A Systems Theory Perspective on Polanyi's Great Transformation: The Case of Financial Derivative Contracts

Whereas much of the renewed interest in Polanyi's Great Transform-ation speculates that the rebalancing of economy and society he foresaw might now be emerging in the context of the financial crisis, the systems theory perspective adopted in this article concludes that there are good reasons to believe that such a shift may be no closer. From an examina-tion of credit default swaps and corporate bonds, the article suggests that finance may best be understood as an internally differentiated subsystem of the economy and thus perhaps peculiarly proof against efforts to exert control over it. Concluding that Polanyi's analysis lacks the conceptual tools to cope with contemporary conditions when compared to systems theory, the article nevertheless suggests that his approach may usefully be extended by adding a fourth fictitious commodity - risk -- to the familiar trio of land, labor, and money.