The Great Retransformation

 Karl Polanyi predicted that markets left to themselves would eventually tear society apart. Eighty years on, his warning looks more urgent than ever.

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There is a book that keeps resurfacing at moments of political upheaval. It was written in New York, by a Hungarian émigré, in the final years of the Second World War. It has no single villain and offers no easy remedy. And yet, decade after decade — after the oil shocks of the 1970s, after the financial crisis of 2008, and now in the age of Brexit and Trump and surging populisms of every stripe — readers keep returning to it, because it seems to describe not just the past but the present.

That book is The Great Transformation, published in 1944 by Karl Polanyi. Its central argument is deceptively simple: the self-regulating market is not a natural or inevitable human institution. It was a historically specific, deliberately constructed phenomenon — and a deeply disruptive one.

To understand why that matters today, it helps to start with what Polanyi thought markets had replaced.

Until the 19th century, the open mass market was a minor aspect of economic life — limited in scope and effect. In most pre-modern societies, economic activity was embedded in social relations: an embedded economy governed by reciprocity, redistribution, and householding rather than price-driven markets. People produced and exchanged to meet social obligations and community needs, not to maximise profit and channel that profit into an ever-widening spectrum of technologies and systems. The idea that you could buy and sell your way through daily life — that the market should organise human relations — would have struck most people in most places throughout history as bizarre, even immoral.

Then, with striking suddenness, everything changed.

The 19th century saw an unprecedented attempt to create a fully self-regulating market — one that operated not as a servant of society but as its master. To do this, Polanyi argued, three things had to be treated as if they were ordinary commodities available for purchase on the open market. He called them fictitious commodities:

• Land — really nature itself
• Labour — really human beings and their time and dignity
• Money — really a social credit system, a set of collective agreements about trust and value

They were "fictitious" because none of them was originally produced for sale. Land exists independently of any market; labour is what people do with their lives; money is a social institution. Yet the market began to treat all three as if they were bolts of cloth or bushels of wheat — things to be bought, sold, and discarded when no longer useful.

The results were not entirely bad. This transformation enabled widespread improvements in material conditions and lifted millions from poverty. But it also created enormous social devastation — poverty, displacement, and environmental destruction. For every industrial city that gleamed with new wealth, there were communities broken apart, landscapes stripped bare, and human beings reduced to units of productive input.

"The idea of a 'free market' operating independently of society is a myth — and attempting to enforce it causes social breakdown."

Society's response was not passive. In response, people pushed back — through labour laws, land protections, and financial regulations. This was what Polanyi called the double movement: market expansion on one side, social self-protection on the other. It was not a coordinated campaign or the product of any single ideology. It was something closer to a biological reflex — the body politic recoiling from pain.

Polanyi's larger argument was that this inherent tension — between the logic of markets and the needs of society — ultimately destabilised the liberal order, contributing to fascism, the First World War, and the Great Depression. Markets, he insisted, are always politically and socially constructed. They do not exist in nature. And the attempt to pretend otherwise — to treat the market as a self-sufficient system that society must adapt itself to, rather than the reverse — eventually breaks something fundamental.

The fit between Polanyi's framework and contemporary populism is striking — arguably one of the most illuminating lenses available for making sense of the political turbulence of the past decade.

The tension he described has not resolved. The free market continues to generate material benefits and raises millions from poverty globally. But there is an ongoing and inherent hollowing out — of mental, emotional, and ecological wellbeing — as material consumption has been abstracted from social life and left largely unregulated. What we have lost, in ways that are difficult to articulate but deeply felt, are the natural feedback mechanisms that give meaning to key aspects of our lives: connections to nature, to community, to the immediate and tangible signals that once told us whether we were living well. When value is converted entirely into an abstract social credit account — when everything is mediated by money — something vital goes missing from the reckoning.

What we now see in both right and left-wing populism, and in centrist radicalism, is a craving for that lost connection: a hunger for direct feedback from social and natural signals that the market has muffled or severed entirely.

The post-1980 wave of globalisation, financialisation, deregulation, and austerity maps neatly onto Polanyi's "first movement." Labour was re-commodified through weakened unions and precarious work. Land and communities were subjected to capital mobility — factories moved, towns hollowed out, and the people left behind were told to retrain or relocate, as if roots were simply overhead costs to be eliminated. Money was liberalised through financial deregulation. The social dislocations Polanyi predicted duly followed: wage stagnation, regional decline, inequality, identity disruption.

Both left and right populism can be read as society's self-protective reflex — the double movement beginning again:

• Trade protectionism (Trump, Brexit) — resistance to the commodification of labour through global competition
• Anti-austerity movements (Syriza, Podemos, Corbynism) — resistance to fiscal discipline imposed by financial markets
• Immigration restriction — partly a defence of labour market conditions and cultural community against market-driven population flows
• Hostility to "globalist" elites — resentment of those who managed and profited from market expansion at others' expense

All of these fit the pattern of communities demanding re-embedding — wanting economic life to serve social needs again, rather than the reverse.

The three fictitious commodities show up clearly in the geography of contemporary populism. Labour: deindustrialised communities in the American Midwest, northern England, and the French périphérie experienced the brutal reality of treating workers as interchangeable market inputs. Populism erupted precisely in these places, and not by accident. Land and place: the geographic concentration of economic gains in a few metropolitan hubs left large territories feeling discarded — producing what French geographer Christophe Guilluy calls the "peripheral France" dynamic, echoed in almost every western democracy. And money: the 2008 financial crisis — in which abstract financial instruments caused catastrophic real-world suffering, and banks were bailed out while homeowners were not — was a Polanyian moment of naked fictitious commodity failure. Populist energy on both left and right surged directly from it, and has not fully dissipated since.

Yet Polanyi was explicit that the countermovement is not inherently progressive. He was writing in the shadow of fascism, and he knew full well that communities demanding order, belonging, and protection from market chaos were just as capable of turning to authoritarian and exclusionary movements as to democratic ones. He saw fascism itself as a pathological countermovement — society's self-protection reflex captured and weaponised.

Contemporary right-wing populism fits this disturbing parallel uncomfortably well. The demand for re-embedding is real and legitimate. But it is being channelled into ethnic and national boundary-drawing rather than class solidarity; into nostalgia for a protected community that often excluded others; into strongman politics rather than democratic re-regulation. The grievance is genuine; the remedy is dangerous.

Polanyi explains why the countermovement arises, but not why it so often takes reactionary rather than solidaristic forms. That requires additional analysis — from Gramsci on hegemony, from Wendy Brown on neoliberalism's authoritarian undertow, from Quinn Slobodian on the architecture of globalisation. Careful empirical work, by Thomas Piketty among others, has also shown that populist voters are not always the most economically precarious. Cultural anxiety, status threat, and political identity matter alongside economic grievance — and Polanyi's framework, primarily economic-structural in nature, tends to underweight their autonomous power.

There is a further complication Polanyi could not have foreseen. Many populist voters are small business owners or retirees, not deindustrialised workers — people whose material position is relatively secure but who feel that the social world they understood has dissolved around them. They are not simply demanding economic re-embedding; they are mourning something more diffuse, and harder to restore by policy alone.

Polanyi also assumed that social protection would tend toward re-embedding markets within society's control. But contemporary right-wing populism often combines demands for protection of some — native workers, established residents — with continued or intensified market exposure for others: immigrants, welfare recipients, populations in the global south. This is selective re-embedding, closer to nationalist mercantilism than to genuine social protection. The countermovement gets hijacked by elites who redirect its energy, wrapping market logic in the language of community.

And then there is the structural problem that may be the hardest of all to solve. Polanyi wrote about nationally-bounded market societies. Today, market expansion is transnational, while the democratic tools of re-embedding — labour law, regulation, fiscal policy — remain largely national. Capital moves freely across borders; parliaments do not. Populism often responds to this mismatch by retreating to national borders, which explains the appeal of protectionism and sovereigntism. But this doesn't actually solve the underlying problem. It is a countermovement that cannot quite reach the thing it is reacting against.

Perhaps the most valuable Polanyian point about contemporary populism is this: the liberal centre's inability to understand populism as a legitimate social response is itself a Polanyian failure. When mainstream politicians and commentators dismiss populist movements as irrational, bigoted, or economically illiterate, they are repeating precisely the error Polanyi attributed to 19th-century liberals — the belief that market logic is natural and neutral, and that resistance to it must therefore be pathological. Polanyi insists the resistance is rational at its root, even when its political expression becomes dangerous. To dismiss it rather than address it is to guarantee the cycle continues.

The question he would press today is not "how do we defeat populism?" but something harder and more honest: what forms of genuine re-embedding would address the legitimate grievances driving it — before the pathological forms win? What would it look like to rebuild economies that serve communities, rather than communities that serve economies?

That remains, arguably, the central unresolved question in Western politics right now.

Which brings us to the question this essay cannot avoid. Is there now space for a Great Retransformation — a conscious, democratic project of re-embedding economic life within social and ecological limits? Could it emerge between the two extreme ends of the political horseshoe, from the broad and restless body of people who belong to neither camp? Or is populism itself antithetical to the patient, structural work such a transformation would require — too impatient, too angry, too easily captured by those who offer the comfort of enemies rather than the difficulty of solutions?

Polanyi believed society would always, eventually, protect itself. The question he left open — and the one we are still trying to answer — is whether it can do so wisely.