Freedom of Action and Freedom of Thought
Polanyi’s life spans the period of modern socialism and, through his intellectual heritage, reaches beyond his 77 years which ended on April 23, 1964. All his life a socialist, he was never … doctrinaire; he many times cut across the main trends of debate within the socialist movements of Europe. Although not a Marxist, he was much less a Social Democrat. Although a humanist, he was eminently a realist. Although aware of the reality of society, and the constraints which this reality places upon the action, values and ideas of all of us who inescapably live in society, his life was guided by an inner necessity to exercise freedom of action and thought and never to give in to determinism or fatalism. Hence the quotation from Hegel, which he many times cited. (Polanyi Levitt 1964, 113).1
In an unpublished note, Karl Polanyi set out the polarities of his world of thought: reality and freedom; the empirical and the normative; community and society; science and religion; efficiency and humanity; technological and social progress; institutional needs and personal needs. Wherever he lived and worked, from Budapest to Vienna, London, New York, or Canada, Polanyi followed events of the day and commented on international political and economic affairs. What, we may ask, would he have thought about our now dangerously disordered world of today? It is my hope that the insights of this gathering of international scholars will enrich our understanding of Karl Polanyi’s passionate appeal to us to chart a path toward a socialist transformation of cooperation and co-existence of diverse cultures and societies that sustain life on our fragile Planet Earth.
Our Dangerously Disordered World
The British master of spy fiction, John Le Carré, famously said “Just because communism failed does not mean capitalism has succeeded.” The end of the Cold War promised a peace dividend. Instead, free from military constraint, the West has engaged in wars throughout the greater Middle East. Following the dismemberment of the former Yugoslavia, we saw the first Gulf War and the massacre of retreating Iraqi troops; military intervention in Afghanistan after 9/11; the destruction of Iraq where the dismantling of military and bureaucratic structures fuelled sectarian conflict and the vengeance of the Islamic State; war in Libya, creating a source of competing jihadist militias; in Somalia, giving rise to Al-Shabab and a fractured state; and in Syria, where external support for the Arab Spring revolt initiated four years of civil war, resulting in the loss of many thousands of lives and the exodus of millions of refugees. The tide of refugees is not confined to Syrians, Iraqis or Afghanis, but includes many more millions displaced by wars, climate change and crushing poverty in regions of Africa and elsewhere.2 We note the role of the former imperial powers, Britain and France, under the leadership of the now declining American Empire. To all of this we add the United States’ support for destabilizing color revolutions and the presence of NATO in countries bordering Russia, with intention to dismember the former Soviet Empire. All this has created a dangerously chaotic world. There is an absence of statesmanship in the capitals of the major Western powers. There is a dangerous culture of fear and revenge. There is danger that local conflicts could escalate into uncontrollable nuclear war.
While refugees risked their lives to cross the Mediterranean to reach the shores of Europe, the EU does not have the capacity or willingness to gain from their skills and desires to contribute to its societies, societies that are now in demographic decline. The earlier dream of a democratic social Europe has turned into the nightmare of unfettered neoliberal market capitalism. The Maastricht Treaty, which imposed a limit of three percent on fiscal deficits, followed by the Euro, which eliminated national currencies, has subjected national governments of the Eurozone to austerity policies and other dictates emanating from Brussels. Democracy is in suspense. Varieties of European capitalism have given way to Anglo-Saxon dominance of financial and corporate capital. The refugee crisis has deepened the divide between political elites and disadvantaged sections of the population, expressed in rising support for nationalistic, right-wing political parties, hostile to the EU. The Left has been in political retreat for the past thirty years. In Greece, it failed to support the expressed wish of the population to resist financial strangulation by creditors and demands for further privatisation. Has the Left crucified itself on the altar of the Euro?
In the United States, where there is no limit on campaign funding and easy passage through the revolving doors of public and corporate sectors, 70 percent of the population has no confidence in the political elites of either party.3 The American president can order killings by drones in distant lands, but he cannot intervene to stop the outbreaks of racial violence in his own country, nor can he impose gun control to stop the arbitrary shootings of children in American schools or of young black people on American streets. With assistance from the mass media, a figure like Donald Trump has emerged as the leading Republican candidate for the presidency. Supporters of his campaign are not confined to people sharing his outrageous views on immigrants or on Muslims, nor to people with low income or educational attainment. His supporters include a wide cross-section of a disillusioned, frustrated and angry population. The epidemic of veteran suicides and the recently reported increase in mortality of white, middle-aged, American males due to depression and substance abuse, testify to a process of social disintegration; it calls to mind the declining life expectancy of Russian males following the collapse of the Soviet Union. (New York Times, Nov. 2, 2015).
The social problems enumerated above are symptoms of a disintegrating political and economic order reminiscent of the opening sentence of Polanyi’s Great Transformation: “Nineteenth-century civilization has collapsed.” Are we now witnessing the unravelling of the neoliberal reincarnation of the 19th century economic order which brought us the First World War and the Great Depression? Is this why Karl Polanyi has returned from relative obscurity to ever-increasing prominence?
The Return of Karl Polanyi
The return of Karl Polanyi to popular discourse was first noted in connection with a WTO ministerial meeting in 1999, when environmental, labour and civil rights advocates staged a high-profile protest against globalization in Seattle. The right-wing CATO Institute targeted Polanyi as the most effective critic of market fundamentalism, and their most serious intellectual adversary. In 2001, Beacon Press issued a new edition of The Great Transformation with a preface by Joseph Stiglitz and an introduction by Fred Block. This signalled the rising importance of Polanyi in academic and intellectual circles. But it was the financial crisis of 2007/8 (henceforth the financial crisis) and the “New Normal” of economic stagnation, ever-increasing inequality of income and wealth, and continuing predatory financialization that invited comparison of the Great Recession with the Great Depression, and moved questions regarding the future of capitalism into the arena of public discussion. Karl Marx appeared on the cover page of The Economist and the ghost of Karl Polanyi haunted the World Economic Forum of 2012. (Elliot 2012).
The continuing resonance of The Great Transformation derives from the consequences of treating land, labour and money as if they were commodities produced for sale. Polanyi called them “fictitious commodities.” The instrumental rationality of economics values human effort and the bounties of nature in terms of their contribution to the expected profitability of the investment of capital. What is not profitable will not be produced. For economists, labour, land and capital are factors of production, whose value is determined by supply and demand in the market. When labour is not in demand, it has no value. The intrinsic value of our time on Earth has no place in economics. If a natural resource cannot be commodified, it likewise has no value. The contribution of nature to the harvest of grain, the yield of a fruit tree or the mineral extracted from the earth accrues to capital as income in the form of rent or profit. This fiction has produced an ever greater disconnect between the exchange value and the social-use value of goods, but more importantly of services. Since that time Polanyi’s warning of the disastrous consequences of freeing the self-regulating market from regulatory control has gained ever increasing relevance and appreciation of the importance of his work.
Remuneration in the financial industries, counted in billions, is grossly overvalued, while the essential services of nurses, teachers and other workers of the care industries are grossly undervalued. Unpaid work at home or in the community appears to have no value at all. Indeed, it is questionable whether the finance, insurance and real estate industries, which now contribute more than 20% to GDP in many countries, adds anything of substance to the well-being of the general population. Rather they serve as a mechanism of transferring real wealth from the bottom to the top of the society. Money was originally a simple convenience to facilitate exchange, but that has changed: the creation by the banking system of mega-trillion financial instruments has ensnared families, businesses and governments in a web of debt, becoming hostage to the power of creditors, enforced by laws and international treaties.
Forty years of neo-liberalism have moved us ever closer to Polanyi’s dystopia of the self-regulating market, freed from democratic political interventions that safeguard human livelihood and ensure an ecologically sustainable future. The Satanic Mills of the market are crushing the tissue and threads that bind us in human society. Storms and fires, droughts, floods and earthquakes are Nature’s revenge for abuse and exploitation. Liberalization of capital has created a modern Leviathan that is devouring productive labour and enterprise (Michael Hudson 2015). The continuing relevance of Polanyi is due to his contention that the requirements of a capitalist economy for ever new markets and profitable investment opportunities are in existential contradiction with our human requirement for mutually supportive social relations. A frequently cited passage of The Great Transformation is prophetic in summarizing the consequences of robbing human beings of the protective cover of cultural institutions. “They would die from social exposure and dislocation. Nature would be reduced to its elements, neighbourhoods and landscapes defiled, rivers polluted… the power to produce food and raw materials destroyed.” (Polanyi 2001, 76-77).
As Wolfgang Streeck concluded in an article entitled How Will Capitalism End?: “… market expansion has today reached a critical threshold with respect to all three of Polanyi’s fictitious commodities.” (Streeck 2014, 51). We do not know how capitalism will end, but we recall Rosa Luxemburg’s barbarism or socialism.
Early family influences
Early family influences played an important role in Karl Polanyi’s lifelong commitment to socialism and freedom of thought. He was born in Vienna in 1886, three years after the death of Marx and the birth of Keynes, into a family whose intellectual milieu of fin de siècle counter-culture had important roots in Russia. His mother, Cecile Wohl, was sent by her father from Vilna to Vienna, where she met and married Mihely Pollacek4, a Jewish Hungarian engineer and railway contractor. Karl and his older siblings were born in Vienna where the Pollaceks had a close family relationship with the Klaschkos.
As a young man, Samuel Klaschko participated in a failed utopian commune of Russian families in Kansas named after Nikolai Tchaikovsky, a prominent figure of radical socialist activism. Klaschko then drove 3000 cattle to market in Chicago; visited the ILGWU in New York where European immigrants worked in the sweatshops of the garment industry; lived in Paris where he worked as a photographer, before eventually settling in Vienna in 1880. There he served as unofficial liaison between Russian revolutionaries of all varieties and International Socialist organizations. Trotsky was a frequent visitor. When they came to Vienna for meetings, and to purchase Marxist literature, they were cared for in rest and recuperation by the Klaschko and Pollacek families before returning to Russia. Some arrived without shoes, their feet wrapped in newspapers. My father told me that these men made an indelible impression on him, and also on his cousin Ervin Szabo. He had a huge respect for the individual courage of revolutionaries, including Bakunin and Jesus of Nazareth.
It was from Samuel Klaschko that Karl Polanyi acquired his admiration for the Russian Revolutionary Socialists. The Revolutionary Socialist Party, founded at the end of the 19th century, united a loose collection of radical socialists. They pioneered the ideological opposition to social democracy on Russian revolutionary soil. Whereas the Russian Social Democrats concentrated their organizational strength on economic issues of the working class, and led mass political struggles, the smaller Revolutionary Socialist Party was “based on subjective factors of personal initiative and revolutionary élan, on Bakunist direct action by the peasantry, and the radical intelligentsia.” These Revolutionary Socialists followed the teachings of Marx, and their differences with the Social Democrats were profound and ultimately irreconcilable. They were socialists, not anarchists, but they were inspired by the legendary courage of Bakunin, who wanted to “organize society on the basis of collective and social property, from the bottom to the top, not from the top to the bottom on the basis of authority.” (Polanyi 1922).
Budapest from the Galilei Circle to the Great War
The influence of Karl’s father, Mihaly Pollacek, was of equal, if not greater importance. His Anglophile orientation complemented the Russophile family influence. Karl referred many times to his father’s “pure, unadulterated idealism of the Western brand.” Mihaly moved the family business from Vienna to Budapest in the early 1890’s where he provided a first-class home education for the children. Instruction in English and French, Latin and Greek engendered in Karl a love of Classical Greek and a lifelong engagement with the philosophy of Aristotle (Polanyi 1957).5 The language of the home was German; Karl did not learn Hungarian until he entered the gymnasium. The children adored their father who invited one or other of them to accompany him on business trips, while Karl’s mother, Cecile, hosted a literary and cultural salon in their spacious Budapest apartment. The death of Mihaly Pollacek in 1905 was a trauma that cast a long shadow over the first decades of Karl’s adult life.
Karl’s sister, Laura, was the first woman to graduate from Budapest University, at the age of 22, with a doctorate in History. Karl’s older brother, Adolph, was expelled from Budapest University for engaging in socialist student activity. He left Hungary for Japan, which, at the time, was an important center of anti-imperialist intellectual ferment. (Mishra 2013).
In 1908, at the age of 22, Karl became the founding president of a Hungarian student movement known as the Galilei Circle. Its journal was called Szabod Gondolat (Free Thought), and received logistical support from the Free Masons. The movement challenged all that was backward in the Hungarian ancien regime of monarchy, aristocracy and the church. It included also senior gymnasium students and conducted some two thousand literacy classes for young workers and peasants. Polanyi was inspired by the Russian student movements of the 1880s and the unforgettable commitment of figures such as Vera Zasulich and Sofya Perovskaya. The Galilei Circle enjoyed the support of the poet Andre Ady and Samuel Klaschko, whose influence extended also to Szabo and Georg Lukács. In a note on Karl Polanyi’s life, my mother Ilona Duczynska recalled the words of one of his former Galilei contemporaries, Maurice Korach: “He was a genius, rhapsodic in his world of thought. He saw far into the future … He was not made for giving continuous, political lead … He was the man for us, our hearts were with him.” (Polanyi 1977, xix-xx).
Following a fistfight in defence of the well-respected professor, Gyula Pikler, attacked by anti-Semitic students, Karl was expelled from Budapest University. He finished his studies in jurisprudence at Kolosvar (Cluj) in Transylvania. He was called to the Bar in 1912 and worked in the chambers of his uncle. But law was not his chosen profession, calling or vocation. He briefly served as general secretary of the Radical Party founded by his friend and mentor, Oskar Jaszi, and wrote for their journal. This constituted his single engagement in party politics.
In the Great War, Karl Polanyi served as a cavalry officer on the Russian front. He fell ill with typhus. When his horse tripped and fell on him, he was sure he would die there. He woke up in a military hospital in Budapest. He was seized by a sense of personal responsibility and that of his whole generation. Patriotism had proved stronger than the internationalist commitments of the labour and socialist parties of England, Germany and France, as the brightest and best of their young men marched behind King, Keiser and Republic to the killing fields of the Great War.
The February 1917 revolution, which ended the war in Russia, and the subsequent Soviet October revolution, signalled the impending end of the First World War and the old political order throughout central Europe. In 1917, the Zimmerwald declaration of War on War was brought from Switzerland to Budapest by Ilona Duczynska and its distribution played an important role in the January 1918 general strikes. It led to her arrest, high profile trial, and imprisonment. In 1918 she was released by the Chrysanthemum Revolution which ended the war and established Hungary as a Republic with Mihaly Karolyi as its first president.
Polanyi did not favour the short-lived Hungarian Soviet Republic led by Bela Kun which was established in January 1919. However, when Hungary was invaded by Romanian, Czech and other foreign armies, he responded to a call by Georg Lukaćs that if he were physically able he would have joined the fight in defence of the country. Late in 1919, Karl Polanyi left Budapest for medical treatment in Vienna.
Red Vienna in the 1920s
Following the defeat of the Hungarian Republic of the Councils by the ‘white terror’ of Admiral Horty’s counter-revolution in late 1919, an exodus of communists, socialists, liberals and other free-thinking émigrés gathered in Vienna. They joined large numbers of demobilized soldiers and an influx of pension-hungry officials from the regions of the former Austro-Hungarian Empire, now reduced to a small country of six million. “While the debate concerning the feasibility of a socialist economy waxed hot, the population of Vienna was literally freezing and hungry.” (Polanyi Levitt 2013, 23-38).
It was in Vienna in 1920 that Karl Polanyi first met Ilona Duczynska in a villa put at the disposal of Hungarian political refugees by a Viennese well-wisher. Ilona was ten years younger than Karl, and much admired by her contemporaries for her revolutionary anti-war activity. Her name was Polish; this, my father told me, was close enough to his ideal of the young Russian revolutionary woman. Their life partnership has been described as the fidelity of equals. My father was an educator, writer, and thinker engaged in the sometimes lonely task of the intellectual; my mother was a writer, historian and aeronautical engineer and at all times a political activist but they shared a socialist outlook on life.
When Ilona first met Karl at the villa, he was sitting apart from the rest, writing. She told me that he looked like a man whose life was behind him—the illness had taken its toll. The manuscript he was writing was known in the family as the Behemoth. It contained a critique of deterministic Marxism and reflections on revolutionary morality of the communist party.
In the Moscow trials of 1922, the Bolsheviks settled old scores with the Revolutionary Socialist Party of Russia. Programmatic differences included land reform, the forced requisition of grain from the peasantry and the disbanding of the Soviets. In an article published in Die Wage in 1922, Karl Polanyi expressed his strongest condemnation of the false accusations brought against them. He valued personal integrity and courage above the correctness of political positions. With reference to the expulsion of Bakunin from the First International, he wrote: “In our view, Marx had a deeper and more fruitful understanding of the revolutionary mission of the proletariat. Just as fifty years ago the judicial murder of Bakunin impoverished the working class movement of the entire world by sapping its revolutionary morality and energies, so one fears that the obnoxious methods of the bloody Moscow replay may deplete the Russian Revolution of ideals and forces whose absence will, someday, cost the Russian working people very dearly.” (Polanyi 1922, p. 397; translation by K.PL).
In the same year Ilona wrote a devastating critique of the bureaucratic and military organization of the Hungarian communist party in exile, published in Unser Weg, edited by Paul Levy. She was promptly expelled. My parents married and I was born in 1923.
At this time, Karl contributed articles to the Hungarian émigré paper Becsi Mayar Ujsag and delivered lectures on Guild Socialism at the Socialist People’s University. He engaged Ludwig von Mises in a debate on the feasibility of a socialist economy in the pages of the most important social science journal of the German speaking world. In preparation, Polanyi studied economics for the first time. But it was not the English Cambridge classics of Marshall and Pigou which informed him, but rather the writings of Austrian economists Menger, Wieser and Böhm-Bawerk whose seminars were attended, among others, by Schumpeter, Neurath, Hilferding and Otto Bauer, a founder of Austro-Marxism. It is a testament to the vibrant intellectual atmosphere of Red Vienna of the 1920s that an article written by an independent intellectual with no formal certification in any of the social sciences appeared in Archiv für Sozialwissenschaft und Sozialpolitik and elicited a response from Mises and a further reply by Polanyi. This was in stark contrast with England where, despite stellar references, Polanyi was not considered qualified for even the lowest academic appointment.
From 1924 until he left Vienna for England, Karl was a senior member of the editorial team of the most important economic and financial weekly in Central Europe, where he was known as the socialist. From this vantage point, he followed international affairs and the unfolding world economic crisis.
Polanyi did not believe in an administrative economy of central planning, nor in a moneyless so-called ‘natural economy’, popular among socialists at that time. His model of a socialist economy was based on the principle of combining technical efficiency with distributional justice and participatory democracy. There was, for him, a role for markets, but prices were to be determined by negotiation between associations of workers representing producers, cooperatives representing consumers, and municipalities representing communities. In the early 1920’s, issues of socialisation of the economy were hotly debated and Polanyi’s challenge of Mises should be seen in this light. It was not the result of abstract academic theorising. He insisted that a socialist economy must be based on actually existing associations of collective interests in negotiations at local, regional and national levels.
In Austria, the government was dominated by conservatives at the federal level while in Vienna a socialist majority prevailed continuously until 1933. (Polanyi Levitt 2013, 39-53). The trade union movement was strong, as was the consumer cooperative movement. Together with Felix Schaffer and other participants, Polanyi continued to work on the elaboration of the socialist model, or theorem, of his 1922 article, but unresolved problems remained. In a letter written to Ilona and myself, Felix Schaffer was of the opinion that the theoretical problems could not be solved, and that Karl would later express his ideas in terms of economic history, in The Great Transformation.