||A system of exchange organized through price-fixing markets. Market exchange was one of three forms of economic integration identified by Karl Polanyi. When he used it to characterize an entire economy (rather than segments within an economy) Polanyi spoke of a market economy thus: \'an economic system controlled, regulated and directed by markets alone; order in the production and distribution of goods is entrusted to this self-regulating mechanism â€¦ [and] ensured by prices alone\' (Polanyi, 1957). Three features of market exchange are especially important.
(a) Market exchange depends upon a characteristic spatial structure involving the transmission of price signals and the interdependence of markets in time and space. \'Price-making markets are integrative only if they are linked up in a system that tends to spread the effects of prices to markets other than those directly affected\' (Polanyi, in Dalton, 1968). Much of mainstream location theory assumed, and on occasion addressed, these matters but attention was usually focused on the pattern of markets â€” for example, as in Christaller\'s central place theory â€” with comparatively little regard to the diffusion of price signals. Notable empirical exceptions include LÃ¶sch\'s (1954, pp. 496-504) suggestive descriptions of \'spatial differences in the movement of commodity prices\' and Pred\'s (1973) reconstruction of the circulation of information (including prices current) through systems of American cities between 1790 and 1840. Most of the theoretical formulations depended upon neo-classical economics, however, which assumes: (i) the universality of market exchange; and (ii) its tendency toward equilibrium. Polanyi contested both of these assumptions: see (b) and (c) respectively.
(b) Market exchange is historically specific. Before the industrial revolution in England, Polanyi argued, \'the economic system was submerged in general social relations; markets were merely an accessory feature of an institutional setting controlled and regulated â€¦ by social authority\'. In pre-industrial societies, therefore, \'the self-regulating market was unknown\': and it was precisely because he believed that the emergence of \'the idea of self-regulation was a complete reversal of the trend of development\' that Polanyi entitled his celebrated account of the industrial revolution The great transformation (1957). Within geography, the historical specificity of market exchange has been accentuated most sharply by those approaches which have drawn upon Marxian economics to recognize \'integration through price-fixing markets [as] characteristic of the capitalist mode of production\' (Harvey, 1973; see capitalism). Even so, Harvey described the Industrial Revolution in terms which were as close to Polanyi as they were to Marx:
The slow build-up of the Industrial Revolution in Britain â€¦ represented a gradual penetration of market exchange into production (as distinct from trade and commerce) through the penetration of land and labour. As the industrial revolution gained momentum, more and more sectors of activity became integrated through market exchange, and distribution and service activities were also drawn in. The circulation of surplus value in its capitalist form finally broke free from the restraining influence of the rank society and then, through its domination of all the key sectors of society became the medium through which the market mode of economic integration gradually bound society into one cohesive economic system. (Harvey, 1973, p. 243)This slippage between Marx and Polanyi is problematic â€” Polanyi was not a Marxist and there are important differences between his formulations and those of historical materialism â€” but Harvey was not alone in seeking to connect them. More recently, Wallerstein\'s discussions of the formation of the capitalist world-economy and what he calls \'historical capitalism\' rely on similar connections and accord a peculiar primacy to systems of (unequal) exchange (see Brenner, 1977; Skocpol, 1977). This is not to argue for an intellectual fideism, of course: Marx\'s formulations have no necessary privilege over Polanyi\'s and, indeed, one commentator has claimed that Wallerstein\'s schema is deficient because it pays too little attention to Polanyi\'s work (Dodgshon, 1977). But the rise of this world-systems analysis has confirmed the continuing significance of Polanyi\'s writings and has underscored the historical specificity of market exchange.
(c) Market exchange entails relations of conflict. According to Polanyi, \'exchange at fluctuating prices aims at a gain that can be attained only by an attitude involving a distinctive antagonistic relationship between the partners â€¦ [which] is ineradicable\' (Polanyi, in Dalton, 1968). In his first formulations Harvey (1973) thus identified market exchange with stratified societies, but he soon acknowledged that this begged the central question. Giddens (1981) had emphasized that for both Marx and Weber \'the market is intrinsically a structure of power\' (emphasis added) and that for any account seeking to build on either of these foundations \'the problem â€¦ is not the recognition of the diversity of the relationships and conflicts created by the capitalist market as such, but that of making the theoretical transition from such relationships and conflicts to identification of classes as structured forms\'. In a later essay Harvey (1974) drew upon Giddens\'s writings to provide a thumbnail sketch of the connections between class structure and residential differentiation; and although this derived \'primarily from a reading of Marx\', it also gave a special prominence to differential \'market capacities\' in a way which plainly owed just as much to Weber (see class). There have been a number of developments from this baseline (see, e.g., Cox, 1978) and particular interest has been attached to studies of the relations between housing markets and labour markets (see, e.g. Harvey, 1978; Thorns, 1982; Hamnett, 1984; Saunders, 1984). More recently, the collapse of communism in eastern Europe and the dissolution of the Soviet Union ushered in a new period of so-called \'market triumphalism\', but many of the former command economies have experienced considerable problems in making the transition to a market economy, which seems to confirm the conflicts and asymmetries which Polanyi believed to be inherent within market exchange.Â (DG)
References Brenner, R. 1977: The origins of capitalist development: a critique of neo-Smithian Marxism. New Left Review 104: 25-92.Â Cox, K.R., ed., 1978: Urbanization and conflict in market societies. London: Methuen.Â Dalton, G., ed., 1968: Primitive, archaic and modern economies. Essays of Karl Polanyi. Boston: Beacon Press.Â Dodgshon, R.A. 1977: Review symposium; The modern world system by Immanuel Wallerstein. A spatial perspective. Peasant Studies 6: 8-19.Â Giddens, A. 1981: The class structure of the advanced societies, 2nd edn. London: Hutchinson.Â Hamnett, C. 1984: The postwar restructuring of the British housing and labour markets. Environment and Planning A 12: 147-61.Â Harvey, D. 1973: Social justice and the city. London: Edward Arnold; Baltimore, MD: Johns Hopkins University Press.Â Harvey, D. 1974: Class structure in a capitalist society and the theory of residential differentiation. In R. Peel, M. Chisholm and P. Haggett, eds, Processes in physical and human geography: Bristol essays. London: Heinemann, 354-69.Â Harvey, D. 1978: Labour, capital and class struggle around the built environment in advanced capitalist societies. In K.R. Cox, ed., Urbanization and conflict in market societies. London: Methuen; Chicago; Maaroufa Press, 9-37.Â LÃ¶sch, A. 1954: The economics of location. New Haven: Yale University Press.Â Polanyi, K. 1957: The great transformation: the political and economic origins of our time. Boston: Beacon Press; Pred, A. 1973: Urban growth and the circulation of information: the United States system of cities 1790-1840. Cambridge, MA: Harvard University Press.Â Saunders, P. 1984: Beyond housing classes. International Journal of Urban and Regional Research 8: 202-25; Skocpol, T. 1977:Wallerstein\'s world capitalist system: a theoretical and historical critique. American Journal of Sociology 82: 1075-90.Â Thorns, D.C. 1982: Industrial restructuring and changes in the labour and property markets in Britain. Environment and Planning A 14: 745-63.
Suggested Reading Cox (1978).Â Harvey (1973), 210-15, 241-5, 261-84.Â Polanyi (1957).