Thursday, 27 October 2011

Max Weber and the Spirit of Capitalism - Rationalisierung and Labor

At the end of a previous post on this site titled The Profit Motive and the Entrepreneurial Spirit - Sketch of A Theory of Capitalism you will find the following paragraph:

And this means that – contrary to what Schumpeter theorized – the real capitalist cannot be the “financier” who simply sits in a bank and lends money for “interest”!! The real “capitalist” is precisely the “entrepreneur” who must go to hell and back to realize a “profit” for the capital invested – and to do so must also “trans-form” the method of production and the products as well!! It is not the “entrepreneurial spirit” that defines capitalism, but it is the intrinsic antagonism of the wage relation that compels the “capitalist” to be “entrepreneurial”!!!

Let us take up the analysis from where we left it. To clarify the various analytical “elements” or “ingredients” that we need, let us turn to Schumpeter’s great contemporary sociologist, Max Weber:

To be sure the capitalistic form of an enterprise and the spirit in which it is run generally stand in some sort of adequate relationship to each other, but not in one of necessary interdependence. Nevertheless, we provisionally use the expression spirit of (modern) capitalism ^^ to describe that attitude which seeks profit rationally and systematically in the manner which we have illustrated by the example of Benjamin Franklin. This, however, is justified by the historical fact that that attitude of


mind has on the one hand found its most suitable expression in capitalistic enterprise, while on the other the enterprise has derived its most suitable motive force from the spirit of capitalism.

But the two may very well occur separately. (Max Weber, ‘Protestant Ethic’, pp64-5)

In the Protestantische Ethik, Weber distinguishes three elements, three factors that may be isolated in the analysis of capitalism as a mode of production. The first is “the search for or pursuit of profit”. The second is its “rational and systematic” character or “manner”, which, combined with the pursuit of profit he calls the “spirit of capitalism”. And this spirit of capitalism he takes as distinct from, third, the “enterprise” which, whilst “on the one hand [has provided the]…. most suitable expression….[for the spirit of capitalism], on the other….  has derived its most suitable motive force from the spirit of capitalism. But the two may very well occur separately.”

There is first “an attitude that seeks profit”, although Weber does not define “profit”. Then there is the “manner” in which profit is sought, which is “rational and systematic” – and this means that the “rationality and systematicity” of the pursuit of profit is “separate” from the “motive force” or “attitude” that “drives” or “causes” the “pursuit of profit”. And this self-same “motive force” or “attitude” or “pursuit” is what “most suitably” drives “enterprise”. Enterprise is therefore “the most suitable expression of the spirit of capitalism” because it derives its “most suitable motive force” from that spirit. Enterprise and the profit motive are “most suited” to each other. And to find out why and how, we must look deeper into both the meaning of “enterprise”, the meaning of “pursuit” or “spirit”, and then the meaning of “profit” and “rationalization” so that we may arrive at “capitalism”.

It is evident that by “rationalization” Weber does not mean the organization of “the pursuit of profit” according to a “purposive or substantive or teleological” rationality. The “rationality” does not consist in the “goals” of the pursuit but purely in the fact that the “goal” is a “quantifiable” one. If the “spirit” of capitalism is the “pursuit” of “profit” and “profit” is a “numerical”, “mathematical quantity or magnitude” – something “measurable” numerically as “profit” is because it is a “monetary measure” – then and only then the “spirit” of capitalism can assume a “rational and systematic” form as a “pursuit” that need not have any substantive “rationality” or “meaning”.

It follows that it is the “quantification” of whatever it is that constitutes the “substance” or “meaning” of “profit” as a social institution – it is this “quantification” or “form-alization” of the social content of “profit” that allows its “rational and systematic” pursuit. But the “pursuit” as a “motive force” is distinct from the “rationalization”. The “pursuit” of a goal or end that could not be “quantified” could not be “rationalized” for the precise reason that the “goal” is not achievable by formally “rational” means. Capitalism is therefore a mode of social organization that allows the “pursuit” of profit to be conducted in a “scientific”, mathematically calculable manner because its “goal” can be “quantified” in the monetary entity of “profit”.

We have then a “motive force” or “drive” or “ethos” that aims at the “rational and systematic” goal of the “quantifiable” entity called “profit”. And this means that the only “rational and systematic” aim or goal of the “pursuit of profit” is its “maximization” over a period of time.

Weber distinguishes the “motive force”, the motivation or drive of capitalism, its “spirit”, from the actual “formal-rational goal”, on one side – the maximization of profit; and from its “purposive goal” which is the “satisfaction” of the “motive force”. “Profit” as a formal and numerical “quantity” cannot be “its own goal”, because then it would be meaningless and purposeless as a “numerical quantity”. The purpose behind the pursuit of profit, the “meaning” of profit, must be something other than its numerical expression, and can be its “monetary” expression only so far as “money” means something “other” than a mere “quantity”!

To understand “profit” we must understand the “motive force” behind “the pursuit of profit” – what makes profit a “pursuit” -; and we must understand how “profit” can be “quantified”, that is, we need to know what allows the “content” of profit to enable it to be “quantified” – not (!) because the “content of profit” is an actual “quantity” but because it is subject to “quantification”. In other words, how is it possible for the “content” of profit (profit outside its “numerical” form) to be “quantified”?

If “profit” were a mere “quantity”, then there would be no need for “enterprise” because its “maximization” would depend entirely on some “engineering numerical formula”. The “enterprise” is needed because “profit” needs “entrepreneurial conduct” in order to be derived. Differently put, if “profit” depended merely on the “entirely individual conduct” of the “entrepreneur” without involving other people, then it could never (!) be described as “enterprise” or “entrepreneurship” but merely as “skill” or “craft” or “strength” in the performance of a “task”. “Enterprise” involves the organization of human beings around some “activity”. But this “activity” need not be “for profit” – and that is why enterprise is indispensable for capitalism but capitalism is not indispensable for “enterprise”!

Yet when Weber argues that “the two may very well occur separately”, he means that “the entrepreneurial spirit” and “the spirit of capitalism” are two separate concepts or human motivations because for him “the spirit of capitalism” contains a “rational and systemic” component in “the pursuit of profit” that “the entrepreneurial spirit” need not necessarily contain. But here Weber is as wrong as can be because the two concepts are “separable” from the other only because “entrepreneurship” does not necessarily contain “the spirit of capitalism”, whereas “the spirit of capitalism” necessarily implies “the entrepreneurial spirit”!  The mistake that Weber has made is to imagine that the capitalist pursuit of profit, whilst it may have an “irrational ethos” as its “motive force”, does not necessarily involve “enterprise” but involves necessarily “rational and systematic” methods for the maximization of profit.

Weber goes to great lengths to differentiate the less “rational” personal qualities of the “ideal type” of the entrepreneur as distinct from the “capitalist” and invokes Sombart to distinguish between “traditionalist” and “entrepreneurial” businesses (pp.63-65 ff) and between profit maximization over time and sheer opportunistic rapacity (p.56). Yet neither of these distinctions detracts from the fact that capitalist investment requires necessarily the realization of profit and therefore also “the command of living labour” which is the essential feature of capitalism regardless of whether “profits” are then distributed as “interest” or “rent” to “passive investors”!

That is why Weber never took adequate notice of Schumpeter’s Unternehmergeist (entrepreneurial spirit) and chose to concentrate instead on the leitender Geist (leadership spirit) of the charismatic political leader and on the “calling” of the “rationalizing” scientist. Schumpeter himself, as we have seen, incorrectly borrows the same “dichotomy” of “capitalist/financier” (dull and calculating) and “entrepreneur” (“enterprising” and “innovative” as well as a “captain of industry”). But both great thinkers neglect the fact that there is no “capitalist enterprise” or “industry” at all without the political Will to Power that hides behind the seemingly “formal, quantitative, monetary” notion of “profit”! Both assume that the normal operation of capitalism – however irrational its “motive force” or “entrepreneurial spirit” –is or can be entirely “rational and systematic” and “scientific” – in other words devoid of social antagonism!
And this, as we will see, is simply impossible where the wage relation and “profit” are concerned.

[To be continued]

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