©Deirdre Nansen McCloskey | COPYRIGHTED MATERIAL

Polanyi and the History of Capitalism: Rejoinder to Blyth

by Santhi Hejeebu and Deirdre McCloskey
Critical Review, 16(1) 2004
Filed under articles [criticism in history and economic history] [replies]

Mark Blyth
Mark Blyth
Mark Blyth's energetic response to our retrospective review of The Great Transformation sheds little light on our critical appreciation of Polanyi's masterpiece. We made two central points, both fairly benign. Both apparently escaped Professor Blyth.

We first dismissed Polanyi's oft-repeated claim, which in his old age he ruefully admitted he had failed to sustain, that there did not exist market societies anywhere before the nineteenth century. On the contrary, we say, they were ubiquitous. Blyth correctly summarizes Polanyi as saying that "commodification of land, labor, and capital . . . were unknown as much for most of human history." Without offering evidence to the contrary, Blyth asserts that Polanyi was correct. He merely repeats Polanyi's assertions with an air of assurance. "Until relatively recently," Professor Blyth assures us, "the economy was not a separate sphere of activity governed by laws of supply and demand." His assurance is not justified by the history, especially that since Polanyi wrote. We made the case by drawing on some of our own favorite examples of early markets; but more seriously by drawing on the work of eminent colleagues in economic history who devoted their scholarly lives to the question. It would be wrong to describe Philip Curtin, K.N. Chaudhuri, David Herlihy, and Fernand Braudel as neo-liberal lapdogs. Yet they all reject Polanyi's claim. A sampling of their work, and that of many others who have escaped Professor Blyth's attention, would have assured him of this. There is by now overwhelming evidence that the commodification of land, labor, and capital is ancient. It is remarkable in 2004 to go on claiming, for example, that England waited until around 1800 of transform land "from an elite inheritance into an alienable factor of production." English land markets at all levels were operating on a large scale from the 14th century on. For that matter, so were markets in labor: in the 14th century, according to Postan, half the peasantry worked for wages. Even in Africa, the Americas, and the Indies it long precedes Europe mercantile taint. And in Europe — contrary to the Romantic view of 19th-century scholarship, especially in German — the evidence collected since 1900, as Herlihy put it three decades ago, has "all but wiped from the ledgers the supposed gulf, once thought fundamental, between a medieval manorial economy and the capitalism of the modern period." It is quite mistaken to say that the "rise of One Big Market where everything is for sale" is a "qualitatively new development." It is not. In the European middle ages more was for sale, arguably, than is now: husbands, wives, slaves, serfs, kingdoms, market days, and eternal salvation. Medieval Europe was thoroughly monetized. Polanyi's history is hopelessly wrong. It would have been surprising, actually, if in 1944 had got it right, when so much of the work on ancient markets had not yet been done — partly in response to Polanyi. He stimulated a great deal of good work. But to adhere now to Polanyi's position in 1944, as Professor Blyth does, is to dishonor his memory. It is to ignore half a century of work in economic history.

Blyth's technique is not to offer alternative historical evidence. It is rather to ask indignantly and repeatedly, But isn't Polanyi's view correct? The short answer is, No. Blyth has done no historical work of his own on the matters he queries. Both of us have, one on medieval open fields, the other on the British East India Company. Nor has he read widely in economic history. Both of us have. We understand that a reading of serious scholarship in economic history that ends at about 1910 — which we infer from internal evidence is about where Polanyi's reading left off — will feel that it is "incontestable" that markets were new in the 19th century or that labor markets did not exist under feudalism. Blyth notes that "If it was not [like the 1910 view of the world], then we have really misunderstood a lot of history." Precisely. But the people who have misunderstood it are not the historians who have re-written Europe's history since 1910, but the political scientists and others who refuse to read what has been written.

Our second point, though, was to applaud Polanyi. He was not a very good economic historian. But he was a very good critic of economics. We are puzzled that Professor Blyth does not understand. While Polanyi was indeed wrong about the alleged historical oddity of market society, he was exactly right that all economies are embedded in societies. "All behavior," as we put it, "is embedded in ethics, the language, and culture of a commercial, or an anti-commercial, society ... Explicitly reckoning with a broad range of human motives, [Polanyi] gives his readers an ethical vote" [p.304]. We urged our fellow economists to overcome their infatuation with Benthamism and pursue a fully embedded economic science.

The problem is that for Polanyi only social mores matter. For many economists since Jeremy Bentham, by contrast, only individual prudence matters. We called the one the "S-variables" of society, solidarity, speech, spirit, the Sacred; and the other the "P-variables" of price, profit, property, pocketbooks, the Profane. It seems obvious to us, but not to Professor Blyth, that both must be called on to explain most social behavior. Think of your marriage, or your choice of profession. One of us has recently become a little acquainted with a new field in economics called the economics of religion. She has been stunned by the unwillingness of the economists laboring there to listen to S-variable accounts of something so definitionally sacred as religion. We noted in the paper this awkwardness of our economist colleagues in dealing with matters of community norms, altruism, and anything that falls out of the usual profit considerations. We seen in it a parallel to Polanyi's own "sacred hatred" of markets. Both rely on extreme prior beliefs of how communities and the markets that connect them operate.

Our answer? Serious analysis of both S and P. Save the good in Polanyi — his claim that economies entail S-variables. Discard the bad — his claim that 4000 years of price history since early Mesopotamia has an entirely non-P explanation.

Blyth appears to have missed all this. He imagines that we claim that societies "have been equally capitalistic at all times." While it is entertaining to imagine Galileo as a dot.com entrepreneur, with the Medici family, perhaps, as his venture capitalists (Cosimo II was in fact a patron of Galileo's), this is not what we had in mind. Blyth attributes to us a preposterous position: that ancient, archaic, or pre-colonial markets means that Gilgamesh, when not at war, had the same consumption bundle in his thoughts as a member of Sam's Club. The logic, which is seen for example in the Polanyi-inspired work of the great classicist Moses Finley, is this: Markets exhibit dot.coms and Sam's Clubs. Therefore, if ancient Rome does not exhibit dot.coms and Sam's Clubs, it must have lacked markets. Which was to be proven. It's not a good argument. The trick is to define "capitalist" as "something modern in the way of market society." Then it is child's play to show that the absence in the ancient world of the modern item — the telegraph, the New York stock exchange — "proves" that capitalism is modern. But the argument is circular.

Like many of the economic liberals he abhors, Blyth looks to a hurried reading of parts of The Wealth of Nations for the economist's theory of human action. Reading the opening chapters of that book and assuming one has the essence of Smith is a common enough error. Smith's propensity to truck, barter, and exchange - that is the propensity to act prudently, the P-variables - is in fact a part of a broader system of ethics elaborated in Smith's other book, The Theory of Moral Sentiments. That is to say, the founder of economics had an embedded market in mind. He gave a serious analysis of both P and S.

The "bartering savage" is Polanyi's straw man, not an essential construct in Smith — though in truth it's easy enough to find "savages" bargaining in markets. Amazonian Indians do, for example, when they listen to the gold fix on the London market on their portable radios to decide daily how far up the mountain to go in robbing Inca graves. Unlike Polanyi, we do not recoil from Smith's archetype of bartering because we understand its placement within Smith's theory of human sentiments.

Polanyi, and Blyth, want gain-seeking to be seen as modern and Western, even Christian. But in fact the Christian gospels attack gain-seeking, surprisingly harshly by the standards of the rest of the world's religious canon. In A Passage to England (1959) the Indian professor of English, Nirad C. Chaudhuri, noted the contrast between the Lord's Prayer requesting merely our daily bread and the Hindu prayer to Durga, the Mother Goddess, "Give me wealth, long life, sons [sic], and all things desirable." One prays to Ganesha the elephant-headed to overcome obstacles at the outset of any project: "bow the head and offer obeisance before the son of Gauri . . . [to obtain] longevity, desired powers, and prosperity." The Vedic hymns are filled with passages like the following in a hymn to Agni the fire god: "I pray to Agni. . . who . . . brings most treasure. . . . Through Agni one may win wealth, and growth from day to day, glorious and most abounding in heroic sons." Thus too in Zoroastrianism a prayer of blessing (Afrinagan Dahman) "I profess myself . , . . . a follower of Zarathushtra . . . May these blessings of the Asha-sanctified come into this house, namely, rewards, compensation, and hospitality; and may there now come to this community Asha, possessions, prosperity, good fortune, and easeful life." Zoroastrianism recommends charity to the poor, but does not condemn fortunes honestly made and devoutly spent, which perhaps has something to do with the prosperity of the tiny group of Parsis in northwest India and in Pakistan, or in England. Contrast Jesus driving the money-changers out of the Temple, and his hard deal in Matthew 19: 21: "If thou wilt be perfect, go and sell that thou hast, and give to the poor, and thou shalt have treasure in heaven: and come and follow me." A superficial reading of Confucius finds an emphasis on love and temperance, justice and courage. Not economic prudence. The Analects are a celebration of the bureaucratic gentleman, not the market's "small man" (the sneering Confucian term). Yet the occasional snobbish attacks on wealth in Confucius do not have the edge and frequency they have in Jesus' terrifying warnings that the rich man squeezes into heaven as a camel through a needle's eye. To think that market behavior or the assumption of gain-seeking is somehow uniquely "Presbyterian" is a mistake.

We will not trouble the reader with a full account of Blyth's drizzle of unscholarly assertions. His reply is not based on wide or deep reading of the history. He believes with most superficial critics of capitalism that its essence is that it is "endlessly acquisitive." He does not appear to have read Adam Smith: no one who had would think that the chief characteristic of that deist was his "Presbyterianism." He winds himself up to an epistemological fury about our alleged denial of the role of ideas in history. And so forth. The piece reads in places like a bright undergraduate's essay — or sometimes not so bright, as when he attributes to Weber and Quine the point about the theory dependence of observation that Kant, or for that matter Protagoras, formulated.

Action proceeds from prudential concerns as well as from feelings of justice and temperance, with love and courage in attendance, too. Smith said so. For us, this is Smith's great appeal, an articulation of the strengths and limits of bourgeois virtues. Similarly, Polanyi's lasting appeal, we argue, reflects the great humanism and optimism with which he wrote. In urging our fellow economists to take heed of Polanyi, we are urging them to rediscover Smith's ethical appeal, to get back to the only serious project — P and S, together.

Professor Blyth says that we want to label everyone as a capitalist regardless of what they believe, think, and say. We do not think he has read our essay very closely. He was sure before he read it that it was merely neo-liberal, a defense of conventional economics, an attack on Polanyi. It is none of these.

While we are flattered that Professor Blyth was moved to reply, we are disappointed that he seems to have understood so little. Doubtless it is our fault: authors have no one to blame but themselves if they are misunderstood.