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Part IX

The Second Contradiction of
Capitalism and Karl Polanyi’s The
Great Transformation*

In "The Second Contradiction of Capitalism: Causes and Consequences," James O’Connor acknowledges his debt to the Hungarian economic historian Karl Polanyi’s account of the effects of the commodification of land and labor on social stability, and also of society’s attempt to protect itself from the predations of the capitalist market economy and to preserve some elements of the "moral economy." Elsewhere, O’Connor remarks that Polanyi’s masterpiece, The Great Transformation, is "alive with insights into the problem of economic development and the social and natural environment." But Polanyi’s work is "widely forgotten," says O’Connor. Yet "[this] work remains a shining light in a heaven filled with dying stars and black holes of bourgeois naturalism, neo-Malthusianism, Club of Rome technocratism, romantic deep ecologyism, and United Nations one-worldism."

O’Connor avers, however, that "Polanyi’s approach does not sufficiently problematize ‘society.’ ‘Society’ is not regarded as class society. Nor does he theorize ‘capitalism’ and ‘crisis’ very well. Hence," continues O’Connor, "it is necessary to frame Polanyi’s method within Marx’s theory of exploitation and capitalist accumulation." O’Connor himself does not take up this task in his writings to date. No other writer in CNS, or in any other venue of which I am aware, examines the relationships between Polanyi, Marx, and O’Connor’s recent theorizing of crisis and the second contradiction of capitalism.

In addition, a second criticism of Polanyi has appeared in recent scholarship concerning his theorization of market society and technology. John Lie contends that Polanyi does not embed market relations in social relationships and therefore only selectively applies his notion of the embeddedness of the economy in society. Meiksins Wood argues that Polanyi is a technological determinist for suggesting that the Industrial Revolution caused the rise of market society, when in fact, markets existed prior to the Industrial Revolution as peasant producers were forced to market their surpluses in order to pay economic rents to their landlords.

When Polanyi’s scholarship is examined closely, these criticisms do not hold as much weight as it initially seems. They miss the mark because Polanyi’s concepts of embeddedness and forms of integration can help us grasp what Polanyi believed was the central question facing modern society: how can human purposes be served by the machine, rather than have machine requirements served by humans? Polanyi contends that 19th century market society (a form of capitalism with a self-regulating system of market exchanges) was civilization’s first attempt to address the problem of machines in society, and society’s collapse into World War I and, eventually fascism, were the results. Polanyi used a framework of class forces, while criticizing economistic notions of class interests, to explain the rise of social protectionism and the descent of market society into fascism in the inter-war years. To focus narrowly on details of his eclectic approach to economic historiography is to mistake the trees for the forest.

Finally, O’Connor’s portrayal of the "second contradiction" of capitalism is here summarized and compared with an account of Polanyi’s The Great Transformation, so that the relationships between O’Connor and Polanyi can be demonstrated. Most importantly, Polanyi’s institutionalist recasting of Marxian concepts of the laws of motion of the productive forces and relations, class struggle, and the state enable him to situate capitalism as a special case of market society in the spectrum of recent and historical human cultures and societies. Polanyi provides a theoretical framework for comparative methods of historical study that can serve second contradiction thinkers and researchers well. This framework may also have uses in movement strategy and state policy.

Karl Polanyi is one of the 20th century’s most interesting, yet most misread and ignored intellectuals. Born in Hungary in 1886, Polanyi was originally trained as a lawyer and economic historian. He was also an officer in the Hungarian army and became a socialist and journalist who worked in "Red" Vienna in the 1920s. Fleeing to England after the rise of fascism in Austria, he became an adult educator in the 1930s, and during World War II he and his family emigrated to the United States where he eventually became a lecturer in anthropology at Columbia University. He authored or co-authored several books, including The Great Transformation: The Political and Economic Origins of Our Times (1944), and other more anthropologically oriented works later in his career. He is probably best known in the field of economic anthropology where he carried out most of his scholarly output in the economic history of antiquity.

Polanyi cannot be pigeonholed as a thinker. He was at times a confusing and imprecise theorist (particularly regarding his "forms of integration" – reciprocity, redistribution and exchange), but then what other thinker could cast a stone in his direction for the sin of confusion? He had a vast range of interests, all of which he brought to bear on his intellectual work at one time or another. He handled history, theology, social theory, ethnography, and political economy with great agility. His ideas at times glow with the passion of the journalist’s craft, perhaps most brightly in The Great Transformation. He created a cross-cultural framework for understanding economic systems, one that changed the development of the fields of economic anthropology, economic history, and comparative economics. Anthropologist Rhoda Halperin summed up the enigma of Karl Polanyi well when she wrote:

French anthropologist Gerald Berthoud concluded ultimately of Polanyi that, "If we must attribute to him a specific field of competence, we have to consider him to be an economic historian. With respect to nineteenth century Europe or classical antiquity, he was less dependent on others to obtain the necessary data and theoretical elements" that he employed in his work. This seems especially reasonable when we recall his experience as a young journalist in Red Vienna, where he reported on international political and economic events. During this period, Polanyi also studied Marx and Lukacs and engaged in published debates with liberal economists Ludwig Von Mises and the young Friedrich Hayek over the feasibility of socialist economics.

Marx and Polanyi share a lot of materialist territory, but Polanyi extended some of Marx’s concepts to enable meaningful comparisons of economic institutions across cultures. They share notions about the fundamental relationships between humans and nature, about forces and relations of production, and about the belief that classes are important in explaining social change in capitalist market society. On the matter of classes, however, Polanyi, having witnessed the history of late 19th century Europe unfold, does not believe in a revolutionary working class, but instead developed a more complex understanding of how classes engage in collective action to achieve their aims.

Rhoda Halperin’s comparative essay on Marx and Polanyi argues that Polanyi appears to have adopted and elaborated many of Marx’s insights into society and economy. Much of Halperin’s discussion, summarized here, addresses not only The Great Transformation, but Polanyi’s more anthropological texts, addressing societies in classical antiquity.

Polanyi and Marx held that institutions and social relations are the key units for explaining economic activity. Halperin adds that an institution is "simply an organizing principle operating in a sociocultural unit. The principle sets the patterns and relationships between the parts of the unit." Marx and Polanyi both conceive of the economy as an instituted process rooted in Marx’s notion of socially determined individual production. Marx wrote in Grundrisse:

Polanyi stated specifically regarding tribal societies in The Great Transformation:

This point is essential to second contradiction theory because Polanyi creates a theoretical space for social motives in the going concerns of any society, beyond the purely economic motive of gain. In so doing, Polanyi establishes that cultural and social factors can be just as important in shaping economic crisis and restructuring as policy changes by political and economic institutions with the power to act to resolve crises. This is similar to the analysis that O’Connor made 40 years later, in examining the role of individualism in the crisis of accumulation in the U. S. in his book, Accumulation Crisis.

Halperin points out, however, that Polanyi’s notion of economy-embedded-in-society has roots in Karl Marx. "The simplest economic category," wrote Marx in Grundrisse, "say, e.g., exchange value, presupposes population, moreover a population producing in specific relations; as well as a certain kind of family, or commune, or state, etc." But Polanyi uses this insight to capture highly variable cross-cultural relationships between societies and their economic systems. He intends his concepts of substantive economy and forms of integration (reciprocity, redistribution, and exchange) as laying the groundwork for a cross-cultural comparative economics. In this framework, Polanyi viewed capitalism (particularly in the 19th century) as one extreme societal form in which exchange was the dominant form of integration, and that in noncapitalist societies the relationship (or form[s] of integration) are often quite different (e.g., more characterized by nonmonetized reciprocal or redistributive relations) than in industrialized countries.

The "substantive economy" concept had two components – the ecological/technological, on the one hand, and the institutional components, on the other, both of which parallel Marx’s categories of forces of production (nature/machine) and relations of production (e.g., property relations; factory organization). Polanyi elaborates on these concepts as well so they can provide a useful framework for cross-cultural comparisons.

Polanyi contended that ecological/technological processes had, until the 19th century, largely served social purposes throughout recorded history. Halperin dismisses this stance as evidence of Polanyi’s "romanticism." She maintains that he "idealized the preindustrial and the primitive...." In my opinion, he provides a compensating emphasis on the substantive, embedded economy to counter the dominant framework of atomistic and ethnocentric neoclassical economics (and to a similar extent that of orthodox Marxism). He is also making a fundamental place in his framework for understanding the possibilities of human freedom. This will also be addressed in the next section.

Polanyi and Marx, on the surface, differ on matters of production and distribution, but this difference is mostly skin deep. Polanyi’s emphasis on forms of integration indicate a controlling role in his framework for distribution over production; Marx usually emphasized the locus of production over distribution, and also consumption, processes. Halperin, however, argues persuasively that they "are much closer in their views of production, distribution and consumption than at first appears to be the case." For example, Marx notes in Grundrisse that productive resources presuppose a prior distribution of these resources either by conquest, revolution, or law.

Polanyi actually gives production a prominent place in the economy when he asserts that the dominant form of integration in society is the organization of the productive resources, including technology. Production and distribution move in tandem with each other in Polanyi’s framework in The Great Transformation. Distribution appears to be critical in his framework because Polanyi is interested in how the supply of a society’s stores, once produced, are allocated among its members. And production is more in the realm of the ecological/technological component of the substantive economy, which Polanyi acknowledges but does not elaborate to the extent that he does with his discussions of institutions. Distribution is the economic activity wherein supply and demand are matched in preindustrial societies, through the mechanisms of reciprocity and redistribution; these modes ensure order in production and distribution, so that absolute poverty in preindustrial societies was all but unknown.

Halperin’s seeming dismissal of Polanyi’s "romantic" belief that the material realm should serve human motives and purposes actually tips us off to Polanyi’s concern for human freedom through the achievement of a socialist society – a general formula he shared with Karl Marx. Most contemporary social scientists ignore this aspect of his theorizing for reasons Halperin herself acknowledges are probably rooted in Polanyi’s status in the emergent Cold War era of the late 1940s:

This masking of Polanyi’s Marxism contributes to a selective treatment of Polanyi’s social, economic, and political thought, at best, and a mischaracterization of it at worst. Polanyi has been criticized by some commentators for not conceiving markets as embedded in society, which they contend results in Polanyi missing the socially networked character of market activity and the legal frameworks underlying commercial and market society, created in some cases as early as the 13th century. These criticisms, whatever their accuracy concerning Polanyi’s historiography, miss Polanyi’s almost shamelessly inter- disciplinary method.

The Great Transformation was first and foremost a polemical and political account of market society, because Polanyi believed that the collapse of fascism and the institutions of the 19th century provided the world with the opportunity to build an authentic international socialism out of the ashes of World War II. To grasp these events, Polanyi believed it was necessary to step across fields of inquiry normally separated by institutional boundaries (i.e., academic turf) to grasp the significance of current events. In my opinion, The Great Transformation is best read as a tract of political theory, one informed by a cross-cultural and institutionalist perspective, upholding the best works in the tradition of political philosophy. Against this backdrop, Polanyi’s ideas concerning forms of integration, embeddedness of the economy in society, and fictitious commodities are windows into the problems of freedom and socialism; they are also institutional concepts that can become spontaneous social innovations (e.g., the "informal economy") and strategic policy tools in the struggles against capitalist oppression.

The Great Transformation traces the institutional origins of the emergence of the self-regulating system of markets in the late 18th and the 19th centuries and the flowering of the Industrial Revolution. The introduction of machines into productive enterprise in commercial society catalyzed "the idea of a self-regulating market," or what he referred to as "market society." While Polanyi believed the advent of machine-based factory production essential to the emergence of market society, he did not consider that such production determined the nature of that coming society. It is a subtle argument, but he prefers not to read the present into the past. Nothing inhered in the use of machinery at that time to lead inexorably to the spread of market society; but their use created a practical opportunity to reform exchange relations and spread machine production through market exchanges of productive inputs and outputs. The opportunities could only be seized by a class of people creative enough and motivated by the prospect of profit to organize and conceptualize such a society. This class of people was generally made up of merchants, according to Polanyi. "Production with the help of specialized, elaborate, expensive tools and plants can be fitted into [an agrarian and commercial] society only by making it incidental to buying and selling. The merchant is the only person available for the undertaking of this, and he is fitted to do so as long as this activity will not involve him in a loss."

Polanyi’s central concept of embeddedness not only expresses the social control of economic activity bound up with and contained by social relations, but also articulates a question central to, yet all but ignored by, we moderns in practical terms: How do we organize human life in a machine society without sacrificing human purposes to the requirements of machines? Thus, there are two senses to Polanyi’s concept of embeddedness. One is institutional, defining and describing the organization of production, distribution and consumption in terms of his concepts of integration (reciprocity, redistribution, and exchange). The other sense is technological, defining the relationship of tools and machines to the institutional principles and purposes governing the forms of integration used in society.

Polanyi is very specific about technology’s place as a catalyst of market society: as a practical necessity, machinery needed reliable inputs of materials for production and reliable markets to sustain revenues for acquiring material inputs.

To Polanyi technology is, practically speaking, an institutional force: its concrete design and operation organizes the productive resources of a society as surely as any organizing principle or institution. This idea is far from new. Writing 70 years earlier, Friedrich Engels authored a criticism of anarchists in which he argues a similar position. Suppose the revolution dethroned the capitalists, he suggested, "Will authority have disappeared or will it only have changed its form?" Engels proceeds to argue, from the example of a cotton spinning mill, that its operations have a number of inherent organizational requirements: an engineer to keep the steam engines going, mechanics to make repairs, other laborers who "transfer products from one room to another."

Ellen Meiksins Wood objects to Polanyi’s characterization of the requirements of machinery for commodity inputs, saying "There is more than a little technological determinism here." She mistakenly equates technological determinism with an argument that technology had a catalytic, constituting role in the development of market society. She contends instead that the revolution in the forces of production was made possible because producers (e.g., feudal tenants) had already been forced into market relations by landlords demanding rent for the land they worked. She asserts that this coercion produced a "capitalist dynamic" that "chronologically and causally preceded industrialization." The dependence of these producers on earning income to pay their rents to landlords provided the drive to technical innovation and stimulated market competition.

Without pretending to resolve this historiographical issue, it should be pointed out that Meiksins Wood does not refute Polanyi’s point about the machine’s requirements imposed on human beings for their effective use. She merely identifies an earlier and obviously important origin for the creation of commercial society, a society assumed by Polanyi when he makes his argument about machinery in The Great Transformation.

Polanyi distinguishes the technological imperative of machinery for factor inputs and adequate return on investment from the creation of an ideology of capitalism, or what he refers to as economic liberalism. The 19th century solution to the problem of integrating machines into society was to make society adapt itself to the requirements of technology and markets by assuring that humans and nature were available for sale or purchase as the commodities labor and land.

This "solution to the problem of the machine" goes against the grain of human society and individual freedom. However, people experience freedom in society to the extent they control their life rhythms and their destinies. The merchants and economic liberals promoting free trade and expanding markets saw freedom differently, however. The merchants and their boosters believed that society had to adapt to the efficient use of machines by turning humans and nature into commodity inputs of labor and land to the production process. Polanyi is clear on this point: human beings made choices that consistently led to the subordination of human society to the needs of the machine and market; gain supplied them with the motive, technology the means. To keep production running, these "commodities" had to circulate in an ever-growing cycle of production, distribution, and consumption, all maintained through interlinked market exchange. Suddenly, Polanyi argues, everyone and everything had an equilibrium price at which their stock would clear the market.

The effects of commodification are worth briefly specifying in so far as freedoms in modern society grow scarcer. Americans, in their exaltation of individualism as the foundation of democratic freedoms, were initially suspicious of labor as a commodity and of the Industrial Revolution generally, but they tended to embrace the economic liberalism (e.g., laissez faire ideology) emerging at the founding of the American nation. The nature of individuals changed over time and with it the wages of freedom in modern society. O’Connor writes in Accumulation Crisis:

This robust selfhood was compromised by the growth and spread of a corporatism that colonizes individuals politically so that they exist only to "legitimate the interests of corporate associations," in place of a Tocquevillean "political individualism and a society based on voluntary groups established to defend the interests of free individuals." O’Connor also finds that "modern ideologies of individualism become mere shadows of that traditional American individuality which flowered in the old subsistence economy, small-town life, the frontier, and, later, small-scale capitalism." What was once an irreducible individual in America, combining the social realities of producer, political agent, and community member, became under "full capitalism" a person with perhaps four shriveled identities signifying dependent social and economic relationships:

• the individual as a worker;

• the individual as the occupant of a job, a role, or occupation (e.g., what O’Connor calls the "salariat");

• the individual as a consumer (replacing the owner of autonomous property and means of livelihood); and

• the individual as a "voter," rather than as an independent thinking, acting, and judging citizen.

Polanyi registers the consequences: shifting social priorities dehumanize social reality; exempting the economy from community limits destroys cultural practices and moral codes that support human livelihood. The social and environmental destruction wrought by this "reverse adaptation" to industrial technology and market society prompts people to resist inverted social priorities and protect the culture and social arrangements of their livelihood, what Polanyi referred to as "social protection." (Note that this is a broader understanding of the motives orthodox Marxism provides, that of class economic interest.) He sees the unfolding of market society as a "double movement" of marketization and social protectionism:

The double movement is Polanyi’s metaphor for class struggle. In market society, Polanyi saw the class struggle as a triangle of class forces: the middle (or trading) classes, the working classes (closely approximating Marx’s bourgeoisie and proletariat), and the peasantry/landed aristocracy (class residue of feudal producers and landlords). Their interests lay with, respectively, the protection of productive organization (in terms of protecting both profit and price), protection of family and human life itself from exploitation, and the protection of agrarianism and landed property. Narrow class interests asserted in a social struggle cannot offer a satisfactory explanation for any long run social process, says Polanyi. The process in question may determine the fate of the class itself (as in deskilling of work through computerization, or through enclosure of common lands surrounding villages), and the interests of given classes determine only the aims and purposes of their struggles, not their potential for success in struggling. In different times and places, however, Polanyi asserts that "each social class stood for interests wider than its own." Indeed, what is not explained by a theory of collective action based on self-interest (as orthodox Marxists and economic liberals contended) was why these classes succeeded in their mobilizations. The reason, says Polanyi, is that

In the double movement these class forces in their opposition both advanced and obstructed the spread of the market (a very Marxian way of framing things). Consistent with Marx, Polanyi saw the trading classes advancing the rise of machine production and the market system. "But if the rise of the industrialists, entrepreneurs, and capitalists was the result of their leading role in the expansionist movement, the defense [of society and land] fell to the traditional landed classes and the nascent working class," writes Polanyi. "And if among the trading community it was the capitalists’ lot to stand for the structural principles of the market system, the role of the die-hard defender of the social fabric was the portion of the feudal aristocracy on the one hand, [and] the rising industrial proletariat on the other." The mobilization of land illustrates this sundering and recomposition of class forces in collective struggle, and in so doing illuminates Polanyi’s thought on embeddedness as well.

"What we call land," Polanyi wrote in a memorable turn of phrase, "is an element of nature inextricably interwoven with man’s institutions. To isolate it and form a market out of it was perhaps the weirdest of all undertakings of our ancestors." With this, Polanyi declares himself across 50 years’ distance an environmentalist, one seeing humans intimately tied to nature. "Traditionally," he continues, land and labor are not separated; labor forms part of life, land remains part of nature, life and nature form an articulate whole. Land is thus tied up with the organizations of kinship, neighborhood, craft, and creed – with tribe and temple, village, gild, and church." However, continues Polanyi:

But land is more than just a locus and supply of resources for production. Nature

This is as radical as any environmental critique gets, and it was uttered over 50 years ago.

Polanyi sees three stages in "the subordination of the surface of the planet to the needs of an industrial society." First in England was the commercialization of the soil through liquidation of feudal lands (including enclosures and conversions to monoculture). Second (and overlapping the first stage) was the increase in food production and raw materials need to serve the needs of growing industrial production and population growth in the towns and cities. Polanyi considered the final stage to be the extension of this system of surplus production to overseas and colonial territories. "With this step land and its produce were finally fitted into the scheme of a self-regulating world market," he notes. This is the true meaning of free trade, he contends because through it "the industrial-agricultural division of labor was applied to the planet." Later in the 19th century, technology facilitates the mobilization of land in the cause of free trade as well, for "once the great investments involved in the building of steamships and railroads came to fruition, whole continents were opened up [to capitalist cultivation] and an avalanche of grain descended upon unhappy Europe." The flood of grain led to protection of the peasantry by the reintroduction of corn laws to prevent the complete destruction of rural life in Central Europe; the disruption of the native cultures in the colonies, however, could not be indigenously averted since their political organization (the nation state) had not yet developed.

As the expansion of markets proceeded, new rounds of protectionism arose to meet them and class alliances broke apart and realigned. Protection of lands and their integration into communities in Europe fell to the peasantry and the landed aristocracy who used English common law to obstruct the expansion of freedoms of contract in land to the peasantry, generally in opposition to the actions of both "the trading classes" and the working class. "The working classes," notes Polanyi, "were won over to free trade as soon as it became apparent that it made food cheaper. Trade unions became bastions of anti-agrarianism, and revolutionary socialism branded the peasantry of the world an indiscriminate mass of reactionaries" as a result. Economic liberalism, shared now by both the working and trading classes (even in their opposition to each others’ economic interests), depended on imperial state policies, while landed interests held no imperial commitments. It was the landed interests, says Polanyi, who "produced the cross-currents of Prussian politics under Bismarck, fed clerical and militarist revanche [revenge] in France, ensured court influence for the feudal aristocracy in the Hapsburg empire, made Church and Army the guardians of crumbling thrones." They became defenders of law and order, and over time built alliances with the "unsoldierly" trading classes throughout Europe, and eventually became reactionary protectors of industrial production as well. Polanyi notes of this collaboration:

Yet social democrats could not be trusted by capitalists to follow the rules of market economy in emergencies, says Polanyi, and they were eventually overthrown in the counter-revolutions of that period. "This explains the remarkable shift in some countries from a supposedly imminent dictatorship of the industrial workers to the actual dictatorship of the peasantry," observes Polanyi. This underscores the various senses of "the great transformation" intended by Polanyi: the first transformation was the radical adoption of the self-regulating market system as the dominant mode of economic activity in modern life; the second great transformation was the shifting and recombining of class allegiances with respect to the virtues or scourges associated with market society. Peasants became useful advocates of the free market for a time, says Polanyi, until they were later discarded by the landed elites when Bolshevist movements of the working class were crushed.

Food self-sufficiency assumed great importance after the food shortages following World War I. "Thoughtless reliance on the world market gave way to a panicky hoarding of food-producing capacity," a mode of organizing the productive resources that Polanyi labels "autarchy." Communities and nations throughout Europe and North America, he observes, became obsessed with self-sufficiency in agrarian production, in part from the food shortages that occurred after the war, because

Agrarian reaction to protect the landed producers was critical to the politics of the inter-war years, says Polanyi. He concludes,

While the protectionism of both classes (landed and working classes) brought on the crisis of the market system, the social strata connected with the land compromised with this system since their livelihood depended on price for their goods in the market, "while the broad class of labor did not shrink from breaking its rules and challenging it outright."

8. The Second Contradiction and
The Great Transformation

Despite O’Connor’s contention that Polanyi did not theorize or problematize class society, it is clear from this discussion that Polanyi possessed a thorough grasp of classes and their roles in modern politics. Perhaps he was "masking his Marxism" to remain a functioning scholar in a time of rampant anti-communism and emergent Cold War politics. But the concepts he developed arise from and point in the same essential directions as those of Marx, and today inform those of O’Connor’s second contradiction model. Moreover, Polanyi drew fundamentally from Marx’s framework for developing his cross-cultural and institutional methods for interpreting the development of capitalism in its 100 year historical run as a self-regulating system of markets.

Polanyi’s analysis of this "double movement" in modern institutions of state, market, and society throughout The Great Transformation is the crux of how market society failed to solve the conundrum of machinery; in Marxian terms, the double movement is a contradiction and it appears to cover the same social substance that O’Connor’s second contradiction of capitalism does, as described in O’Connor’s recent essay "Is Sustainable Capitalism Possible?" Expressed in terms of the "substantive economy," the human/ecological components appear to be in contradiction with the technological and institutional structures of the economy.

The second contradiction of capitalism results from the tendency of capitalist production activity to consume the "conditions of production" that enable businesses to produce at all. In O’Connor’s formulation (drawing from Marx) these conditions of production include the key factors of production: labor, land, and urban services. O’Connor, writing before he framed the second contradiction notion, tends to couch his analyses of crisis in the conditions of production in terms of the falling rate of capital accumulation, though not exclusively (since the causes are both economic and social). Polanyi, on the other hand, while not rejecting cost-oriented accounts of crisis, broadens the use of the concept of crisis to include the facts of social upheaval and cultural disruption as evidence of crisis. In fact, Polanyi measures crisis in terms of the varieties of state intervention, rooted in the commodity fictions imposed on humans and nature (as labor and land):

O’Connor writes that conditions of production are treated as if they are commodities but "are not produced as commodities," but to be available to capital requires they be organized and delivered "in the required quantities and qualities, and at the right time and place," formulations consistent with Polanyi’s concept of fictitious commodities of labor and land. The agent organizing these conditions of production is the state. He further observes that all activities of the liberal democratic state which do not concern money and armed force can be categorized under the heading "regulation or production of conditions of production." These include:

• labor, family, health, education and welfare policy (generally, social policy);

• urban transport, communications, land use and zoning policy (urban policy); and

• water, air, land, coastline, and park land policy (environmental policy).

O’Connor believes the causes of the conflicts that mark the second contradiction are both economic and social. They are "economic" in the sense that shortages of wage labor, urban space, and environmental resources (concepts which roughly parallel Polanyi’s "fictitious commodities" of labor and land) are created which reduce production factor supplies and push up costs to businesses. The causes of the second contradiction are also social because political struggle over these spheres also push up costs and reduce the flexibility of capital generally and the variability of labor power in particular.

Accumulation Crisis builds O’Connor’s case that since World War II changes in the working class, the professional classes, capital, and the state all erected protective barriers to capital accumulation, not the least of which is the postwar emergence of environmentalism at elite and grassroots levels. Reaching into the state’s growing intervention into society and economy, he introduces the concepts of "system integration" and "social integration". These terms indicate that capitalism could not recompose society on its own as a system, but that continuation of both economy and society require active intervention by the state at both the level of economic integration (system integration) and of society (social integration or "reproduction" of the social sphere that underpins the functioning of the economy). Thus, O’Connor’s theory takes a Polanyesque turn by introducing integrative policy actions by the state into his crisis framework (what Polanyi referred to as "planning"). "System integration" recalls Polanyi’s forms of integration, reflecting O’Connor’s interest in how economically productive resources are organized and its products distributed. Meanwhile, "social integration" represents state intervention to protect and even prop up spheres of social reproduction and affective noneconomic social relations, an intervention Polanyi did not theorize. Yet, it should be recognized, as O’Connor points out in his earlier book, The Fiscal Crisis of the State, that social reproduction as an object of state policy and fiscal investment begins to compete for public funds with state investments on behalf of capitalist accumulation. And, in Polanyesque terms, the state becomes the key agent of the forms of integration via the mechanisms of social, economic, and environmental policy, supplementing society as the sole organizer and enforcer of social practices in these areas.

And yet the state-centered "solutions" to problems of system and social integration (i.e., the social protection movements) further reduce the rate of capital accumulation. Social, urban and environmental policies of the state produce still more contradictions between the economy and social needs, such that the state itself becomes the principal arena of economic and social struggles over reproduction (of conditions of production).

Adding O’Connor’s concept of the second contradiction we can now see that the state’s planning and administrative efforts to promote both system integration (for the sake of business profits) and social integration (for the sake of assuring adequate supplies and demands for labor and mobilized land) conflict with each other. For example, lax enforcement of pollution laws on an oil refinery (which may promote the "system integration" of the refinery with the larger regional economy as an energy supplier and major unionized employer) may generate health problems in surrounding neighborhoods. The neighbors’ health problems may inhibit the "social integration" of the neighbors by forcing them to lose jobs, go on public assistance and use socialized health care. Their loss of social independence increases public expenditures and tax burdens on businesses and residents as well. It may also increase labor costs to businesses in the region as the supply of healthy workers grows more scarce. In this way, the attempt by capital to "externalize environmental costs" onto other social groups may actually increase pressure on the public budget and its own bottom line of surplus value creation.

But the analytic point to be emphasized about O’Connor’s second contradiction framework is that, despite these Polanyesque amendments to the critique of capitalism and the state, it ultimately seems to measure crisis in the conditions of production in terms of changes in the costs to capital or public budgets. This focus of attention, it seems to me, is both realistic and appropriate. But Polanyi would object that the social conflict itself is a result of contradictory realities within and between economic institutions, those of productive organization, labor and land, whose relations are governed primarily by "freedom of contract" and exchange. It is this reorganization of the productive resources in market society – their sundering from communal, social and ecological bonds, and their reassembly in an ever-differentiating division of labor – that at root structures this conflict. It is here that eco-Marxist or Polanyesque strategic solutions to the social dimensions of crisis (e.g., structural unemployment, housing shortages, continuing education of the work force, restoration of common property regimes) might include re-forming these commodified relationships, perhaps along lines that are more reciprocal or redistributive, or perhaps involving non-monetary approaches to exchange. These might represent micro-strategies that work to create space for informal, nonmonetized human relations of production and distribution.

Polanyi himself looked forward to a time when "the market system will no longer be self-regulating, even in principle, since it will not comprise labor, land, and money." Wages and working conditions are negotiated outside the market (though unionization rates have declined worldwide). And to remove land from the market, he added, "is synonymous with the incorporation of land with definite institutions such as the homestead, the factory, the township, the school, the church, parks, wildlife preserves, and so on." He likely would approve of the land trust model in which land itself is removed from the speculative market, to become a more affordable site for housing or farm produce. In ways such as these, the fictitious commodities labor and land would be returned to their rightful positions in society – as human beings in their habitat, in human nature. Polanyi’s institutionalism informed his ideals in a way that makes these ideals practical, providing potential strategies and policies for political movements to put forward as reciprocal or redistributive alternatives to the social, economic, and environmental injustices of the second contradiction of capitalism.