The question of who we are has never been separable from the question of what we do. This insight, central to both classical political economy and contemporary identity theory, becomes acutely visible during periods of economic transformation. When the material foundations of society shift—when agrarian orders yield to industrial systems, or when manufacturing economies give way to service and knowledge work—something deeper than employment patterns changes. The very categories through which people understand themselves, their worth, and their place in the social order undergo fundamental reconstruction.

Karl Polanyi's analysis of the Great Transformation illuminated how market society's emergence didn't merely reorganize production but disembedded economic activity from social relations, creating what he termed a satanic mill that ground traditional identities into dust. Yet Polanyi also recognized that societies don't passively accept such destruction—they generate counter-movements, new forms of solidarity, fresh bases for collective self-understanding. The transformation of identity is never simply imposed; it involves complex processes of resistance, adaptation, and creative reconstruction.

Understanding these dynamics matters beyond historical interest. We currently inhabit a period of accelerating economic restructuring—automation, platform capitalism, the reorganization of care work, the spatial redistribution of production through globalization and its partial reversal. Each shift carries identity implications that remain largely invisible until their psychological and political consequences erupt. Developing theoretical frameworks adequate to these transformations requires examining how production structures and identity formations co-constitute each other across different historical contexts.

The relationship between economic activity and self-understanding runs deeper than occupational labels. When we ask what someone does, we're rarely seeking mere information about their time allocation. We're attempting to locate them within a moral and social geography—to understand their capabilities, their reliability, their contribution to collective life. This is why unemployment carries stigma beyond income loss, and why retirement often precipitates identity crisis regardless of financial security.

Amartya Sen's capability approach helps illuminate this linkage. Sen argued that development should be understood not as GDP growth but as the expansion of human capabilities—the real freedoms people have to lead lives they have reason to value. Economic structures don't simply provide resources; they constitute capability sets that define what kinds of persons it's possible to become. A peasant economy enables certain forms of embodied skill, intergenerational knowledge transmission, and seasonal rhythm that structure selfhood in particular ways. Industrial wage labor enables different capabilities—precision, temporal discipline, abstract coordination—while foreclosing others.

This production-identity linkage operates at multiple scales. At the individual level, work shapes cognitive patterns, emotional regulation, and bodily comportment. Factory workers, craft artisans, knowledge professionals, and care workers develop distinct sensory attunements, temporal orientations, and relational styles. At the collective level, production systems generate shared identities—the working class, the professions, the creative industries—that become bases for political mobilization and cultural recognition.

The linkage also operates through what we might call identity infrastructure—the institutions, narratives, and social technologies through which production-based identities are constructed and maintained. Trade unions, professional associations, educational credentials, and workplace rituals all serve to translate economic positions into identity claims. When economic structures shift, this infrastructure doesn't automatically reconfigure itself. It may persist as zombie institutions, generating identity claims disconnected from material reality.

Understanding production-identity linkage requires attending to its temporal dimensions. Identities formed through production aren't merely present-tense descriptions but involve narratives about the past and expectations about the future. A skilled craftsperson's identity encompasses apprenticeship memories, accumulated expertise, and anticipated mastery. Economic disruption shatters not just current self-understanding but temporal coherence itself—the sense of a life forming a comprehensible trajectory.

Takeaway

Economic structures don't merely employ us—they constitute the capability sets through which we become particular kinds of persons, making our productive relationships inseparable from our deepest self-understanding.

When economic transformation severs established production-identity linkages, the result is often experienced as profound psychological and social trauma. Polanyi's concept of disembedding captures how market expansion tears economic activity from its social matrix, but we must extend this analysis to understand the identity implications. People don't simply lose jobs or income; they lose the grounds on which they've constructed meaningful selfhood.

Consider the deindustrialization that swept through Western manufacturing regions from the 1970s onward. Studies of affected communities consistently reveal damage exceeding what economic indicators capture. In former mining villages, steel towns, and textile communities, generations had built identities around particular forms of work—its physical demands, its dangers, its solidarities, its relationship to place. When those industries departed, they took with them not just employment but the entire symbolic and relational infrastructure through which people understood their worth.

The psychological costs manifest in predictable but no less devastating patterns: elevated rates of depression, suicide, substance abuse, and what Anne Case and Angus Deaton termed deaths of despair. But these individual symptoms express a collective condition—what Durkheim would recognize as anomie, the dissolution of the normative frameworks through which social life becomes meaningful. When the occupational category through which you understood yourself ceases to exist, you face an ontological crisis that no amount of retraining addresses.

Disembedding trauma also generates political consequences that transformation theorists must take seriously. The resentment and disorientation produced by identity destruction don't simply dissipate—they seek new objects and new narratives. Authoritarian populism frequently thrives in precisely those regions where economic transformation has most thoroughly dismantled established identity structures. The appeal of nostalgic nationalism lies partly in its promise of identity restoration, however illusory.

What makes disembedding particularly destructive is its speed relative to identity formation. Economic structures can transform in decades; identity formations typically require generations to consolidate. This temporal mismatch means that people formed under one economic order must navigate another without adequate cognitive and emotional resources. Their identity infrastructure, built for a vanished world, provides no guidance for the world they actually inhabit.

Takeaway

Economic transformation doesn't just eliminate jobs—it destroys the symbolic infrastructure through which people constructed meaningful selves, producing trauma that economic metrics systematically fail to capture.

Yet societies are not merely victims of economic transformation—they are also active constructors of new identity formations adapted to changed conditions. Understanding this constructive dimension is essential for transformation theory, which must account not only for destruction but for regeneration. How do new collective identities emerge from the wreckage of old economic orders?

Historical evidence suggests that new identity formation follows no single pattern but exhibits certain recurring dynamics. Initial phases often involve transitional identities that bridge old and new orders—the factory worker who maintains craft pretensions, the professional who emphasizes aristocratic credentials, the knowledge worker who performs industrial-era discipline. These hybrid formations may appear as false consciousness or nostalgia, but they serve important psychological functions, providing continuity while material conditions shift.

More durable new identities typically emerge through social movements that articulate novel bases for collective self-understanding. The 19th-century labor movement didn't simply organize workers economically—it constructed the working class as an identity category with its own dignity, culture, and historical mission. Contemporary movements around precarious work, platform labor, and care work similarly attempt to transform structural positions into identity claims capable of generating solidarity and recognition.

The formation of new identities also requires institutional innovation—the creation of identity infrastructure suited to transformed economic conditions. This might include new forms of credentialing, new occupational associations, new narratives of contribution and worth. The rise of professional identity in the 20th century, for instance, depended on universities, licensing bodies, and cultural productions that established expertise as a legitimate basis for social honor.

A crucial insight from Sen's work applies here: capability expansion enables identity diversification. When economic transformation genuinely expands what people can do and be—rather than merely substituting one constraint for another—it creates conditions for richer identity possibilities. The key question for any economic transition is whether it opens new spaces for human flourishing or merely replaces old constraints with new ones. Sustainable transformation requires attending not just to economic efficiency but to the capability sets that different economic structures enable.

Takeaway

Sustainable identity reconstruction requires more than economic adaptation—it demands social movements that articulate new bases for dignity and institutions that validate transformed modes of contributing to collective life.

Economic transitions are never merely economic. They are identity events that determine what kinds of persons it's possible to become, what bases for dignity and recognition remain available, and what narratives can render individual and collective life coherent. Transformation theory that ignores these dimensions misses precisely what makes economic change so consequential for human welfare.

The policy implications extend far beyond conventional economic thinking. Managing economic transition responsibly requires attending to identity infrastructure—the institutions, narratives, and social technologies through which people construct meaningful selfhood. It demands temporal sensitivity, recognizing that identity formation operates on generational timescales that economic restructuring often ignores. And it requires support for the social movements and institutional innovations through which new identity formations emerge.

Ultimately, the measure of economic transformation should be Sen's measure: does it expand human capabilities, enlarge the range of valuable beings and doings available to people? An economic transition that produces material gains while destroying the grounds for meaningful identity has not succeeded. It has merely substituted one form of impoverishment for another.