Why a Theory of Value? II – Value and Economic History

This is the transcript of a paper held at Brunel University, London, UK, at 07.02.2013.

The world is a vampire. That is to say: the world as it appears today, the capitalist world, is a kind of society uniquely oriented towards the accumulation of labor time for its own sake, and the production and exchange of commodities is the means through which this is achieved. In the classical economics of the 19th century and even more so in the neoclassical economics of today, much effort has been expended on naturalizing this type of society, that is, on making it seem like the inevitable structure of human society once a certain level of technological advance or social sophistication has been reached. Economic history has often been derivative of this view, that it is mankind’s lot, in Adam Smith’s words, to “truck, barter and exchange”. The transformation of all goods into commodities produced for and sold in the market appears then as a natural outcome of the progress of society, and history of the economic in turn appears as merely a casting off of those restrictions on natural liberty which prevent the full flourishing of the market pur sang.

Now it is well-known that this view was strongly contested in the thought of Karl Marx, whose critique of political economy was devoted to the denaturalization of capitalist society. For Marx, it was of the utmost importance to show that capitalist society had its own logic, with a historical origin, and therefore also, at least potentially, a historical end. That which has originated at a definite point in history as the result of conscious and unconscious political and economic transformations is something which can also end by such means. Marx’s theory of value, often called the ‘labor theory of value’ (although Marx did not call it that), is often and rightly understood to have served the purpose of describing the logic of capitalism as its own unique system in this light. Although the classical economists had theories of value, at least for capitalism, and although arguably neoclassical economics has a hidden value theory as well, the idea is most generally associated with Marxist thought. For this reason I will start there, with its historical and ontological status. Then I will talk about the possible meaning of this concept of value for precapitalist societies, how we could define it, and what this might mean for our understanding of economic history as a discipline.

Now there is much to Marx’s theory of value, his theory of crisis and so forth, but these I do not want to go into – my purpose here is not to elucidate what Marx’s theory of value is, nor to defend it as correct. It has often been criticized and from many different political angles, and while I personally think it stands up very well in the latest economic theory literature, that is not what this lecture is about. For many, Marx’s theory of value often seems to be the sticking point keeping them from accepting his general analysis: people just can’t wrap their heads around what it is supposed to be, what purpose it is supposed to serve. It is clear Marx found it important, and tried to make political points with it, but it seems too elaborate and abstract a system to be merely a cover for a number of moral and political criticisms of capitalism – after all, many have been formulated that had no need to refer to a theory of value. In the Marxist economic literature, there is an extensive amount written on defending, elucidating, improving, and applying his theory of value. However, my feeling is that this literature is lacking in one significant dimension: there is very little explanation or defense of the theory of value itself. By this I mean, not even just Marx’s theory of value, but the need for any theory of value at all: what kind of thing a theory of value is, and why economic historians, in particular, might need one. This is what I want to analyze today. My remarks on this are preliminary, and should be taken as such: I am merely attempting to explore some, to my mind, fairly unexamined ground here.

So what kind of beast is a theory of value? Is it really merely a rhetorical device, a mere metaphysics, as so many critics from the economic mainstream have suggested throughout the years? To my mind, if Marx’s theory of value is to work as a theory, it should not just have a certain explanatory or political value right now, but it should also be understandable and applicable in a historical context. At the same time, this requires a careful examination of what aspects of economic history should be taken as specific to capitalism, and which as transhistorical, and therefore also a necessary part of the logic of other economic formations.

It was highly important for Marx to differentiate capitalism from pre-capitalist societies. The theory of value of capitalism he outlines in his famous work Capital applies to capitalism only, for this reason, and takes as premise the development of, in Marx’s terminology, “generalized commodity production” as well as the predominance of “free wage labour”. The resulting universal commensurability of commodities, and of the labour power which makes them, is where Marx starts his analysis of capitalism in Capital. This is what makes capitalism what it is. The expression of this universal commensurability is the all-pervasiveness of money in the process of exchange. It is this attribute of money that makes ‘the economy’ seem a separate thing, operating on its own strength entirely separate from the ‘thick’ substance of the rest of society – the clearest example of this being the ability of financial capital to induce crises in the whole of society by its activities. It was for this reason that Karl Polanyi and other economic historians have suggested that capitalism is unique precisely in having the economic logic be divorced, or disembedded, from wider society.

But what could this practically mean? We know now that Polanyi was wrong to think markets and money exchange were nonexistent in precapitalist societies. It is not as simple as that. We must seek something more fundamental to all forms of production and exchange in our recorded history. Marx himself attempted to do so: in the Communist Manifesto as well as in later works, capitalism itself as a mode of production is placed in a larger economic history context, as succeeding other economic formations such as feudalism, slavery, the so-called Asiatic mode of production, and so forth. What characterizes all these modes of production? It is that all these were societies in their own way producing and distributing goods in order to reproduce their existing social relations. To cite the anthropologist Maurice Godelier, this means that society exists as “an articulated ensemble of relations and functions, all of which are simultaneously necessary for its existence as such, but whose importance for its reproduction is variable. (…) There exists a hierarchy of social relations depending on the function each assumes in this process.” Moreover, each of these societies in its reproduction is capable of generating a surplus sufficient to allow the existence of a state and their own ruling classes, whatever they were.

We need not accept all Marx and Engels’ precise classifications today to understand that the significance of this is to suggest that precapitalist societies were sufficiently different from the capitalist one to have their own logic, their own social relations reproducing that kind of society through the production of material goods, and what’s more, that we can understand this logic through the lens of reproduction. It has been said that Marxism inaugurated the discipline of economic history by this idea, and indeed, the very premise of economic history must be that the material reproduction of past societies, in whatever way they worked, must be intelligible to us today. I want to argue then that from a historical comparative perspective, a theory of value such as Marx developed for capitalism appears as a way to describe the logics of present and past economic formations in a way that makes intelligible to us how they reproduce themselves materially, that is to say, according to what logic a given society produces and distributes the goods necessary not just to reproduce that society in its existing form, but also to permit, where applicable, the surplus that allows the existence of people who do not work, of leisure, of war, of arts and culture, and so forth.

This approach to the ontological question of what a theory of value is suggests to me strong commonalities with the methodologies of anthropology, in particular the subdiscipline known as economic anthropology. Whereas Marxists and non-Marxist economic historians have made great contributions to our understanding of the empirical details of the historical production and exchange of particular goods, of the economic institutions and organizations of the past, and so forth, few have put this in the context of the need to understand the value logics of these societies. Even the Marxist debates about the transition from one ‘mode of production’ to another have by and large focused on at what point and in what historical societies we’re allowed to use the word ‘capitalism’; but this is not what I mean. What I intend is to suggest an economic anthropological approach to the value question. It is, or should be, I believe, no coincidence that the word value (wert) was chosen by Marx as the core term for the thing that capitalist society eternally seeks to accumulate and that organizes its reproduction. Many people have found this, too, confusing: after all, doesn’t value suggest a moral judgement? Aren’t values things more similar to judgements about virtues, priorities , and what a society is about socially and culturally, rather than economically? Using a term like that in what purports to be an objective, scientific analysis of capitalism seems fallacious, or a way to smuggle in moral judgement through the back door. But for me, this makes sense when understood in an anthropological manner (and I must admit here, I am not a trained anthropologist).

What thinking about present and past social formations in terms of value helps us do is to overcome precisely this separation between ‘the economic’ and ‘the social’, or in the economic history literature, ‘the cultural’; where the latter tends to function as the remainder category for everything that could not be explained in terms of the former. As I have mentioned before, this division is itself a product of the appearance of our own society, and therefore risks anachronism as well as superficiality. Both Marxist and non-Marxist economists and economic historians have often been accused of economic reductionism, of wishing to explain and reduce everything to terms of material production and gain. This may be unfair to some extent, but this division between the economic and the sociocultural in economic history lends reason to this criticism, especially as the division is always made in favor, in scientific terms, of the ‘economic dimension of life’. I think if we are to understand economic history properly, we cannot so easily divorce whatever elements the discipline has determined as its own terrain from the wider societies they are and were part of, as is too commonly the practice now.

What this requires is a level of abstraction that can accommodate, when analyzing the social relations of past economic formations, both the processes of production and distribution of goods themselves, as well as the ideas that people have about these processes and these goods that are constitutive of the relations themselves. Put in clearer terms, what this means is that when people make or distribute certain goods, they have a view of themselves, their role in society, and the role of other people and goods in that society, which determine which goods are made, who obtains them, whether and under what conditions they are exchanged, and so forth. As Maurice Godelier has emphasized in his underappreciated work of economic anthropology, The Mental and the Material, the mistake has hitherto often been to see the processes of production and distribution as one thing and their mental representation and content as another, similar to Marx’s so abused metaphor of the ‘base’ and the ‘superstructure’. Both in Marxist and non-Marxist economic history, it has tended to be production and distribution themselves that count, through analyses of guilds, price lists, trading depots, land markets, and so forth, and the question of people’s values, beliefs, and representations of society are left to the cultural and social historians. Or where they are examined, they are examined precisely as a superstructure – they are not understood as constituting part of the way a society organizes its production and distribution itself, except as a mere reflection.

But in the real experience of society, these two domains cannot be separated. The mental perception of society (what Godelier calls ‘idéel‘), at least insofar as it concerns the processes of production and distribution of goods (the matériel), is an integral part of these processes themselves. They are what allows these societies to exist as they do. Without this understanding, even if we can explain in purely technical terms how exchange and production worked in a particular society, we cannot explain why it worked like that and no other way, and more importantly still, why people put up with it. As Godelier wrote: “What we need to be able to explain… is how social groups and individuals can in some measure co-operate in the production and reproduction of their own subordination, even exploitation. (…) We must therefore seek to use our theoretical imagination to penetrate the black box of those mechanisms which goven the distribution of the same representations among social groups with partially or profoundly opposed interests.”

If we want to take such an analysis beyond a Voltairian ‘bad priests’ sort of explanation, where ideology is simply a layer imposed on top of society by a ruling class to deceive everyone to their own benefit, we must see such representations as constitutive of people’s self-perception in the reproduction of society. In other words, the question is not just what goods people make and who gets them, but what these goods mean to them, and why certain people are considered entitled to them. This cannot be separated from the processes themselves. As Godelier emphasizes: “There exists in every social relation a mental part that is both one of the actual conditions for the birth and reproduction of this relation, and at the same time its internal organizational schema.” This goes beyond Marx’s own theory of value itself, and into areas I think generally left unexamined by approaches relying entirely on it.

Economic anthropology furnishes us with a great number of different systems of production and exchange, both with and without money, with or without commodity production, using gifts, potlatches, hereditary and ancestral power, magic and taboo of all sorts; unfortunately I simply do not have the time to go into these in detail, so I must speak in fairly abstract terms. What is decisive here is to understand that societies are rarely, if ever, constituted explicitly in terms of the ‘economic’. As Durkheim and others have observed, the imaginary constitution of society is usually in terms of some divine order and dispensation, something justified and constituted by the gods and requiring the constant placating of the gods to maintain; but even in modern societies, the elaborate apparatus of political theory and philosophy has served to find justification for society in terms often not immediately economic, such as in the work of the social contract theorists, old and new. The Athenian polis was, despite its advanced and almost modern-seeming political and economic activities, first and foremost a covenant with the gods for the perpetuation of society on the basis of a complicated system of heredity, obligations towards the gods as well as their institutions, and the relations to other Greek city-states.

In ancient Egypt, the rule of the Pharaoh was based on his ability to control the Nile floods (by communicating with the gods) and thereby make possible the harvest, for which in return he was to be placated with tribute in the form of goods or labor, and so on. An economic historian might reduce this to speaking merely of a geographically encaged peasantry captured by a “hydraulic state”, as Karl Wittfogel did, but this is to miss the significance of the view of the Pharaoh. This was not merely a ruling class legitimation of the extortion of the Egyptian peasants, but for the Egyptian peasants, the reproduction of Egyptian society actually did depend on distributing a certain amount of surplus goods and labor to the Pharaoh and his retainers; without this, the very logic of Egyptian society would not have been possible, and therefore there would not have been an Egyptian society in the first place. This is not a conservative argument to justify all forms of class rule, but it is to understand the significance of the particular social relations of Egyptian society – social relations which, as Godelier says, “dominate when they function simultaneously as social relations of production, as the social framework and support for the material process of the appropriation of nature.”

What I want to suggest then is that this is the first aspect of value that is essential for comparative economic history: value in the sense of the values people hold about society, their representation of their society’s purpose and their role within it, and the obligations and debts this places upon them. As David Graeber has described at length in his book Debt: The First 5000 Years, relations of exchange have throughout history often taken the form of a debt relation, not least the eternal and irreducable debt owed to the gods and/or divine rulers for the constitution and perpetuation of society itself. Debt, as we know, is in and of itself merely a claim on distribution of goods; but if it comes to dominate the value system and representation of a society in the minds of those producing goods, it becomes part of the system of production and exchange itself. It is what the production and distribution of goods is seen as being ultimately for, and it is this, not the mere day-to-day political needs of a ruling class or the technical requirements of factories and markets, that determines the form and nature of the processes of production and exchange. As Graeber suggests in Towards an Anthropological Theory of Value, it is this ability of value theory to (I paraphrase) “suggest the possibility of overcoming the difference between theories that start from social structure and theories that start from individual motivation” that constitutes what economic anthropology could be seen as contributing as a discipline. Certainly within economic history this seems of enormous importance.

The second aspect I want to suggest is a closely related one, which I have alluded to before: commensurability. I think an important part of Marx’s need to explain capitalism as a historically unique social logic is his observation, not understood by the classical economists, that capitalism is a society in which there is a generalized commensurability of goods and labor. In the vast majority of historically existing societies, various goods and various kinds of labor have been sometimes commensurable, sometimes not. Often certain objects are sacred, or hereditary, and cannot be traded for or compared with other objects; certain kinds of production are intrinsic to themselves for their ritual meaning or their political purpose; and divisions of gender, caste, age, and so forth can be so strong as to make any comparison not just impossible to express in market terms, but in fact altogether inconceivable. Moreover, there are always a number of goods that are commonplace and for common purposes, and do not have any higher social or cultural status, and these are for that reason often interchangeable in a market sense, allowing measurements of simple accumulation in that sense. Such mental, representational systems create or oppose commensurability between goods, which in turn determines the nature and processes of production and exchange; they are an essential part of the value logic of a given society’s economy.

Yet every society needs to reproduce itself and its social relations, and therefore must have a yardstick, or perhaps multiple, by which it measures its success or failure at doing so – a yardstick that is expressed within these mental representations of what society is about. These could conceivably be expressed in terms of divine favor, political success, territorial expansion, or other things, but there must be some way in which this yardstick relates to the material production and exchange of goods by whatever means – for example whether the size of the chief’s potlatch is sufficient to feed the tribe and more impressive than that of the rival people. I would venture that it is only in this sense that it makes sense for Marx to say that the social relations, including their mental content, can come into conflict with the development of technology. This yardstick (and of course there can be more than one, and more or less conscious) is what I would call value in the analysis of that society.

Having made these two observations about the significance of value for economic history, I want to draw this argument to a close. As I have said, a theory of value like that of Marx has often been discussed purely in terms of its significance in economic theory or in politics, but it has not often been asked what value itself could mean and what kind of historical-ontological status it has. My argument is that the idea of theories of value, applied to past societies, is or could be a tremendously useful concept for economic historians. It allows us to talk about mental representations, ideas, and religious and cultural logics if and when they become a functional part of the social relations of production. By this I mean that these mental conceptions become material and part of economic history when they, at least in part, determine the nature of the production of goods and their distribution in a given society. From economic anthropology we can learn not just a great deal about the different ways in which precapitalist societies have organized these processes, but we can also fruitfully apply the rich body of theory on social facts, obligation and debt, and commensurability to economic history itself. This, in turn, I hope will allow economic historians more generally, whether Marxist or otherwise, to overcome the dichotomy between the economic and the sociocultural in examining past and present societies, and thereby remove some major obstacles for a more holistic and integrated understanding of how societies actually work.

Why a Theory of Value?

The gentleman from Unlearning Economics asked me recently in response to my rebuttal of Steve Keen’s critique of Marx’s theory of value why indeed there is any need for a value theory at all. It seemed to him labor as the measure of value was simply assumed by Marxists, and even if their explanations of the economy were clearly better than others and they can rebut the critiques of Keen, Bose and others, it is still not clear why there should be such a thing as a ‘labor theory of value’ at all. I find I often run into this problem with many intelligent, critical people who are by no means unwilling to take my Marxisant analysis seriously, but who simply do not get what kind of thing a theory of value is, let alone Marx’s; and then indeed it must seem a strange and unnecessary quasi-metaphysical imposition. Now initially I thought this as well, and before I fully immersed myself in Marxist thought I was quite hostile to the notion of the labor theory of value, or even the need for such a theory at all. And indeed neoclassical economists have spent more than a century trying to refute both Marx’s theory and the need for such a theory at all. However, it is not so much just Marx’s arguments in Capital itself that convinced me, as my wider reading giving me a more historically and anthropologically grounded perspective about production and exchange in history, and I would venture to say the concept of a theory of value can only make sense if put explicitly in this wider context. Continue reading “Why a Theory of Value?”

Death Agony of Social-Democracy

Where can social-democracy go? In Greece, the parties of the center, once utterly dominant on the country’s political scene, can barely scrape together a majority combined even with the help of a mass of bonus seats for the plurality party. Their opposition is now formidable in the form of SYRIZA, a left social-democrat outfit with a programme of radical reform that would stretch liberal political economy to the breaking point, but staying well short of an explicit commitment to revolution. In France, the victory of the Parti Socialiste is complete with its clear majority in the Assemblée Nationale following François Hollande’s election to the Elysée. In the UK, the Conservative-LibDem coalition appears ever weaker and less able to enforce its majority, while the Labour Party has been leading it in the polls by large numbers for months on end. In Germany, the ruling rightist coalition has suffered painful defeats in the länder against the SPD. In short, it seems finally things are looking up for European social-democracy. Continue reading “Death Agony of Social-Democracy”

Karl Polanyi and the Challenge for Economic History

For a long time now there has been a debate within economic history about the question whether the usual tools of neoclassical economics for understanding historical change, such as utility maximization by individuals within a market context, can be fruitfully applied to premodern or precapitalist societies. Ever since Karl Polanyi argued in his seminal work The Great Transformation that “the role played by markets in the internal economy of the various countries (…) was insignificant up to recent times, and the changeover to an economy dominated by the market pattern will stand out all the more clearly”, it has been a hotly debated item whether the societies preceding our market capitalist one can be said to have been ‘market societies’, and if not, what this entails for the nature of economic behavior under such societies.1 Polanyi himself argued that the formation of a ‘market economy’ implied a ‘capitalistic psychology’, but that the pre-capitalist societies were characterized by structures he defined as being either based on the principle of reciprocity, such as gift economies, or on the principle of redistribution, such as the palace redistribution societies of the ancient Near East, or on ‘householding’ in the style as described by Aristotle. The motives of these societies were not primarily those of gain, but motives of “custom, magic and religion”.2 In his book Polanyi describes the gain-oriented motives of market economies, assumed (according to him) by economists’ prejudices to have held throughout history, as evolving as a result of state interventionism by absolutist states in the early modern period.3 This in turn evolved into a “self-regulating market” on the basis of competition, which brought with it the mindset of individualism and “economic liberalism [as] the basic organising principle of society” in the view of the capitalists.4 This again leads to the “tradition” or “prejudices” of the classical economists, which “attempted to base the law of the market on the alleged propensities of man in the state of nature”, namely man as gain-oriented, individualist, market exchanging etc.5

It is important to note in this context that Polanyi’s book is however not primarily a description of the change from premarket society to market capitalism in psychological-behavioral terms. The ‘great transformation’ of his book is not the ability of market society to disembed itself from society, thereby allowing everyone to behave according to the rules of liberal thought to the benefit of all – his argument is precisely that this cannot be the case, because a society that actually entirely consists of market interactions following market behavior would cease to exist entirely very quickly. The ‘great transformation’ Polanyi describes in his book is in fact the recognition in the 20th century that the basis of capitalist society as laid down in the 19th century cannot be allowed to continue, because it is based on requiring a type of economic behavior that is incompatible with the survival of civilisation. This is the qualitative change to capitalism, and it is in his view a negative and disastrous one. As he explicitly says: “Nineteenth-century civilization alone was economic in a different and distinctive sense, for it chose to base itself on a motive only rarely acknowledged as valid in the history of human societies (…) namely, gain. The self-regulating market system was uniquely derived from this principle.6

Since the publication of this thesis much ink has been spilled about whether Polanyi was right in his broad historical analysis. Although Polanyi appears to entertain the idea of trade being extant to a serious degree in past societies, he nonetheless explicitly claimed that trade did not depend on markets, that markets were “local” and “had no tendency to grow”, and that the division of labor did not originate or exist in exchange, and that international trade up until recently was not trade between individuals.7 Many recent economic historians have contested aspects of this story. The impetus for this was to respond to a 1977 article by the famous Douglass North, reviving Polanyi as a challenge for economic historians, to see whether economic history done in the neoclassical mode could explain these precapitalist societies. As North put it: “I wish to make the affirmative point that as yet we have not even tried to see how far economic analysis will take us in explaining institutional arrangements”, whereby the “institutional arrangements” meant are those economic allocation mechanisms that are seemingly not analogous to capitalist, individualist markets.8 Sheila Ogilvie has done – and pointed to – studies which show that peasants in rural economies in the premodern era have clearly displayed “economic mentalities”, with “the poorest groups showing careful economic calculation and maximization”, and peasants “responded to market prices” and “transacted eagerly in markets”.9 Morris Silver has challenged his description of the societies of the ancient Near East as being free of market allocation of land and labor, by arguing that although there were prolongued periods of state regulation and redistribution in this area during this period, there were also long periods of “unfettered market activity”.10 Silver’s evidence is perhaps not as strong as he presents it, but the point of these and other rebuttals is clear: Polanyi was wrong in saying that precapitalist societies did not display ‘economic mentalities’, and markets in land and labor did exist. It would seem then that the economic historians have met the challenge: ‘economic mentalities’ and the corresponding markets can be found throughout history.

The interesting question is really not the question whether it is empirically correct or not that certain types of markets in land existed at a certain time or that certain risk-bearing initiatives were undertaken by peasants or merchants in a certain place. For the purposes of this article we shall assume that Polanyi’s critics are broadly right, and that in fact gain-seeking behavior by individuals has existed throughout history (which seems plausible) and that market-based trade has existed in almost every society, leaving the debate about gift societies aside (which is almost certain). Rather, I would argue that both Polanyi and his critics like Ogilvie are mistaken in their understanding of how economics can be applied to precapitalist history, but for different reasons.

Polanyi based his case on the wrong foundation when he argued against the Whiggish view of history as being the history of capitalist individualism coming into its own by arguing that this was impossible because significant market activity and gain-oriented behavior did not exist earlier. This was not an effective criticism, not just because it was empirically wrong, but because it took neoclassical economicsassumptions at their face value. By effectively assuming that the relevant question was whether “economic behavior” existed in the past, and by assuming that such behavior can be understood in terms of “economic calculation”and markets sec, he opened the door wide for ‘formalist’ economic historians like Ogilvie and others to criticize him by ‘finding’ such instances in the past. What Polanyi should have done, and what would turn the discussion in a direction that has not been discussed by Polanyi’s recent critics, is to criticize the implicit assumption in such thought that the understanding of the economic structure of past societies depends on individual behavior in exchange. Because this is what the formalists mean, and what they want to formalize, when they speak about “economic behavior” as such: they do not mean the whole range of behavior in past societies that in some way interacted with economic institutions, since that would be virtually everything, but they mean specifically the behavior of indidivuals insofar as they took part in market exchange.

But there’s the rub: why should we take this as the main explanandum? I would argue that we can save a substantial degree of Polanyi’s thesis about a significant qualitative change between capitalist society and precapitalist society by focusing not on this narrow neoclassical concept of “economic behavior” in the past, but by understanding such behavior as being part of a wider system of economic production and reproduction of society. The relevance and irrelevance of the evidence regarding markets then comes nicely into view: although, say, ancient Athens definitely had individual international trade, and although it had substantial markets in which no doubt the individual actors behaved according to economic calculation, ancient Athenian society as such did not reproduce itself by means of these market activities; it reproduced itself first and foremost through the Aristotelian oikos subsistence agriculture.11 Similarly, feudal society had significant trade, both local, international and long-distance, but again whether or not economic calculation was shown can be taken as an irrelevant given: the question is whether feudal society reproduced itself qua feudal society by such trade, and the answer is no. It was manorial agricultural production that reproduced feudal society.12 Under capitalism markets and trade also exist; but capitalism is the first society that reproduces itself through commodity production, which exists only in and through markets. This is the qualitative difference, the Great Transformation.13

People always and everywhere have had interaction with each other, trade and gift economies alike. It is precisely a sign of the narrowmindedness and limited nature of neoclassical understandings of what ‘economic behavior’ is that they worry about whether such economies can be understood as ‘utility maximizing’ and the like. One can always make any society fit these definitions simply by expanding their meaning to cover the behavior shown – this, pace North, has absolutely no value whatsoever for understanding them. To understand the economic structure of societies one should not search for psychologizing explanations about whether individuals showed ‘economic behavior’, which is either tautological, when taken in terms of utility, or irrelevant, when taken in terms of maximization within a market structure. One should look at how the means of survival of a given socio-economic structure, including its cultural elements, were (re)produced and distributed. Markets in virtually all societies have played a role in this, but when looked at from this angle, it becomes clear how despite the transhistorical persistence of markets, a market under capitalism simply is not the same economic phenomenon as a market in ancient Athens. Capitalism is a qualitative change, and in the long run a negative one. To understand this is truly Polanyi’s challenge for economic historians.

1 Karl Polanyi, The Great Transformation (Boston, MA: Beacon Press 2001 [1944]), p. 46.
2 Polanyi, p. 57.
3 Polanyi, p. 70.
4 Polanyi, p. 148.
5 Polanyi, p. 47. Although Polanyi’s book predates the current-day neoclassical school of economics as such, and this school does not strictly (necessarily) base itself on ‘the state of nature’, the Whiggish assumptions Polanyi argued against and the retrojection of such assumptions about man into the past are broadly equivalent. I will therefore for the purposes of discussing Polanyi’s argument conflate the “tradition” he assailed with the neoclassical one based on it.
6 Polanyi, p. 31. Emphasis added.
7 Polanyi, p. 281-283.
8 Douglass North, “Markets and Other Allocation Systems in History: The Challenge of Karl Polanyi”, in: Journal of European Economic History 6:3 (1977), p. 709.
9 Sheila Ogilvie, “The Economic World of the Bohemian Serf: Economic Concepts, Preferences, and Constraints on the Estate of Friedland, 1583-1692”, in: The Economic History Review 54:3 (2001), p. 432-433.
10 Morris Silver, “Karl Polanyi and Markets in the Ancient Near East: The Challenge of the Evidence”, in: The Journal of Economic History 43:4 (1983), p. 795.
11 “In ancient Greece the principal economy was that of the household. This was predominantly a rural economy. (…) The word ‘economy’ derives from the ancient Greek term oikonomia (…) closely associated with the organization and management of the household [oikos]”. Graham Oliver, “Economy”, in: Nigel Guy Wilson (ed.), Enclyclopedia of Ancient Greece (New York, NY 2005), p. 249. Oddly Oliver in this article confuses the positions of the ‘formalists’ and ‘substantivists’ on the question discussed here.
12 E.g. “The essence of the feudal mode of production in the Marxist sense is the exploitative relationship between landowners and subordinate peasants, in which the surplus beyond the subsistence of the latter, whether in direct labor, in rent in kind or in money, is transferred under coercive sanction to the former.” R.H. Hilton (ed.), The Transition from Feudalism to Capitalism (London 1976), p. 30.
13 “In themselves money and commodities are no more capital than are the means of production and of subsistence. They want transforming into capital. But this transformation itself can only take place under certain circumstances that centre in this, viz., that two very different kinds of commodity-possessors must come face to face and into contact; on the one hand, the owners of money, means of production, means of subsistence, who are eager to increase the sum of values they possess, by buying other people’s labour power; on the other hand, free labourers, the sellers of their own labour power, and therefore the sellers of labour. Free labourers, in the double sense that neither they themselves form part and parcel of the means of production, as in the case of slaves, bondsmen, &c., nor do the means of production belong to them, as in the case of peasant-proprietors; they are, therefore, free from, unencumbered by, any means of production of their own. With this polarization of the market for commodities, the fundamental conditions of capitalist production are given.” Karl Marx, Capital Vol. I [London 1887], Ch. 26. http://www.marxists.org/archive/marx/works/1867-c1/ch26.htm.

Crisis: Liberalism fails where anti-liberalism succeeds

The current economic crisis, despite (or maybe because) of the hullaballoo about its premature ‘end’, gives a good perspective on the failures of liberal economic policy. Precisely those nations that had in the past attempted a get-rich-quick scheme by relying on extreme liberalism to draw in capital in search of unrestricted territory for expansion are now the ones suffering the most from the inevitable cyclical collapse that is attendant on the movement of capital.

Such ‘success stories’ of liberal development as Ireland and Iceland have gone into deep recession. Continue reading “Crisis: Liberalism fails where anti-liberalism succeeds”