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ON BELIEF IN ECONOM IC DETERM INISM y K A R L P O L A N Y I

MY main thesis is(a) that economic determinism was pre-eminently a nineteenth centuryphenomenon, which has now ceased to operate in the greater part of theworld ; it was efifective only un der a m ark et-s yst em , w hich is rap idlydisappearing in Europe ;(6) th a t th e mark et system violently distorted our views on ma n and society ;(c) these disto rted views are proving one of the ma in obstacles to the solutionof the problems of our civilization.

DEFINITION OF THK PRBSENT PHASE OF OUR CIVILIZATION. An historian shouldfind no difficulty in defining the stage at which we ha ve arriv ed . The to ur is calledindu strial civilization. The first stage of th e tour is over, and we are em bark ing onth e second. Th e mach ine age, or indu strial civilization, which sta rted som etimein the eightee nth cen tury, is still far rom being over. It s first phase h as beencalled by man y names, such as liberal capitalism, or m arke t-econ om y; th e n extphase will be called by some other nam e, we can no t ye t be certain by w ha t. Th epoint is to distinguish between the technologic l aspect which comprises the wholeof the machine age or industrial civilization, and the sociological, which dififerentiatesthe phase which is already behind us from the phase which is still to come.THB present condition of m an can be described in simple terms. The Ind ustria lRevolution, some 150 years ago, introduced a civilization of a technological type.Mankind ma y not survive th e dep arture ; th e machine m ay yet destroy m an ; no-oneis able to gauge whether, in the long run, man and the machine are compatible.But since industrial civilization can not and will not be willingly discarded, thetask of ad aptin g it to the requirements of hu m an existencemust hesolved, if ma nk indshall continue on earth.STTOH, in comm on sense term s, is th e bird s eye riew of our trou bles. Meanw hileth e first pha se of th e new civilization is, as we saw, already beh ind us. I t involveda peculiar social organisation, which derived its name from its oentral institution,th e m ark et. In the greater pa rt of the world this market-econom y is disappearingin our day s. B ut the outlook on ma n and society, which it bequea thed to us, persists,n obstructs our attempts to incorporate the machine into the fabric of a stablehunuua ezistenoe.

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civilization unhinged th e elements of man s being. The ma chineW hether our distant ancestors were tree-climbing creatures or whether they

is ago was our ha bita tion physically severed firom n atu re . Th ough A dam s cursengless jerks alongside of a mov ing belt. Ev en wa r, for all its horror s, was a

t i8 no t possible to foretell whe the r such a civilization can successfully be adju sted as we saw, ma n s present condition is set by a further fact, no t of aical, bu t of a social ord er. Fo r his prim e difficulty in grappling wifch th e

idly fading aw ay on th e major pa rt of th e pla net . It s baneful inheritanc e is theiJK situatio n is thu s peculiar to th e utm ost. In the ninete enth cen tury the m achine

h proved t o be no mo re tha n an episode. Y et so incisive was this experience,a t our current notions are alm ost entirely derived from th is short period. In

the m ind and soul as the m achine itself was foreign to nat ur e. These viewsm at er ia l and id ea l , and tha t in everyday life man m ainly acts on the

a proposition waw, of course, true in respect to a market-economy. But only rejipe t to stich an economy K the term economic is used as synonym ous with

concerning prod uc tion we m aintain tha t there do not exist any hum an m otivesare intrinsically ec on om ic ; and as to th e so-called economic m otivesm s ma y sound paradoxical. Yet the contrary view was, as we said, merely a

ECONOMIC MOTIVES. I wiU now, mo et relu ctan tly, hav e tode upon your intellectual delicacy and proceed to discuss economics. How ever,yBtm of th e nin etee nth ce ntu ry, called m arket-eco nom y. U nde r such a system

we derive from selling othe r comm odities on th e m ar ke t. Th e nam e of the9 Q


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income varies according t o w ha t we are offering for sale : th e price of th e use oflabou r pow er is called wages ; th e price of th e use of the land is called rent ; th eprice of use of cap ital is called in te re st ; th e income called profit derives from th esale of commodities which fetch a higher price than the commodities needed toproduce it, thus leaving over a margin wliich forms the income of the entrepreneurTh us sales produce incomes and all incomes derive from sales. Inciden tally, produc -tion is being taken care of, and the consumers goods produced during the courseof the year are distributed amongst the members of the community with the help)of th e incomes th ey hav e earned. Such a system can not fail to work as long usevery member of the community has a valid motive which induces him to eam anincome. Such a mo tive actua lly exists unde r the system : it is hunger, or th e fear ofit, wbich those who sell the use of their labour power, and gain with those who sellth e use of capita l, or land, or ma ke profits on the sale of oth er com m oditie s. Veryroughly, the one motive attaches to the employed class, the other to the employersclass. Since these two m otives ensure the productiOii of m ate rial goods we ari^used to calling them economic mo tives.L E T US st op and consider. Is there any thi ng intrinsically economic abou t thesemotives in the sense in which we sp)eak of religious or aesthetic motives being basedon religious or aesthetic exp)eriences ? Is th ere an yth ing a bo ut hu nger or, for t h a tmatter, aboiit gain or gambling which may have their attractions, but again thatatt rac tion is not intrinsically economic . In other words, the connection betweenthese sensations and the activity of production is nothing inherent in these sensationsbut is contin gent upon social organisation. Under the m arke t organ isation, aswe saw, such a connection most definitely exists : hunger and gain are linked here,by virtue of th a t organisation, with production. Th at explains why, under a marke t-system , we call these mo tives economic . But wha t ab ou t other social organisa-t ions, ap ar t from ma rket-econom y ? Do we flnd here also hunge r and gain linkedwith the produ ctive activities without which society could not exist ? Th e answeris decidedly in th e negativ e. We find, as a rule, th at th e organisation of productionin human society is such that the motives of hunger and gain are not app)ealed to ;indeed, wbere the motive of hunger is connected with productive activities, we flndth at m otive merged with other strong motives. Such a m ixture of motives is wha twe mean when we sp)eak of social mo tives, the kind of incentives which m ake usconform with approved behaviou r. Scanning the history of hum an civilizationwe do not find m an acting so as to safeguard his individual in terest in th e acquisitionof material goods, but rather so as to ensure his social standing, his social claims,his social assets . H e values material goods prima rily as m ean s to this end . M an seconom y, as a rule, is submerged in his social relationship. Some of you m ight hav ebeen wondering on what facts I was basing these assertions. Firs t the re are the

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O N E L I E F I N E C O N O M I C D E T E R M I N I S M 9 9fundamental results broaght to light by research done by Booial anthropologistsin the field of prim itive economics. Two nam es are outsta nd ing, B ronUlaw Malinow-ski and Ric hard Thu rnwa ld. Together with some other scholars they made funda-mental discoveries on the place of the productive or economic system in society.The legend of th e individualistic psychology of prim itive m an is exploded. Ne itheri-rude egotism, nor a propensity to barter or exchange, nor a tendency to caterchiefly for himself is in evid ence. Eq ual ly discredited is th e legend of th e com-m unistic psychology of th e ' sa vage ', his supposed lack of appre ciation of his sep aratepersonal interest and so on. The tru th is th a t m an has been very much the sam eall through th e course of history. Taking institutions not separately bu t inter-related ly, we find him behaving in a m anne r comprehensible to us. Ye t a a rulethe productive, or economic system is arranged in such a manner that no individualis mov ed by hunger (or th e fear of it) to pa rtici pa te in prod uction . His share in th ecommon food resources is secured to him independently of his part in the productiveefforts of th e com m unity . He re are some brief quo tation s : Un der th e kraal-lan dsyste m of th e Kaffirs de sti tu tio n is impossible : whosoever need s assistance receivesit unqu estioning ly (Mair, L, P . : AN AFRICAN PKOPLE IN THE TWENTIETHOENTtTRY,1934). No K w ak iutl ever ran the least risk of going hu ngr y (Loeb, E . M. :THE DIS TB IBtm ON AND FUNCTION OF MONEY IN EARLY SOCIETY, 1 93 6 , Or t h i s The re is no sta rva tio n in societies living on th e subsistence m argin (He rskevits,H , J . : THE ECONOMIC LIFH OF PRIMITIVE PEOPLES, 1940). As a rule, the in div id ualin primitive society is not threatened by starvation linless the community as awhole is in a like predic am ent. It is the absence of th e th re at of individual s tarv atio nwhich makes primitive society, in a sense, more humane than nineteenth centurysociety, an d a t the same tim e less economic. Th e same is tru e of the stim ulus ofintiividual gain. The cha racteris tic feature of prim itive economics is th e absenceof an y desire to make profits firom prod uctio n or exchang e (Thurnw ald, R . :ECONOMICS IN PRIMITIVE coMMTTNmBS, 1932). Gain, which is often the s tim ulu sfor work in more civilized communities, never acts as an impulse to work under theoriginal na tiv e conditions (Malinowski, B . : AROONAUTS OF THB WESTERN PACIFIC,1930). Now here in uninfiuenced primitive society do we find labour associatedwith the idea of p a y m e n t (Lowie : SOCIAL ORGANISATION, E . S .S C , Vol. XIV).T H E R E is, secondly, unbroken continuity of primitive society with civilized typesof society. W he th er ancie nt despotic civilization, feudal society, city sta te, medieva lurban society, mercantile society or regulative system of the ei^teenth centuryWestern Evurope, everywhere we find the economic system embedded in the socialsystem. W het her the actu al motives fall under the heading of civio custom ortradition, duty or commitment, religious observance, political allegiance, legalobligation or admuuBtoatire regulation, issued by state, municipality or guikl,


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makes no difference. Not hunger nor gain but pride and prestige, rank and sta tus ,public praise and private reputation provide the incentives forindividual participationin production. Fear of having to forego m aterial necessities, the incentive of gainor profit need not be absent. Markets are widely spread under all types of humancivilization and the occupation of the m erchant also is fairly general. Yet, marketsare sites of trading and merchants are in the nature of things expected to act on themotive of gain. Bu t the markets are mere isolated patches which do not link upinto an economy. Never before the nineteenth century did they become dominantin society.THIRDLY there is the suddenness with which the transformation occurred. Thisis not a matter of degree but ofkind. Achain-reaction was induced, and the harmlessinstitution of the market flashed into a sociological explosion. By making labourand land into commodities, man and nature had been subjected to the supply-demand-price mechanism. This meant the subordinating of the whole of societyto the institution of the m arke t. Instead of the econo/flic system being embeddedin social relationships, social relationships were now embedded in the economicsystem. Instead of incomes being determined by rank and position, rank andposition were now determined by incomes. The relationship of statu s and contractuswas reversedthe la tter took everjrwhere the place of the former. To speak merelyof an influence exerted by the economic factor on social stratification was a grave understatem ent. The sides of a triangle do not rightly speaking influence theangles, they determine them . The working of a capitalistic society was not merely influenced by the market mechanism, it was determined by it. The social classeswere now identical with supply and demand on the market for labour, land,capital, and so on. Moreover, since no hum an community can exist w ithout afunctioning productive apparatus, all institutions in society must conform to therequirements of that apparatus. Marriage and the rearing of children, the organisa-tion of science and education, of religion and arts, the choice of profession, the formsof habitation, the shape of settlements down even to the aesthetics of every-daylife, must be moulded according to the needs of the system. Here was economicsocie ty Here it could truly be said that society was determined by economics.Most significant of all, our views of man and society were violently adjusted to thismost artificial ofallsocial settings. Within an almost incredibly short time fantasticviews of the human condition became current and gained the status of axioms.Let me explain.THB every day activities of men and women are, in the nature of thingB, to a largeextent related to production of material goods. Since, in principle, the exclusivemotive of all these activities was now either the fear of starvation or the lure ofprofit, these motives, now described as economic , were singled out from among

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all other motives and considered to be the normal incentives of man in his everydayactiv ities. All othe r incentives, such as hon our, pride, solidarity, civic obligation,moral duty or simply a sense of common decency were regarded as being motivesnot related to everyday life, but of a rare and more esoteric nature, fatefuUy summedup in the word id e al . Man was supposed to consist of two components : thoseakin to hung er and gain, and those akin to piety, du ty and honou r. The first wereregarded as m at er ia l , the latt er as ideal . Produ ctive activities were onceand for all linked with the ma terial. Man being strictly depe nden t upon mean s ofsubsistence, this am ounted to a materialistic m orality. All att em pts to correct itin pra ctice were bo und t o fail, since th ey now took th e form of arguin g for an equ allyunreal idealistic m oral ity. This is the source of th a t fatal divorce of th e mate rialand the ideal which is the crux of all our practical anthropology : instead of the m ixed mo tives in which m an is at one with himself his division into an alleged ma terial and ideal , ma n was hypos tatised. The Pau linian dualism of fieshand spirit was merely a proposition of theological anth ropo logy . It had very litt leto do with materialism. Und er market-economy hu m an society itself was organisedon dualistic lines, everyday life being handed over to the material, with Sundaysreserved for the ideal.Now, if this definition of man were tnie, every human society would have to possessa separa te economic system, based on economic m otives , such as existed innineteenth century society. T ha t s why the m arketing view of m an is also a m arketingview of society. Un der the influence of nine teen th ce ntu ry conditions it seemedobvious th a t sepa rate economic institutions must exist j n every society. Actuallythe characteristic of human societies is precisely the absence of such separate anddistinct economic institutio ns. T ha t the economic system is embedded in thesocial relations means precisely this.T H I S explains the current belief in economic determ inism . W here the re is a sep ara teecononuc system the requirements of that system determine all other institutionsin society. No othe r altern ativ e is possible, since m an s depende nce upon m ateri algoods allows of none other. T ha t economic determ ination was the cha racte ristiifeature of the nineteenth century society was exactly because in that society theeconomic system was separate and distinct from the rest of society, being basedon a separate set of motiveshunger and gain.L E T me proceed to some conclusions.TH E task of adjusting the organisation of life to the actuality of an industrial civiliza-tion is still with us. Our relations to me n, work, and na ture ha ve to be re-shaped.The atom bomb has made the problem merely more urgent.TH E civilization we are seeking is an industrial civilization on which the basicrequ irem ents of hum an life are fulfilled. Th e marke t-organisa tion of society has

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broken dow n. Some other organisation is developing. I t is a trem endo us task tointe gra te society in a new wa y. It is th e problem of a new civilization.B U T do not let us be intim idated by the bogey of economic determinism . Do no tlet us be misled into a notion of the nature of man which is poor and unrealthedualistic fallacyaccording to which the incentives on which production is organisedspring from one set of motives, the incentives on which communal eflFort, good citizensand high political achievement is organised derive from a different set of motives.D o NOT imagine th a t th e economic system m ust U mit our achievem ent of our idealsin society. O nly the society which is em bedded in the m ark et is determ ined byth e economic system . N o other society is.T A K E th e problem of freedom. Much of th e freedom we cherish the civic libertie s,th e freedom of speech and so on, were by-products of capitalism. N eed the y disappea rwith capitalism ? N ot at all. T o imagine this is simp ly an illusion of economicdeterminismwhich is valid only in a market society H ay ek s fear of serfdom isth e illogic application of economic determ inism of a -non-ma rket econom y. Wecan have more civic libertiesindeed extend civic liberties into the industrial sphere.M B . B U B N H A M has also prophesised a great deal, on supposedly Marxian lines,ab ou t wh at class is to rule, etc.all on lines of economic determ inism . Ye t heassumes the end of market-economy, in which alone such determinism applies.T HE Lasciate ogni speranza of economic determ inism is left behind us. T ogeth erwith freedom from enslavement to the market, man also gains a more importantfree do m ; his im agina tion is free again to crea te and shap e his society, confidentthat he can possess the fullness of the freedom which he is prepared to plan for,to organise and safeguard.

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