A special New Year gift for our friends:- the introductory chapter of a new book on the Philosophical Antecedents of Neoclassical Economic Theory in contrast with Classical Political Economy and the Labour Theory of Value. Hope you enjoy this!
Exordium
“A specifically bourgeois economic ethic” – Max Weber, the
Protestant Ethic and Neoclassical Economic Theory
What the great religious epoch of the
seventeenth century bequeathed to its utilitarian successor was, however, above
all an amazingly good, we may even say a pharisaically good, conscience in the
acqusition of money, so long as it took place legally. Every trace of the
deplacere vix potest has disappeared.
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 his 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.
In this
telling passage from the last chapter of Weber’s Protestant Ethic dedicated to “Asceticism”, the great German
scholar draws a clear and unmistakable link between the world-changing emphasis
of the Protestant faith on “work” (Arbeit)
as the road to salvation and its manifestation or reward in the “outward signs”
of material wealth and success – the light cloak that nefariously turns into an
“iron cage”. Yet in tracing this link between “the Protestant Ethic” and “the
Spirit of Capitalism” and then designating the former as “a specifically bourgeois economic ethic” Weber unwittingly inverts
or, more accurately as we are about to see “reverses”, the real content of what
truly constitutes the “specificity” of this “bourgeois ethic”. The aim of this
piece – as intrepid, I believe, as it is original – is to show that the
Protestant Work Ethic, though it certainly played a historical role in the rise
of the Spirit of Capitalism, most certainly could not provide a logical
coherent foundation for “a specifically bourgeois economic ethic”, and was in
fact in complete opposition to and even in contradiction with such ethic. By so
doing, we hope to provide a revealing original interpretation and critique of
the worldview introduced by the negatives
Denken – a worldview that, whilst in strident opposition to the
universalistic claims of Western metaphysics and theology, has come to dominate
implicitly, though not explicitly, the science and ideology of global
capitalism.
Our
thesis here is that the Protestant Work Ethic retains the Christian and
Scholastic genes of mediaeval theology and jusnaturalism (Latin, jus naturale, Natural Law) that will
ultimately form the foundations of Classical Political Economy and of the
Labour Theory of Value – both of which are emphatically antithetical to any version of “a specifically bourgeois (and
capitalist) economic ethic”. The real, true and canonic “bourgeois economic
ethic” – indeed, an entire imponent metaphysics, as we shall show – is and
could only be constituted by what has come to be known as “neoclassical
economic theory”, a theory that from its early beginnings in the middle of the
nineteenth century on the back of Hobbesian and Lockean possessive
individualism and then through its direct predecessor, the negatives Denken initiated by Schopenhauer, has come to dominate
and permeate the entire one-dimensional uni-verse
of bourgeois orthodox “economic science”. We characterize this philosophical
and socio-theoretical current, immensely influential to this day - though this
is far from obvious to even the most perceptive scholars in economics
especially - as “negatives Denken” or
“negative thought”. The meaning of this description will become apparent in the
course of our exposition as we trace the salient aspects of the negatives Denken with special reference
to the field of economic theory as expounded and articulated by Neoclassical
Theory.
For
although in the worldview of the negatives
Denken “labour” can consume existing wealth or
“nature” to provide for individual wants when it comes into contact with this
“nature”, it can by no means “create” or produce greater wealth to satisfy
or provide for human wants unless this “labour” can be made more “productive”
by “capital”. Aphoristically put, one might say that for the Protestant Ethic
production leads to greater wealth and possessions by means of labour
understood as penitence (toil and abstinence or parsimony) whereas for the negatives Denken it is the renunciation
of present consumption that leads to future accumulation through the diversion
of labour to the production of capital. The
essential feature that both the Protestant Ethic and the negatives Denken have in common is that for both “labour” is
“sacrifice and penance” or “toil and effort”: yet the all-important difference
is that for the first labour pro-duces greater wealth, regardless of whether
this wealth is then saved or consumed, whereas for the second this is
impossible given the essence of labour as “want” or “provision for want”, and
only the renunciation of consumption, the conquering or sublimation of “want”,
can lead to the accumulation of wealth provided that this renunciation is
devoted to the production of labor-saving tools and ultimately exchange values.
We wish
to demonstrate here that whilst Neoclassical economic theory and a fortiori the negatives Denken give absolute pre-eminence to sacrifice and
“renunciation” as the real foundation, source and origin of “greater wealth” or
“production”, just as the Protestant Ethic did, they deny most vehemently that
“labour” can be the real source and origin of greater wealth and assert rather
that that source and origin is to be found in “capital” understood as “the saving of labour” or better still as the
“diversion of labour from immediate
consumption to production goods or labour-saving
tools” – or, in other words, “means of production” or “capital”. Indeed, for
the negatives Denken and for
Neoclassical Theory it is quite simply metaphysically impossible for “labour”
to be the source and origin of “wealth” of any description; if anything, labour
is seen as consumption of wealth, as
“want” or as “provision for want” (Bedarf)
to ensure survival. For Neoclassical Theory thus labour has no “utility” and is
rather “dis-utility”; labour is effort, toil and pain - thence it cannot be the
substance of or be embodied in any kind of “wealth” or “goods”. Not labour, but
renunciation of consumption, which includes labour-as-consumption (!), in
favour of the production of labour-saving tools can lead to the accumulation of
wealth. Not only, then, is labour not the source of wealth-creation for the negatives Denken, but labour is even
considered as a form of consumption of wealth to secure its own subsistence!
Furthermore, as we will show presently, for the negatives Denken the accumulation of wealth must be devoted not to
consumption but to the production of “Objective Value” or goods for exchange:
the necessary corollary of this condition is that if the increased production is
not to be consumed, that part of it that is constituted by consumption goods
can then be used only toward the purchase of the “labours” of other individuals
who do not or cannot afford to save.
The protestantische Ethik as enucleated by
Weber still expressly glorifies “labour” as the direct and positive source and motor of wealth-creation, that is to
say, as the substance of all except
“natural” wealth, by tracing “the spirit of capitalism” back to the Christian
notions of human expiation of the original sin through the ascetic dedication
to work and prayer as in the Benedictine motto – “ora et labora” (work and pray). The devotion to work and prayer
represents a “withdrawal from the world” by subtracting time from the pursuit
of “worldly and mundane” pursuits that sinfully privilege this world and this
life against “the other world” and the afterlife, above all by exalting the toil and sacrifice to which man was condemned when expelled from the Garden
of Eden. Work and prayer represent therefore the rightful pious means of
expiating for the original sin of mankind and its expulsion from heaven. This
is an “ex-piation” (Lt. pius, pious)
that is equally a “red-emption” (Lt. red-emptio,
buying back) of man’s salvation, of man’s original state of heavenly bliss or
“grace”: - expiation and redemption that represent a “renunciation” of the
evanescent terrestrial world (the Augustinian civitas terrena) and an “a-scent” back to paradise (Lt. ascensio, climbing up [to paradise or civitas Dei]). The task and substance of
this A-skesis is therefore the withdrawal from and denigration of the world and mundane pleasures by the ascetic
through the sheer renunciation of
these pleasures and of “consumption”. This Christian deontology and ethic of
ascetic renunciation was articulated early in the Middle Ages by the monastic
sects (Benedictine and Franciscan) and was then sharpened and exasperated in
the determinist eschatology of the Puritan Protestant Work Ethic.
For the
Protestant Work Ethic, there are two aspects to the Askesis: one is the “toil” represented by labour as penance and
atonement for the original sin, and the other is the “parsimony” that devotion
to labour entails as a result of being a material diversion from “consumption”.
Yet, as we shall demonstrate here, this “renunciation”, in its German version
as Entsagung, a term coined by
Goethe, will undergo a profound and radical reformulation through
Schopenhauer’s metaphysics and ethics as a direct and profoundly influential
negation of Classical German Idealism, most virulently in opposition to the
universal rationalism of Hegel’s dialectics. So radical was the reformulation
of the Christian and ascetic worldview at the hands of Schopenhauer and the theoreticians
that followed in his wake - from Nietzsche to Weber and Heidegger in
philosophy, Mach in science, and the Austrian School in economics – that we can
indeed speak of a “reversal” (Um-kehrung)
of that worldview whereby first its metaphysics and then its ethics were
thoroughy “turned inside out” until they found practical expression in
Neoclassical Theory from the early marginalists to the Austrian School, to
General Equilibrium.
Weber
perceived the central difficulty, the apory in his thesis, as these passages
demonstrate:
Rationalism is a historical concept which covers a
whole world of different things. It will be our task to find out whose
intellectual child the particular concrete form of rational thought was, from
which the idea of a calling and the
devotion to labour in the calling
has grown, which is, as we have seen, so
irrational from the standpoint of purely eudaemonistic self-interest, but
which has been and still is one of the most characteristic elements of our
capitalistic culture. We are here particularly interested in the origin of
precisely the irrational element
which lies in this, as in every conception of a calling.
(Vorbermerkung, pp.75-8).
In
fact, the summum bonum of [this] ethic, the earning of more and more
money, combined with the strict avoidance of all spontaneous enjoyment of life,
is above all completely devoid of any eudaemonistic, not to say hedonistic,
admixture. It is thought of so purely as an end in itself, that from the point
of view of the happiness of, or utility to, the single individual, it appears
entirely transcendental and absolutely irrational. Man is dominated by the
making of money, by acquisition as the ultimate purpose of his life. Economic
acquisition is no longer subordinated to man as the means for the satisfaction
of his material needs. This reversal of what we should call the natural
relationship, so irrational from a naive point of view, is evidently as
definitely a leading principle of capitalism as it is foreign to all peoples
not under capitalistic influence. At the same time it expresses a type of
feeling which is closely connected with certain religious ideas. (PE, beginning of Ch.2, “The Spirit of
Capitalism”.)
For
Weber, capitalist industry is supremely “rational’ in that it relies on the
arithmetical surplus of profit over costs in the process of production and
market exchange of goods. Its rationality is purely “instrumental” (or
purposive, Zweck-rationalitat) and
not substantive (Wert-rationalitat)
because it is made tangible by the
ability of the capitalist to calculate
precisely the profitability of his enterprise through the medium of money.
It is this Kalkulation that makes
capitalism a supremely rational human endeavor for Weber. On the other hand,
apart from the fact that all “callings” or vocations are “irrational” in the
sense that they do not have a material origin, and apart from the fact that the
Protestant calling leads to the “indefinite” accumulation of wealth, the
capitalist calling appears irrational to Weber also because, on one side, the capitalist seeks to accumulate
wealth through the exertion of “labour”, and yet at the same time “the devotion
to labour in the [capitalist] calling… [is]…irrational from the standpoint of
eudaemonistic self-interest”. In
other words, Weber correctly points out, the entire capitalist enterprise seems
wholly irrational and counter-productive from the very self-interested standpoint of the capitalist! If indeed the aim of
the capitalist is the “eudaemonistic self-interested”
one of accumulating wealth, it is then irrational
to think that this can be done through “the devotion to labour” or money
when it is blatantly obvious that such “devotion” represents an “indefinite
renunciation” of the very “wealth” or “self-interest” that the devotion to
labour or to “money” is meant to help accumulate!
And the
converse is even more true and irrational: for it is irrational in the extreme
to suppose that a “devotion to labour” that is meant as expiation for the
original sin can be pursued so ascetically
when one knows that it will actually result in the accumulation of wealth!
Weber is saying, quite validly, that a calling that at one and the same time
pursues wealth through labour when labour is ipso facto the diversion of time for consumption to time for
production and therefore to total “abnegation” of the self or “renunciation” of
wealth – that such a calling can only be classed as “irrational”, in complete
contradiction with the “calculating” rationality that money makes mathematically
possible for the capitalist! Worse still, the indefinite accumulation of wealth
that is a by-product of the devotion to labour is irrationally inconsistent
with its original goal of expiation of the original sin.
This interesting “contradiction” between “devotion to
labour” and “accumulation of wealth” should have prompted Weber to reassess the
legitimacy of the link between the Protestant Work Ethic and the Spirit of
Capitalism not so much in historical terms, where it may well be accurate and
even legitimate – but above all in terms of the internal consistency of such a
link, and therefore of its ability to be adopted effectively by the capitalist
bourgeoisie as a lasting ideology capable of being presented not just as “a
specifically bourgeois economic ethic” but indeed eventually (in the late
nineteenth century) as an “economic science”. ((Interestingly, it was another Neoclassical economist, the Italian
Vilfredo Pareto, who first distinguished between ideologies and their
“derivations” that may be functional to the interests underlying them and those
that may be dys-functional or detract from those interests. Weber’s own notion
of Zweck-rationalitat is aimed at
assessing the “purposive rationality” of given means at achieving stated aims.)
Another
important inconsistency with the Protestant ethic is that the accumulation of
wealth in capitalist industry is impossible as the result of purely individual
exertion or toil or sacrifice, but rather through the command over the
“labours” of other individuals – something that is clearly inconsistent with
the status of the “devotion to labour” as expiation or sacrifice. For it is
preposterous to suggest that one may expiate and atone for one’s sins vicariously by accumulating the labour
of others! If indeed labour is the real motor of the accumulation of wealth,
then it becomes impossible for the capitalist to explain the legitimacy of his
profits. As every capitalist knows, any accumulation of capital on any suitable
scale is possible only through the use of the labours of many workers, not just the work of the individual
capitalist! (As Marx established, capital is the concentration of workers in
one place, what he called “the concentration of capital” distinct from “the
concentration of capitals” which refers to the need for capitalists to equalize
the rate of profit across different markets.) Weber himself in the first
quotation above specified how the capitalist, apart from feeling justified in
his profits through the Protestant Work Ethic, acquired also through this Ethic
a workforce of “unusually industrious
workmen”. The contradiction here between “private” capitalist accumulation
and the utilization of a large workforce that makes such “private” accumulation
possible is entirely palpable!
Yet
another apory in the Protestant Ethic is that of the conflict between greater
labour productivity and the depreciation of the price of labour or wages. What
for Smith and the Puritans – and for Weber - was wealth-creating division of
labour, Hegel perceived in Smith’s “pin production” as the paradox of greater productivity
of labour that does not enrich the worker! The problem, of course, as Marx will
correctly explain, is that the “use value” of the higher productivity of living
labor (its “wealth”) is obviously greater with specialization, but the
“value-in-exchange” of the “labor-power” of the worker is lower as a result
because the employer can employ fewer workers for the same output and thus
lower the wages he pays to the fewer workers he can employ! With good reason,
Mandeville could chastise Smith with the harsh reality that “the Publick” that
benefitted from “Private Vices” (conspicuous consumption) was not the working
class whilst taking delight both in the ferity of humans as well as in exposing
the hypocrisy of Smith’s “invisible hand” (a Deus absconditus or hidden God) that justified bourgeois enrichment
and working-class immiseration as a hidden divine purpose. Mandeville could
still share the condemnation of “laziness” and of the charity halls, not for
‘Deistic’ reasons related to “the Protestant work ethic” (for discouraging
“labor” as an avenue to “wealth”), but for the quite cynical realization that
they invited work-shirking on the part of proletarians to the detriment of
profits and production of goods to satisfy those “private vices” that he
mercilessly lampooned! What may appear as contradictory was in fact only sheer
cynicism that Mandeville preferred to hypocrisy – for him, “hypocrisy is the
tribute that vice pays to virtue”.
This
conceptual inability of the Protestant Ethic to reconcile labour as the source
of new wealth and the legitimacy of capitalist profits as a separate claim to
wealth also based on labour is a major source of theoretical paradoxes, one
that afflicted equally Classical Political Economy, and one that Marx exposed
vehemently and ruthlessly. In reality, with the “protestant ethic” Weber is
still unwittingly reprising the Labour Theory of Value in its pre-Marxian form,
although in his academic lectures he had adopted already the marginalism of the
Austrian
School.
(In the Vorbermekung, however, he
embraces Cantillon’s notion of “entrepreneurial profit” whereby profits are the
simple outcome of exchange. It is a well-known fact that Weber’s understanding
and grasp of economic theory was rather limited.) Specifically, Weber was
embracing Smith’s theory of specialization as the source of new and greater
wealth: - division of labour, specialization, as wealth-creation, as more efficient pro-duction or “labour productivity”,
and therefore labour as pro-duction. Wealth is created through growing labour
productivity enabled by exchange and therefore “specialization”, that is,
through the pro-duction of more goods for exchange and the use of fewer goods
for consumption: “growth of productivity through exchange” is the source of
wealth. In this perspective, wealth is the “squeezing out” of greater output
from existing means of production or resources or from their re-combination by
means of higher labour “intensity”. By consuming less himself or by “working
harder” the worker can exchange more – and by exchanging more he can
“specialize” more so as to produce even more! The worker can be more productive
by specializing, producing more and consuming less in the exchange. Smith
assumes fixed and exogenous technology. Smith’s theory does not allow for
“innovation” or the role of wealth as “delayed consumption”. Thus, “consuming
less oneself” becomes “producing wealth for exchange by consuming less”. Both
Smith and Weber single out this “parsimony” as a means of accumulating wealth
and as an aspect of “Asceticism” in (‘PE’, p161). It can be seen how this
“protestant work ethic” rationale still
preserves entirely the link between labour
and wealth-creation because the aim
of parsimony is not “the saving of labour time through its diversion from
consumption to production”, but rather increasing the productivity of labour
through its “intensification” by means of specialisation.
In the
Smithian worldview, faithfully adopted by Weber to describe his conception of
the Protestant Work Ethic, it is still Labour
(Arbeit), it is the higher productivity of labour that is the immediate source
and cause (fons et origo) of the
increase of wealth. This rationale and aetiology is in all and for all the
rationale of Natural Law, of Classical Political Economy and of the Labour
Theory of Value (from the mediaeval Schoolmen such as Aquinas to Smith and to
Marx through Ricardo and JS Mill). It is the ancient biblical prejudice that wealth comes only “in the sweat of thy
brow”. (Smith refers in “Astronomy” to the distinction between “tranquility and
composure” and “labour and discomfort”.) Labour as toil is “the price to be
paid for the acquisition of wealth” – a “real cost” hypothesis. As we are about
to see, this worldview of wealth as a direct product of labor requires three
fundamental tenets: the first is that human needs are fairly homogeneous, with
minor exceptions; the second is that human labour, although it may be as
heterogeneous as there are human activities, is quantitatively homogeneous in
terms of the labour-time or labour-power required to satisfy these homogeneous
human needs; and third, as a corollary of this, that labour therefore represents
the most fundamental and pervasive source of human social co-operation and
co-ordination to ensure the reproduction of society, the basis of the social
synthesis.
This rationale and aetiology could no longer serve the
bourgeoisie after the initial phase of accumulation in the First Industrial Revolution. The central
achievement of Neoclassical Theory, derived fundamentally from the
philosophical “reversal” of Western Hellenic and Judaeo-Christian metaphysics
performed by the negatives Denken, will
be the outlining of a complex and comprehensive economic “science” that will
relegate “labour” and the working class to their subordinate place in the
market economy. Above all, by severing the social-teleological osmotic link
between labour and wealth, Neoclassical Theory was able to replace the
Judaeo-Christian “Beruf”, so burdened with “metaphysical” notions, religious
tenets and “moral theology” (this was Schopenhauer’s, and Nietzsche’s, critique
of Kant and Hegel), with the positivistic Hobbesian “amoral, effective Entsagung” that leads to the
entrepreneurial spirit (Unternehmergeist)
of the “captain of industry” glorified by Schumpeter. This is the “specifically bourgeois economic ethic” that Weber was seeking at the end of Die
protestantische Ethik but understood and traced incorrectly. The new
link that needs to be theorized is that between “labour as consumption of
nature”, “saving as renunciation of consumption”, and thence as “deliverance
from the world” (Schopenhauer), on one side, and then “capital as diversion of
labour from consumption of wealth to production of labour-saving tools or tools
that increase labour productivity”, “utility as partial satisfaction of
insatiable human appetite” or as “gap between want and provision for want”, and
therefore “capital as store of utility or value meant for future exchange”,
“value for exchange as objective [market validated] value” and finally “capital
as interest-yielding labour-saving tools” due to the discount of future goods.
Only by
severing the nexus between labour and wealth and replacing it with the link
between wealth and “utility”, and only by reversing
(um-kehren) the metaphysical content
of “wealth” and “labour” by re-defining fundamentally the understanding of this
human reality will it be possible for the bourgeoisie to establish that wealth
is not an objective or intersubjective
entity that can “grow” or be
“accumulated” but rather a subjective
estimation by atomistic individuals of the “utilities in exchange” or
“marginal utilities” to be derived from the exchange of production and
consumption goods in a temporal
dimension, that is, through the subjective discounting of present wealth as
against its use in the future. Neoclassical theory draws its conclusions thus
from the application of abstract general principles from physics and
psychology.
This is
the side that Weber neglects but that is present in Schopenhauer and is
insightfully and coherently, though not always explicitly, applied in the
sphere of economic theory by Bohm-Bawerk and the Austrian School of Economics,
first, and then more broadly by Neoclassical Theory. Let us look more intently
then at the Neoclassical notions of labour and capital.