Kari Polanyi Levitt

Emerita Professor of Economics, McGill University, Montreal – Canada

Seventieth anniversary of the publication of Friedrich Hayek’s Road to Serfdom and Karl Polanyi’s Great Transformation, in 1944.

For Hayek, the departure from minimalist laissez-faire government was the road to serfdom. For Polanyi, the self-regulating market was the road to the ruin of the western democracies.

In From the Great Transformation to the Great Financialization (2013), we trace the conflicting philosophies of Hayek and Polanyi to their origins, in Socialist Vienna of the 1920s.

Polanyi and Hayek arrived in England as émigré intellectuals in the early 1930s. The opening sentence of the Great Transformation reads: “Nineteenth century civilization has collapsed.” Note the present tense of these words, written 30 years after the start of the Great WCover-Levitt-From-Great-Transar. Nowhere was the collapse of that civilization more evident than in Vienna, the former glittering capital of the Hapsburg Empire of 50 million people reduced to the impoverished capital of the 6 million Republic of Austria. In the socialist Red Vienna of my childhood, Hayek and his mentor Ludwig von Mises were the misfits, the remnants of the old order. As recalled by Mises in his memoirs: “To appreciate duly Doctor Hayek’s achievements, one must take into account political, economic, and ideological conditions as they prevailed in Europe and especially in Vienna at the time the First World War came to an end” (M Mises, 1976: 183). They were traumatized by the socialist municipal administration that favoured the working classes. They considered socialism of all varieties and economic planning of any kind to be an infringement on personal liberty. They looked back on the liberal utopia of the pre-1914 economic order as an ideal to be recovered and refashioned.

In Chapter 2, we follow Hayek’s career from Vienna to the London School of Economics to his influence on the Chicago School and the international thought collective of the Mont Pelerin Society. Neoliberal ideology was consciously constructed from European sources, but took root in the United States where it found support from opponents of New Deal policies. In its most radical form, neoliberalism defines freedom in purely economic terms. Politics is reduced to the rule of law by a strong state dedicated to the preservation of private property and free enterprise.

In Chapter 3, we introduce the reader to the formative influences on Karl Polanyi in pre-1914 Vienna, where Russian revolutionaries of all varieties were welcomed and assisted by family and family friends, and to Budapest, where he was a founding member and first president of a Hungarian student movement dedicated to Free Thought. In Vienna of the 1920s, he engaged Mises in the socialist accountancy debates and outlined a model of associational functionalist socialism, moderating criteria of economic efficiency with social justice and participatory democracy. His socialism was neither that of traditional European social democracy, nor that of centralized communist planning. It was more akin to the third stream of the European socialist tradition- the populist, syndicalist and quasi-anarchist one of corporatist guild socialism.

Kari Polanyi Levitt, Montreal, June 2014

Table of Contents

Interview with Michèle Rioux: Nine Decades of Scientific and Militant Life

KARI POLANYI: Nine Decades of Scientific and Militant Life
Michèle Rioux

This is a transcript of an interview conducted by Professor Michèle Rioux, Director of the Centre d’études sur l’intégration et la mondialisation (CEIM) and full professor in the department of Political Science at the Université de Quebec á Montreal, with Kari Polanyi during the Fall of 2013 and published in Interventions Economiques. The interview is part of a research project leading to a book that will discuss the work and life of two extraordinary women in Canadian political economy, Kari Polanyi and Sylvia Ostry.

Summary of questions:

Michèle Rioux: Dear Kari, can you tell us about the first decade of your life?
Michèle Rioux: You were 11 years old? The second decade of your life was just beginning.
Michèle Rioux: Who was your favorite?
Michèle Rioux: When did you meet John Maynard Keynes?
Michèle Rioux: But you have been in contact with ideas of the general theory?
Michèle Rioux: Did the ideas of Kalecki and Keynes resonate with students or were they more inclined to study Marx?
Michèle Rioux: You were in your twenties and thirties, you were finishing your program and you then travelled to Canada. What made you cross the ocean?
Michèle Rioux: But you were a PhD Student?
Interviewer: So you were not the failure you thought you were!
Michèle Rioux: That brings us almost to the third decade of your life.
Michèle Rioux: But you never finished?
Michèle Rioux : Can you give us a sense of what was really original in this project?
Michèle Rioux: This was your first project as a McGill professor. Were you teaching courses at the time?
Michèle Rioux: When did you start the work on the Caribbean?
Michèle Rioux: What is the next important moment, the publication of your book Silent Surrender?
Michèle Rioux: In your economic planning model, what was the main element? What is related to the question of investment in Canada?
Michèle Rioux: Did you know at the time that it was important?
Michèle Rioux: Why were the seventies so important for you?
Michèle Rioux: Did you miss Europe?
Michèle Rioux: Who do you think was the most important person in your life and in shaping the way you have approached your work?
Michèle Rioux: And your children, you told me that you owe the title Silent Surrender to your son.
Michèle Rioux: For young people interested in political economy what would be your best advice?

Michèle Rioux: Dear Kari, can you tell us about the first decade of your life?
KARI: I was born in Vienna, shortly after the end of the First World War. It was a chaotic and economically very difficult time. My father, Karl Polanyi , then in his forties, had a good position as a journalist for an important weekly economic and financial journal. My mother was studying engineering, as she had wanted to do since she was a young woman. I had a very happy childhood, even though I was the only child. I grew up in Red Vienna, which was perhaps the most successful illustration of what a socialist urban government can achieve in a country that was quite poor, with a high rate of unemployment. Production in Austria did not reach the prewar level until 1928. Socialist governments were elected in Vienna from the revolution of 1918, which put an end to the Austro-Hungarian monarchy, until the overthrow of the working class movement in February 1934. Red Vienna had remarkable housing projects, of which the Karl Marx Hof was the best known but there were dozens, if not hundreds of them, built by the municipality. The defining moment of my life was when the working class movement was attacked.
Michèle Rioux: You were 11 years old? The second decade of your life was just beginning.
KARI: I was 10 years old going on to 11. The Austrian government destroyed the working class movement in Vienna. I knew more or less what was happening. There was to be a General Strike. On my way to school I noticed that the electric clock in the large public square had stopped, and I knew that this was the beginning of the General Strike and so turned around to go back home. My mother was very active, and she told me that she would be busy for the next few days and that I would be in charge of the house and of my grandmother. I was given for the first time paper money. I went down to buy a lot of bread and made all kinds of preparations for these few days without electricity. Because we lived rather near to the barracks, we could see the army bring their guns to bombard the social housing. I think this was the defining moment of my life because I knew which side I was on, the side of the workers of Vienna. I remained concerned with political events for the next ten years, twenty years or maybe eighty years. The civil war lasted four days. Eventually the government forces won. The leaders of the social democratic party left the country and went to Prague. I went back to school and almost half of the teachers were gone. They had been dismissed, and it was clear that this was because they were socialists.
In the following week, I was sent to England on a train. When I arrived in England, it was a challenge. I went to stay with very close family friends and learned English within a year or two. I was fortunate to have a very good education because I won a scholarship to a prestigious avant-garde boarding school. Former school mates tell me that I was forever reading. There was the Left Book Club and I think I read every single book that they published. At the time of the civil war in Spain, we raised money to buy wool and we made knitted sweaters. I was always politically active.
For those fortunate to be young in war-time England, which was never invaded, they were extraordinary times. They were the best years of my life. At school, I had two subjects that I loved, history and physics. When the time came, I did my examination in history. I got the entrance but I did not get the scholarships and my parents had no money. My father was then in the United States and my mother had joined him but I refused to leave England. I was living with family friends and I then tried for physics in Cambridge. All the exams were in mathematics, except for one practical lab and I did quite well. I was accepted into the second year of the program. But again, no scholarship. I decided that I was a failure, a total academic failure, having failed to get into Oxford to study history or Cambridge to study physics.
So I decided to follow my political left-wing interests at the London School of Economics (LSE). And of course, the fees were minimal and it was easy to get a loan from the local education authorities. The LSE was temporarily relocated to Cambridge, and we could attend lectures by any of the great and famous Cambridge economists, like Joan Robinson and others, as well as our own lecturers.
Michèle Rioux: Who was your favorite?
KARI: My real favourite and from whom I learned so much, that I have remembered it for the rest of my career in economics, was Nickolas Kaldor. His course on Economic Analysis was presented as a history of economic thought. He would present Adam Smith and the exchange of beavers and dears, you know that old story. But after having presented Adam Smith, he then proceeded to deconstruct him; likewise with Ricardo and the whole Ricardian system, and then with Marx, and the marginalists revolution. I will never forget how the course ended. “Ladies and gentlemen,” he said, “there is currently a research survey to find out how business men set their prices. They report that they sum up the costs and they add a margin; so you see we still do not know the source of value.”
I also attended a course by Professor F. von Hayek. Unfortunately, the course was mediocre because Hayek chose to lecture from a large textbook chapter by chapter. The textbook was written by Kenneth Boulding; it was a very fat, large book that my father called “the Boulder”. After a few weeks, most of the students stopped attending the lectures because you could just read the book. We were never exposed to Hayek’s theories.
I chose to specialize in statistics, because I had done a lot of mathematics. I loved mathematics and I thought a specialization in statistics might be more useful than economic theory. I wanted to know what happens in the real world.
After the first two years at the LSE, I was called up for National Service. I was told that I could find my own employment, and that would be my National Service. My ambition was to specialize in labour research. Because I had done some voluntary work with the labour research department built by a wonderful woman by the name of Margot Heinemann, I found employment in the research department of the Amalgamated Engineering Union, representing over a million workers employed in the war industries. During the war, the research department was located in South London and it was entirely staffed by women. The director was Yvonne Kaap who had previously worked at Vogue in Paris.
I later returned to complete my undergraduate studies at the LSE. A little known, but very important fact, is that the student movement in England in the thirties and during the war, was dominated by the communist party. Because of the rise of Hitler and the Spanish civil war, many bright young people thought that the Soviet Union was the only way to defeat fascism. And this indeed was true. Thus, while I was at the LSE, the communists were at the center and had the brightest of the students. On the left, were pacifists and rationalists and on the right was the labour party. And beyond the labour party there was nothing. There were no conservatives, no liberals. There was a total absence in the student life of the political spectrum of the right.
Michèle Rioux: When did you meet John Maynard Keynes?
KARI: I never met Keynes.
Michèle Rioux: But you have been in contact with ideas of the general theory?
KARI: We were aware of the Keynes’ proposal of 1942 issued as an official government white paper as a blueprint for a new post-war international financial order. It was widely discussed. But the LSE was not friendly to Keynes. More precisely, Lionel Robbins had brought Hayek from Vienna in 1931, for the specific purpose of combating what they considered to be the dangerous influence of Keynes. Dangerous because it was inflationary, and the LSE was very close to the city. They feared Keynes because they thought that deficit financing would create inflation. The city and the bankers hate inflation like the devil hates holy water. Keynes was never part of the undergraduate curriculum at the LSE. When I wrote my final exam in in 1947, Keynes was not on the curriculum. In Cambridge, there were off campus classes in Keynesian economics taught by young LSE lecturers. Interestingly, at the same time, we were discovering the work of Michael Kalecki . There were also the usual classes on Marx that were given by the communist party. But that was all off campus.
Michèle Rioux: Did the ideas of Kalecki and Keynes resonate with students or were they more inclined to study Marx?
KARI: We were somewhat introduced to these ideas by Kaldor. He initially believed in the conventional neoclassical price theory, but then departed from that belief, and later relocated to Cambridge University. I certainly knew the basics of the Keynesian approach, but it was not taught in any of my courses. I recently reread Kolecki, he was prescient in his prediction that the Keynesian solution would ultimately fail. He argued that if we have full employment for a long period of time, as indeed we had in the 1950s and 60s, the power of the capitalist class would weaken to such a degree that they would find it intolerable, as indeed happened in the stagflation of the 1970s. The neoliberal counter revolution was constructed in think tanks as a response to the concern of the capitalist class that the world was getting out of control, both domestically and in the third world.
Michèle Rioux: You were in your twenties and thirties, you were finishing your program and you then travelled to Canada. What made you cross the ocean?
KARI: I had met in England some Canadians who had volunteered to fight fascism. They were all communists, including Joe Levitt and I agreed to join him in Canada when I finished my studies. He was demobilized in 1946 and I came to Canada in 1947, as a member of the communist party. I thought Canada would resemble Britain, allowing you to engage in any political activity of your choice, including the communist party. However, I discovered that although that was the case in theory, in fact it was quite different.
I arrived on the last day of October, which is Halloween. When the dead rise from the graves and in catholic Europe at that time, all the cemeteries are lit with candles. I thought it was a very appropriate entrance to my new life in Toronto. Joe made contact with the University of Toronto, as I was planning on continuing my graduate studies. I spent my first year in Canada at the University of Toronto. I had a teaching assistantship, because it was a course on economic history, a subject that I knew very well. The professor let me teach the classes, which I very much enjoyed, but I found the atmosphere oppressive, stifling, boring, really very depressing – grey halls, grey people. I decided I did not want to live this kind of life. This was not what I had come to Canada for. I wanted to pursue my interest in the labour movement and do labour research. In truth, I did not want to do graduate studies. However, I did meet the famous Harold Innis , a small man behind a desk piled up with books.
Michèle Rioux: But you were a PhD Student?
KARI: No, I was not a PhD Student. I had a BSc. I had a first degree, a BSc [econ] from the LSE, where I had tied for the first class spot with Ralph Turvey.
Interviewer: So you were not the failure you thought you were!
KARI: I was no failure, no. I tied for the first spot with Ralph Turvey, but Maurice Dobb broke the tie in favour of Turvey. I had offers of fellowships at LSE and, in many ways, I thought I should stay there because I had really wonderful career opportunities. In London, Nicki Kaldor had invited me to join his team on the famous British study on The Effects of Allied Strategic Bombing on the German War Economy. There was a very small team in Britain led by Kaldor and a very large American team led by John Kenneth Galbraith. This is how the two of them got to know each other. When the British and the American forces had invaded Germany, they had seized many documents on war production from the German war factories and brought them to London and to Washington respectively to be analyzed. The British team was very small. It consisted of Kaldor, who directed it, a professional statistician, whose name I don’t remember, and myself. I was hired because I could read German. My task was to look at microfiches and record the information. The study found that the result of the heavy bombing of German industrial cities and the working class population was a constant increase of production. You cannot demolish a people just by bombing. You can demolish a lot of structures but you can’t demolish the will of a people. The German bombing had a similar effect in England. If I had stayed in Europe, I would probably have gone to work with Gunnar Myrdal at the UN economic commission in Geneva, but instead I came to Canada for personal reasons, for love.
When I arrived in Toronto, it was depressing. The university was depressing and the center of the city was depressing. I got on a street car in west Toronto in search of the city, passed a few buildings and fields, and when we arrived at the terminus on the east side I said: “I thought we were going to the city.” And they said “You’ve been through it. You’ve passed it already.” King and Bay, a few tall buildings. It was in 1947, and I was 24.
Michèle Rioux: That brings us almost to the third decade of your life.
Kari: From 1947 until 1956, I was working in left-wing political movements. After the year I spent at the University of Toronto, I decided to go back to a milieu that I thought would be more interesting, more sociable. I looked for a factory job of the kind I had done in the summer vacations in England, and I found one on the Western Road of Toronto called the Acme Screw and Gear Company. I spent a year working there and enjoyed it very much, because the people were pleasant and kind. When I was sick with the flu, they brought soup and food to my home. I got involved in the United Automobile Workers. I initiated a newspaper for the local called Yours to Build. Later I worked in the research department of the United Electrical Workers. This was a frustrating experience. I was then invited to edit a sixteen page monthly tabloid for the Mine, Mill and Smelter Workers Union which was much more interesting. It was a new challenge.
In 1956, like many others, I resigned from the communist party, after the Hungarian revolution and the invasion by the Soviet Union. Because it seemed that I had wasted many years, I needed to get back to my studies, and I considered making a big change. At that time, information technology was just beginning, and opportunities were being offered to bright students with an undergraduate degree. Eventually I decided to stay in economics and enrolled in a Master’s program in the University of Toronto instead. I did two years of the master’s program and all the courses of the PhD program.
Michèle Rioux: But you never finished?
KARI: I never finished. I became interested in traditional Canadian economic history as well as in economic development; I wanted to combine this with the mathematics and the statistics. This is how I got engaged in the input-output studies of the Atlantic Provinces. I was drawn to it by Professor B. S. Keirstead. He had built an excellent department at Mcgill, including Jack Weldon and Tom Asimakopoulos. But a quarrel with the administration at McGill forced him to leave for Toronto, which is where I met him. He came from the Maritimes and he got me involved with the Maritimes as an underdeveloped region of Canada. So this is where my interest in development began. We were introduced to national accounting and I have spent much of my professional life in this area of national accounting and the construction of input-output tables. I was initially introduced to national accounting at LSE by a small book by J.R. Hicks, The social framework: An Introduction to Economics. It presented the system of national accounts, in terms of major constituent sectors.
In 1961 I received a job offer from McGill, which I think was at the prompting of professor Keirstead. I accepted the offer. I started at McGill without having finished the PhD, and I never finished it. I was initially engaged in a huge project on the production of input-output tables for the four Atlantic Provinces.
Michèle Rioux : Can you give us a sense of what was really original in this project?
KARI: It was original because at that time there was interesting work being done on the construction of the input output tables. The new idea came from Tadek Matuszewski at University Laval. He was brilliant and was advising the Quebec Bureau of statistics in the early 1960s. He introduced the idea of rectangular tables, instead of the square format that we all knew. Essentially, there are the basic tables of input, but they are rectangular with many more commodities than industries, corresponding to the reality of the economy. And then there was a matching rectangular table for the output of the many commodities of the few industries. This caused quite a bit of a storm, and I got involved in it. We made the tables for the Atlantic Provinces with that method, which was new at the time. Thus, I was involved from the beginning in Statistics Canada, working with Terry Gigantes, who was another McGill “product” and student of Professor Weldon. Most of the staff had actually come from McGill and Terry was the director of this input-output work. A recent book by Duncan McDowall, The Sum of the Satisfactions on Canada’s national accounting, contains a generous treatment of my contribution.
The project was huge. It lasted for over 10 years and it was ultimately financed by the Atlantic Development Board, which does not exist anymore. There was a discussion at the time about regional policy. Should industries in the Maritimes be encouraged by Ottawa or should people be encouraged to emigrate and leave the region? That is a very classic problem. It is a problem that is currently much discussed in terms of the contribution of immigrants to their country of origin. I never supported that position. My initial work was on the industrialisation and economic development within the Maritime Provinces and then later I transferred that onto an international scale.
Michèle Rioux: This was your first project as a McGill professor. Were you teaching courses at the time?
KARI: I was teaching a very heavy load. When I first came to McGill, I was given a course about which I knew nothing, Canadian banking. In order to entice me to come they also gave me a course on technics of economic planning. I taught a course on business cycles, which I also found interesting. However, the problem was that in the sixties, business cycles had disappeared, and the course morphed into a course on economic growth. Instead of the old business cycle, recessions took the form of slowing down the rate of growth. For the banking course, I would start at five in the morning to have time to read the next chapter in the textbook, and I would present myself at 9 o’clock in the morning and behave as if I was totally familiar with the material. I was very strict with the students because I knew that this was a contest between my authority, as a relatively young woman, and a large class of commerce students, mostly male. If I did not exert my authority, I would be in trouble. So if I caught them reading a newspaper, I stopped lecturing and suggested that they read outside the class.
Michèle Rioux: When did you start the work on the Caribbean?
KARI: My contact with the Caribbean came shortly before I accepted the position at McGill, in 1961, and the person responsible was Professor Keirstead. It was the time of the Federation of the West Indies, which later collapsed in 1962. The circumstances were that he had a year of sabbatical leave and he was invited to undertake a study on the federal shipping service by Arthur Lewis.
Keirstead did what all professors do when they have a lot of work and it is a little boring. They find a graduate student. He asked for somebody who was more competent than myself, but they were not available. He then asked somebody else, who was also not available, at which point, in desperation, he sent me an invitation in December. I jumped at the opportunity. My husband was very helpful and cooperative and he said: “Ok, you can go.” I prepared everything for the children for Christmas and I went and set foot in Jamaica, late in December of 1960 and there I encountered a very new and strange world.
I felt that I had stepped back into the nineteenth century, the world of the novels of Jane Austen. It was very, very colonial. I was sent to Trinidad, which is where I had to do the research. That is how it started. Then, in the following spring I was asked to come and proof read in Jamaica. There I met a number of relatively young economists who had been trained in Britain at the LSE or at Cambridge, with whom I found I had much in common. Friendships were formed and that was the beginning of it.
Michèle Rioux: What is the next important moment, the publication of your book Silent Surrender?
KARI: It all started with Charles Taylor, an eminent political philosopher who was very active in the New Democratic Party (NDP). The NDP were having many discussions about foreign ownership, and Charles persuaded me to interest myself in this issue to write a background paper that could be used for their discussions.
At that time, the heavy weights did not see a problem. The influx of foreign capital was believed to be obviously beneficial. The most influential economist of Canadian origin at that time was Harry Johnson. I don’t know whether that name is still known, but he was a very high profile Canadian in favour of economic liberalisation. I started to look at this and I became increasingly interested. The first thing I noticed was that there is surely a difference between portfolio capital and the operations of subsidiaries of large corporations of foreign investment. This discussion continued over two or three years. I constantly had to fortify my position, which became increasingly negative towards the sell-out of Canada’s manufacturing industries to a huge influx of American money.
At the same time, I maintained my connection with the Caribbean and was working with my colleagues on the construction an economic planning model for a typical Caribbean economy.
Michèle Rioux: In your economic planning model, what was the main element? What is related to the question of investment in Canada?
KARI: I think the question to ask is what did the effort in constructing an economic plan framework have in common with the discussion about private investment in Canada? What they had in common was that these economies were dominated by extremely large foreign owned extractive industries. You had in Jamaica a very large bauxite and alumina industry with the presence of Alcan and Alcoa, Kaiser, Reynolds; at least those four huge international companies. In Trinidad, there was Shell and Texaco, very large refineries, and there was also throughout the Caribbean a sugar industry dominated by British capital. The common factor was the effect on open economies of being dominated by subsidiaries and branches of large foreign companies. That was the common factor.
In the models that we attempted to construct, that reality had a central place. At this time there was an interesting intellectual movement in the West Indies and a published journal called the New World Journal. It was in that journal that my paper, which would become Silent Surrender, was first published in 1968. It was reprinted and circulated until the McMillan Company asked me if I would be interested in turning it into a book.
Michèle Rioux: Did you know at the time that it was important?
KARI: It certainly became very important in the NDP. Not only within the NDP, but because this was the time of Walter L. Gordon who was then the Minister of Finance. He commissioned the study which became the Watkins Report on foreign ownership, in which Mel Watkins and Stephen Hymer participated. That was at the same time as I was preparing the book for publication, and these were friends of mine.
Silent Surrender was an important document no doubt about it. It went to many re-printings and re-editions, large reeditions, physically larger, student editions, which were cheaper and so on. The book was reviewed, when it was first published, on the front page of the business section of the New York Times with an interview, etc. It was extensively reviewed in Canada. Then I found myself in demand to be speaking about this. I did not like it, it was interfering with my work and it was too much. I had to finish the input-output work, a big project in Ottawa. I had to teach. I had undertaken interesting work in the Caribbean. With all of this on my plate, I said “Look, if you want somebody to carry the Canadian flag and become an activist, it’s not me. Do it yourself.”
Incidentally I also had a dramatic encounter regarding my tenure in 1970, because after ten years my tenure was not yet confirmed.
I had written this book and I had an unfinished project. A committee of four, from which the two most important members of the department, professors Weldon and Asimakopulos, had reclused themselves, were discussing my promotion. The committee said: “We respect your work and when you finish this large statistical study, you will get your tenure.” I had sent them a big pile of works including the book that has just been published. They asked me: “Incidentally, Kari, what do you think of this publication the Silent Surrender?” I replied: “In these circumstances, it is for you to judge”. They said: “Yes, but we would like to know what you think about it.” I thought for a moment and I still remember my reply. I said: “I think it is the most important thing that I have ever done, maybe the most important thing that I will do for the rest of my career.” They looked totally stunned because the people to whom they had sent my work to be evaluated had reported very negatively on the book. They repeated; “You’ll get your tenure when you finish your statistical study”. I replied: “Fine, I intend to finish it, so it is ok”.
Subsequently, I wrote them and said: “I think you owe me an explanation as to why this book is not a publication for the purposes of tenure and promotion”. They replied: “You know you will get your tenure when you finish the statistical work.”
Throughout my career, I have rarely submitted an article to a top of the line peer reviewed journal. I have not been motivated to do that. I can see really how much work I had actually done in my lifetime. It is a lot. None of it was motivated by advancing my career. But I understand that it is not possible anymore to behave in a university the way in which I behaved. I was fortunate in enjoying the privilege of the liberty to choose what I considered important to write and to publish. I don’t know how possible this is anymore. Certainly, it is not possible to survive or to eventually become a full professor in a good university without having a doctorate.
Michèle Rioux: Why were the seventies so important for you?
KARI: They are a very important part of my life, because I had a good time and a lot of it were spent in the West Indies. I think I told you that I had started some work with Lloyd Best. We had a grant from McGill from the Center for Developing Areas Studies to develop our approach to plantation economy model for the Caribbean. I had wanted to continue this work with some CIDA funding in Trinidad at the University of the West Indies and something happened, a political intervention and CIDA took the money off the table. I had finally got leave from McGill and I had planned to move for two years with the family to Trinidad. In these circumstances I accepted an invitation from Mr. William Demas, then chief economist for Trinidad to employ my skills in national economic accounting to produce a new database for the next five-year plan for the country.
The project was initially financed by IMF Technical Assistance and had strong support from the government of Trinidad and Tobago. I was an adviser on the new system of national economic accounts. We built a team of young graduates in economics and worked with the statistical office to reorganize the economic statistics of the country. The work started in September 1969 and was abruptly terminated in 1973 by changing circumstances at the political level. This was regrettable because we had done an amazing detailed and careful statistical work which was methodologically innovative.
I then accepted a professorial appointment at the University of the West Indies and did not return to Canada full time until 1977. I was kind of floating. In the 1980s, I was determined to develop a really good course in development economics at the undergraduate and graduate levels at McGill.
In 1978, my mother passed away, and I inherited the responsibility of the literary legacy of my father Karl Polanyi. This added a whole new dimension to my life. There was my Caribbean work, my McGill teaching, and now the responsibility for the legacy of my father. In 1986, a centenary conference was organized by the Hungarian Academy of Sciences in Budapest, celebrating the life and work of my father. The earthly remains of my parents were transferred from Canada to a cemetery in Budapest.
Michèle Rioux:: Did you miss Europe ?
KARI: I missed it of course, but when time goes by, you distance yourself from your country origin. In my life, I grew ever closer to the West Indies and ever more involved in work there. When you ask me what I think is my most important contribution, it is probably my work in the Caribbean. I have published two edited books on the Caribbean, including the George Beckwood Papers (2000); Reclaiming Development: Independent Thought and Caribbean Community (2005), a collection of my essays on Caribbean topics; and jointly with Lloyd Best, Essays on the Theory of Plantation Economy: a Historical and Institutional Approach to Economic Development (2009).
In the 1990s, I was teaching a course on economic development in an excellent two year post-graduate program at the University of the West Indies in Jamaica.
In the Caribbean, there are many people who think of me as Caribbean by origin. Many are not aware that I have also a life in Canada. So I have three lives: Europe where I come from and continue to maintain contact, particularly in Vienna and Budapest, Canada where I have lived since 1947, in Toronto but much more importantly Montreal, and in the Caribbean, where I have developed another life.
Since I retired form McGill, I have more productive than ever before. I have been able to do a lot more writing, and my interests have widened and broadened. My interests have shifted from national economic accounting and technics of development planning towards a wider historical approach, to the trajectory of capitalism across space and time.
A collection of essays, under the title of From the Great Transformation to the Great Financialization, was published earlier in 2013. I am currently working on the completion of a manuscript on development economics economists from mercantilism and Adam Smith to the financial crisis of 2008 which revealed the rising importance of the global south in shifting geo-political power relations.
My sight is now very poor, I cannot read, but I have software that converts electronic text to speech. I am not saying the situation is good, it’s not, but it encourages reflection on knowledge accumulated over the years, and discourages the accumulation of ever more material, which serve act as a substitute for creative thinking. When I need information, I depend on human assistance.
Michèle Rioux: who do you think was the most important person in your life and in shaping the way you have approached your work?
KARI: It must be my parents, but I think that this is ultimately true for just about everybody. No doubt that our parents have an enormous influence on how we are shaped. My parents are very different from each other. My father worked in the area of ideas and my mother was an activist. As a young woman, she played an important role in the Hungarian struggle against the First World War. She became a national heroic figure together with her comrade and first husband in organizing the production of anti-war literature distributed in the war factories and army barracks of Budapest. She was arrested and accused of treason. My mother has been described as a sovereign revolutionary; she was no camp follower. I hugely admired my mother when I was growing up in Vienna. When I was young, she was my model, rather than my father. It was much later in life that I grew to appreciate the ideas of my father.
Both my parents had an influence and I always felt, because of growing up in a socialist household, in a socialist Red Vienna, that I had to put the education that I had received and whatever natural intelligence I had been endowed with in some way to use in this world. I never had a career plan. Wherever I found myself I would become engaged in what I thought was a positive way, in an effort to serve a cause. It stems from the prevailing values of the family. The other thing is the curiosity. I am enormously curious and always continue to find what I do sufficiently interesting to attempt to keep writing and working.
Michèle Rioux: And your children, you told me that you owe the title Silent Surrender to your son.
KARI: There is no question that my children have suffered a lot from my active kind of life. If I had to do it over again, I might have chosen differently. But it is also the way that I was brought up. I was raised to be independent from an early age. My father was in rebellion against the bourgeois expectations of his mother, and my mother was in rebellion against her aristocratic family origins. They encouraged me to be independent and I thought when my children were growing up that that was the best for them too. I think there was a little too much independence and not enough caring.
Michèle Rioux: For young people interested in political economy what would be your best advice?
KARI: That is an enormous question. All I can say is that we have to rethink the way we live in this world. We have to reconsider our place in the universe, our relationship with nature, and perhaps the most important, we need to slow down, and to restore our personal relationships with people and with our physical environment. There is an increasing interest in other civilisations, in other societies, and all of that is good. The solution does not lie in ever more sophisticated technologies but on the contrary, in questioning how we really want to live with each other, in the natural environment we are too rapidly destroying.


Pope Francis and Karl Polanyi

Pope Francis - Wikimedia Commons

Pope Francis – Wikimedia Commons

My sincere thanks for the many responses to the invitation to comment on Pope Francis’ first Apostolic Exhortation as outlined in the Atlantic article:”Pope Francis’s Theory of Economics” http://www.theatlantic.com/business/archive/2013/11/pope-franciss-theory-of-economics/281865/

Below we are posting a selection of the more substantive comments received.

I am confirmed in my initial view of the importance of Pope Francis’ intervention and its resonance to the social philosophy of my father.

I also refer you to a communication by Brazilian liberation theologian Leonardo Boff, available in Spanish on the ALAI website: alainet.org

An English translation is available here:

Leonardo Boff-Pope Francis and the political economy of exclusion

The most recent communication is from Argentine-Canadian economist Alberto Rabilotta. He writes: “At the end of the 1920s, the economist Karl Polanyi wrote that “it is necessary to transcend the individual Christian ethic, to recognize the reality of society, the ultimate and insuperable nature of society, and to acquire consciousness of this insuperable character” (1).

In a recent article (2) the theologian and philosopher Leonardo Boff underlines some of the positions of Pope Francis in the Pontifical Exhortation and notes that there is a “perceptible affinity” with the thought of Karl Polanyi. In effect, reading what the Pope has written, and knowing something of the work of Polanyi, whether by accident or by design, this affinity exists.”

For the full article, see:
I refer you also to the excellent article by James Carroll, in the New Yorker, “A Radical Pope’s First Year”

James Carroll_ A Radical Pope’s First Year _ The New Yorker

In connection with the origins of liberation theology, we are reminded of Karl Polanyi’s close association with the tradition of Christian socialism in England, where he co-edited “Christianity and the Social Revolution” with Joseph Needham, the author of a multi-volume account of technology in China. It contains his essay “The Essence of Fascism.”


“It is a great time to hear and see the actions and thoughts of a man with such great institutional authority abandon the market mentality. It generates a type of mystical euphoria. But be aware. A couple of months ago he participated and condoned a ceremony of canonization of all the catholic martyrs that died defending Franco’s coup against the republic, which was promoted by the reactionary Spanish Catholic church hierarchy, with the support of the previous popes.

The historians that have studied the life of around three of these “saints”, have found that their social activities during the war could best be defined as crimes against humanity. There are many other Basque priests that died defending the second republic, and none of them is in the new list of saints.

Fascism, according to Karl Polanyi, was also a response to the collapse of the ancienne régime, also being a rebellion against the hegemony of the markets.

Theology is easy, but let us remain scientifically sceptical.”

- Francisco Bozzano-Barnes


“Je n’oublie jamais l’hommage fait par Karl Polanyi à la fin de la Grande Transformation d’Owen et du Christ…

Il est arrivé à Durkheim qui était athée de répondre à quelqu’un qui lui demandait “mais ce que vous appelez société c’est dieu?” réponse
“oh si vous voulez l’appelez ainsi cela ne me dérange pas”…”

- Jean-Michel Servet


“I’m sure your father would be pleased with this
article–just as he was glad to see included in an early edition of
Co-Existence an article that discussed Pope John XXIII’s ‘Pacem in
terris’, the 1963 Encyclical that, in his reading, warned the flock
against chasing after “the daydream of a capitalist world community.””

-Gareth Dale


“I think this commentary does justice to what your father was suggesting, and the considerations seem to fit with some of the growth models being developed in parts of the world, particularly in China. In short, the struggle between economic and social man continues.”

-James Palombo


“My friends in Argentina – survivors of the dirty war – were cautiously optimistic when Francis was appointed. It seems their judgment is being borne out. InRome and Milan, they tell me that he is having a shock-effect on the Italian political classes, and that too cannot be a bad thing.”

-James Galbraith


“I live in Argentina. The actual pope lived all his long life here, and he never agreed or shared liberation theology. More than that, in the middle of 1970, he, as the chief of Jesuites, had separated priests who maked option for the poor. More! He is accused of facilitating the kidnapping of two priests by the military. The involvement of the Catholic Church in the dictatorship was never repudiated by the church or by the pope. Today we still expect the Pope to compel the Argentina Catholic Church to open adoption files because we are looking for the 400 children stolen under the dictatorship.”

- Nora Britos


“This document is mostly about the Church.  Some of it goes back to the Middle Ages.  One of the slogans of the medieval reform movements was to call for reform “in capite et in membris”,  “in the head and in the members”.   Pope Francis is quite explicit in saying here that reform must begin at the top, at the centre.  But the Church does not exist in a vacuum.  It exists in societies.  So he is looking at some of the problems of these societies, and in addition to a severe critique of inequality he is also — both in the Church itself and in various societies (the plural is important) — questioning the very notion of a pensée unique.   Thus he cites the African bishops who complain about the imposition of European or North American institutions on the African reality.  Thus the passage cited in the Atlantic article:

“If we really want to achieve a healthy world economy, what is needed at this juncture of history is a more efficient way of interacting which, with due regard for the sovereignty of each nation, ensures the economic well-being of all countries, not just of a few.”  

    That is to say,  globalization is not a solution: it is the problem, or one of the problems.  Different societies have different needs,  demand different structures. Hence his emphasis on decentralization, both in the Church and in the world at large.   His approach to the so-called free market is here similar to that of Karl Polanyi:  the market is a social creation,  and as it actually functions,  it supports social structures that are inherently unjust.   It is, however, extremely important to note that for Pope Francis “decentralization” does not involve individualism,  much less the extreme individualism of a consumer society. Margaret Thatcher denied the existence of society.   Francis is very much aware of societies,  and aware of the fact that societies are different one from another.

    Hayek complained that an economy controlled by a central bureaucracy demanded a kind of knowledge that no one could attain.  Keynes simply noted that the same is true of markets,  let alone a “Market” which is supposed to control the whole world.  Polany noted that this is quite impossible,  and that reactions to this are inevitable.  Inevitable but not a  kind of automated magic.   The form that this reaction would take may well be different in different societies,  although in nineteenth century Europe it appeared to be somewhat the same in very different societies:  Germany,  France,  Austria, England.  They all evolved institutions to protect people from the dictatorship of markets.   As was the case with Polanyi,  Pope Francis simply does not accept economic determinism,  either of the Marxian variety or of the Washington Consensus.   Different societies have different needs,  and solutions must be found there,  not in Washington or Brussels. Here again the parallel with  Polanyi is striking. “

- Jordan Bishop 


“I was not at all surprised reading the very interesting and important “Apostolic Exhortation”[1] of Pope Francis.The encyclical letters of John Paul II on social and economic  issues have been in many ways very similar.In his famous statement in 1991,in the Encyclical letter “Centesimus Annus”. He said,that the Marxist solution has failed,but the realities of marginalization and exploitation remain in the world. He added that there was a risk that radical capitalist ideology could spread which refuses even to consider these problems. and warned the world about the inevitable failures of solutions based on the free market forces.[2]In other letters he said similar things. Pope Francis in his recent  “Apostolic Exhortation”[3] was referring to the ongoing transformation of the world.Many of his ideas reminded me also of Polanyi’s work about the „Great Transformation” and are in many ways similar to Kofi Annan statement in 2003. Pope Francis’  formula “In our time humanity is experiencing a turning-point in its history, as we can see from the advances being made in so many fields”. This epochal change has been set in motion by the enormous qualitative, quantitative, rapid and cumulative advances occurring in the sciences and in technology, and by their instant application in different areas of nature and of life. We are in an age of knowledge and information, which has led to new and often anonymous kinds of power.I think that in Chapter I of the encyclical letter on Capitalism, he went much further than just trying to rehabilitate the liberation theology.His analysis of the main structural, and systemic aspects of contemporary capitalism went   in many ways beyond his predecessors. A few examples:  “The family is experiencing a profound cultural crisis, as are all communities and social bonds….” A completely new culture has come to life and continues to grow in the cities .. . Cities are multicultural; in the larger cities, a connective network is found in which groups of people share a common imagination and dreams about life, and new human interactions arise, new cultures, invisible cities. Various subcultures exist side by side, and often practice segregation and violence”….” We cannot ignore the fact that in cities human trafficking, the narcotics trade, the abuse and exploitation of minors, the abandonment of the elderly and infirm, and various forms of corruption and criminal activity take place. At the same time, what could be significant places of encounter and solidarity often become places of isolation and mutual distrust”. The “four no” „No to an economy of exclusion”…„No to the new idolatry of money”.. „No to a financial system which rules rather than serves”.”No to the inequality which spawns violence” and the detailed explanations” resemble to many, more radical  UN documents and  neo-marxist works. All these  problems and the process of transformations comprise radical challenges also to the Roman Catholic Church. This institution of course survived many transformations, but the ongoing one is in many ways unprecedented. The adjustment or the new tasks will have to be radical and difficult.Not only because the doctrines. Theological changes have of course never been smooth and easy: In this era the Church has to take into account  the forces o fan increasingly global ideological competitors which are both secular and clerical. The competition with Islam for example  is not confined any longer to the developing regions of the World. Therefore  I found the following statement also very important:

“I am aware that nowadays documents do not arouse the same interest as in the past and that they are quickly forgotten. Nevertheless, I want to emphasize that what I am trying to express here has a programmatic significance and important consequences. I hope that all communities will devote the necessary effort to advancing along the path of a pastoral and missionary conversion which cannot leave things as they presently are. “Mere administration” can no longer be enough”.

-Mihaly Simai

[1] An apostolic exhortation is a type of communication from the Pope,which is aim is to inform and  encourages the Church, the clerics and the Laymen. but does not define the doctrines. It is considered lower in formal authority than a papal encyclical.
[2] John Paul „Ont he Hundredth Anniversary of Rerum Novarum:Centesimus Annus” Encycical letter.May 1 1991 Publication 436-8.United States Cattholic Conference,Washington DC. P.82
[3] Evangelii Gaudiumof the Holy Father Francis to the bishops, clergy,consecrated persons and the lay faithful on the proclamation of the gospel in today’s world. Chapter II.Vatican Press, 2013. 52-75

“My guess is that the Pope may try to rehabilitate Liberation Theology, specifically regarding the debt issue. He can’t afford to be called Marxist, which is what the Liberation Theologists were called, even though I published my critique first through Orbis books (the Maryknoll order) rather than by a left-wing publisher.But all my Catholic colleagues were isolated by the two bad popes that followed the murder of the last “good” pope just as he was to sponsor an Academy of Geoeconomics to focus on liberation theology. (The plan was for it to have been in New Orleans.)In any case, Polanyi is “safe,” at least as compared to Marx.It would be intriguing if our research into the ancient Near East and the Mesopotamian origins of the biblical economic laws (esp. the Jubilee Year) were picked up by the Vatican.I’m afraid that would take a new generation of Catholic officials ? and the last two popes have pretty much sterilized such a generation by empowering Opus Dei in place of the Liberation theologists.(Our group, by the way, is the International Scholars Conference  on Ancient Near Eastern Economies, ISCANEE, funded by Harvard and the Institute for the Study of Long-term Economic Trends, ISLET. Our fifth volume, on labor in the ancient Near East, is just being completed now.)”

-Michael Hudson

Comment on Kari Polanyi Levitt’s “From the Great Transformation to the Great Financialization: on Karl Polanyi and other essays” published by Fernwood and Zed books, 2013.

By Roy Culpeper, October 2013

The humanist tradition in economics and the Canadian connection
Canadian development economist Kari Polanyi Levitt has a reputation in Canada and abroad as an advocate for economic policies rooted in social justice and distributional equity. Levitt has worked tirelessly to build development studies as a multi-disciplinary field of scholarly endeavour, in which development economics plays an essential role but must be complemented by essential contributions from other social scientists and historians. Now in her ninety-first year, the Professor Emerita of Economics at McGill University has published a new book entitled From the Great Transformation to the Great Financialization: On Karl Polanyi and Other Essays.

Professor Levitt is the daughter of Karl Polanyi, most famous for The Great Transformation: Political and Economic Origins of Our Time. Levitt has done much to build the intellectual legacy of her father, whose thinking has enjoyed something of a rebirth in recent years. As its title suggests, her own book—a compilation of essays and lectures written over a number of years—serves as a bridge between the thinking of Karl Polanyi, which emerged from the Great Depression, and the crisis-ridden world that confronts us today.

Although he has been appreciated by anthropologists, sociologists and political scientists, Polanyi’s recognition, let alone acceptance, among mainstream economists has been conspicuous by its absence. The reasons are fairly straightforward. First, Polanyi was a thinker not constrained by disciplinary boundaries. He drew on the work of all the social sciences as well as history and philosophy. But since his magnum opus was published, and particularly since the 1970s, mainstream economics (known more formally as “neoclassical economics”) has become narrowly focused on the analytics of markets, increasingly utilizing highly complex mathematical tools, and divorced from the social and political realities that policymakers and business people must contend with daily.

Second, although Polanyi was not opposed to markets or the market economy per se, what he profoundly objected to was the “market society” in which “self-regulating” markets dominate social and political norms. In Polanyi’s view, if it is to be socially and environmentally sustainable, and compatible with democracy, the economy must be embedded in society and serve the needs of the entire human community. Polanyi came to this view through his study of human communities throughout history, in which the economy was the servant of society, not its master. Industrial capitalism turned this relationship upside-down—embedding society in the economy, so that individuals and communities are led to serve the needs of the market for labour, commodities and capital. However, Polanyi also believed in the possibilities of human agency to push back against these forces, reasserting the needs of society through the cooperative and democratic efforts of workers, communities and governments.

The Great Depression gave birth in the post-World War II generation to Keynesian policies of intervention aimed at maintaining full employment, supporting the welfare state and a more equitable international distribution of income. This seemed to be a vindication of Polanyi’s thinking. But the last quarter of the twentieth century witnessed the eclipse of Keynesianism and the return of “neoliberalism”, an ideology that asserts the primacy of markets and the dangers inherent in activist governments that intervene in the economy in order to achieve socially desirable outcomes.

Although spearheaded from the late 1970s by Margaret Thatcher in the U.K. and Ronald Reagan in the United States, Levitt locates the origins of modern neoliberalism much earlier, in Vienna of the 1920s, the selfsame milieu in which Karl Polanyi began his career and his profoundly divergent thinking. There, neoliberalism was championed by Friedrich Hayek and his mentor, Ludwig von Mises, who longed for a return to the pre-World War 1 laissez-faire approach. Such longings however remained in the policy wilderness until the 1960s. It was only with the re-emergence of unbridled financial markets that neoliberalism found the means to enforce its policies on a global scale.

Professor Levitt’s “great financialization” refers to the policies to liberalize and deregulate the financial sector, both at the domestic level and ultimately throughout the global economy. Initially championed by neoliberal advocates as the means to “discipline” governments to implement business-friendly policies, financial liberalization has instead brought about a series of crises from the 1970s until today. And far from engendering a self-regulating market that would automatically check against speculative excesses and bubbles, liberalization gave birth to financial innovation with an increasing appetite for risk, cloaked by opacity and the inability or unwillingness of governments to arrest the growing threats posed by all of these tendencies. The latest crisis, erupting in the heartland of the global financial sector—the United States and Europe—has as yet shown only anemic signs of recovery.

Mainstream, neoclassical economics has a lot to answer for in leading the world to the present impasse. As Paul Krugman aptly asked in a New York Times Magazine article in September 2009, how did economists get it so wrong? The answer has much to do with how mainstream economics has turned inwards, like medieval theology, becoming increasingly less relevant to the real world, even to brokers on Wall Street.

While she harbours deep reservations about the usefulness of much present-day economics and its complicity in the Great Financialization, Professor Levitt remains convinced that the basic tools of economics, as modified by Keynes, are essential to understanding the critical issues facing rich countries and poor alike. And like her father, she cannot imagine that economics alone can tackle today’s social and economic problems. Accordingly she urges younger scholars and activists to embrace an understanding of local history and culture, along with an interdisciplinary analysis of the opportunities and constraints facing any country or region, in order to lay the foundations for policies aimed at distributional equity and environmental sustainability.

Roy Culpeper is the former President of the North-South Institute of Canada and currently a Senior Fellow of the University of Ottawa’s School of International Development and Global Studies, and Adjunct Professor at the School of Public Policy and Administration, Carleton University.

“From the Great Transformation to the Great Financialization: on Karl Polanyi and Other Essays” by Kari Polanyi, with an afterword from Samir Amin

Cover-Levitt-From-Great-TransIn Canada, Kari Levitt is known for her path-breaking study Silent Surrender (1970, 2002), which warned of the consequences of permitting industries to be dominated by multinational corporations. In the Caribbean the author is known for her work on the persistence of the Plantation Economy (2009), from slavery to the present. In From the Great Transformation to the Great Financialization, Kari Levitt draws on the insights of her father Karl Polanyi’s classic The Great Transformation to set the financial crisis of 2008 in the perspective of the predatory financialization of the Western heartlands of capitalism. The author traces the return of capitalism to its mercantilist origins in commerce and conquest, and the return of Asia to the stage of world history in the autumn of American empire. The most surprising aspect of the on-going multi-faceted global crisis has been the resilience of the South in resuming strong economic growth compared with the inability of Western governments to save the economic livelihoods of millions.

“…the continuities of scholarly approach and of substance shine through with a light that illuminates past, present and potential future.”

— Norman Girvan, University of the West Indies

“This extraordinary volume from Kari Polanyi Levitt is a must read and provides a unique window on the thinking of Karl Polanyi, demonstrating the relevance of his ideas to the challenges of the 21st Century.”

— James Putzel, London School of Economics

“The author’s approach reveals the striking contrast between the power of the historical method and the sterility of conventional economic theory based on trans-historical rationality.”

— Samir Amin, Third World Forum

“Kari Polanyi Levitt has made an important contribution to the understanding of the role of emerging nations in moving toward a more equitable multipolar world.”

— José Antonio Ocampo, Columbia University

“Kari Polanyi Levitt demonstrates how Karl Polanyi… offers an alternative policy framework for our time— one steeped in humanism, social democracy, and environmental sustainability.”

— Roy Culpeper, Carleton University

To order:

Canada: http://fernwoodpublishing.ca/page/Ordering

US & International: http://zedbooks.co.uk/node/326