Monday, 31 October 2011

‘Time Is Money’ – Intellectual Origins of the Neoclassical Revolution, Part One.

There are two sides to human activity. The very “necessity” of human action requires a mediation between volition and gratification, between ends and means. The ends are “ideal” and the means are the ex-pression of volition through human instrumental action that takes place (a “place” is the material expression of human activity which is indistinguishable from ec-sistence). Both the projection of the ideal ends and the manifestation of the means are human “needs”. The point is to ensure that human activity does not become destructive in the sense that it foreseeably defeats its purpose by negating or barring the harmonious expression of this “system of needs”.



The task of German Idealism, culminating in the Absolute Idealism of Hegel and in the historical materialism of Marx, is to enucleate this “finality” of human living activity in the reconciliation of volition (the will) with freedom (the limits of the scope of the will on the environment, above all the “human” environment). Human living activity is an ex-pression of the will, it is its ful-filment, that dis-covers or un-conceals (the Greek meaning of a-letheia, a remembrance that un-covers the truth) the inter esse (“interest”, the common being) of human beings as beings human, as individual manifestations of the species.



Even British Utilitarianism, from Hobbes to Locke and Bentham through the “science” of Classical Political Economy, allows the homologation of human activity as an inter-est, a common being, through the mediation of “labour”. The “labour” is intended as a mechanical “power” – a “force” that works in time – and that can be measured and quantified in terms of the “utility” of its “pro-ducts” – the “goods” it “brings forth”. And because this “utility” is not “subjective”, because it is inter-subjective, it can be quantified even to the extent that it can be “exchanged” for the “labour” of other human beings. In other words, this “labour” becomes a “quantity” that can be accumulated or “saved” in the shape of its material pro-ducts so that it can then be utilized “to purchase or acquire” the “labour” of other human beings in the form of “wages”.



Even in the form articulated by Karl Marx, even with the distinction that he drew between “labour” and “labour power”, the fact that Marx uncritically accepted the ability of “the market mechanism” to allocate labour-power as a resource through its “measure” as “socially necessary labour time” – this fact meant that the objectification of human living labour into its pro-ducts as “dead labour” was accepted universally even by the Socialist parties that represented the industrial proletariat from the second half of the nineteenth century.



Even when “labour” is understood as “labour power”, and perhaps especially then, its “utility” is accepted as being “inter-subjective”: labour is the source of all “addition” of human wealth to the “wealth” already freely available in “nature”. By “trans-forming” nature, labour “creates and pro-duces” goods that have universal human “utility”. Consequently, human “labour” constitutes the “social synthesis” – the ability of human beings to reproduce themselves and their societies physically and to accumulate wealth – “to grow” their economy.



The “satisfaction” of human needs and desires comes at the “cost” or “price” of human effort, of “labour”, of toil – a reminder that excessive material gratification negates the spirituality of mankind and constitutes a neglect of religious duty: in excessive amounts, it may even amount to sinful conduct. “Labour as toil”, therefore, can be also a form of “penitence”, of atoning for the sins of the flesh: the Benedictine command of “Ora et labora” (work and pray) calls the faithful to an existence of “renunciation” of wordly goods in exchange for other-wordly rewards.



This is the essence of the “calling”, of the Askesis, of the ascetic ideal described by Weber as the origin of the “spirit of capitalism”: the elevation of “labour” to “an end in itself” finally degenerates in the accumulation of the “goods” it produces – especially when these goods can be “exchanged” for the labour-power of other human beings. And here we have truly the origins of capitalism: - NOT in the Askesis, but rather in the ability to command the “labour-power” of formally “free” human beings!



Max Weber not only fails to perceive this essential distinction, but he also makes the error of identifying the centrality of “labour” as the ascetic ideal with the genesis of “the spirit of capitalism” and, therefore, with the birth of “a specifically bourgeois economic ethic”. So long as “labour” – however understood - remains the “essence” of “wealth”, the bourgeoisie will never be able to breathe easily or sleep peacefully. – And that for reasons that are too obvious to discuss, really. Even in its “socialistic” acceptation – from the left Ricardians to Keynesians, from Proudhonians to Kaleckians – the bourgeoisie barely tolerates the “goody-goody” moralizing of these “wet” ideologists.



The only “economic theory” that can serve as “a specifically bourgeois ethic” or strategy (“ideology”) is one that stresses the paramountcy of “capital” in the process of production. But to do so, what must be defeated if not confuted first is precisely this archaic centrality of the Arbeit (“labour”) in the history of Western metaphysics, from the Bible (Paul Samuelson in his Economics textbook cites the Old Testament: “The laborer is worthy of his hire”!) to Paul Krugman’s “Conscience of A Liberal”, all drenched as it is in Keynesian buffoonery and mental confusion. And the centrality of “labour” consists all in this “egregious and nefarious” belief – this absurd “faith” – in the ability of “labour” to provide “the social synthesis” – to be “social labour” – to act as the foundation of the inter esse, of the “common being”, of what turns atomised “human beings” into “beings human”.



The Neoclassical Revolution that began in the middle of the nineteenth century is perhaps the most imponent ideological and conscious effort ever performed in human history by a social class to defeat the ideology of another class using all the power influence and resources – intellectual, religious and propagandistic – available to the capitalist bourgeoisie on the back of its exploitation of human living labour.



Closely linked to the “reaction” against the French Revolution and the European uprisings of 1830 and 1848, the theory of marginal utility first excogitated by Gossen, was elaborated in German engineering circles and then divulged by Jevons and Menger, then Bohm-Bawerk and the Austrian School, until it was promulgated and widely publicized by Marshall and formalized mathematically by Walras as “general equilibrium analysis”.



In our next intervention, we will take a closer look at this “Copernican revolution” (it is the claim made by Stanley Jevons about the importance of his theory, reported by Keynes in “Essays In Biography”) or rather “counter-revolution”.


From Weber to the Neoclassics


In “the Protestant Work Ethic” Weber believes to have identified “a specifically bourgeois economic ethic”. We argued above that that is not so, and that Weber is wrong. And he is wrong for reasons that are revealing and instructive and above all politically essential to our “fight against labor”. First of all, Weber refers to an “economic” ethic – which already casts the net wider than he had intended by “specifying” the bourgeois ethic as a “work” ethic. And the fact that “work” does not make up “the entirety” of the “economic” for the bourgeoisie is absolutely vital, crucial and essential to bourgeois ideology. Were the bourgeoisie to concede that “work” was the real source of all “profits” and indeed of “value”, then it would have a very difficult time arguing that “capital” is the most important “factor of production” and that indeed it is “capital” that makes production at all possible!



Weber almost tacitly concedes this point by referring to an “economic ethic” and also by conceding that –



To-day the spirit of religious asceticism—whether finally, who knows?—has escaped from the cage, but victorious capitalism, since it rests on mechanical [181] foundations, needs its support no longer.”



This demonstrates that, at most, the Protestant work ethic was only a “support” for the bourgeoisie – certainly not a “necessity” and indeed it did not even serve “to originate” capitalist industry because, as we argued earlier, it is not the belief that “time is money” that creates capitalist industry but rather “the fact” (!) that “time is money” that makes possible and encourages the belief, the “ethic”!



But the notion that “time is money” does not mean in the least that “work is money”! As we saw in the quotations given above, Weber already concedes that “business astuteness” is both independent of and originates “much earlier than” the protestant work ethic. Weber himself argues against his own thesis when he makes the following proposition:



“The ability of mental concentration, as well as the absolutely essential feeling of obligation to one's job, are here most often combined with a strict economy which calculates the possibility of high earnings, and a cool self-control and frugality which enormously increase performance. This provides the most favourable foundation for the conception of labour as an end in itself, as a calling which is necessary to capitalism.”



The contradiction, the non sequitur, in Weber’s reasoning is blindingly obvious: it is not “the conception of labour as an end in itself” that makes it “a calling necessary to capitalism”! It is rather “a strict economy which calculates the possibility of high earnings, and a cool self-control and frugality which enormously increase performance” that “provide the most favourable foundation for the conception of labour as an end in itself”!! In other words, “labour as an end in itself” does not and cannot provide “a specifically bourgeois economic ethic” – but rather it can provide “a specifically socialist economic ethic”!!



The centrality of the Arbeit is not and cannot be the basis of “the specifically bourgeois economic ethic” that Weber is so desperately searching! The idea that “labour…is necessary to capitalism”, that “labour is the only source of value and of wealth” – that kind of miserable faith in “labor”and philosophy of “labor” belongs to all the “do-gooders” of the rational socialism and of Keynesianism! This belief, which was central to the Classical Political Economy and to the “ideology” of Keynesianism is something that the bourgeoisie could never accept for its “economic science” and that it could embrace solely as the “ideology of socialism”, as the new opium of the masses!



Because the very notion of “labor” as an “exactly calculable”, “rational measure of profit” is precisely dependent – and indeed it is “the creature”! – of “capital” itself!!

There could simply be no “labor” without “the regular discipline of the factory”, without the political command of the capitalist that transforms “living labour” into the “equivalent of dead objectified labour”, that transmutes – by means of sheer violence and coercion – the living activity of workers into a “quantity” exactly and rationally and systematically “calculable” in terms of “the wage”, in terms of its own pro-duct, in terms of “wage-basket goods”!!



For this “trans-mutation” or meta-morphosis to occur – this trans-substantiation! (like Jesus turning rocks into bread and fish) – the living labour of workers must be turned first into “the capitalist organization of labor”, which is “the rational organization of free labour”, which becomes “the regular discipline of the factory imposed on free labour”, which turns finally into “rational Socialism”, into “the Problematik of modern Socialism” and, at last (!!!), the “economic science” of Keynes in the ‘General Theory’!!



Weber draws the “wrong conclusions” from much more insightful and revealing “premises”:



“The ability of mental concentration, as well as the absolutely essential feeling of obligation to one's job, are here most often combined with a strict economy which calculates the possibility of high earnings, and a cool self-control and frugality which enormously increase performance.”



But in Weber’s own admission, it is not “labor” that leads to “profits”: it is rather “strict economy and frugality” that lead to “the possibility of high earnings” and of “enormously increased performance”. Weber commits the extraordinary non sequitur and mistake of not seeing that neither “strict economy” nor “frugality” have anything whatsoever to do with “labor”! If “labor” were the true source of “earnings and profits”, then the “socialist Utopia” would finally be realized and the capitalist class could be wiped out forever! How can “labor as an end in itself”, then, even in our wildest dreams form the basis for “a specifically bourgeois economic ethic”?



But how can “the ability of mental concentration” and “strict economy” and “frugality” – which are all negative and passive qualities, more “saving” rather than “investment” – how can these “passive” habits lead to “positive wealth”, to “value”, to the active generation of “profits”? How can “frugality” lead to “higher earnings and increased performance or productivity and value”?



In truth, Weber ought to have known what “the specifically bourgeois economic theory” behind this argument was! - Because he was quite aware of the Neoclassical Revolution or the neoclassical theory of Marginal Utility developed by Gossen and Jevons and Menger, and in part even by Marshall – and in particular he ought to have been aware of the significant addition to this Revolution in “economic science” operated by the Viennese professor Eugen Bohm-Bawerk, “the bourgeois Marx” and perhaps the most significant and influential member of the Austrian School – at least according to his great and most scholarly pupil – Joseph Schumpeter.



To trace carefully this last passage – from rational socialism to Keynes, from “time” to “money” – we must then travel to Austria, follow the Inn to the Danube and breathe suavely the opulent atmosphere of fin-de-siecle Vienna as we traverse the “counter-revolutionary stream” of the Neoclassical Revolution.

Sunday, 30 October 2011

Comment on Wolfgang Munchau FT Column

http://www.ft.com/intl/cms/s/0/e2338886-0151-11e1-b177-00144feabdc0.html#axzz1bDhVx6QL
Mr. Munchau, with whom we normally and stridently agree, has done "a howler". The patent absurdity of what he is arguing can be fathomed by changing the title of his article to the converse: "What kills the euro will save the Union" - which is as banal a non sequitur as one may wish for in a George W. Bush speech!
If one follows Mr. Munchau's logic so efficaciously applied in articles past on the topic, the only way to save the euro now is to take the most radical option of all - the true "bazooka" - and turn the European Central Bank into the "lender of last resort" (or the lender of no return) - whereupon "speculators" and "markets" would have to pack their CDSs and  go home.
But if ever Eurozone political, industrial and financial elites were prepared to do that - then not only would the rest of the Union have absolutely nothing that it could do against such firm and incontrovertible action - but indeed it would have promptly to join the members of a "Eurozone" that had now become overnight an "indissoluble, sovereign and sacrosanct Union" - "a more perfect union" in the American sense!
I am almost tempted to put this in mathematical notation (as does the ridiculous Daniel Gros at Eurovox who has suddenly discovered "modelling"! Munchau forgets and neglects that the entire idea behind the European Monetary Union was to establish an "optimal currency area" (OPA) in which monetary policy would be set centrally to protect Germany from "imported inflation" due to the "competitive devaluations" of France and Italy, and to force these national elites to discipline their workers through "austerity" - which is what is happening now in any case, except.... Except that because the ECB is not a "real" central bank that can act as lender of last resort, financial-market speculation is "blackmailing" the sovereign debt of France and Italy and others simply because "the opportunity exists"! And the opportunity exists because the elites of eurozone countries will not accept that "either we hang together or we shall most certainly hang separately"!
What is happening in stark reality is that these "national elites" simply wish to preserve at all costs their own little puny patch like the miserable cowards that they are by not penalising their financial sectors and bearing the costs of "the burden of adjustment" that follow necessarily from the Great Financial Crisis!
The eurozone countries have absolutely nothing to lose from further integration and absolutely everything to renounce if they go their separate ways - because European disunion is already encouraging other "emerging countries" from China to Russia and India and Brasil and - would you believe? - even Turkey to rear their ugly heads and make demands on Europe that will see our Continent become a global backwater and sink into the Atlantic like....Atlantis!
Conversely, the immediate eclipse of speculative activity against the euro and "sovereign debt" that would result from the ECB becoming the lender of last resort would put a gun to the temple of the rest of the "Union" countries either to join the euro or to be consigned to the dustbin of history!
You pays your money and you takes your choice!

On Capitalism as Rational Socialism


The English translation of Emile Durkheim’s, the great French sociologist, work La Division du Travail Social is almost universally rendered as “The Social Division of Labor”. The obvious mis-translation illustrates brilliantly and perfectly the gross misconception that gives rise to it: Durkheim was speaking of the division of social labour – certainly not of the “social division of labour”! For there can clearly be no “labour” as an entity that is abstracted from the ineluctable “sociality” of human beings. Our living activity, our very “being” from eating to dreaming to speaking and therefore also working, is simply unimaginable independently of our belonging to our species. Just as Leibniz could enjoin that “a being must be a being” – that, in other words, it is impossible to conceive of “being” except as a “unity” – so we may say that “human beings” (individual physical human bodies) are really and truly aspects of “being human”. In other words, it is utterly impossible to conceive human beings as separate atomic individuals whose lives and activities can be described independently of their “humanity”, of their “being human”. And this applies a fortiori to our living activity as living labour.



To speak of “labour” abstractly is to believe that there is a “quantity”, a material and spatial and homogeneous entity that can be “measured” according to, say, time or productivity or definite tasks. But what we know for certain about human activity is that its potential forms of material ex-pression are virtually infinite however much they may be “conditioned” by our natural environment.



It is absolutely impossible therefore to describe human living activity in terms of “individual labour” – there is simply no such “thing”! Living labour is an activity that cannot be “measured” and that therefore cannot be “divided”: there can be no such thing as “the division of labour”! What is possible, however, is for human beings as “being humans” to divide the totality of their social labour into different but interdependent tasks. Social labour then is a “totality” that belongs to the human species (leaving out for a moment its impact on the environment) and that is by that very fact only divisible in a “political” sense – never “scientifically” or “mathematically” or “rationally” or “systematically”! Only “politically”! And the question then becomes what kind of political decision-making is in place so as “to organize social labour” – again, not “labour” (!), but “social labour”.



Durkheim, incidentally, distinguished between the “mechanical solidarity” of early social groups and the “organic solidarity” of advanced human societies. But when Max Weber considers “modern capitalism” (the phrase is Werner Sombart’s, but Weber borrows it), he speaks invariably of its “mechanical foundations”, of “the iron cage” – indicating metaphorically the complex “machinery” of what he calls “the capitalist organization of labour”. Given his “spiritualist” bent, Weber considers that capitalist society is less “organic” than earlier human groupings. Yet here again we must side with Durkheim: what makes advanced industrial capitalist societies “organic” is the fact that despite the imposing and ubiquitous “machinery”, the interdependence of human beings has now reached such a stage that it has become truly “organic”, rather than “mechanical”. Even in a “metaphorical” sense, heavy industry is becoming a smaller component of capitalist industry, leaving greater space for services and, above all, “information”. The “viruses” that we attribute to computer systems are becoming ever more “organically” real with each passing day!



So let us now return to Weber and that absolutely remarkable passage from the “Foreword” to his intended series of studies on “The Sociology of Religions” which Talcott Parsons (despite the appalling translation in places) wisely chose to preface to the English edition of Die Protestantische Ethik. Here it is:



Eine exakte Kalkulation: – die Grundlage alles andern, – ist eben nur auf dem Boden freier Arbeit möglich. Und wie – und weil – keine rationale Arbeitsorganisation, so – und deshalb – hat die Welt außerhalb des modernen Okzidents auch keinen rationalen Sozialismus gekannt….



Aber ebenso wie – trotzdem es doch überall einmal städtische Marktprivilegien, Zünfte, Gilden und allerhand rechtliche Scheidungen zwischen Stadt und Land in der verschiedensten Form gab, – doch der Begriff des »Bürgers« überall außer im Okzident und der Begriff der »Bourgeoisie« überall außer im modernen Okzident fehlte, so fehlte auch das »Proletariat« als Klasse und mußte fehlen, weil eben die rationale Organisation freier Arbeit als Betrieb fehlte….



Vollends fehlt der moderne Gegensatz: großindustrieller Unternehmer und freier Lohnarbeiter. Und daher konnte es auch eine Problematik von der Art, wie sie der moderne Sozialismus kennt, nicht geben.





Exact calculation – the basis of all others – is possible only on the ground of free labour.

And just as, or rather because, the world has known no rational organization of labour outside the modern Occident, it has known no rational socialism [precisely what Lenin is attempting in Russia!]. …



But although there have everywhere been civic market privileges, companies, guilds, and all sorts of legal differences between town and country, the concept of the Burger [as opposed to "citizen" in Parsons’s derelict translation] has not existed outside the Occident, and that of the bourgeoisie outside the modern Occident. Similarly, the proletariat as a class could not exist, because there was no rational organization of free labour under regular discipline of the factory [die rationale Organisation freier Arbeit als Betrieb].



The modern conflict of the large-scale industrial entrepreneur and free-wage labourers was entirely lacking. And thus there could be no Problematik such as that experienced by modern socialism.



Hidden in these few lapidary notes are some of the most remarkable political and sociological insights in the history of capitalist praxis. We should study them very carefully because they contain “the keynote” (Italians would call it “la chiave di lettura”), the “key” to the interpretation of capitalist society and State in the Keynesian era.



The world has never known “the rational organization of labour”, says Weber – outside of capitalism, of the bourgeois era, that is. But “the rational organization of labour” means quintessentially for Weber that “the organization of labour” must occur in accordance with a “measurable”, “calculable”, hence “quantifiable” method of organization. And for him it “the only basis or ground” for this rational organization of labour to be “exactly calculable” is that this labour force is “free”. But here the “freedom” of “labour” needs to be defined, and the definition of “free” will also qualify the definition of “labour”. – Because the “freedom” of “labour” contains a number of characteristics. The first is that the labour is “free” from any social bonds that prevent or interfere with its being subjected to “regular discipline of the factory”. In other words, Weber intends “freedom” for “labour” only in a negative sense: it is “freedom from” social bonds or rights that may prevent “labour” from being subjected to “the regular discipline of the factory”: and this means that this “labour” must be entirely “destitute”, “divested” from all social bonds or claims to anything that may serve for its own reproduction outside of the “factory”! “Labour” must be “free from” the means of production so that it may “alienate” itself to the “bourgeois” who will subject it to “the regular discipline of the factory”.



Already, therefore, Weber’s main contention in the Ethik that the “calling” of labour under the principle of “time is money” was responsible for “the spirit of capitalism” is completely confuted! It is not religious faith, but rather the coercion of human living labour into factory work as regular discipline that turns the “time” of human beings into “money”!



Weber does not explain what it is that is “calculated” when “exact calculation” or “rationality” is enforced on “organized labour in the factory”: he does not explain “profit”, which is quite obviously the “monetary difference” between the cost of factory production and the revenue derived from the sale of the goods produced in that factory. So already at least we have a definition of “profit” that goes well beyond Weber’s earlier simplistic notion of “opportunistic exchange” and that comes closer to “the rational and systematic pursuit of profit” that he intended.



But this leads us to the second meaning of “free”: this “labour” must be “free” also in the sense that the living activity of each human being as worker is easily comparable to that of every other worker: in other words, the work itself (!), the labour process, has to be easily comparable and measurable as in the ergonomic principles of Taylorism, and then of Fordism. Thus, the organization of labour can be “rational” only if it is “exactly calculable”. And this “exact calculation” is possible only on the basis of “free labour under regular discipline” – which “discipline” consists in the physical homologation (so far as is possible) of human living activity in terms of tasks and time! In other words, it is “regular discipline” of formally “free labour” that makes possible – and it alone (!) can make possible – the exact calculation or “rationality” of “the organization of labour”.



And all this put together is not “capitalism” but it is also and above all (!!) “rational socialism”! Only “rational socialism” ensures “the existence of the proletariat as a class (!)” that is in “opposition” or “contrast” (Gegensatz – not necessarily “conflict or struggle” [Kampf] – again, poor Parsons translation) with “the large-scale entrepreneur”. By this, Weber surely means that “the organization of labour” can be “rational” only if it is “exactly calculable” by means of “profit” (or the monetary expression of value) and for this the “labour” must be subjected to “the regular discipline of the factory” so that it is “free” in the following senses:

-          “free” from ownership of the means of production for its own reproduction;

-          “free” in the sense of “performing homogeneous tasks” that make it comparable to other living labour in such a way that all living labour becomes one aggregate mass of “divisible labour” (including “individual labour”);

-          “free” in the sense that once “labour” is “divisible” its productive power as “social labour” becomes “the property” of “capital” because it is “capital” in the shape of the means of production that “bring individual labours together as social labour” within the factory under the regular discipline of the capitalist;

-           and finally, this “labour” must be “free” to form an “opposition or contrast as a class” to the employer or entrepreneur (the Arbeit-geber, the “giver” of “labour”) in such a way that the “labour” becomes truly “rational” or “exactly calculable” in terms of its “organization”.



But this final “task” of the political organization of “labour” as “free labour” upon which the “exact calculability” and therefore the “profitability” (!) of the “rational organization of labour” is dependent – this final task of organizing “free labour as a class” is the task of “rational Socialism”!!



So this is the Problematik of rational Socialism! How to ensure that the living labour of workers which is always and always will be ANTAGONISTIC to the capitalist “rational organization of free labour under the regular discipline of the factory” - which will always be antagonistic to the wage relation and the “reduction” of living labour to alienated “free labour” – the Problematik of rational Socialism is how to ensure that this worker antagonism to the false exchange of living labour with dead labour (the “goods” the capitalist produces) is “organized” in a manner that makes possible “the exact calculation” on which the capitalistic extraction of “value” and “profits” is based!!



Please NOTE! That Weber does not speak of “rational Socialism” as “the problem” or as “a problem” for capitalism, for the bourgeoisie. No!! He speaks instead of “the Problematik” of modern rational Socialism: in other words, the integration of the workers’ antagonistic push against the capitalist wage relation is as much of a “problem” for capital as it is for the Sozialismus, for the Social Democratic or “Labor” parties of Europe whose task it is “to organize living labour” as a “class” for its exploitation as “labour”, as “organized free labour” (a “labour” that is homogeneous and calculable and “divisible”) “under the regular discipline of the factory” commanded by the capitalist for “profit”!



This is the tremendous – revolutionary! – realization that President Roosevelt had first and sought to implement in the American New Deal Settlement following the Great Crash of 1929 – and a realization that Keynes only later theorized in bourgeois “economic” terms in the ‘General Theory’!! This development is what we will study next when we return to Keynes.



Appendix: This useful note by Paul Krugman on “Keynesianism” reveals how he acknowledges that opposition to Keynesian policies by the bourgeoisie is due to the fact that they wish to restrain “do-goodism” (remember that we have called Krugman himself a “do-gooder” on this site – just search). BUT KRUGMAN IS WRONG! What the bourgeoisie fears in “Keynesianism” is that the rest of society will be able to unmask Keynesianism for what it is – the bleakest apology for “rational Socialism” – the very “regular discipline of the factory” that we are exposing here!! And once we all see Keynesianism for what it is – then the necks of the bourgeoisie come next!!

http://krugman.blogs.nytimes.com/2011/10/29/more-thoughts-on-weaponized-keynesianism/
And this essay by Herbert Marcuse on Weber and the application of "rationality" to industrial capitalism covers some of our points - but not in the same way (thank God! - because I just discovered it!) and without the politico-economic analysis.
http://www.scribd.com/doc/63708218/Herbert-Marcuse-Industrialization-and-Capitalism-in-the-Works-of-Max-Weber

Saturday, 29 October 2011

Max Weber and "The Iron Cage"


What is collapsing around us is the “settlement” that had seen the industrial working class “integrated” as the engine of capitalist growth through the institutional instrument of the money wage. What is evaporating, vanishing before our very eyes is the relevance and legitimacy of “Labor” parties that still cling to the “reduction” of living labour to dead objectified labour, and therefore the “representation” of the economic system as an impartial objective “mechanism” or machinery dependent on the “rational organization of labor” – and therefore on the “neutrality” of the State-Plan in co-ordinating the functioning of the system through the maintenance of legality and of the competitive “level playing field”. The “fine-tuning” of Keynesian memory has been blown away – smashed – in the eclipse of the Great Moderation. The central banks – the ultimate Keynesian technocratic refuge of the bourgeoisie – that had celebrated the stamping out of inflation, the coming of “price stability”, now find themselves roasting in the inferno of “financial instability” fuelled diabolically by the attempt to recycle the immense profits accumulated on the blood and sweat of Chinese workers, helplessly tyrannized by the most brutal dictatorship in size and truculence the earth has ever known, that swelled the financial bubble that burst so spectacularly barely three years ago.



Capitalism is in agony, and so is its “science”: we are here to administer its extreme unction and perhaps to draft its post mortem. What dies with this stage of capitalism (Minsky spoke of different “capitalisms”) is the ideology of Social Democracy: the ideology of “Labor”. For “labor” is precisely what we must fight. We must refuse to work. And we must refuse the “labor” that the capitalist “employer” gives to us. It is true: the employer “gives” labor! By accepting to work, we accept “labor” as defined by capital. We rebel therefore principally against the “Labor” parties: our party will be called “the Party Against Labor”. Let us see why by returning to Max Weber, and only later to Keynes.



A specifically bourgeois economic ethic had grown up. With the consciousness of standing in the fullness

176

of God's grace and being visibly blessed by Him, the bourgeois business man, as long as he remained within the bounds of formal correctness, as long as his moral conduct was spotless and the use to which he put his wealth was not objectionable, could follow his pecuniary interests as he would and feel that he was fulfilling a duty in doing so. The power of religious asceticism provided him in addition with sober, conscientious, and unusually industrious workmen, who clung to their work as to a life purpose willed by God.



Weber’s attempt to locate the “spirit” of capitalism and therefore great part of the historical origins of capitalism in “the protestant work ethic” at the beginning of the bourgeois era as “a specifically bourgeois economic ethic” must fail, and for reasons that are both instructive and politically useful to us – us the “party against labor”.



Not only is there a problem with historical periodisation. The timing of the “protestant ethic” does not accord with the rise of agrarian and then industrial capitalism in England and Northern Europe in the early 1600s. Not only is it a horrendous reality that, far from being “sober, conscientious, and unusually industrious workmen, who clung to their work as to a life purpose willed by God”, the industrial proletariat that was herded into vast urban centres in England from London to Manchester and beyond resembled an army returning from a horrific war. Just read any Charles Dickens novel and you will understand perfectly well how far from reality Weber is here.



Weber’s judgement is not just wrong but deprecable and contemptible in the extreme. His sociological and theoretical work is motivated by the interests of his own class, the bourgeoisie: and this is precisely why it is not sufficient to say how wrong he was: it is very important “to get inside the mind” of one of the sharpest and perspicacious and encyclopaedic political minds the bourgeoisie has ever produced. It is symptomatic of his espousal of the point of view of his class that Weber should put the cart before the horse both analytically (as we are about to see) and historically by seeking to camouflage as a “religious belief” – a “calling” – the vile and horrific practices of a class that to this day seeks to glorify and rationalize its brutality in the name of scientific objectivity.



Right from the beginning of his monograph, Weber’s quote from Benjamin Franklin to the effect that “time is money” brilliantly illustrates his misapprehension and willful obfuscation: it was not because people “believed” through their religious faith that “time is money” that a protestant work ethic developed. Instead, it was precisely because “time had already become money” that the bourgeoisie developed a religious apology for the enforcement of their “bourgeois economic ethic” on the rest of society. (Cf. on this, the superb study by EP Thompson on “Time and Work Discipline in the Industrial Revolution” - http://www.4shared.com/document/s3K-9DQB/14564783-E-P-Thompson-Tempo-Di.htm .) What Weber was attempting to do with the central thesis of the Ethik was nothing less than to rewrite the truculent history of the rise of his class in Europe and to cover it in sanctimonious ascetic self-righteousness.



But there are also analytical reasons why Weber is as wrong as can be. Protestantism could never serve as “a specifically bourgeois economic ethic” for the very simple reason that it is founded entirely on “labour”: it is therefore at bottom a profoundly socialistic faith or belief or “ethos” whose highest theoretical economic expression is to be found in the Classical Political Economy that reached its apex with David Ricardo – after which it gave way to the Neoclassical (or marginalist) Revolution which, as we will argue here, represents much more intimately “a specifically bourgeois economic theory and ethic”. In disposing of the labour theory of value, “the Marx of the bourgeoisie”, Eugen Bohm-Bawerk, the chief artificer of the Austrian School, was both blunt and devastating: if “value and interest” are solely attributable to “labour” and to “the theft of labour time”, then competition for workers between capitalists should ensure that there is no “profit” left at all!



Weber himself acknowledges the inadequacy of “the protestant work ethic” as an explanation for the mature stages of capitalism:



In Baxter's view the care for external goods should only lie on the shoulders of the saint like a light cloak, which can be thrown aside at any moment. But fate decreed that the cloak should become an iron cage.

Since asceticism undertook to remodel the world and to work out its ideals in the world, material goods have gained an increasing and finally an inexorable power over the lives of men as at no previous period in history.

To-day the spirit of religious asceticism—whether finally, who knows?—has escaped from the cage. But victorious capitalism, since it rests on mechanical

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foundations, needs its support no longer.



Note how Weber is talking merely of a “supporting role” for the protestant work ethic in the origins of capitalism. But did the bourgeoisie really need this “ethos” except as pure ideology? The question is worth exploring because it may well be that the history of asceticism may still lead us to “a specifically bourgeois economic ethic” interpreted in a sense very different from Weber’s. Perhaps the biggest objection to Weber’s formulation of the problem is that he seeks to present the work ethic as an attribute not just of the bourgeoisie but also of the working class!



The Puritan wanted to work in a calling; we are forced to do so. For when asceticism was carried out of monastic cells into everyday life, and began to dominate worldly morality, it did its part in building the tremendous cosmos of the modern economic order. This order is now bound to the technical and economic conditions of machine production which to-day determine the lives of all the individuals who are born into this mechanism, not only those directly concerned with economic acquisition, with irresistible force. Perhaps it will so determine them until the last ton of fossilized coal is burnt. (p181)



Again, Weber is confusing consumerism with the urge to work and save. Even at its apex, the protestant work ethic had to do with “working and saving and investing” – not at all with “spending and consuming”! In his ill-advised attempt to implicate workers in the “work ethic”, Weber conveniently forgets the “ideological function” of that ethic right from the beginning! Nor does Weber even attempt to explain how and why the work ethic transformed itself from an autonomous motivational “calling” to a “mechanical foundation”, to an “iron cage” (stahlhartes Gehause, steel-hard casing) in which individuals are more “inmates” of industrial capitalism than free agents or “entrepreneurs”. Weber has fallen victim here to the very “late romanticism” – an echo of the Freiheit (free will) of German Idealism – whose eclipse and demise Nietzsche had announced and certified with unprecedented and perhaps since unequalled clairvoyance.



“God is dead!” – Nietzsche’s famous pronouncement - means also this: not merely that “values” and Weber’s “calling” (Beruf) or “ascetic ideal” have been “killed”, have “died”, as Weber seems nostalgically to lament. Nietzsche’s phrase “God is dead” means above all the discovery, the realization that the centrality of human “consciousness”, of the Ego, the Ich-heit, the “individual” and his Individualitat – that all these lofty “idols” have been destroyed and an-nihilated (hence, nihilism) by the rise of precisely that “rational organization of free labour”, that “rational Sozialismus” that Weber identified!



There is no Ent-zauberung (dis-enchantment) for Nietzsche as there is for Weber! (Cf. K. Lowith’s study, ‘Max Weber and Karl Marx’.) Nietzsche shows as conclusively as is humanly possible that the “freedom” of the “individual” was a ruse from its Judaeo-Christian beginnings through the “astute theology” of German Idealism, to the Nihilism of the late nineteenth century that presaged the cataclysms of the twentieth! And it is as revealing as it is surprising that Weber himself who more than any other social theoretician and “scientist” documented and theorized the Rationalisierung should ultimately fall back on the notions of “ethos” and “calling” to explain social developments such as the rise of the bourgeoisie and capitalism that will inexorably lead to the (precisely!) an-nihilation of “faith” and “calling” and “ethos” and their en-casement, their im-prisonment in the “mechanical foundations” of the society of capital!



Once again, the question for us as for Weber should be NOT how the belief that “time is money” gave rise to capitalist industry, but rather how the reality of industrial capitalism – the wage relation, or “the organization of free labour under regular discipline” – ensured the “reduction” of the experience of time into the fetishistic accumulation of capital!



We need to isolate from asceticism, therefore, those elements that support strategically the interests of the bourgeoisie from those that support the interests of the working class. - Remembering all the while, of course, that ideologies do not always work to the advantage of those who devise them. Indeed, it is precisely the history and critique of the concept of the Arbeit, the notion of “Labour” from its early monastic version as labor to its Hobbesian and British empiricist version as “labour Power” in Classical Political Economy, to the dialectical Askesis of German Idealism, and finally to the Neoclassical version as the calculus of Lust und Leid (Pleasure and Pain) that will reveal to us the separate, even superficially opposed (!), yet cognate philosophical and conceptual origins of both bourgeois and socialist ideologies.



We need to find what Goethe called a  Kontignation (Latin, contignatio, meaning architrave making “different” concepts “con-tiguous”), a “passage-way” that leads us from Weber’s genial political and sociological analyses to Keynes’s politico-economic “science”.  This is what we will do in our next intervention.

Friday, 28 October 2011

Weber and Keynes – The Rational Organisation of Labour as “the Problematik of Socialism”.


Let us return to that remarkable passage we found in Weber’s Ethik in which he seems to come close to the essence, to the crux of the capitalist mode of production:

For without the rational capitalistic organization of labour, all this, so far as it was possible at all, would have nothing like the same significance, above all for the social structure and all the specific problems of the modem Occident connected with it.

Exact calculation—the basis of everything else—is only possible on a basis of free labour. (p22)



We saw earlier that Weber does not define the “content” of profit: he defines “profit” instead in purely “monetary” terms in which receipts exceed expenses. And this profit he attributes originally to exchange:



Let us now define our terms somewhat more carefully than is generally done. We will define a capitalistic economic action as one which rests on the expectation of profit by the utilization of opportunities for exchange, that is on (formally) peaceful chances of profit…



The shift from “opportunistic exchange”, which would define a capitalism that is far from “systematic” or indeed “rational” or “scientific”, to one that is founded on “the rational capitalistic organization of labour” is as obvious as it is dramatic. Weber has touched – however unwittingly – on the all-important difference between the early forms of “mercantilist” capitalism which do rely on gains derived from the greater “value” of goods exchanged for goods of “less value”, to a form of “organized capitalism” that “rationally and systematically” ensures the production of goods with “higher value” than the means of production utilized on the basis of “the rational organization of labour”!



Not only that! But Weber also makes a statement of truly earth-shattering significance:



Exact calculation—the basis of everything else—is only possible on a basis of free labour.
Eine exakte Kalkulation: – die Grundlage alles andern, – ist eben nur auf dem Boden freier Arbeit möglich. Und wie – und weil – keine rationale Arbeitsorganisation, so – und deshalb – hat die Welt außerhalb des modernen Okzidents auch keinen rationalen Sozialismus gekannt.

 In other words, capitalism is a social system founded on the exchange for profit (in monetary terms) between goods of “less value” for goods of “more value” on the “basis” – “the basis of everything else”! – of “exact [rational] calculation” made “only possible on a basis of [the rational organization] of free labour”! This is  the Problematik of "rational Socialism"!



Before we look at what Weber may mean by “the organization of free labour”, let us take a closer look at what he may mean by “rationality”. And here we turn to the “Author’s Preface” of the Ethik where he describes this process of “rationalization” (Rationalisierung) as being the most distinctive characteristic of what Weber calls “the Occident”. Clear and loud is here the echo of what we will find in Heidegger’s philosophy, and especially in the Einfuhrung in die Metaphysik – but here Weber is referring to the Nietzschean “self-dissolution” (Selbst-Aufhebung) of Christianity and Antiquity in the “completion” (Heidegger’s Vollendung) of Western metaphysics in the desert of Nihilism through the “scientific” Will to Truth. (We have discussed this on this site – just search “Will to Truth”.)



We have no time to go into a detailed discussion of Weberian Rationalisierung because it is not our focus here. But when Weber confronts the meaning of this “rationality” he, unlike Schumpeter who (as we saw in our piece on “Nietzsche, Schumpeter, Menger”) completely confused Weber’s use for a kind of “empirical scientific truth” – makes clear that there is neither a teleological or “scientific” meaning to this – and that indeed it cannot even be defined in terms of “systematic empirical methods” as Langlois does stupidly in his pathetic attempt to saddle Marx with the “teleology” – as if, as we are about to see, Weber had not thought that Lenin’s greatness consisted precisely in the attempt to achieve “the rational organization of labour” in Russia!



So here is the nub. The Rationalisierung is not for Weber a process of “substantive rationality” intended teleologically, nor is it a process of “systematization”, which in itself would amount to an empty “formalistic” definition. No. Let us see more closely what he means.



It is hence our first concern to work out and to explain genetically the special peculiarity of Occidental rationalism, and within this field that of the modern Occidental form. Every such attempt at explanation must, recognizing the fundamental importance of the economic factor, above all take account of the economic conditions. But at the same time the opposite correlation must not be left out of consideration. For though the development of economic rationalism is partly dependent on rational technique and law, it is at the same time determined by the ability and disposition of men to adopt certain types of practical rational conduct. When these types have been obstructed by spiritual obstacles, the

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development of rational economic conduct has also met serious inner resistance. The magical and religious forces, and the ethical ideas of duty based upon them, have in the past always been among the most important formative influences on conduct. In the studies collected here we shall be concerned with these forces.





No finality, then. No telos. Rationality of the Western kind is a “practical rational conduct” that is conditioned and determined by “non-rational”, even “magical and religious forces, and the ethical ideas of duty based upon them”. These are “forces” that Nietzsche had already explored in works that culminate on “The Genealogy of Morals” and in “The Gaya Scienza”. Weber is simply continuing from where Nietzsche left off, but in his own exquisitely genial manner. Remember that Weber was a member of the German Parliament and that his “ideas” embodied also the interests and the will of the German bourgeoisie whose very existence was now threatened by the catastrophe of the Great War and the collapse of Wilhelmine Germany together with its Zivilisation.



Hence in a universal history of culture the central problem for us is not, in the last analysis, even from a purely economic view-point, the development of capitalistic activity as such, differing in different cultures only

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in form: the adventurer type, or capitalism in trade, war, politics, or administration as sources of gain. It is rather the origin of this sober bourgeois capitalism with its rational organization of free labour. Or in terms of cultural history, the problem is that of the origin of the Western bourgeois class and of its peculiarities, a problem which is certainly closely connected with that of the origin of the capitalistic organization of labour, but is not quite the same thing. For the bourgeois as a class existed prior to the development of the peculiar modern form of capitalism, though, it is true, only in the Western hemisphere.



Just as with Keynes – whose sober reflections on the fate of his own class, the bourgeoisie, begin with the farcical Paris Conference and Versailles Treaty in 1919 – so now does Weber confront the survival and “the origin of this sober bourgeois capitalism with its rational organization of free labour”. And the specific, pressing, imponent and imposing “problem” that Keynes and Weber face, together with their bourgeois class, is “the problems [Problematik] of socialism”! No, there is no mis-spelling: there is no solecism, no typing error. Weber mentions specifically NOT “socialism as the problem”, but much rather “the problems such as those of socialism”!

Vollends fehlt der moderne Gegensatz: großindustrieller Unternehmer und freier Lohnarbeiter. Und daher konnte es auch eine Problematik von der Art, wie sie der moderne Sozialismus kennt, nicht geben.




Sandwiched in between the two last quotations from the Ethik is this passage of apocalyptic importance that ought to be read one hundred times:



And just as, or rather because, the world has known no rational organization of labour outside the modern Occident, it has known no rational socialism [precisely what Lenin is attempting in Russia!]. Of course, there has been civic economy, a civic food-supply policy, mercantilism and welfare policies of princes, rationing, regulation of economic life, protectionism, and laissez-faire theories (as in China). The world has also known socialistic and communistic experiments of various sorts : family, religious, or military communism, State socialism (in Egypt), monopolistic cartels, and consumers' organizations. But although there have everywhere been civic market privileges, companies, guilds, and all sorts of legal differences between town and country, the concept of the "bourgeois" [Burger - as opposed to "citizen"] has not existed outside the Occident, and that of the bourgeoisie outside the modern Occident. Similarly, the proletariat as a class could not exist, because there was no rational organization of free labour under regular discipline [die rationale Organisation freier Arbeit als Betrieb] .
Class struggles between creditor and debtor classes; landowners and the landless, serfs, or tenants; trading interests and consumers or landlords, have existed everywhere in various combinations. But even the Western mediaeval struggles between putters-out and their workers exist elsewhere only in beginnings. The modern conflict of the large-scale industrial entrepreneur and free-wage labourers was entirely lacking. And thus there could be no such problems as those of socialism.

Aber ebenso wie – trotzdem es doch überall einmal städtische Marktprivilegien, Zünfte, Gilden und allerhand rechtliche Scheidungen zwischen Stadt und Land in der verschiedensten Form gab, – doch der Begriff des »Bürgers« überall außer im Okzident und der Begriff der »Bourgeoisie« überall außer im modernen Okzident fehlte, so fehlte auch das »Proletariat« als Klasse und mußte fehlen, weil eben die rationale Organisation freier Arbeit als Betrieb fehlte. »Klassenkämpfe« zwischen Gläubiger- und Schuldnerschichten, Grundbesitzern und Besitzlosen oder Fronknechten oder Pächtern, Handelsinteressenten und Konsumenten oder Grundbesitzern, hat es in verschiedener Konstellation überall längst gegeben. Aber schon die okzidental-mittelalterlichen Kämpfe zwischen Verlegern und Verlegten finden sich anderwärts nur in Ansätzen. Vollends fehlt der moderne Gegensatz: großindustrieller Unternehmer und freier Lohnarbeiter. Und daher konnte es auch eine Problematik von der Art, wie sie der moderne Sozialismus kennt, nicht geben.


It is not “socialism” that is so much the problem. The Sozialismus is already integrated in the German Parliament (Regierung) through the existence and breath-takingly “rational political organization” of the German proletariat by the Social Democratic Party of Germany! The problem is not “socialism”, but rather “the problems” that the Sozialismus has in “organizing rationally” the integration of the proletariat as “free labour” within the system of political command by the “sober Western bourgeois class”! And this was precisely, exactly, specifically the very “problem”, but formulated in a philosophical framework, that Nietzsche devoted his entire “super-human” philosophical effort (“Kampf”, struggle, he called it) to addressing!



The problems of Socialism have to do precisely with this: with the ability of the political parties of the working class – the Social Democratic or “Labour” (!) parties – to represent and channel and integrate the antagonistic push of the working class – careful! This is what Weber calls “rational organization of free labour under regular discipline” - against the wage relation within the political institutions and organs such as the Parliament and the State (!) that represent instead the interests of the bourgeoisie!



And this is exactly, precisely, specifically and certainly “the Problematik such as that of socialism” that Keynes confronts in the “General Theory”: the absorption of the antagonistic push of the working class against the wage relation in the form of aggregate and effective demand – in the form of “growth” - as a means of “controlling” this push through the “rational organization of labour” – “rational” because “measured” through the institutional means of “the money-wage” as “the fundamental unit of capitalist antagonism” so as to turn “free labour” into “organized labour under regular discipline”!!!



How Keynes addresses this problem from the stand-point, from the strategic perspective, of the bourgeoisie in the guise of “economic science”, through the construction of a Rooseveltian New Deal, the State-Plan, is something that we must now go and discover.

The Betrayal of Europe - Comment on the Lex Column

http://www.ft.com/intl/cms/s/3/c1979b8e-015c-11e1-ae24-00144feabdc0.html#axzz1bDhVx6QL

The clownish saga of so-called European leaders incapable of putting an end to the obscene abuse and bare-faced THEFT of the wealth and resources of the vast majority of Europeans by "the markets" keen and skilled at "speculating" against "sovereign debts" from Greece to Italy - and all this for the simple reason that they do not wish to draw a line under the LOSSES that they know all too well will have to be suffered by Finanzkapital (German and French banks) as a result of the current "crisis"....All this disgusting, execrable vortex of unspeakable greed ans stupidity is enough to make a hippopotamus choke with anger.

Young Europeans can no longer tolerate this absurd chicanery, this unseemly prostration of these so-called "leaders", these "straw-men", these hollow men that parade themselves daily before news cameras and that daily betray our aspirations and now.... and now finally our values and ideals.

By refusing to take the decisive action of acknowledging that Europe is one and indivisible, that the future of European people from Istanbul to Lisbon, from Tunisia to Iceland, lies in taking whatever action is necessary - first and foremost and most blindingly obvious right now, the transformation of the ECB into the lender of last resort for the Eurozone - by refusing steadfastly to take these actions so as to save their filthy miserable execrable bank accounts, THESE VILE TRAITORS !!! - these vile traitors have resorted even to prostrating proud Europe to begging from the Chinese dictatorship - NOT because there is any necessity whatsoever - financial or economic or other wise - BUT SIMPLY TO PROTECT THEIR FINANCIAL ASSETS !!!

These inveterate bastards and snakes, these filthy vermin would prostrate every European value first, and then through the "austerity" measures that devalue and lower our living standards until they resemble what the abominable Chinese dictatorship - filthiest and most ignoble gang of lousy snakes - what the Chinese dictatorship imposes ON ITS OWN PEOPLE who each passing day now threaten to rise up in the throes of despair to vanquish and annihilate and disintegrate forever this CRIME AGAINST HUMANITY that must be wiped off the face of the earth and banished from our human universe!!
Of course, the hilarious irony of all this is that (a) the Chinese dictatorship will never invest in Europe unless it can be guaranteed political support against its own internal political and economic problems (including value of yuan) that are escalating BY THE HOUR; and (b) the European capitalist bastards themselves do not want Chinese help because they have a trade surplus with China and any Chinese aid would force them to allow more Chinese-dictatorship subsidised exports to Europe!!

Appendix: Just read and decipher what the wonderful James Mackintosh at the FT has to say on the matter:


Indeed, some of the measures being taken make it hard to decide whether to laugh or to cry. After two years of vilifying credit default swaps, the derivatives have been adopted as one of the ways to “leverage” the European financial stability facility, the eurozone bail-out fund.
In addition to that, after governments (correctly) put part of the blame for the original 2007 crisis on structured finance, the EFSF is to set up a special purpose vehicle with two tranches to attract money from China and other sovereign wealth funds. Some of the richest countries in the world are using the model that got them into trouble in the first place to persuade some of the poorest countries [ and most abominable dictatorships!!!] in the world to help them recover.

Here is the article: http://www.ft.com/intl/cms/s/0/ab9170f8-017f-11e1-8e59-00144feabdc0.html#axzz1boSNFuXf
Paul Krugman's View: http://krugman.blogs.nytimes.com/2011/10/28/here-we-go-again/
And Daniel Gros's: http://www.voxeu.org/index.php?q=node/7168
The FAZ on possible "political conditions" the Chinese dictatorship may impose: http://www.faz.net/aktuell/politik/ausland/europas-schuldenkrise-china-mit-vielfaeltigen-interessen-11509892.html

Max Weber’s Theory of the Origins of Capitalism

The Weberian interpretation of capitalism distinguishes its operari, its mechanical functioning which is “rational and systematic” not in a normative or purposive or still less a teleological sense, but only because its “economic action” can be “measured” according to mathematical relations that serve “to maximize” the “profit” expressed in monetary terms of the capitalist activity. The ultimate “rationality”, the basis upon which the “rational-mathematic” and “systematic-scientific” measurement of capitalist economic action is at all possible is the calculation of “profit”, which Weber defines as the difference, monetarily expressed, between expenses and receipts. All other “impulses” must be subordinated to this overriding calculating “rationality”. Yet this does not mean if the “measurement” of profit and the economic actions taken in its “pursuit” can be calculated mathematically so as to maximize that profit – this does not mean that the “pursuit” itself is “rational” in any substantive sense. The “rationality” of capitalist economic action is limited to and defined by the sheer “calculability” of the steps taken in the pursuit of profit maximization. But the “pursuit” itself cannot be “rational” in the sense that the ultimate “motive forces” of human action cannot be subjected to the formal “rationality” of mathematical calculation and maximization.


Unlimited greed for gain is not in the least identical with capitalism and is still less its spirit. Capitalism may even be identical with the restraint or at least a rational tempering of this irrational impulse. But capitalism is identical with the pursuit of profit, and forever renewed profit, by means of continuous, rational, capitalistic enterprise. For it must be so: in a wholly capitalistic order of society, an individual capitalistic enterprise which did not take advantage of its opportunities for profit-making would be doomed to extinction.

Let us now define our terms somewhat more carefully than is generally done. We will define a capitalistic economic action as one which rests on the expectation of profit by the utilization of opportunities for exchange, that is on (formally) peaceful chances of profit….

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…Where capitalistic acquisition is rationally pursued, the corresponding action is adjusted to calculations in terms of capital. This means that the action is adapted to a systematic utilization of goods or personal services as means of acquisition in such a way that, at the close of a business period, the balance of the enterprise in money assets (or, in the case of a continuous enterprise, the periodically estimated money value of assets) exceeds the capital, i.e. the estimated value of the material means of production used for acquisition in exchange. (pp17-8)



At first, Weber’s reasoning appears to be circuitous because he defines “a capitalistic economic action as one which rests on the pursuit and expectation of profit and renewed profit by means of continuous, rational, capitalistic enterprise”. But he quickly extricates himself out of the difficulty by further defining “capitalistic enterprise” as



a systematic utilization of goods or personal services as means of acquisition in such a way that, at the close of a business period, the balance of the enterprise in money assets (or, in the case of a continuous enterprise, the periodically estimated money value of assets) exceeds the capital, i.e. the estimated value of the material means of production used for acquisition in exchange.

Thus, “capitalistic enterprise” consists of “exchange for profit” defined as the monetary excess of receipts over expenses. Nowhere does Weber attempt to define “profit” except in monetary terms. And the profit is the simple result of “exchange” of goods. Weber here isolates three elements, namely, “rational” action, exchange and profits. The problem remains, however, that Weber does not define or explain “profit” and therefore we do not know yet how the simple act of “exchange” can give rise “rationally and systematically” to the realization of “profits” unless this is done through extortion or trickstery. This faulty definition is also inconsistent with Weber’s own position that “the rational organization of free labour” and therefore of “production” and “productivity” (see below) is crucial to the definition of capitalism – indicating thereby that “profit” is to be found in the sphere of production and not in the sphere of exchange.



Indeed, having considered a number of “peculiarities” of capitalist economic action, Weber then comes to this startling statement:



However, all these peculiarities of Western capitalism have derived their significance in the last analysis only from their association with the capitalistic organization of labour. Even what is generally called commercialization, the development of negotiable securities and the rationalization of speculation, the exchanges, etc., is connected with it. For without the rational capitalistic organization of labour, all this, so far as it was possible at all, would have nothing like the same significance, above all for the social structure and all the specific problems of the modem Occident connected with it.

Exact calculation—the basis of everything else—is only possible on a basis of free labour. (p22)



Now, we certainly agree that Weber here is getting very close to the mark. Unfortunately, however, he fails to give any indication at all as to why and how “exact calculation… is only possible on a basis of free labour”!



Hence in a universal history of culture the central problem for us is not, in the last analysis, even from a purely economic view-point, the development of capitalistic activity as such, differing in different cultures only

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in form: the adventurer type, or capitalism in trade, war, politics, or administration as sources of gain. It is rather the origin of this sober bourgeois capitalism with its rational organization of free labour.



Clearly, then, “free labour” is at the very centre of capitalism with the added attribute or characteristic that capitalism is responsible for “its rational organization”. But how does this lead us to profit? Weber does not explain even though he seems to have extensive insights into the workings of industrial relations and of the labour process for the production of goods for exchange as well as of the “antagonism” of free labour and capital with regard to the wage relation, that is, with regard to the antagonism of living labour to alienate itself to the command of the capitalist:





A man does not "by nature" wish to earn more and more money but simply to live as he is accustomed"* to live and to earn as much as is necessary for that purpose. Wherever modern capitalism has begun its work of increasing the productivity of human labour by increasing its intensity, it has encountered the immensely stubborn resistance of this leading trait of pre-capitalistic labour. And to-day it encounters it the more, the more backward (from a capitalistic point of view) the labouring forces are with which it has to deal.

Another obvious possibility, to return to our example, since the appeal to the acquisitive instinct through higher wage-rates failed, would have been to try the opposite policy, to force the worker by reduction of his wage-rates to work harder to earn the same amount than he did before. Low wages and high profits seem even to-day to a superficial observer to stand in correlation; everything which is paid out in wages seems to involve a corresponding reduction of profits. That road capitalism has taken again and again since its beginning. (p60)



Nor is Weber bereft of knowledge about the dynamic whereby the antagonism of workers in the production process compels the capitalist to turn into an entrepreneur and so transform both the means of production and, with them, the goods produced:



But the effectiveness of this apparently so efficient method has its limits. Of course the presence of a surplus population which it can hire cheaply in the labour  market is a necessity for the development of capitalism. But though too large a reserve army may in certain cases favour its quantitative expansion, it checks its qualitative development, especially the transition, to types of enterprise which make more intensive use of labour. Low wages are by no means identical with cheap labour. (p61)



But then, suddenly and inexplicably, Weber abandons his analysis of the antagonism between capital and workers and begins to describe the process by which certain “religious upbringing” historically helped overcome the opposition of workers to the alienation of their living labour and how this “change of attitude” was itself responsible for the “spirit of capitalism” that transformed industry from “traditionalism” to modern capitalism:



Labour must, on the contrary be performed as if it were an absolute end in itself, a calling. But such an attitude is by no means a product of nature. It cannot be evoked by low wages or high ones alone, but can only be the product of a long and arduous process of education. (p62)



The ability of mental concentration, as well as the absolutely essential feeling of obligation to one's job, are here most often combined with a strict economy which calculates the possibility of high earnings, and a cool self-control and frugality which enormously increase performance. This provides the most favourable foundation for the conception of labour as an end in itself, as a calling which is necessary to capitalism: the chances of overcoming traditionalism are greatest on account of the religious upbringing.

This observation of present-day capitalism in itself suggests that it is worth while to ask how this connection of adaptability to capitalism with religious factors may have come about in the days of the early development of capitalism. (p63)



Of course, this “explanation” of the origins of capitalism or of its “spirit” can satisfy no one because it raises more questions than it pretends to answer. Again, Weber has not explained the meaning and content of “profit”. He has not accounted for the antagonism of workers to the wage relation both in terms of “distribution” of goods produced and above all in terms of the alienation of living labour from the means of production and from social labour. But above all he has not explained satisfactorily or at all how and why “the Protestant work ethic” could ever induce workers to relinquish their antagonism to the wage relation to become instead “enthusiastic and dutiful” participants in the alienation of their living labour!



Above all, Weber has failed to explain how the quantification of the “content” of profit as a social relation of production can be operated by capital and therefore enable the “rationalization” of production and distribution of commodities for the realization and maximization of profits from their sale on the market!


This is a topic we will address in connection with the adoption of neoclassical value theory from the Austrian School through to Keynes.