The social embeddedness of local economies

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The social embeddedness of local economies
Paul Blokker
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Overview Class

• Embeddedness
• Main themes
• a. the market economy as independent sub-system
• b. the social embeddedness of the economy
• c. different forms of integration reciprocity,
  redistribution, market
• d. the market economy as disembedded
• e. fictitious commodities land, labour, and
  money
• f. social reactions to disembedment

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Overview Course

• Embeddedness
• 2. Main themes
• a. Economic sociology markets as created, as
  reliant on external regulation and social norms,
  as based on forms of trust
• b Varieties of capitalism varieties of
  institutionalizing the market
• c. liberal market economies and coordinated
  market economies
• d. Different modes of governance state, market,
  hierarchy, association, community

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Overview Course

• Embeddedness
• 3. Relevance
• An understanding of historical variety of
  economic activity and its relation to society
• Current economic order designated by convergence
  towards disembedded markets (globalization), but
  at the same time by embedded (local) markets
  (localization)
• Knowledge of the role of institutions and society
  in reproducing the market

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Overview Course

• Embeddedness
• Relevant literature of the reading list
• Beckert, Jens (2007), 'The Great Transformation
  of Embeddedness Karl Polanyi and the New
  Economic Sociology',
• Block, F. (2000), 'Disorderly coordination the
  Limited Capacities of States and Markets.
• Crouch, C. et al. (2001), Local production
  systems in Europe rise or demise?, Oxford/New
  York Oxford University Press, in particular
  conclusions.
• Evans, P. (1995), Embedded Autonomy States
  Industrial Transformation, Princeton.
• Polanyi, Karl (1944), The Great Transformation,
  in particular chapter 4.
• Trigilia, C. (2000), Economic Sociology,
  Blackwell Publishers, in particular chapter 5.

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1Relation betweenEconomy and Society
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1. Economy - Society

• Economy as independent system?
• neo-classical economics as well as classical
  sociology presuppose a market economy that is
  detached from the rest of society, that forms an
  independent sub-system of its own the famous
  invisible hand regulates the market, or, the
  market is self-regulating

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1. Economy - Society

• Economy as independent system?
• A very general definition of the economy is as
  a body of activities which are usually carried
  out by members of a society in order to produce,
  distribute, and exchange goods and services
  (Trigilia 2002 2).

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1. Economy - Society

• Economy as independent system?
• Economists tend to follow a more narrow
  definition, with an emphasis on activities which
  involve the rational allocation of scarce
  resources in order to obtain the most from the
  means available (Trigilia 2002 2).

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1. Economy - Society

• Economy as independent system?
• Two types of understanding the economy can be
  identified
• 1. Formal means-ends relationship, actors
  economizing
• 2. Substantive provisioning for the material
  wants of society

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1. Economy - Society

• Economy as independent system?
• A standard definition of the market economy would
  then be something like
• An economic system in which entrepreneurs hire
  workers to produce goods and services to be
  marketed (sold on the market) with the intention
  of making a profit.

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1. Economy - Society

• Capitalism involves at least 4 principles
• i. all factors of production (land, labour,
  means of production such as machinery) are
  subject to specified property rights
• ii. the allocation of scarce resources (primary
  materials, goods, services) through markets
• iii. an economy based on entrepreneurs who take
  initiatives, make decisions, and calculate risks
• iv. civilizational condition the primacy of
  economic values and an inbuilt tendency to
  subordinate social activities to the goal of
  unending economic growth.

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1. Economy - Society

• Economy as embedded
• Increasingly recognized that the market economy
  is always already embedded in larger society. In
  other words, a market economy can only function
  if it relates to, and is sustained by, larger
  society.

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1. Economy - Society

• Economy as embedded
• A major thinker who was (one of) the first to
  elaborate an economic-sociological approach to
  the embeddedness of markets was Karl Polanyi
  (anthropologist, sociologist), although he hardly
  used the notion embeddedness.

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1. Economy - Society

• Karl Paul Polanyi (1886-1964)
• Polanyis most well-known work is The Great
  Transformation (1944), which analyses the rise
  and fall of the self-regulating market society
• Polanyi distinguishes in his The Great
  Transformation between 3 (or actually 4) forms of
  the integration of the economy in society, that
  is, modes of embeddedness of the economy in wider
  society.

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1. Economy - Society

• Karl Paul Polanyi (1886-1964)

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1. Economy - Society

• Economy as embedded
• Much of what Polanyi tried to explain in his The
  Great Transformation was the unicity of the
  modern market society, and of market
  fundamentalism, and the problematic consequences
  of such a type of market society.

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1. Economy - Society

• Economy as embedded
• Polanyi takes a historical approach to the
  relationship between economy and society,
  distinguishing three (or four) modes of
  integration
• Reciprocity
• Redistribution
• Market
• (4. Householding)

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1. Economy - Society

• Reciprocity
• - The exchange of goods and services within a
  (primitive) society is based on traditions
  related to family and kinship.
• - Primitive economies functioned on the basis of
  complex networks of shared obligations that
  motivated individual behaviour.
• Polanyi uses the example of Trobriand Islanders
  in Western Melanesia (cf. Malinowski, Thurnwald)

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1. Economy - Society

• Reciprocity
• Reciprocity entails that
• goods and services are produced and exchanged
  on the expectation that other goods and services
  would be received in ways and over periods of
  time that were fixed by shared social norms
  (Trigilia 2002 98)
• NB. not by market supply and demand, or motives
  of gain or profit.

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1. Economy - Society

• Reciprocity

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1. Economy - Society

• Redistribution
• Redistribution entails the production and
  allocation of goods on the basis of norms
  establishing the modalities of labor services and
  types of resources that should be transferred to
  a political chief (Trigilia 2002 98).
• This type of integration was predominant in
  larger, imperial types of society (Egypt,
  Mesopotamia).

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1. Economy - Society

• Redistribution

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1. Economy - Society

• Market
• The market society is based on the exchange of
  goods through market-regulated trade, in which
  prices emerge from the unrestrained interaction
  of demand and supply.

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1. Economy - Society

• Market
• NB. But the Market Society also demands -
  different from markets - that the production of
  goods and services, as well as the distribution
  of income, depend on a price-regulated market
  (Trigilia 2002 98).

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1. Economy - Society

• Market

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1. Economy - Society

• (Householding)
• Householding (what the Greeks called
  oeconomia/oikon) consists in the production
  for ones own use, thus providing for ones
  self-subsistence (normally for the family).

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1. Economy - Society

• Embeddedness of economy
• Polanyi thus theorizes various forms of
  embeddedness of the economy.
• The notion of embeddedness has become a key
  notion in economic sociology.
• Often, however, the interpretation is very
  different from Polanyis.

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1. Economy - Society

• Embeddedness of economy
• For Polanyi, embeddedness is
• 1. Markets as necessarily limited by
  institutional regulations which connect them to
  the moral fabric of society. Unregulated markets
  will lead to social anomie.
• 2. In a normative sense, embeddedness refers to
  a social reformist view of society, in which the
  state needs to tame the market (Beckert 2007
  8).

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1. Economy - Society

• Embeddedness of economy
• One of the first to pick embeddedness up was Mark
  Granovetter. His interpretation is embeddedness
  as social networks
• Economic action is embedded in concrete,
  ongoing systems of social relations (Granovetter
  1985).
• E.g. immigrant networks, information networks,
  organization of financial markets.

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1. Economy - Society

• Embeddedness of economy
• A more complex definition closer to Polanyi
  is provided by Zukin and Dimaggio (1990)
• 1. Cultural embeddedness
• 2. Cognitive embeddedness
• 3. Political embeddedness
• 4. Structural embeddedness

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1. Social Question

• Double movement
• Polanyi argues that the commodification of
  fictitious commodities, i.e., those factors that
  are not produced for the market, leads to social
  resistance

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1. Social Question

• Double movement
• Double movement too much commodification and
  disembedment leads to attempts to re-embed the
  economy.
• At the end of the 19th century, the social
  reaction consisted of labour unions, socialist
  parties.

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1. Social Question

• More on Karl Polanyi
• http//polanyi.concordia.ca/
• http//homepage.newschool.edu/het//profiles/polany
  i.htm

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1. Social Question

• More on Karl Polanyi

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