Born in 1886 in Vienna, Karl Polanyi grew up in Budapest, in an assimilated, highly cultured Jewish family. Polanyi’s father, an engineer who became a railroad contractor, was so conscientious that when his business failed, around 1900, he repaid the shareholders, plunging the family into genteel poverty. Polanyi’s mother founded a women’s college, hosted a salon, and had a somewhat chaotic personality that a daughter-in-law once likened to “a book not yet written.” At home, as Gareth Dale recounts in a thoughtful 2016 biography, the family spoke German, French, and a little Hungarian; Karl also learned English, Latin, and Greek as a child. “I was taught tolerance not only by Goethe,” he later recalled, “but also, with seemingly mutually exclusive accents, by Dostoyevsky and John Stuart Mill.”

After university, Polanyi helped to found Hungary’s Radical Citizens’ Party, which called for land redistribution, free trade, and extended suffrage. But he remained enough of a traditionalist to enlist as a cavalry officer shortly after the First World War broke out. At the front, where, he said, “the Russian winter and the blackish steppe made me feel sick at heart,” he read “Hamlet” obsessively, and wrote letters home asking his family to send volumes of Marx, Flaubert, and Locke. After the war, the Radical Citizens took power, but they fumbled it. In the short-lived Communist government that followed, Polanyi was offered a position in the culture ministry by his friend György Lukács, later a celebrated Marxist literary critic.

When the Communists fell, pogroms broke out, and Polanyi fled to Vienna. “He looked like one who looks back on life, not forward to it,” Ilona Duczynska, who became his wife, remembered. Duczynska was a Communist engineer, ten years younger than he was. She had smuggled tsarist diamonds out of Russia in a tube of toothpaste and once borrowed a pistol to assassinate Hungary’s Prime Minister, though he resigned before she could shoot him. She and Polanyi married in 1923 and soon had a daughter.

These were the days of so-called Red Vienna, when the city’s socialist government was providing apartments for the working class and opening new libraries and kindergartens. Polanyi held informal seminars on socialist economics at home. He started writing for The Austrian Economist in 1924, and he was promoted to editor-in-chief a few months before the right-wing takeover sent him into exile. Duczynska remained in Vienna, going underground with a militia, but, in 1936, she, too, emigrated, taking a job as a cook in a London boarding house. In 1940, Bennington College offered Polanyi a lectureship, and he left for Vermont, where his family soon joined him and he began to turn his lecture notes into a book. “Not since 1920 did I have a time so rich in study and development,” he wrote.

Polanyi starts “The Great Transformation” by giving capitalism its due. For all but eighteen months of the century prior to the First World War, he writes, a web of international trade and investment kept peace among Europe’s great powers. Money crossed borders easily, thanks to the gold standard, a promise by each nation’s central bank to sell gold at a fixed price in its own currency. This both harmonized trade between countries and stabilized relative currency values. If a nation started to sell more goods than it bought, gold streamed in, expanding the money supply, heating up the economy, and raising prices high enough to discourage foreign buyers—at which point, in a correction so smooth it almost seemed natural, exports sank back down to pre-boom levels. The trouble was that the system could be gratuitously cruel. If a country went into a recession or its currency weakened, the only remedy was to attract foreign money by forcing prices down, cutting government spending, or raising interest rates—which, in effect, meant throwing people out of work. “No private suffering, no restriction of sovereignty, was deemed too great a sacrifice for the recovery of monetary integrity,” Polanyi wrote.

The system was sustainable politically only as long as those whose lives it ruined didn’t have a say. But, in the late nineteenth and early twentieth centuries, the right to vote spread. In the twenties and thirties, governments began trying to protect citizens’ jobs from shifts in international prices by raising tariffs, so that, in the system’s final years, it hardened national borders instead of opening them, and engendered what Polanyi called a “new crustacean type of nation,” which turned away from international trade, making first one world war, and then another, inevitable.

In Vienna, Polanyi had heard socialism dismissed as utopian, on the ground that no central authority could efficiently manage millions of different wishes, resources, and capabilities. In “The Great Transformation,” he swivelled this popgun around. What was utopian, he declared, was “the concept of a self-regulating market.” Human life wasn’t as orderly as mathematics, and only a goggle-eyed idealist would think it wise to lash people to a mechanism like the gold standard and then turn the crank. For most of human history, he observed, money and the exchange of goods had been embedded within culture, religion, and politics. The experiment of subordinating a nation to a self-adjusting market hadn’t even been attempted until Britain tried it, in the mid-eighteen-thirties, and that effort had required a great deal of coördination and behind-the-scenes management. “Laissez-faire,” Polanyi earnestly joked, “was planned.”

On the other hand, Polanyi believed that resistance to market forces, which he dubbed “the countermovement,” truly was spontaneous and ad hoc. He pointed to the motley of late-nineteenth-century measures—inspecting food and drink, subsidizing irrigation, regulating coal-mine ventilation, requiring vaccinations, protecting juvenile chimney sweeps, and so on—that were instituted to housebreak capitalism. Because such restraints went against the laws of supply and demand, they were despised by defenders of laissez-faire, who, Polanyi noticed, usually argued “that the incomplete application of its principles was the reason for every and any difficulty laid to its charge.” But what was the alternative? Once the laissez-faire machine started running, it cheerfully annihilated the people and the natural environment that it made use of, unless it was restrained.

Polanyi offered the example of the enclosure movement in sixteenth-century England, when landowners tore down villages and turned common lands into private pastures. The changes brought efficiencies that raised the land’s food yield as well as its value, in the long term improving life for everyone. Enclosure was a good thing, in other words; the numbers said so. In the short term, however, it dispossessed peasants who couldn’t immediately improvise a new living, and it was only because of a countermovement—led in piecemeal fashion by the monarchy, in a long, losing battle with Parliament—that more people didn’t die of exposure and starvation. If you argued that resistance did not compute, you would be right, but the countermovement, though it couldn’t stop progress, shielded people by slowing it down. It made enclosure so gradual that, even three centuries later, the poet John Clare was lamenting its advance in his sonnets.