Karl Polanyi was an economist who studied various economies that existed in history. He publised various economic works. His most important work is The Great Transformation: The Political Origins of Our Time, which explained that the market economy is a fairly recent economy. Polanyi looked at the economies of various great empires through time and explained how these economies changed. According to Karl Polanyi, markets are, ‘a meeting place for the purpose of barter or buying and selling. Every human society has had an economy of some kind but not until fairly recently has any economy been controlled by the markets. Instead of the economy being ruled by social relations, social relations ruled the economy.
The role of markets in ancient economies has been minimal because markets were too far from one another. Today’s economies are self-regulating and dominated by markets and market prices. For earlier and ancient economies gain and profit did not play an important part in the economy. Early economies were driven by social relationships rather than self-interests. In early economies humans sought out material goods that would enhance their social standing, social assets, and social claims rather than personal gain.
When one tribal member gives to another tribal member they can expect in return from that tribal member or another member of the tribe something of equal worth. For example, if a tribe member gives some food to another tribe member, that tribe member will give something of the same worth back. If it is not a material, the tribe member will give his or her time by helping in some type of physical labor, such as planting crops or taking part in a hunt. The giver might not get something back right away but the receiver has to give back something of equal worth in a certain amount of time or they will lose status in the tribe. Rituals and ceremonies were developed to ensure that reciprocity went smoothly.
Since everything is shared collectively in tribal societies maintaining social ties is incredibly important to the individual. All social obligations are reciprocal and fulfill the individuals interest the best. If an individual acted in his or her own self-interest rather than in the interest of the tribe, it could be fatal to that individual. If the individual were to hold back somehow they would lose status and if the individual lost enough of their status they could be cutoff from the tribe and would become an outcast. An outcast from the tribe had little hope of surviving.
How members of a tribe receive what they need is determined by two factors: reciprocity and redistribution. Symmetry and centricity help economic systems that are based on reciprocity and redistribution to work without written records or any kind of public administration. Reciprocity means what one gives to another today will be matched tomorrow by one taking. Redistribution in tribal societies most often comes about through the tribal chieftain or headman. It is the tribal chieftain who gains goods from tribal members and redistribute the wealth to the members. The bigger the territory, the greater number of goods that the land produces the greater the need for redistribution and for the division of labor in order for everyone to receive the goods that their survival is dependent on. Polanyi believed that early humans never hunted or gathered food for just themselves or their immediate family but rather for the whole group in which they live.
Economies that were driven by the markets changed societies and greatly influenced how they were run. markets are able to control the prices of goods only when there are many markets in close proximity to one another and many traders bartering and haggling over the price of goods. When markets have a greater role in controlling the economy they also have a greater role in controlling society. When economies are no longer shaped by social relationships but shaped by markets societies change their social relationships. Societies, social relationships are reshaped to accommodate the market economy. Local trade is limited to goods that are too heavy or perishable to travel over long distances, and are found in the region in which they are being traded in. External trade is the trade of goods that are absent from the regions in which they are being exchanged. Markets are usually found where rivers or overland roads intersect, fords, seaports, and riverheads. Neither local or external trade in the ancient economy were very competitive, it was the internal trade that was competitive. Goods are exchanged more and there is greater bartering in internal trade than local or external trade. Polanyi did not believe that bartering lead to the development of market economies; rather bartering was just a part of the systems of reciprocity and redistribution. Bartering was a type of social relationship that implied trust and confidence.
Written by Alex Boyce, 2003