It is widely known that human behaviors will never be consistent and constant. The extraction of meaning to this statement brings about the differences in the interpretation of market system of the great minds in the past and current. To state that one school of thoughts provides a higher moral values and justice to the behaviors of an institution – either market or political system is an injustice on its own.
Adam Smith’s ideas in the interpretation of the market liberalization are commendable – justifying a market movement in which trade and market exchange automatically, based on pure self-interest of the participants, a proponent of laissez-faire economy. In a laissez-faire economy, it is assumed that the market is rationally behaving and that an equilibrium can be reached when trades are exhaustive enough satisfying all if not most of the market participants. However, it’s worth to point out that in deriving the assumption that market could be developed naturally based on self-interests, we missed out that in almost any event that deals with the human behaviors, there will always be interventions – and interventions can sometimes create inequality.
In order for the laissez-faire economy to develop, it is almost certain that an institution will be developed to regulate or create interests for trades to happen. We see this greatly in the introduction of capitalism economy in which self-interests are man-made; through manipulation of desires and needs. At some point, a debate could surface if the self-interests in humans overpower the maintenance of the justice system in the market economy – such as the introduction of fiat money, albeit necessary, is prone to interventions and manipulations by the selected few.
This is the critique that Karl Polanyi is trying to make. His argument is that the liberalization of market economy alters the way society functions in which key resources that previously either belong to the state or to the society are now traded at market prices such as land and labor. This continual trade would eventually leave this resources to the selected hands. Karl Polanyi is a great believer in resource allocation, redistribution and reciprocity. A lot of his ideas stem from the inner-side of human feelings, arguing on the key ingredients of life and human needs. If Adam Smith believes that market exists out of pure selfinterests to trade, Karl Polanyi sides with the argument that market only exists to satisfy human needs, and above a certain level, a different non-tradable desire exists such as happiness and freedom.
In reaching a mid-point, both forces are required in a “liberalized” market system as the main proponent of a system is always about justice. A balanced system that provides justice to the creative minds who create and trade should be balanced with the majority who requires and consumes but pays through their labor and be parting from the societal belongings of the land and resources.