Karl Polanyi’s The Great Transformation is a farrago of confusions, absurdities, fallacies, and distorted attacks on the free market. The temptation is to engage in almost a line-by-line critique. I will abjure this to first set out some of the basic philosophic and economic flaws, before going into some of the detailed criticisms.
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Why, then, do we consider the free market as "natural," as Polanyi sneeringly asks? The reason is that the free market is (1) what men have turned to when they have been allowed freedom of choice, and (2) what men should turn to if they are to enjoy the full stature of men, if they are to satisfy their wants, and mould nature to their purposes. For it is the market that brings us the standard of living of civilization.
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I mentioned that the free society would permit Polanyi or any who agree with him to abandon the market and find whatever other forms suit them. But one thing and one thing alone the free society would not permit Polanyi to do: to use coercion over the rest of us. It will let him join a commune, but it will not let him force you or me into his commune. This is the sole difference, and I therefore must conclude that this is Polanyi’s sole basic complaint against the free society and the free market: they do not permit him, or any of his friends, or anyone else, to use force to coerce someone else into doing what Polanyi or anyone else wants. It does not permit force and violence, it does not permit dictation, it does not permit theft, it does not permit exploitation. I must conclude that the type of world, which Polanyi would force us back into, is precisely the world of coercion, dictation, and exploitation. And all this in the name of "humanity"? Truly, Polanyi, like his fellow-thinkers, is the "humanitarian with the guillotine." (See Isabel Paterson’s profound work of political theory, The God of the Machine, Putnam’s, 1943).
The naked and open advocacy of force and exploitation would, of course, not get very far; and so Polanyi falls back on the fallacy of methodological holism, on treating "society" as a real entity in itself, apart from, and above, the existence or interests of the individual members. The market, Polanyi thunders, disrupted and sundered "society"; restrictions on the market [are] "society’s" indispensable method of "protecting itself." All very well, until we begin to inquire: who is "society"? Where is it? What are its identifiable attributes? Whenever someone begins to talk about "society" or "society’s" interest coming before "mere individuals and their interest," a good operative rule is: guard your pocketbook. And guard yourself! Because behind the facade of "society," there is always a group of power-hungry doctrinaires and exploiters, ready to take your money and to order your actions and your life. For, somehow, they "are" society!
The only intelligible way of defining society is as: the array of voluntary interpersonal relations. And preeminent amongst such voluntary interrelations is the free market! In short, the market, and the interrelations arising from the market, is society, or at least the bulk and the heart of it. In fact, contrary to Polanyi and other’s statements that sociability and fellowship comes before the market; the truth is virtually the reverse; for it is only because the market and its division of labor permits mutual gain among men, that they can afford to be sociable and friendly, and that amicable relations can ensue. For, in the jungle, in the tribal and caste societies, there is not mutual benefit but warfare for scarce resources!
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Finally, in the final chapter, Polanyi tries to assure us that his projected collectivist society would really preserve many of the "freedoms" that, he grudgingly admits, the market economy brought us. This chapter is almost a textbook presentation of utmost confusion about the concept of "freedom"; and of confusion between the vitally distinct concepts of "freedom" and of "power."
(On this crucial distinction, always blurred by collectivists, see F.A. Hayek, The Road to Serfdom.) Many "freedoms" would be kept, even maximized, (after all, isn’t a worker with more money more "free," and who cares about the money taken away from the luxurious rich, anyway?), and including such "freedom" as the "right to a job" without being discriminated against because of race, creed, or color. Not only does Polanyi vainly think, or assert, that we can have at least enough "freedoms" in his collectivist society; he also believes, equally vainly, that we can preserve industrialism and Western civilization. Both hopes are vain; in both cases, Polanyi thinks he can preserve the effect (freedom of speech, or industrial civilization), while destroying the cause (the free market, private property rights, etc.) In this way, he is thinking, not only as Nehru and Kwame Nkrumah think, he is thinking also in the same fashion as the savage whom he so exuberantly extols.
To sum up: I have read few books in my time that have been more vicious or more fallacious.
