From the moment we posted it, we have noticed great interest from the friends who visit this site in the piece on "Absolute and Relative Exploitation". This distinction plays a central role in the work we are conducting now, called collectively "Krisis" - particularly the final chapters. This piece is meant to illustrate and enucleate the meaning of this conceptual and historical distinction to our visiting friends by analysing closely Max Weber's own insights that serve as a pro-paedeutic to Keynes's economic analysis. I hope you enjoy this.
The Weberian interpretation of capitalism focuses on 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 Kalkulation
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”.
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….
17
…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)
From the outset, the Vorbermerkungen
published in 1920 and meant as a general introduction to the Aufsatze zur Religionssoziologie are
intended as a recapitulation of Weber’s reflections on and theory of the
origins and nature of capitalism. This is the culmination of a reflection that
was already well advanced with the “triptych” of 1918-9 and the intensification
of the political debate around the Verfassungsfrage
in 1919 in which Weber seems finally to veer toward authoritarianism. Here
therefore we have the fruit of Weber’s “mature” reflections on his exegesis and
critique of the capitalist economy and its social institutions. In the process,
Weber seeks to reconcile the “irrational” calling
(Beruf) or “ascetic Ideal”, as the esse,
the “Will” or “Spirit” at the origins of “the spirit of capitalism” with the
“rationally calculable” operari of
capitalistic economic action itself.
Capitalism is only one form of “economic action” that relies
on “opportunities for exchange” which, by definition, have a degree of
legitimacy and are therefore “peaceful” and that, where they are “rationally
pursued” involve the “periodic excess” of the “balance of the enterprise in
money assets” over the preceding period. Already, therefore, capitalistic
economic action involves a “system” that ensures its legitimate reproduction on
an expanded scale. It involves the “systematic utilization of goods or personal
services as means of acquisition” for profit, that is, the difference between
the cost of utilizing goods and personal services as a means of acquisition and
“the estimated value of the material means of production used for acquisition
in exchange” or “capital”. Weber’s awkwardness in describing capitalist
economic action is on full display here, despite his resolve “to define our
terms somewhat more carefully than is generally done”, and it reflects clearly
his unwillingness to separate the “institutional” aspects of capitalist
enterprise from its narrower systemic elements.
We notice next that Weber does not distinguish between goods
and personal services utilized systematically in capitalism from “the means of
production”. This indicates that Weber sees no distinction, where capitalist
economic action is concerned, between “means of production” and “labor”
(personal services). In other words, he treats “labor” as a simple “homogeneous
quantity” that is “utilized” just like other “goods” in the production of
“means of acquisition”. Weber is not saying that the aim of capitalist
enterprise is “to acquire more means of acquisition”, (as Don Patinkin put it,
in capitalism “goods do not buy goods”), but it is an awkward way of saying
that the “money assets” of a capitalist enterprise at the end of a given period
have to be systematically higher than at the start. Thus, what really matters
for capitalist “profit” is the value of “money assets” and not “means of
acquisition”.
Yet this does not mean that if the “measurement” of profit
and the economic actions taken in its “pursuit” can be calculated
mathematically so as to maximize that profit then the “pursuit” of profit
itself is “rational” in any substantive
sense – in terms of what Weber himself called “Wert-rationalitat”. 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:
it is a “Zweck-rationalitat”, a rationality limited to and circumscribed by its
“purpose”. 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. (p.17)
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 so long as the monetary value of these
goods at periodic intervals is greater than the goods and personal services
“utilized to acquire them”. 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, which Weber has already excluded. But capitalist enterprise is hemmed
in between two pincers: - from below, capitalists are forced by competition to
take advantage of profit opportunities that are, therefore, necessarily
“limited” or “scarce”. From above, instead, capitalist investment cannot be so
foolhardy that it is not checked by “reasonable” opportunities for profit that
ensure its “renewed” character. This upper limit can be constituted by “risk”
and by “social limits” (values, religion, institutions, social cohesion, the
environment – “externalities”).
Already therefore we have a definition of capitalist
economic action that requires two fundamental limitations: on the low side,
capitalist enterprise requires the regulation of competition so that “regular
opportunities for profit” actually exist on a “renewed” basis and are not
defeated by monopoly or else by other practices that endanger the “entry” of
new competitors into “the market”. And the preservation of the possibility of
“renewal” of this action is what sets the upper limit to capitalist industry.
It is evident from Weber’s broad definition that there is no “independent”
de-finition of capitalistic economic action, but that instead capitalism
depends on a number of “institutional” presuppositions or con-ditions that
allow it to operate “rationally and systematically”.
But when Weber confronts the meaning of this “rationality”
he makes clear - unlike Schumpeter who (as we saw in our piece on Nietzschebuch) completely confused
Weber’s use for a kind of “empirical scientific truth” – that there is neither
a teleological nor a “scientific” meaning to this – and that indeed it cannot
even be defined in terms of “systematic empirical methods” (as Langlois does
stupidly in his peevish attempt to saddle Marx with the “teleological” aspect
of “rationality” – 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!). 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
26
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 with Genealogie
der Moral and 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
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
23
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.
Thus, although “the peculiar modern form of capitalism” is
“closely connected with that of the origin of the capitalistic organization of
labor” or rather “the rational organization of free labor”, still this
“peculiar modern” or “sober bourgeois” capitalism “is not quite the same thing”
as the “broader” kind of capitalism because “the bourgeois class existed prior
to the development of [this] peculiar modern form of capitalism”. There are two
types of capitalism, then: - a “broader” type and a “peculiar modern, sober
bourgeois” form of capitalism. This second type is “sober” because it involves
the “rational organization of free labor”. This “broader” definition seems
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 “sober capitalism” – indicating thereby that in this
second type of capitalism “profit” is to be found in the sphere of production
and not in the sphere of exchange. Or at the very least the two “spheres” need
to be connected through that qualification of “labor” that Weber makes by
calling it “free”. What is the nature of this “freedom”?
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)
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.”
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”!
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.
Note
how “exact calculation” – that is, rational calculation – here means “regular profitability”!
Weber is certainly 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”! Clearly, “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 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.
Weber 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 being alienated by being placed
under 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)
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)
Weber
starts from the most blindingly obvious fact visible to the most “superficial
observer” with even the slightest knowledge of capitalist industry:
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.
It is
this obvious fact that leads one immediately to suspect that capitalist
profitability has to do with “the rational organization of labor”. Minimising
wages tends to maximize profits. But the relationship is far more complicated
than that, because it is often possible for individual capitalists to offer
higher wages to their workers so as to get them to work harder or longer. Yet
this runs up against the undeniable reality that
[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.
Weber
is absurdly wrong here – because this “immensely stubborn resistance” is not
merely “a leading trait of pre-capitalistic labor” but it is indeed a trait
especially of workers in the most advanced
industrial capitalist sectors or nations! Workers are keen to accept higher
wages, but only on the condition that their working conditions, which include
wages and labor process, are not extended or “intensified” significantly. It is
because of this “immensely stubborn resistance” that the capitalist either
increases wages significantly or else replaces existing means of production (machinery
and labor process) “to types of
enterprise which make more intensive use
of labour” so as to increase the
“productivity” of the workers. There is an obvious quid pro quo involved here
between the “technology” of the means of production and the “wage and working
conditions” of workers. It does not seem possible therefore for Weber to hold
to the notion that the workers’ “stubborn resistance” to the increase “in the
productivity of human labor by increasing its intensity” is a “leading trait of
pre-capitalistic labor” because in fact and in reality this “exchange” between
high productivity and high wages and conditions is unquestionably the most evident aspect of advanced capitalism!
Weber himself admits as much when he writes,
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….That [is a] road capitalism
has taken again and again since its beginning.
And this
“opposite policy” of “forcing the worker to work harder”, consists not so much,
as Weber says, “of reducing his wage-rates to earn the same amount as before”,
which only happened in the “putting-out” system of “piece-rate wages”, but
rather by deploying “a reserve army of labor” prepared to work for lower wages
– which is an indispensable ingredient of capitalism, not just “a road
capitalism has taken” repeatedly! Weber finally gets to this violent reality:
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.
Once
again, Weber displays the awkwardness of someone who, by his own admission
according to his wife, “attended his first lessons on political economy when
he began giving them”! But Weber is making a terrifically valid and extremely
insightful point here that deserves close attention: Capital may “expand quantitatively” by employing a
greater number of workers at low wages. But these “low wages” may not mean that
the labor employed is “cheap” if the productivity of that labor is so low that
its output becomes uncompetitive because it is “relatively” expensive. So,
rather than “expanding” – that is, seeking to maximize revenue – by what we may
call “absolute exploitation” of workers, capital may “develop qualitatively” by
“making more intensive use of labor” through the employment of new technologies
and labor processes - what Weber calls here “types of enterprise [Betrieb]”. We may call this “relative exploitation”.
But we should note above all the “difference” in Weber’s terminology between
“expansion” and “development”, and then the emphasis on “the type of enterprise”. These are analytical
features first outlined by Marx, especially in the Grundrisse, and adopted and adapted by Schumpeter in his “theorie der wirtschaftlichen Entwicklung”.
Four
major elements emerge already from the thrust of Weber’s analysis of capitalism
thus far:
The
first is the distinction between “opportunistic” or “mercantilist” capitalism
and the more “serious bourgeois” modern capitalism that Weber subdivides
further into the “entrepreneurial” capitalism of “innovators” and “risk-takers”
who create new opportunities for “profit”, and the “capitalistic” or “rentier”
or “financial” capitalism constituted by “passive investors” happy to collect “dividends,
interest and rent” from their mere “ownership” of capital. This distinction
Weber would have taken straight out of Schumpeter’s pioneering theory of
economic development glorifying the Unternehmer-Geist (entrepreneurial Spirit)
and the corresponding Unternehmer-Gewinn (profit).
The
second is that “labor” is seen as a homogeneous “force” (labor-power or
Arbeits-Kraft) that is interested only or predominantly in “wages and
wage-rates” – in its “purchasing power” – rather than in working conditions,
technologies and labor process.
The
third point is that this “labor” is “free” in the sense that the ultimate
“spirit of capitalism” consists precisely of “the care for external goods” that
has now rigidified or “crystallized” into a “steel-hard casing” and that
determines ultimately the “rational allocation” of the means of production on
the part of capitalists for the provision and satisfaction of “the iron cage”.
The “freedom” of “labor” is the fundamental condition that will ensure both the
“competition” required from below and the “checks and balances” required as a
limitation to capitalistic profit-seeking.
The
fourth element is that because workers care only for their wages (their needs
and wants), the conflict between workers “as a class” and capitalists boils
down ultimately to their being employed for satisfactory wages and does not
extend to other more “utopian” demands. These “socialist” demands are “utopian”
firstly because capitalist production is so rational that it ensures the
efficient production and distribution of social resources (in accordance with
Marginal Utility Theory) so that essentially “rational Socialism” coincides
with “rational capitalism”; and secondly, as a corollary, socialist demands are
utopian because they are inflated by the political representatives of workers
in the new social democratic and communist mass parties – in effect, they are a
by-product of the very Demokratisierung
engendered by “sober bourgeois capitalism”.
Weber
sees “free
labor” as a homogeneous malleable “mass” or “force” that can be “organized
rationally” by “sober bourgeois capitalists” in order to maximize the “profits”
and the “productivity” of the “lifeless machine” of production which is seen to
embody the “crystallized Spirit” of “the iron cage” – of “labor” as “calling”
at first, and then as “the care for external goods” – expressed “freely” by
workers as their aggregate market demand for goods. Although he is aware of the
historical difference between “quantitative expansion” and “qualitative
development” as specific capitalist “types of enterprise”, Weber does not see
the antagonism in production that this “difference” so evidently demonstrates!
For him, conflict exists only in consumption – and the combination of “free
labor” and “rational organization for profit” make capitalist enterprise
capable of rational calculation and resolution
of this pervasive conflict in the “congealed Spirit” of the “lifeless
machine” guided by the “living machine” of State and private capitalist
bureaucracy. - In the same manner as Hobbes resolved the bellum omnium contra omnes by hypothesizing the convention in metu mortis of the Leviathan, of the State-machine as a “mechanical
ab-solution” of all human conflict, Weber envisages the possibility of
“resolving” the conflict of the Demokratisierung
in the Kalkulation of “compromise”
within the Ratio of the
“parliamentary oversight of the bureaucracy”, the “selection” of the
“responsible” leitender Geist. But,
like Hobbes, Weber then faces the problem of the “trans-formation” of the
system, of its Entwicklung, of its Dynamik, which he can understand only in
terms of “political representation and compromise” – of the Parlamentarisierung. This is the Aufklarung – the “spirit of
Enlightenment” – that Carl Schmitt will definitively
demolish in his response to Thoma in The
Crisis of Parliamentary Democracy.
Weber
saw “the problem” of the State that Schumpeter ignored almost completely, but
he was unequal to the task precisely because “parliament” alone did not have
the “instruments” it needed if the “rational profitability” of market capitalism
failed. “Demand” may well come from “free labor”: but it does not
“automatically” guarantee “profitability”. As Keynes was about to discover and
theorise, it is “aggregate demand” that requires specific policies and instruments that the German State
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