The social embeddedness of
local economies
Paul Blokker
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Overview Class
Embeddedness
1. Main themes:
a. the market economy as independent subsystem
b. the social embeddedness of the economy
c. different forms of integration: reciprocity,
redistribution, market
d. the market economy as disembedded
e. fictitious commodities: land, labour, and
money
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f. social reactions to disembedment
Overview Course
Embeddedness
2. Main themes:
a. Economic sociology: markets as created, as
reliant on external regulation and social
norms, as based on forms of trust
b Varieties of capitalism: varieties of
institutionalizing the market
c. liberal market economies and coordinated
market economies
d. Different modes of governance: state,
market, hierarchy, association, community3
Overview Course
Embeddedness
3. Relevance:
a. An understanding of historical variety of
economic activity and its relation to society
b. Current economic order designated by
convergence towards disembedded markets
(globalization), but at the same time by
embedded (local) markets (localization)
c. Knowledge of the role of institutions and
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society in reproducing the market
Overview Course
Embeddedness
Relevant literature of the reading list:
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Beckert, Jens (2007), 'The Great Transformation of
Embeddedness: Karl Polanyi and the New Economic
Sociology',
Block, F. (2000), 'Disorderly coordination: the Limited
Capacities of States and Markets’.
Crouch, C. et al. (2001), Local production systems in
Europe: rise or demise?, Oxford/New York: Oxford University
Press, in particular conclusions.
Evans, P. (1995), Embedded Autonomy: States & Industrial
Transformation, Princeton.
Polanyi, Karl (1944), The Great Transformation, in particular
chapter 4.
Trigilia, C. (2000), Economic Sociology, Blackwell Publishers,
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in particular chapter 5.
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Relation between
Economy and Society
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1. Economy - Society
Economy as independent system?
-
neo-classical economics as well as classical
sociology presuppose a market economy
that is detached from the rest of society,
that forms an independent sub-system of its
own: the famous ‘invisible hand’ regulates
the market, or, the market is ‘selfregulating’
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1. Economy - Society
Economy as independent system?
-
A very general definition of the economy is
as: ‘a body of activities which are usually
carried out by members of a society in order
to produce, distribute, and exchange goods
and services’ (Trigilia 2002: 2).
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1. Economy - Society
Economy as independent system?
-
Economists tend to follow a more narrow
definition, with an emphasis on ’activities
which involve the rational allocation of
scarce resources in order to obtain the most
from the means available’ (Trigilia 2002: 2).
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1. Economy - Society
Economy as independent system?
-
Two types of understanding the economy
can be identified:
1. Formal: means-ends relationship, actors
economizing
2. Substantive: provisioning for the
material wants of society
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1. Economy - Society
Economy as independent system?
-
A standard definition of the market economy
would then be something like:
An economic system in which entrepreneurs
hire workers to produce goods and services
to be marketed (sold on the market) with
the intention of making a profit.
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1. Economy - Society
Capitalism involves at least 4 principles
i.
all factors of production (land, labour, means of
production such as machinery) are subject to
specified property rights;
ii. the allocation of scarce resources (primary
materials, goods, services) through markets;
iii. an economy based on entrepreneurs who take
initiatives, make decisions, and calculate risks;
iv. ‘civilizational condition’: the primacy of economic
values and an inbuilt tendency to subordinate social
activities to the goal of unending economic growth.
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1. Economy - Society
Economy as embedded
-
Increasingly recognized that the market
economy is always already embedded
in larger society. In other words, a market
economy can only function if it relates to,
and is sustained by, larger society.
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1. Economy - Society
Economy as embedded
-
A major thinker who was (one of) the first
to elaborate an economic-sociological
approach to the embeddedness of markets
was Karl Polanyi (anthropologist,
sociologist), although he hardly used the
notion ‘embeddedness’.
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1. Economy - Society
Karl Paul Polanyi (1886-1964)
- Polanyi’s most well-known work is The Great
Transformation (1944), which analyses the
rise and fall of the self-regulating market
society
-
Polanyi distinguishes in his The Great
Transformation between 3 (or actually 4)
forms of the ‘integration’ of the economy in
society, that is, modes of embeddedness of
the economy in wider society.
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1. Economy - Society
Karl Paul Polanyi (1886-1964)
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1. Economy - Society
Economy as embedded
-
Much of what Polanyi tried to explain in his
The Great Transformation was the
unicity of the modern market society, and of
‘market fundamentalism’, and the
problematic consequences of such a type of
‘market society’.
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1. Economy - Society
Economy as embedded
-
Polanyi takes a historical approach to the
relationship between economy and society,
distinguishing three (or four) modes of
integration:
1. Reciprocity
2. Redistribution
3. Market
(4. Householding)
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1. Economy - Society
Reciprocity
- The exchange of goods and services within a
(primitive) society is based on traditions
related to family and kinship.
- Primitive economies functioned on the basis
of complex networks of shared
obligations that motivated individual
behaviour.
Polanyi uses the example of Trobriand Islanders
in Western Melanesia (cf. Malinowski,
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Thurnwald)
1. Economy - Society
Reciprocity
- Reciprocity entails that
‘goods and services are produced and
exchanged on the expectation that other
goods and services would be received in
ways and over periods of time that were
fixed by shared social norms’ (Trigilia 2002:
98);
NB. not by market supply and demand, or
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motives of gain or profit.
1. Economy - Society
Reciprocity
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1. Economy - Society
Redistribution
- Redistribution entails the production and
allocation of ‘goods on the basis of norms
establishing the modalities of labor services
and types of resources that should be
transferred to a political chief’ (Trigilia 2002:
98).
This type of integration was predominant in
larger, imperial types of society (Egypt,
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Mesopotamia).
1. Economy - Society
Redistribution
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1. Economy - Society
Market
- The market society is based
exchange of goods through
regulated trade, in which prices
from the unrestrained interaction of
and supply.
on the
marketemerge
demand
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1. Economy - Society
Market
NB. But the Market Society also demands different from markets - that the production
of goods and services, as well as the
distribution of income, depend on a priceregulated market (Trigilia 2002: 98).
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1. Economy - Society
Market
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1. Economy - Society
(Householding)
- Householding (what the Greeks called
‘oeconomia’/’oikon’)
consists
in
the
production for one’s own use, thus providing
for one’s self-subsistence (normally for the
family).
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1. Economy - Society
Embeddedness of economy
- Polanyi thus theorizes various forms of
embeddedness of the economy.
-
The notion of embeddedness has become
a key notion in economic sociology.
-
Often, however, the interpretation is very
different from Polanyi’s.
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1. Economy - Society
Embeddedness of economy
- For Polanyi, embeddedness is:
1. Markets as necessarily limited by
institutional regulations which connect them
to the moral fabric of society. Unregulated
markets will lead to social anomie.
2. In a normative sense, embeddedness
refers to a social reformist view of
society, in which the state needs to ‘tame’
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the market (Beckert 2007: 8).
1. Economy - Society
Embeddedness of economy
- One of the first to pick embeddedness up
was Mark Granovetter. His interpretation
is embeddedness as social networks:
Economic action is ‘embedded in concrete,
ongoing systems of social relations’
(Granovetter 1985).
E.g. immigrant networks, information
networks, organization of financial markets.
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1. Economy - Society
Embeddedness of economy
- A more complex definition – closer to
Polanyi – is provided by Zukin and Dimaggio
(1990):
1.
2.
3.
4.
Cultural embeddedness
Cognitive embeddedness
Political embeddedness
Structural embeddedness
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1. Social Question
Double movement
- Polanyi argues that the commodification of
fictitious commodities, i.e., those factors
that are not produced for the market, leads
to social resistance
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1. Social Question
Double movement
- Double
movement:
too
much
commodification and disembedment leads to
attempts to re-embed the economy.
-
At the end of the 19th century, the social
reaction consisted of labour unions, socialist
parties.
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1. Social Question
More on Karl Polanyi
- http://polanyi.concordia.ca/
- http://homepage.newschool.e
du/het//profiles/polanyi.htm
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1. Social Question
More on Karl Polanyi
- …
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