The Great Transformation

Stiglitz compares Polanyi’s analysis of “the great transformation of European civilization from the preindustrial world to the era of industrialization, and the shifts in ideas, ideologies, and social and economic policies [to the]transformation confronting developing countries around the world today” (vii), citing Seattle and Prague’s 1999 and 2000 protests against international financial institutions. Stiglitz believes that Polanyi was ahead of his time in his disavowal of free-market ideology, as the government always steps in to clean up the consequences of purportedly self-regulating markets, especially the increase in poverty, although the free market can lead to advances as well.

He states that there is now consensus that a free market cannot exist, although the depth and methodology of government involvement remains up for debate. Stiglitz sees Polanyi’s work as “a precursor to today’s dominant systemic approach” (viii), viewing those few economists who still espouse the doctrines of the gold standard as misguided when considering market volatility. He references the inconsistencies of the IMF (the International Monetary Fund), which avows the free-market system despite the fact that it is a fiscally-regulatory body. He also speaks to the hypocrisy of developed nations, who counsel developing nations to avoid government regulation despite the fact that developed nations’ governments regulate their own economy, as well as the problems associated with increased levels of unemployment in developing nations that bend to the prescriptions of developed nations.