The Great Transformation

The international system failed in the 1920s, leading to the reappearance of forgotten issues of early capitalism, such as popular government:

The fascist attack on popular democracy merely revived the issue of political interventionism which haunted the history of market economy, since that issue was hardly more than another name for the separation of the economic from the political sphere (231).

Polanyi discusses the history of Speenhamland and the subsequent abolishment of the allowance system via the Poor Laws, which allowed for this separation through market liberalism. The Poor Laws also created a new social stratification between the physically-incapable paupers destined for the workhouse and the physically-able laborers who earned their wages, creating a new social category of the unemployed who should not feel relief. Any conception of relief for this demographic would indicate a violation of their rights. The separation of economics and politics spread from the academic sphere to the wholesale structure of society:“But the more the labor market contorted the lives of the workers, the more insistently they clamoured for the vote. The demand for popular government was the political source of the tension” (233).

This led to a rise in constitutionalism, which sought to protect industrial property from the people through the separation of powers.