Polanyi, Piketty, and the Twenty-First Century Market Economy

Abstract

Both Karl Polanyi in The Great Transformation and Thomas Piketty in Capital and Ideology make use of the long historical roots of our current high levels of inequality and disappearing safety net, in an effort to understand the ideological basis of, and turmoil within, market societies. Both Polanyi and Piketty decry the erosion of the social institutions that maintained social stability and their replacement by market institutions. In this article, we provide brief overviews of the arguments of both Polanyi and Piketty and then use their framework to analyze current economic and social developments.

Keywords:

• Polanyi
• Piketty
• disembedded economy
• inequality
• neoproprietarian

JEL Classification Codes:

• B25
• B31
• B52
• B55
• D63
• E02

Disclosure Statement

The authors report that there are no competing interests to declare.

Notes

1 Including a contribution by Champlin and Knoedler (2022).

2 Median weekly earnings of Asians are substantially higher than White wages for both men and women. See Guzman and Kollar (2023); U.S. Bureau of Labor Statistics (2021).

3 The disproportionate gains to the top of the income distribution are noted by Piketty (2020, 835): “inequality skyrocketed, so much so that the bottom 50% of the income distribution has seen no income growth since the 1980s, which is totally unprecedented in U.S. history (and fairly uncommon for any country in peacetime).”

4 Polanyi does clearly state that under mercantilism, “markets were merely an accessory feature of an institutional setting controlled and regulated more than ever by social authority” (67); and then change enclosures to the establishment of market society. See, also, Cangiani 2017, 922.

5 As Michele Cangiani notes, transforming labor into a fictitious economy meant that “the whole economy—the very livelihood of people—is now entrusted to the market mechanism and wage labor” (Cangiani 2017, 919). John Watkins (2017) observes that “applying the concepts of corporeal and incorporeal property to labor involves certain conditions. One person cannot possess another. One cannot transfer the title to one’s body to another person. Such sales, for example, are forbidden by the Thirteenth and Fourteenth Amendments of the U.S. Constitution…. When people agree to work, they sell a promise to work. But since there is no collateral to ensure fulfillment of the promise, the promise cannot be enforced. As Polanyi noted, the assertion that the promise cannot be enforced did not stop policymakers from trying” (Watkins 2017, 102). Polanyi made this point even more emphatically in the Great Transformation: “To allow the market mechanism to be the sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society” (Polanyi, 1944, 73).

6 In the Social Structures of Accumulation framework, the period after the Second World War and up through most of the 1970s is often described as a Golden Age for U.S. workers who benefited from strong unions and worker-friendly policies. See, for example, Lippitt 1997.

7 Indeed, the establishment of a federal income tax in the United States required amending the U.S. Constitution (the 16th amendment in 1913). A federal estate tax was established in 1916.

8 Using Polanyi’s framework, the current period is characterized by the return of disembeddedness.

9 The success of the sharp turn to laissez-faire government in the late 1970s and early 1980s is associated with President Reagan and his conservative supporters. It is important to note that the success of these policies was also due to the lack of a significant or effective response by the Democratic Party. “[A]nd yet the Democratic presidents who followed [Ronald] Reagan, Bill Clinton, and Barack Obama, never made any real attempt to revise the narrative or reverse the policies of the 1980s … the Clinton and Obama administrations basically validated and perpetuated the basic thrust of policy under Reagan.

10 A recent study details the very low tax rates currently paid by the Forbes 400. See Hanlon and Buffie 2021.

11 Compensation to enslavers in the French and British West Indies did occur imposing an economic burden on these island nations that persists to this day (See Coates 2014). Compensation to enslavers in the United States was discussed but ultimately rejected due to the sheer size of the enslaved population as well as the costs imposed by the Civil War. The question of compensation to those who were enslaved (rather than the enslavers) was not considered either in Europe or the United States.

12 “Slaves were the single largest, by far, financial asset of property in the entire American economy.” The sale of these slaves—”in whose bodies that money congealed,” writes Walter Johnson, a Harvard historian—generated even more ancillary wealth. Ta-Nehisi Coates quotes David Blight in confirming this statistic in “Slavery Made America” (2014). See, also, Ransom (2001).

13 See the Pulitzer Prize winning book by Douglas Blackmon, Slavery by Another Name: The Re-Enslavement of Black Americans from the Civil War to World War II (2008) and a film based on the book available from PBS. On reconstruction, see Eric Foner, The Second Founding: How the Civil War and Reconstruction Remade the Constitution (2019).

14 For an overview of recent research on racial wealth inequality in the United States, see Mineo (2021). For an overview of the impact of racial segregation through municipal codes and other zoning laws, see Richard Rothstein (2017).

15 It should be noted that the crises of the first half of the twentieth century extended well beyond Europe and the major economies. Piketty discusses colonial societies as well as communist and post-communist societies. Given the current level of global integration, a crisis of “neoproprietarianism” societies will have an effect well beyond the United States, Europe, and Japan.

16 We note that this social cohesiveness was characterized by continuing high levels of economic exclusion of women and people of color. (Cf. Coontz 1992; Kuttner 2018, 26–27).

17 See, for example, Crain (2018) for a short summary of these policies.

18 Ann Davis (2020) has observed that the global financial crisis has created the impetus for the rise of populism and the response in the form of double movements in some countries, although it is unclear as of yet whether this double movement will yield significant protections for workers. As Watkins and Seidelman (2019) argue, the populist impulse in the United States as represented by Trump and his supporters may instead represent the “last gasp of neoliberalism” (363).

19 Indeed, Gareth Dale opines that even Polanyi had underestimated “the degree to which social democracy, had, however reluctantly in some cases, hitched its wagon to the capitalist machine” (Dale, 286).

Additional information

Notes on contributors

Dell P. Champlin

Dell P. Champlin is at Oregon State University. Janet T. Knoedler is at Bucknell University.

Janet T. Knoedler

Dell P. Champlin is at Oregon State University. Janet T. Knoedler is at Bucknell University.