Cash begets no interest and hence is an “inefficiency”. The banks portfolios which today include brokerage houses, underwriting establishments, derivative boutiques, merchant banking, and stock market positions are recorded at their historic cost unless the given bank owns 20% or more of a particular issue.

BIS has systematically opposed the regulation of derivatives, which are the supreme instrument for attaining astronomical leverage in financial gambles. Without them the shooting down of the British, Italian, Canadian and other currencies in the early 1990s would have been impossible.

It is a sad commentary on the innocence of economists concerning what goes on in financial circles that a follower of Polanyi should look to the BIS as a an institution that might be helpful in re-embedding the economy in society. Behind the formalism of abstract “controls”, Polanyi’s analysis went back to the crucial element of economic and political power. His analysis needs a more explicit treatment of the subject such as François Perroux’s concept of the dominant revenue, the income of which in a given historic context comes to be mistaken with the welfare of society.

There is much excellent material in several of the essays of the symposium that lack of space prevents my quoting in so brief a review. What is particularly rewarding is J.A. Kregel’s essay “On the Implications of (Mis)understanding Markets in Transition Countries”. It deals with the disastrous “instantaneous transition” to a market economy imposed by the IMF and US advisers on the transition.

“In studying the process of introducing a democratic free-market economy into the former Soviet Union, anyone familiar with the early `stabilization policies’ proposed could not but have been struck by the naïve belief in the ability of the market to provide the necessary adjustments. For not only were markets assumed to exist, institutional structures common in the industrialized countries were also assumed to emerge miraculously with the introduction of private property ....” The three great pillars of the transition programme recommended by western experts and international institutions - the elimination of price controls, the opening of the economy to foreign trade and capital flows, and the privatization of state property, - have exactly the same intention of turning labour, land and money into commodities freely traded for gain in the market.

“In his explanation of the counterbalancing forces to the thrust of the market, Polanyi places great weight on the role played by the Speelhamland system of the late 18th century in delaying the creation of a full-fledged labour market and thus the full introduction of the market system. He also noted that this system was not edifying for labour, but simply indicated its role as the normal response of the system to excessively rapid change.”

Kegel turns Polanyi’s masterful analysis of the local Speelhamland laws as a searchlight on what has happened during the breakup of the Soviet regime. “Despite the difficulties facing the government in playing its dual role of promoter of the market and protector of the people, there are other forces at work in Russia to counter the speed of change. One is the system of state enterprises and the power of the enterprise directors (among whom the Prime Minister belongs) to influence the pace of economic reform. Under central planning, state enterprises were akin to small, decentralized regional governments, providing not only employment, but a wide range of social services to their workers and the other residents of the industrial tows in which they were located. These included schooling, health services, enterprise shops, and could even extend to street cleaning. In the period of penury following perestroika and before the flood of Western imports, enterprise shops provided a first line of defence against starvation for their workers. These amalgamations of social, political, and economic functions are just as anachronistic in the new Russia based on free markets as the Speenhamland system was in Britain of the 18th century, but they serve a similar purpose of shielding the population from the ravages of change. This explains the great difficulty in transforming them into `efficient’ production units, as well as preparing them for privatization.

“It is interesting to note that Parliament, the seat of democratic decision-making and the Central Bank, seat of independent monetary decision making, have both been willing to risk their sovereignty against the government in order to defend and preserve such enterprises. Members of Parliament understood more quickly than western economists that privatization meant that they would have to shed the very activities that made them a shield to protect the population. They thus fought, not against reform or against the