The Fictitious Commodities Concept Of Karl Polanyi Essay

Polanyi describes the move from an embedded economy to an economy based on the idea of a self-regulated market as a gradual process which begins with the commodification of land and money and culminates in the commodification of labor. The commodification of land, labor and money, in turn, was made necessary by the requirements of industry. In order for industry to function without any intervention, “all factors involved must be on sale, that is, they must be available in the needed quantities to anybody who is prepared to pay for them”. Thus, “labor, land, and money are essential elements of industry; they also must be organized in markets” and be treated as commodities.

But, Labor, land, and money are obviously not commodities’, according to Polanyi. They are not produced to be sold on the market: labor is nothing less than living human beings; land “an element of nature inextricably interwoven with man’s institutions” and money is ‘a token of purchasing power’. Thus, it was utopian to assume that the “supply” of labor, land and money could freely adjust to changes in demand – nor would this be desirable from a societal point of view. Labor, land and money serve a multitude of other purposes in life; constricting their essence to ‘production for sale’ is fiction. Polanyi thus labeled labor, land and money as fictitious commodities. It was only a fiction that these three could become complete commodities. Therefore, the introduction of self-regulating markets as the main mechanism of communal life “implied a stark utopia”.

According to Polanyi it was the commodification of land, labor and money which gave rise to the distinct economic sphere and thus led to the subordination of the society to the market. By trying to treat labor, land and money as commodities, the system endangered its societal cohesion, because this could have great consequences such as unemployment and uprooting. Polanyi points out that there was neither unemployment nor homelessness on a big scale in previous societies, since there were always societal institutions rescuing people in need. Such institutions, however, intervened in free markets of labor, land and money and the position of dogmatic liberals was to abolish such institutions in the name of self-regulated markets, even if this had dire social consequences.

The fictitious commodities concept has two important applications for this particular investigation of the impacts of SEZs on the Indian society and economy.

Firstly, land and labor do not perform like genuine commodities; they are not items that can be stored, transported, and distributed in accordance with changes in market conditions. Labor cannot be separated from its owner who is enmeshed within social relations (e.g. family, community) and is dependent on the market price (i.e. wage) for his economic survival and social standing. The fact individuals are embedded within social relations means labor will not meekly follow where markets lead. Similarly in the case of land – a non-reproducible, non-transportable asset, supply of which cannot readily be increased to meet increases in demand. It is also valued in multiple ways that are not easily reducible to exchange value, which makes its supply particularly inelastic. This aspect of the fictitious commodity concept has important implications for the analysis of special enterprise zones. The links between humans and habitats mean that people will value and treat their land as a purely financial asset; communities will not necessarily uproot to secure land, or employment, in new areas even if the economic potential is greater. Thus, purchasing large areas of land is problematic in a SEZ, as no doubt, some sellers of land will be found, but there will also surely be some hold-outs that will prevent contiguity. This problem is compounded by the fact that land ownership in India’s rural communities is highly fragmented, meaning that a buyer might have to negotiate with hundreds of farmers.

Second, (and somewhat related to the first point) following Polanyi’s observation that the “road to the free market was opened and kept open by an enormous increase in continuous, centrally organized and controlled interventionism”, to ensure that land and labor function as commodities states perform a central role in the creation and regulation of land and labor markets by dismantling laws, policies, and institutions that restrict market expansion and replacing them with ones that promote market development.

Building on Polanyi’s observation on the state’s role in developing markets, Ha-Joon Chang suggests that it is possible to observe a vast occurrence of different forms of state interventionism in today’s markets. Not only do states play a crucial role in developing markets, they also move to regulate them. Thus, in the case of land, states can be observed to determine which actors can participate in markets (e.g. requiring registration of land ownership); which objects are legitimate items of exchange (e.g. prohibiting the transfer of communal land); and, stipulate the rights and obligations of property owners (e.g. social and environmental mitigation). Such complex gamut of roles played by today’s socially embedded states brings the synchronicity of the double movement sharply into focus (with states becoming the focal points of political struggles as political actors contest the boundaries between the two sides of the double movement).

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