The Dichotomy Between “Economic” and “Political”

A self-regulating market demands nothing less than the institutional separation of society into an economic and a political sphere.  Such a dichotomy is, in effect, merely the restatement, from the point of view of society as a whole, of the existence of a self-regulating market.  It might be argued that the separateness of the two spheres obtains in every type of society at all times.  Such an inference, however, would be based on a fallacy.  True, no society can exist without a system of some kind which ensures order in the production and distribution of goods.  But that does not imply the existence of separate economic institutions; normally, the economic order is merely a function of the social order.  Neither under tribal nor feudal nor under mercantile conditions was there, as we say, a separate economic system in society.  Nineteenth-century society, in which economic activity was isolated and imputed to a distinctive economic motive, was a singular departure.

Such an institutional pattern could not have functioned unless society was somehow subordinated to its requirements.  A market economy can exist only in a market society.  We reached this conclusion on general grounds in our analysis of the market pattern.  We can now specify the reasons for this assertion.  A market economy must comprise all elements of industry, including labor, land, and money.  (In a market economy money also is an essential element of industrial life and its inclusion in the market mechanism has, as we will see, far-reaching institutional consequences.)  But labor and land are no other than the human beings themselves of which every society consists and the natural surroundings in which it exists.  To include them in the market mechanism means to subordinate the substance of society itself to the laws of the market. (74-75)

Karl Polanyi | The Great Transformation: The Political and Economic Origins of Our Times


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