INTRODUCTION

Karl Polanyi’s critique of the market economy has over recent decades attracted much attention, in the context of debates over “market society” and neoliberalism. Less consideration has been paid, however, to his political theory, including his understanding of “the state”. Although the interrelations among politics, the economy and society always occupied the centre of his analysis, it is true that there is little in his oeuvre that directly addresses the state. His focus, Michael Burawoy remarks, was “not politics and the bourgeois revolution but economics and the market revolution, not the formation of a national bourgeoisie but the formation of national markets”. His thesis that the origins of the “cataclysm” (the wars and economic crises of the early to mid-twentieth century) “lay in the utopian endeavour of economic liberalism to set up a self-regulating market system” implies no less than “that the balance of power, the gold standard, and the liberal state … were, in the last resort, shaped in one common matrix, the self-regulating market”. The liberal state, for Polanyi, was one of the four defining institutions of nineteenth-century civilization, alongside the balance of power system, the gold standard and the self-regulating market (“the common matrix”). Of these, the state is the one to which he devotes the least analysis. Despite its role in shaping the other three, it gains no systematic or separate attention. Rather, sporadic observations are sprinkled throughout The Great Transformation, most of which elaborate the same idea of the allegedly non-intervening, liberal state.

But this is not the end of the story. For Polanyi, as for Marx, the understanding of the modern state as an institutional correlate of the market economy (in Polanyi’s case) or of the mode of production (in Marx’s) was only one angle among many. Just as from Marx’s reflections and historical, philosophical and journalistic remarks on the state at least six approaches can be sifted out, according to Bob Jessop, so too in Polanyi’s writings various perspectives emerge. These were developed during the different historical conjunctures in which he wrote, and serve distinct arguments concerning state–economy and state–society relations.

Many scholars see the account of Europe’s nineteenth-century market system in Karl Polanyi’s The Great Transformation as offering key insights into contemporary trends of change. That account, however, differs substantially from much of the vast contemporaneous record of nineteenth-century Europe. What the analyses of countless social theorists; the speeches, official documents, reports and other writings of European reformers and statesmen; and the work of the century’s greatest literary figures emphasized were the features Europeans considered to be the most characteristic of that time: domination, exploitation, inequality, and the recurring class conflicts which these generated. But, while Polanyi is unsparing in depicting the horrors of industrialization, his account ignores the exploitation, monopoly, and political repression that created and sustained those horrors for over a century; and while contemporaneous accounts treated class conflicts as a fundamental dimension of Europe’s industrial development, in The Great Transformation, class interests and conflicts play a decidedly secondary or subsidiary role in the rise and demise of Europe’s nineteenth-century market system.

The Great Transformation focuses on the rise of Europe’s nineteenth-century market system, its disastrous impact on society, and the countermovement that it triggered and that, by interfering with the logic of the market mechanism, ultimately brought about its demise. Its central claim is that the basic dynamic shaping industrial capitalism during the nineteenth century and its transformation in the course of the world wars was the antagonism that emerged, not among groups, sectors, or classes, but between “society as a whole” and the “blind action” of the self-regulating market system’s “soulless institutions”. Polanyi argued that the rise of this system triggered a “spontaneous social protective reaction that came from all sectors of society”; and that all sectors or classes were successful in securing protection for themselves because their efforts served to protect the essential substances of human society (land, labour and money) and thus served the general interest of society as a whole. In sum, the self-regulating market threatened, and met with resistance from, “society as a whole”, and when different sectors or classes endeavored to secure protection for themselves (the “protectionist countermove”), their efforts redounded to the benefit of society as a whole.

INTRODUCTION

In this chapter, I will attempt to explain the role of the concept of democracy in Polanyi’s social philosophy. This task is not so easy, as Polanyi does not provide any systematic analysis of the term. Moreover, Polanyi uses the concept of democracy in narrower and broader meanings at different points. In The Great Transformation, the term democracy mainly denotes existing popular governments of the twentieth century, and it is primarily used to demonstrate the inherent tension between social claims and capitalist market requirements. However, in other (unpublished or less known) texts, Polanyi employs the term in its ideal meaning: democracy is hereby a vision of a future society, in which moral-political values such as freedom, equality and social justice are institutionally guaranteed. Furthermore, this ideal concept of democracy involves not only a political and social transformation but also implies moral progress. The development of democracy is therefore based on the “spiritual ennobling of the masses” as well as the “transformation of souls”, as Polanyi states.

Polanyi is not a utopian thinker, but he firmly believes in the transforming power of ideas and institutions. The awareness that human beings are able to evolve is, for him, not utopian at all, but rather realistic, for the capacity of adapting to new circumstances is, in fact, an essential part of human nature. One of the necessary preconditions of democracy is, therefore, the so-called “believing politics”, that is the political conviction that an adequate institutional framework is able to cause socioeconomic and moral development. Or, the other way round, adequate socioeconomic positions and moral practices enable the perpetuation of a democratically set institutional framework in the long run.

It is this particular aspect of Polanyi’s oeuvre which I shall analyse in the next sections. The aim is to provide a better comprehension of Polanyi’s concept of democracy, in particular, to present and explain his ideal vision of a free democratic society. In the second section, after this introduction, I shall present Polanyi’s view of democracy as a process. The current parliamentary democracies represent an important step towards achieving freedom, especially concerning freedom from absolutism and political totalitarianism.

INTRODUCTION

What is the economy and how should we understand its place in society? This question is central to many of Karl Polanyi’s key contributions to political economic thought, and it developed into an explicitly stated research focus in the later stages of his academic career. The way in which he approached the issue can be broadly understood as resulting from his engagement with the neoclassical understanding of the economy which had come to prominence during his youth. Under strict neoclassical assumptions, individuals are materially self-interested without limit, yet resources are scarce, and so they must trade in order to maximize utility. This sort of behaviour is the only “economic” behaviour, and so from this perspective, “the economy” is coterminous with “the market”. And to the extent that these assumptions are pitched as inherent to human nature, they are applicable to economic activity in all times and places. Although Polanyi sometimes reproduced elements of neoclassical thought in his analysis of capitalism, he strongly rejected its universalist pretensions, seeing them as fitting in to a longer tradition of essentialism in liberal economic thought, particularly the laissez-faire theories of nineteenth-century political economists such as Thomas Malthus and David Ricardo.

In this chapter, we consider the various ways in which Polanyi’s desire to challenge market-centric representations of the economy permeated his most important theoretical interventions, considering strengths and weaknesses along the way. Firstly, we examine the critique of laissez-faire market ideology that Polanyi presented in The Great Transformation (TGT). Here, Polanyi argues that a market-centric reading of the history of capitalism occluded both the role of politics in creating and sustaining market orders, as well as failing to recognize adequately the way in which markets can generate various types of harm and conflict. After demonstrating how that critique fits into the broader framework of the book, we note weaknesses both in terms of a failure to recognize relevant precedents to nineteenth-century laissez-faire thought, and in terms of the way in which the theoretical premises of economic liberalism are relied on too directly in his narrative of real-world economic history. In the second section, we move on to consider Polanyi’s books published subsequently to TGT.

Karl Polanyi’s analysis of the commodification process under capitalism in The Great Transformation (1944) provides us with a profound and perceptive understanding of how society as a whole becomes subordinate to the market, even to the degree that it faces the danger of annihilation. This threat posed by the market, to make the society an “appendage” to the market also represents a violation of the human essence, conceived in an Aristotelian way as the “political animal”. This chapter deals with commodification as a continuous process within which everything, produced or not, including human beings, or more accurately their agency or transformative capacities and powers, is transformed into commodities, rather than as a state characterized by the three “fictitious commodities”, labour, land and money. In other words, commodification will transform every human aspect and quality into abstract, functional units that are necessary for the working of the market institution. It is believed that the terms “extension of the market” (Polanyi), “commodity fetishism” (Marx), and “reification” (Lukács), all refer to the same process. The market system continuously extends its boundaries into every sphere of life, down to the most basic ingredients of human existence, from family to science, to “commodify” them. In other words, it is contended, Marx’s conception of commodification would be a nice addition to that of Polanyi’s for two reasons. First, whereas Polanyi seems to restrict commodification with the three commodity fictions even if he shows in a masterful way that this process does not stop at the creation of these fictions and it continues until it includes all aspects of human lives, Marx considers it as an inclusive social and economic process that eventually causes human existence to become “subsumed” by capital as a social relation. Second, whereas Polanyi seems comfortable with a theory of price determination emphasizing demand and supply, such as the neoclassical utility theory of value and price determination, Marx’s (or the classical school’s in general) labour theory of value, which forms the foundations upon which the notion of commodity fetishism is built, has the capacity to “demystify” exchange relations, and thus to show how human properties are “negated” or violated.

It seems obvious to begin a book about contemporary India in 1947, the moment the British Indian Empire became just India (and Pakistan). But it does need justification. Some scholars have emphasized 1947 as being more about continuity. Gradual political change, such as the 1909 Morley-Minto Reforms and 1935 Government of India Act had slowly increased both the number of Indians able to vote and the participation of Indians in political office. After 1937 Indian politicians formed governments to rule at state level while the British political presence was increasingly being squeezed out of day-to-day local politics and became ever more isolated at the highest levels of government. During the Second World War the British Indian Army expanded rapidly through the recruitment of Indian soldiers and senior officers. While almost entirely British in the 1930s only around half the officers of the elite Indian Civil Service (ICS) were British by 1946. As this book shows later rapid growth of Indian owned business, particularly in consumer goods but also in banking, shipping and iron and steel had also reduced the predominant economic role of Britain in India by 1947.

But 1947 is crucial.

The year marked much more than just a change in personnel at the top of government. The British colonial government was very much in power until independence. In 1939 Britain declared war on behalf of India without local consultation and mobilized the entire country for soldiers and supplies. In 1942 the mass anti-British Quit India Movement was crushed and its leadership easily rounded up and imprisoned. Independence in 1947 marked a real change in political power relations. The year also saw a real change in the foundation of political power from a very restricted voting franchise to democracy based on a universal franchise, which rejected property, gender and education qualifications. The British had long rejected universal franchise. The final legislatures elected under British rule in 1946 had rested on an electorate of 30 million people, or less than 10 per cent of the population. Independence was also scarred by the horrors of partition which saw British rule across the sub-continent being replaced by two independent nations, India and Pakistan (then comprising West and East Pakistan, the latter becoming independent Bangladesh in 1971).

Polanyi begins his masterpiece, The Great Transformation (TGT), with the stark observation that “Nineteenth-century civilization has collapsed”. The nineteenth-century civilization was a bold attempt to establish a self-regulating market encompassing the entire globe. Polanyi believed that the self-regulating market, which he called a “gargantuan automaton” once it reached the entire globe, was perilous to society and that its full realization was impossible. According to him, money – commodity-money under the international gold standard, to be precise – was, simultaneously, what held the nineteenth-century civilization together and what played the biggest role in its demise.

Given the importance Polanyi attributes to money and given that money is one of the three fictitious commodities that he discusses at great length, one should expect that the vast secondary literature on Polanyi pays sufficient attention to the place of money in Polanyi’s thought. Unfortunately, that is not entirely the case. Although there are excellent discussions of Polanyi’s writings on international finance, the nature of money, and the functions of money in different economic systems in history, Polanyi’s theoretical framework on money remains elusive. This chapter fills this gap by outlining the analytical connections between Polanyi’s theory of money, commodity fiction, and embeddedness. It will be shown that Polanyi’s theory of money is an integral part of his criticism of the market system and that Polanyi corroborates this criticism through historical analyses of the international gold standard as well as special-purpose money in different allocation systems. This chapter also suggests that Polanyi’s theory of money offers rich avenues for examining money and finance in contemporary capitalism.

The basic argument of the chapter can be summarized as follows. Polanyi’s theory of money rests on a thorough criticism of orthodox perspectives on money. These conventional accounts of money, which harken back to Aristotle and are reproduced without critical reflection in economics textbooks, portray money primarily as a medium of exchange that serves as a measure of value and unit of account. The orthodox theories find the origins of money in the evolution of market society, which replaced the inefficiency of barter and truck with the genesis of a generalized medium of exchange.

In perhaps the most widely cited political economy work seeking to understand the economic importance of India’s social structure Pranab Bardhan wrote in 1984 that there were three dominant proprietary classes (DPCs). These DPCs were the industrial bourgeoisie, rich farmers and professionals. The “professionals” class included civil servants and private-sector white collar workers. Bardhan estimated that the three DPCs belonged roughly to the top two deciles of the population. In 1975/6 this was 5 per cent of rural households and 17.6 per cent of urban households by income or 3.8 million rural and 3.7 million urban households. Bardhan argues that the three DPCs were the dominant classes in India and had a key role in influencing the process of government policy making. The key hypothesis of Bardhan was that “when diverse elements of the loose and uneasy coalition of the dominant proprietary classes pull in different directions and when none of them is individually strong enough to dominate the process of resource allocation, one predictable outcome is the proliferation of subsidies and grants to placate all of them” (1984: 61). The result of this is that even with extensive resource mobilization through savings and taxation, “the bulk of these resources have been frittered away in current expenditures” (ibid.). The influence of the DPCs on government, he argued, was evident. For example, farmers receive direct subsidies to maintain farm support prices and subsidies to reduce the cost of fertiliser, irrigation water, and diesel. Indirect subsidies for the professionals can be seen in the growth of public-sector employment and salaries. Bardhan notes that since the beginning of the 1960s real per capita income of central government employees increased two and a half times faster than that of per capita income in the country. Bardhan argues that the “Indian public economy has thus become an elaborate network of patronage and subsidies” (ibid.: 65). There is a clear link here with the various discussions of public investment as a driver of economic growth in India (see Chapter 2). The DPCs compel the government to extend to them more generous subsidies, this forces the government to cut back on public investment and economic growth declines.

Accounts of the capitalist knowledge and information economy promise exciting theoretical innovations, and political agendas. At the same time, economic theory as such seems to face problems in the analysis of cognitive (or “immaterial”) goods and resources. Neoclassical as well as Marxist authors find themselves forced to rethink their fundamental categories, scarcity and labour. As has been widely observed, knowledge and information are in many aspects non-scarce, namely insofar as they are non-rival (i.e. not used up when used), and excluding people from accessing them is cost intensive, difficult or even impossible (as in the cases of digitized music or images, scientific results or published news). Neoclassical accounts thus have to introduce trade-off scenarios, network-effects promoting monopolies, public spending, sharing and even gift economies in order to understand how knowledge and information work economically. For Marxists, the equivalent set of problems is which and whose work counts as necessary in order to achieve valuable knowledge, how this labour is measured and where it enters processes of exploitation. Marx himself famously argued that in an economy driven by science and technology, “labour time ceases and must cease to be” the “measure” of wealth, so that “production based on exchange value breaks down”. And while some of his followers conclude that a “post-capitalist” economy is finally within view, others argue that the mechanisms of exploitation have changed fundamentally.

In contrast to neoclassical and Marxist approaches, Polanyi saw the creation of peculiar, “fictitious” commodities at the very heart of the capitalist economy and society. For him, three goods which are not produced for markets but are nevertheless sold on markets – land, labour and money – explain fundamental structures and problems of the modern market economy. Polanyi’s institutionally and politically sensitive theory of fictitious commodities might also offer clues for understanding a capitalism based on knowledge and information. Diverse authors, more or less tentatively, have already dubbed knowledge as the “fourth fictitious commodity”. Just as the commons of land were privatized through enclosures in early modernity, so common knowledge is turned to intellectual property through laws and treaties. Just as manual labour has been subjugated to the discipline of the factory, so intellectual labour is brought under dense quality control and quantified by performance indicators, measuring everything from satisfaction with call centre services to the citation of publications.

Over the last 30 years Karl Polanyi’s The Great Transformation, first published in 1944, has become a canonical text in several inter-related social sciences – sociology, geography, anthropology, international political economy, as well as making in-roads into political science and economics. Undoubtedly, part of its appeal lies in the resonance of his theories with our times which have been marked by the deregulation of markets and their extension into new realms. Polanyi argued that the rise of market fundamentalism had devastating consequences for society, leading to protective countermovements that could be of a progressive or reactionary character. From the perspective of today’s market fundamentalism, Polanyi’s countermovement effectively frames, on the one hand, the democratic social movements of 2011, including the Arab Spring, Occupy, and Indignados, and, on the other hand, the more recent advance of illiberal democracies, often veering toward dictatorships, in Turkey, Poland, Hungary, the Philippines, Brazil, Italy, Israel and Egypt. It also frames an understanding of such popular movements behind Brexit, Trumpism, the Five Star Movement, and the Yellow Vests as a reaction to an expanding market that commodifies, denigrates and excludes. It is the obvious appeal of Polanyi’s argument that now leads commentators to evaluate his writings critically and with renewed intensity, searching for answers to crises of a global scale.

CRITIQUES OF POLANYI

The most common criticism of The Great Transformation is Polanyi’s failure to anticipate another round of market fundamentalism beginning in the 1970s that has continued virtually unabated for nearly 50 years. Attributing colonial atrocities, two world wars, and the rise of fascism to the repercussions of a market fundamentalism, Polanyi believed that humanity would never be so irrational and irresponsible as to take another plunge toward a market utopia. Yet this is precisely what happened. I call this “Polanyi’s Paradox” – a mistaken idealistic response to a materialist diagnosis. He failed to recognize the mighty economic forces driving marketization.

This calls for a twenty-first-century reconstruction of The Great Transformation very much as The Great Transformation can itself be seen as a twentieth-century reconstruction of The Communist Manifesto. Polanyi’s reconstruction of Marx and Engels’ treatise moved the centre of gravity from production to exchange, from exploitation to commodification, from struggle against capital to countermovement against the market.

This chapter presents a snapshot of the Indian economy in 2017, and discusses some of the key influences on the economy (the constitution, the federal system and the central bank). The chapter then offers an unfolding narrative to reveal the origins of the 2017 snapshot, considering variously inflation, trade, agriculture, remittances and episodes of economic growth since 1947.

THE INDIAN ECONOMY IN 2017

In 2017 in terms of total GDP, India is the world’s seventh-largest economy, similar in size to either France or Italy. By 2050 it is forecast to be the world’s second largest, having overtaken the United States and remaining only behind China. According to the 2011 Census India had a population of 1.21 billion, which is likely to have increased to 1.34 billion people by 2017, and by around 2024 it should overtake China (1.39 billion in 2017). In 2017 India had a GDP per capita of around $2,000 which put it at the bottom of the middle-income countries in the world. In PPP (purchasing power partity) terms (which adjusts for cost of living) India’s per capita GDP was $7,170 in 2017 which put it 126th in the world. In 2017 the Indian economy had experienced several years of 7 per cent annual growth, which was among the world’s fastest, and after nearly forty years of lagging behind China was just about faster. This rate was forecast to continue into the near future. This growth has been led by the service sector where India has become the world’s largest base for technology startups, with more than 1,400 founded in 2016 alone.

Recent economic growth looks to be sustainable. India’s domestic debt was around 70 per cent of GDP and foreign debt around 21 per cent of GDP, both had been stable or slowly declining over the years up to 2017. The inflation rate was around 4 per cent and had been steadily declining over the previous few years. India’s export growth had been slowly declining over the years immediately before 2017, but the country had seen its oil import bill cut by almost $80 billion due to lower oil prices, which allowed the overall balance of payments to show some improvement.

INTRODUCTION

Considering that the gold standard stands at the heart of Polanyi’s account of nineteenth-century liberal governance, there has been curiously little discussion of his conception of this institution. Beyond casual references, few scholars have enquired into Polanyi’s analysis of the gold standard. Instead, most of the attention has gravitated towards his analysis of the commodification of labour. It is thus the reform of the Poor Laws in 1834 and its impact on labour that became the focal point of much writings on this author, despite Polanyi claiming that it was the gold standard which had been the supreme vehicle of the Market society.

The gold standard, however, played a pivotal role in the argument of The Great Transformation. Polanyi develops the thesis that it was the policies implemented in the nineteenth century in the name of progress, and more specifically Market progress, which were responsible for the apparent breakdown of European civilization in the first half of the twentieth century (two world wars, the depression and the rise of fascism). By forcing people to become more and more competitive on the market, pro-market policies pushed people to make more and more sacrifices (e.g. cutting wages, working longer hours, being less attentive to the community) until these threatened the very fabric of society. In order to demonstrate this argument, Polanyi needed to link as directly as possible the tragic developments of the twentieth-century events to what he saw as the market policies of the nineteenth century. Here, the gold standard seemed well suited to bear this analytical burden as an institution that spanned the whole period covered in this book. It also appeared as a logical choice since the gold standard is often seen as the quintessential deflationary regime of governance. The term of deflation is usually associated with a regime that intensifies market pressures by limiting the amount of money in circulation. When there is less money, its value increases and market actors have to compete harder to get it. In the case of the gold standard, this would have been achieved by forcing banks to back their banknotes with reserves of gold, a rare metal that made it more difficult to create new money.

This chapter builds on the previous discussion that has conceptualized and theorized gig work to explore trends in the gig economy. The first section introduces a discussion on how to operationalize gig work; that is, to define it in terms of categories of work that statistics agencies provide data for – our key postulate here being that there is no distinct statistical measure of gig work, and that a number of types of work share its features. Hence, we operationalize gig work in terms of four highly contingent types of employment: casual work, temporary agency work, zero-hours contracts, and dependent contractors.

The following sections then examine trends in these forms of work and provide a critical analysis of the factors that have driven their growth or resurgence. In so doing, what is notable is that despite widespread claims that gig work will become the “new norm”, empirical evidence suggests that the four forms of work identified still remain as relatively minor components of the workforce in developed countries. However, this is not to down play the significance of gig work, but rather we argue that the impact of gig work on the economy is not in its direct incidence, but rather the potential impact that such forms of work can have on employment elsewhere.

Operationalizing gig work

In attempting to understand trends in gig work, it is first necessary to operationalize gig work in terms of work and employment categories that national and international statistical agencies would utilize. As such, gig work has been seen as most coterminous with the status of being a dependent contractor, in being available on-demand and generally working through one organization (as demonstrated by Uber). A narrower definition of gig work would be to specify contractors or freelancers that are sourced via the intermediary of an online platform, which is where the novelty of the gig economy as a term largely originated. This is the definition cited by De Stefano (2016), who denotes work in the gig economy as constituting both “crowd-work” (that is, where a number of firms and workers are connected via an online platform) and “on-demand work”, whereby a single user firm uses an online platform to match workers to demand for services.

One way of understanding how we find ourselves in this political moment is to understand better the ideas that make up populism. What is it that populist politicians say, believe, claim to believe, value, promise, that seems so convincing in the context we are in? At a time when political choices can seem increasingly volatile and polarized, a deeper understanding of which “packages of ideas” move people to action is crucial. And ideologies are just that: the link between ideas and mobilization of any type, whether casting a ballot, taking to the streets, staging a rally, writing a manifesto, or creating a hashtag.

Looking at the ideas that make up populism, and how these hang together as an ideology, can serve as a lens through which to track populism over time: if we can identify these key ideas and how these become more or less prominent – in relation to how they are being used and defined by political parties, movements and leaders – then we can start to tell populism from everything else because we will have a better idea of its boundaries. We can also track how it has evolved in different places and over time, and from what kind of “oxygen” it has benefited to become defining of our political era. But, equally importantly, we can track some of our own transformations as citizens and explain why we have become so susceptible to it.

Why thinking about ideologies helps

There are some clear advantages to treating populism as an ideology, as a set of ideas and the ideals that hang together as a blueprint for political action. The main advantage is that it forces observers to see it as more than a sum of its parts; it gives it some coherence and direction. In a word, it allows us to deal with populism as a political project (outlined by some and acquiesced to by others) rather than just “a development” or a symptom.

Because they help mobilize people, ideologies are more than just political thought: they contain a recommended, normative course of action.