Commentary on Political Economy

Thursday 20 October 2011

Weber and Schumpeter - Rationalisation, Leadership and Profit

Max Weber sees "the spirit of capitalism" as the "ascetic accumulation of wealth", as an "obsession" that is conducted "rationally", through the "scientisation" of social and industrial activity - a "scientisation" that consists of the "mathematical measurement" of all aspects of social life. Weber perceives the "insatiable" character of capitalist accumulation. He laments and certifies its "disenchantment" (Entzauberung) of human life and experience in the seemingly "senseless" pursuit of abstract "wealth". He records and classifies the process of "rationalisation" that this engenders in all walks of human association and activity - from the "bureaucratisation" of government functions to the "parliamentarisation" of mass parties that closely parallel the structure of industrial government with their "soul-less democracies", to the subsumption and subordination of scientific research to the needs of "industry", to the "mathematisation" of Western music under the pentagrammatic system, to the codification of laws.

In short, Max Weber - whom Raymond Aron described as "the heir of Machiavelli and contemporary of Nietzsche" - studiously records and analyses the development of capitalism as a "secularisation" and "rationalisation" of human life. But Weber was too close to Nietzsche to overlook the fact that this Rationalisierung has anything to do with "science" as it is normally understood: instead, as Machiavelli would have taught him, such a process of rationalisation serves merely to concentrate and centralise social and political power in the hands of ever-more "charismatic" leaders. Far from atrophying or eclipsing "the spirit of leadership", capitalist industrial society, with its "massification" and "rationalisation" merely places more decision-making "responsibility" on the shoulders of a "leitender Geist" (leadership Spirit) capable of determining - not the content or the conditions or thrust - but the strategic "direction", the "orientation" of the imponent resources that "the industrial system" governed by the modern nation-state requires for the effective mediation of the "antagonistic interests" of capitalist society.

Like Nietzsche, Weber keenly perceives this social antagonism, though he cannot explain it; he correctly identifies the thrust toward and need for the "co-ordination" and "guidance" of the complex interests involved. But Weber does not see the strict connection, apart from this "formal analytical and mathematical classification", between political governance of the modern nation-state and the antagonism of capitalist industrial enterprise. He fails therefore to go beyond his initial masterly study of the origins of capitalism in the Askesis, in the piety of the Protestant Ethic and its "renunciation" of worldly pleasures in favour of the "reward" of saving and parsimony. Weber himself admits, at the end of the Protestantische Ethik, that this "work ethic" remains still centred and focused on the utility of labour (!) - and that it cannot therefore constitute "a specifically bourgeois ethic".

Despite this breathtaking avowal, Weber still neglects to look deeper into this "specifically bourgeois ethic" - obviously one that will replace "work" or "labour" as its focus (remember the fundamenta Benedictine ascetic injunction: "Ora et labora!", work and pray!) - precisely for the reason that for him "the spirit of capitalism" and capitalism itself are derived merely from some "ethic", from some "faith" that turns into secularism and accumulation of material wealth! Weber therefore overlooks the specific operation of capitalist industry, its particular modus operandi, preferring instead to concentrate on the "political consequences" of the Rationalisierung in terms of political "leadership" and charisma.

In pointed contrast, Schumpeter is a contemporary of Weber, but he is also the heir of Mach. Through Weber he is linked to Nietzsche, but he is already too much under the spell of Machism fully to comprehend the significance of Nietzsche's radical critique of bourgeois society. Schumpeter looks at capitalism through the "scientific" prism of Machism: what you see is what you get. The task of the "scientist" is not to look "beyond" or "behind" mere phenomena, but rather to find the simplest mathematical "con-nection" between them; it is "to describe" reality, not to explain it - and to describe it in the simplest and most "predictable" manner. That is why, as we saw in the previous study, Schumpeter never goes beyond the simple "observation" and "analysis" (literally, retrospective dissection) of the empirical behaviour of capitalist institutions. When Schumpeter looks for a "trans-formation mechanism" to explain the "meta-morphosis" of capitalist industry - its "development, evolution and growth" (Entwicklung) - he finds it in the "entrepreneurial spirit" (Unternehmer-geist) without seeing the contra-diction between "mechanism" and "spirit"!

The reason for this astounding oversight can be found in Ernst Mach's philosophy of science: the "empirical observation" of entrepreneurs in capitalist industry and the provision of "finance" by "capitalists" is all that counts; both factors can be reconciled as parts of one "mechanism" for the trans-formation of capitalist industry through "innovation" and "creative destruction". Schumpeter allows that the "entrepreneur" derives a "profit" from his "innovative leadership", from his "enterprise". Indeed, the Unternehmer-Gewinn (the entrepreneurial profit) is the only "profit" that is worthy of the name for him! All other "profits" are simply "interest" charged by "capitalists" for advancing their "working capital" to the entrepreneur!

In other words, Schumpeter never even attempts to locate the source of "profits" beyond the mere "innovation process" of the entrepreneur, beyond the "reward" for his "enterprise". Schumpeter does not look at the "motive" behind the activity of the entrepreneur except to allude to a vague Nietzschean "will to conquer", to the simple "pleasure of success". Again, this failure is largely due to the fact that, unlike Weber, Schumpeter does not see the Rationalisierung as a political process but simply as a "scientific development" - not as a "progress" (!) understood in a teleological or moral sense, but only as the application of scientific principles to human organisation and industry.

Put differently, Schumpeter interprets "profits" as a function of and reward for the "entrepreneurial spirit". Yet he does not even suspect that it may be "the profit motive" that makes the "entrepreneurial spirit" a matter of life and death for the "capitalist"!

 In our next intervention, we will explain how it is in fact "the profit motive" that is and must be the main driver of capitalist enterprise, and not, as Schumpeter clearly believed, the other way around.


  1. As I delve deeper in the spirit of capitalism and its end game of profitability, I can't help but think that there is a way to be more just and contribute to society. To be fair, I expect firms to contribute to charity without the ulterior intent of tax cuts.

  2. Capitalism is applied to a variety of historical cases, varying in time, geography, politics, and culture. There is, however, agreement that capitalism became dominant in the Western world following the demise of feudalism.
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  3. Thank you so much for clearing out this issue. Rational thinking is really needed during this kind of discussion.
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  4. I love reading all your articles. They just depict an economy that slowly depletes as the government become corrupt.
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  5. I would agree with the previous comment that "capitalism became dominant in the Western world following the demise of feudalism". Maybe because they are wealthy and have the right to manipulate the socioeconomic of one country.

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