market cannot exist in reality?
• In what ways did political decisions shape the rise of market liberalism?
• How does Polanyi explain the social and political crises of the early 20th century?
• What role do democratic institutions play in Polanyi’s analysis of economic prosperity?
• How can Polanyi’s critique inform current debates on market fundamentalism?
• How do Block and Somers reinterpret Polanyi’s theory for contemporary contexts?
• What are the implications of Polanyi’s argument for modern social policy?

Critical approaches & debates

Fred Block’s reading of Polanyi’s The Great Transformation is rooted mainly in a Marxist and critical sociological perspective that highlights Polanyi's market critique and its social consequences. Scholars like Block and Somers emphasize Polanyi’s analysis of the "double movement"—the tension between market expansion and social protectionism—and how this interplay questions neoliberal narratives. Feminist and postcolonial critiques, however, often argue that Polanyi pays insufficient attention to gendered and colonial dimensions of market society. Disagreements also arise around the interpretation of Polanyi’s view on democracy-market relations and whether his theory can explain recent political shifts supporting market fundamentalism.

Key passages

A key passage in The Great Transformation is Polanyi’s explanation of the “double movement,” where the expansion of the self-regulating market triggers a reactive social protection movement. This argument frames the core of his critique: society’s natural resistance to market forces that commodify land, labor, and money—“fictitious commodities.” This passage uses analytic argumentation to link historic economic change with social upheaval, underlining the unsustainable nature of pure market logic.

Bibliography

• Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press, 2001 (original 1944).
• Block, Fred & Somers, Margaret. The Power of Market Fundamentalism: Karl Polanyi's Critique. Harvard University Press, 2014. — Critical reappraisal and extension of Polanyi’s ideas in contemporary settings.
• McCarthy, Michael. “The Power of Bad Ideas.” Boston Review, 2017. — Analysis of contemporary market theory in light of Polanyi’s work.