Question

What is Polanyi's critique of Smith and economic liberalism?

Answer 1

Critiques of liberal financial theory, two main assumptions in particular: –

1. Assumption that the market is a unique type of society's "natural" financial organisation

2. Assumption that human financial conduct is naturally, inevitably driven by the objective of maximizing self-interest and profit–assumption that markets are self-regulating

Critique of liberalism by Polanyi: – Market not "natural" It is a creation of history

• Premarket values did not include greed and

' rationality '

• No possession of personal property

• No cash economy

• No labor markets

Polanyi rejected both Marxists and economic libertarians for their shared premise that the state should or might wither away. Marxists assumed the government would be redundant after the workers ' revolution. Libertarians have seen (and have seen) that the state has interfered with the genius of the market. As both an end in itself and a necessary precondition for financial taming, Polanyi embraced democratic politics. Polanyi remained an optimist despite his gloomy historical rendering.

Economic order is usually merely a function of the social structure in which it is contained. However, with economic liberalism and the rise in the nineteenth century of the concept of self-regulating market, independent and self-referential financial organizations were developed, which as part of their development continued to absorb all other spheres of culture. This was the economy's "disassembly," its removal from the frame that included it.

Self-regulating market dominance subjects society as a whole to an economic logic of profit maximization. It is the triumph of an anonymous rationality that finds its complete expression in market exchanges and the rational search for profit and submits to the unseen regulating hand to harmonize interests.