It is our personal misfortune that, from being raucous critics of capitalism, we are now forced to come out in its defence by the appearance on the global scene of a monster - the Chinese Dictatorship - that the international bourgeoisie is solely responsible for creating in the first place! Given the defeatist and often treasonous chorus of voices - again from the bourgeoisie itself, keen to undermine democratic institutions -, it is almost tragic that we are impelled to sing the praises of “the market mechanism” and, specifically, its clear superiority over any kind of autocratic “command economy” such as the one that the Chinese Dictatorship and its Western saraband of traitors would like to foist upon us! Enjoy.
We saw in our previous post that List’s implicit critique of the Leninist-Marxist axiom “Politics is a concentrate of Economics” is entirely correct. List’s own work, in the tradition of the German Historical School of Economics, provides a healthy corrective to the later degeneration of economic enquiry leading to Neoclassical and Marxist economics - and particularly their erroneous and presumptuous scientistic attachment to “the Law of Value” according to which economic value is a quantifiable entity that can be priced by “free markets”. Yet, List’s work and that of his predecessors and successors in Political Economy fails to identify what Max Weber (in true neo-Kantian fashion) called “the specificity of economics”. Here we argue that Weber himself, despite taking the analysis of economics a sociological step forward from Marx’s great oeuvre, still fails to hit the mark, but with the indisputable advantage, as we are about to discover, of highlighting and uncovering essential truths and insights into the nature of modern market capitalism. Thus, we can surely affirm, contrary to Lenin, that Economics is a concentrate of Politics. But there is a sense in which Politics is a concentrate of Economics because the rise of capitalism has shown that the ability of a society to produce wealth is dependent on its focus on the satisfaction of material needs. This is the strict sense in which Lenin’s dictum has validity!
Stricto sensu, Lenin’s facile reduction of the Political to Economics is valid for societies, such as a capitalist one, in which the satisfaction of material wants and needs has attained overriding importance. In this specific context, the centrality of work, of labour, in Judaeo-Christian societies is undeniable. A careful revision of Weber’s insuperable work on the sociology of Western society, following Marx’s own impressive foundations, reveals at once the centrality to Western societies of what Hegel called “the system of needs”, and what Weber was later to fashion as “the iron cage”. The ubiquitous misunderstanding is that by “the iron cage” (stahlharte Gebaude) Weber meant the end-result of the Western Rationalisierung. Nothing could be further from the truth! A meticulous reading of the Protesantische Ethik quickly reveals that by “iron cage” Weber meant the evolution of the Hegelian “system of needs” in the sense of individualistic material consumption. Even in the negatives Denken, Schopenhauer’s “renunciation” (Entsagung) of the Arbeit (labour) for the Sisyphean futility of its satisfaction (Voll-endung) of human needs, for its meretricious character, for its being futile operari, does nothing else than confirm, precisely in its absolute negation of Labour, the equally absolute centrality of it to the nascent capitalist society - a centrality that Schopenhauer’s pessimism steadfastly “renounces” with its “withdrawal from the world” (Welt-flucht) and search for the self-abnegation of Nirvana.
If, then, the Economic is precisely the study of how “the system of needs” or “the iron cage” has evolved historically and institutionally, it is to the work of Marx and Weber - not to List and others - that we must turn. Max Weber never understood the strictly economic meaning of capitalism. He figured that profit - and therefore value - was the monetary difference between investment and revenue. Unlike Marx, he never examined the nature of “value” - its dependence on the commodification of human living labour into labour-power; and therefore he never understood the nature of money in capitalism and of profits, or of what Marx called surplus value, as its essential aim.
Weber’s “iron cage” referred specifically to the “system of needs” - which in turn required “the rational organisation of the labour force” - and that again in turn the rise of “rational socialism” as a Problematik raised peculiarly by capitalism as a specific form of social relations of production requiring an organised labour force or working class.
In a nutshell, whereas Marx focused his sharp critical gaze on the antagonism of the wage relation as the defining social and political reality of the capitalist mode of production, Weber’s vast scholarship was concerned rather with understanding (Verstehen) the institutional means from which capitalist industry derived its social and political legitimacy. Where Marx’s union of theory and practice (praxis) sought to justify scientifically the necessity of revolution as the resolution to capitalist exploitation arising from the internal contradictions of the wage relation, Weber reflected wissenschaflich (sine ira et studio!) on the reasons for the political endurance of capitalist industry and bourgeois parliamentary regimes in the face of the rising organisation of the industrial workforce into a political class represented by mass socialist parties within bourgeois parliamentary regimes. Revolution as catharsis from capitalist alienation on one side, democratisation and legitimation of bureaucratic governance to stabilise bourgeois elitist rule on the other: hence, Marxian Praxis vs. Weberian Objektivitat.
Yet, because Weber followed his insuperable sociological bent, unlike Marx, he never forgot that capitalism is not at all “economics”; instead, economics is a set of social institutions concerning the social production of material wants and needs - and these invariably involve the organisation of labour. Marx identified the causes of capitalist exploitation in the “separation” (Trennung) of workers from the means of production; Weber instead took both this separation and exploitation as a given of social life - indeed, as a requirement of complex technical processes whereby experts assume control and ownership over the means of production:
Everywhere we find the same thing: the means of operation within the factory, the state administration, the army and university departments are concentrated by means of a bureaucratically structured human apparatus in the hands of the person who has command over (herrschaft) this human apparatus. This is due partly to purely technical considerations, to the nature of modem means of operation - machines, artillery and so on - bur partly simply to the greater efficiency of this kind of human cooperation: to the development of ‘discipline’, the discipline of the army office, workshop and business. In any event it is a serious mistake to think that this separation of the worker from the means of operation is something peculiar to industry, and, moreover, to private industry. The basic state of affairs remains the same when a different person becomes lord and master of this apparatus, when, say, a state president or minister controls it instead of a private manufacturer. The ‘separation' from the means of operation continues in any case. As long as there are mines, furnaces, railways, factories and machines, they will never be the property of an individual or of several individual workers in the sense in which the materials of a craft in the Middle Ages were the property of one guild-master or of a local trade cooperative or guild. That is out of the question because of the nature of present-day technology.
Weber constantly confuses technical knowledge with legal ownership - despite the fact that he ultimately conceded their profound inter-dependence in the late Munich lecture on Science (Wissenschaft als Beruf), specifically the dependence of scientific research on the industrial needs of capitalism and ultimately on “the iron cage”. It is the inevitability of the technical stratification of production, between management and workers, between intellectual and manual labour, that induces the equally inevitable necessity of profit as the unequal distribution of the social product.
What, then, is socialism in relation to this fact? As I have already mentioned, the word has many meanings. However, what one usually thinks of as the opposite of socialism is a private economic order, that is a state of affairs in which provision for economic need is in the hands of private entrepreneurs and is so arranged that these entrepreneurs procure the material means of operation, officials and labour force by means of contracts of purchase and wage contracts, and then have the goods made and sell them on the market at their  own economic risk and in the expectation of personal gain. Socialist theory has applied the label ‘anarchy of production' to this private economic order because it is unconcerned whether the personal interest of the individual entrepreneurs in selling their products (the profit interest) functions in such a way as to guarantee that those who need these goods are indeed provided with them. Historically, there has been a change in the question of which of a society’s needs should be taken care of by business (that is privately) and which should be supplied not privately but socialistically in the widest sense, in other words by planned organisation.
Having identified, correctly, the specificity of economics in the production and distribution of material goods and services, Weber now seems to move much closer to the specificity of capitalist industry within the category of economics.
What characterises our current situation is firstly the fact that the private sector of the economy in conjunction with private bureaucratic organisation and hence with the separation of the worker from the means of operation (Betriebsmitteln), dominates an area that has never exhibited these two characteristics together on such a scale at any time in history, namely the area of industrial production. Secondly there is the fact that this process coincides with the introduction of mechanical production within the factory, and thus with a local concentration of labour on one and the same premises, with the fact that the worker is tied to the machine, and with common working discipline throughout the machine-shop or pit. Above all else, it is this discipline which gives our present-day way of 'separating' the worker from the means of work (Arbeitsmitteln) its special quality. It was life lived under these conditions, this factory discipline, that gave birth to modern socialism.
It is not socialism that explains capitalism, argues Weber in his lecture on Sozialismus; to the contrary, it is capitalism that explains socialism. In this forceful riposte to Marx’s saying that “the steam engine explains the windmill”, to which he had already dedicated a long essay in honour of Werner Sombart, Weber prepotently inverts Marx’s historical-materialist dialectic: it is socialism, not capitalism, that is the weaker side in this historical and epochal confrontation. The “separation” of workers and tools has always existed and always will exist - as will the exploitation of workers on the part of the owners - in the army as in public administration as in the mediaeval fief, as in the latifunds of Antiquity. It is not the case therefore that the Sozialismus of social-democratic and communist parties, or indeed the anarcho-syndicalism of trade unions, will replace capitalist industry anytime soon! Instead, presses Weber in his harangue, it is this Sozialismus that is a temporary historical accident of capitalist industry and of parliamentary democracy. The reason for this is that the sphere of industrial production serves to satisfy individual physiological and intellectual needs - at least this regard, the labour market and the industrial process operate in a manner entirely similar to that of natural selection in biology:
Socialism of the most diverse kinds has existed everywhere at every period and in every country in the world. The unique character of modem socialism could grow only on this soil. This subjection to working discipline is felt so acutely by the production worker because, in contrast to, say, a slave plantation or enforced labour on a manorial farm,12 a modern production plant functions on the basis of an extraordinarily severe process of selection. A modern manufacturer does not employ just any worker, just because he might work for a low wage. Rather he installs the man at the machine on piece-wages and says: 'All right, now work! I shall see how much you earn.' If the man does not prove himself capable of earning a certain minimum wage he is told: 'we are sorry, but you are not suited to this occupation, we cannot use you. He is expelled because the machine is not working to capacity unless
Weber: Political Writings
the man operating it knows how to utilise it fully. It is the same~ or similar, everywhere. In contrast to the use of slave labour in antiquity, where the lord was tied to whatever slaves he had (if one of them died, it was a capital loss for him), every modem industrial firm rests on the principle of selection (Auslese). On the other hand this selection is driven to an extreme of intensity by competition between entrepreneurs, which ties the individual entrepreneur to certain maximum wages; the inevitability (Zwangslaufigkeit) of the workers’ earnings corresponds to the inevitability of discipline.
The Darwinian and Nietzschean roots of Weber’s theoretical paradigm are absolutely unmistakeable. It is competition between workers and capitalists and then again competition among these social classes that imposes the industrial labour discipline on which capitalism is founded! The market mechanism is a set of institutions that above all preserve the formal freedom of the labour force - even down to the point where it organises or it is allowed by the State or the bourgeoisie to organise as a political class! Not only is this crucial in terms of dictating the direction of production through the relatively free choice of consumption by workers, but it is also a powerful mechanism for mustering the productive force of workers. The market mechanism is a set of institutions that regulate social conflict around these needs. It s the continuation of politics by other means.
If the worker goes to the entrepreneur today and says, ‘We cannot live on these wages and you could pay us more', in nine out of ten cases - I mean in peacetime and in those branches of industry where there is really fierce competition - the employer is in a position to show the workers from his books that this is impossible: 'My competitor pays wages of such and such; if I pay each of you even only so much more, all the profit I could pay to the shareholders disappears from my books. I could not carry on the business, for I would get no credit from the bank.' Thereby he is often just telling the naked truth. Finally, there is the additional point that under the pressure of competition profitability depends on the elimination of human labour as far as possible by new, labour-saving machines~and especially the highest-paid type of workers who cost the business most. Hence skilled workers must be replaced by unskilled workers or workers trained directly at the machine. This is inevitable and it happens all the time.
This is a process of selection that operates as much among capitalist owners and managers as it does among workers. As Maurice Dobb showed (in his seminal Studies in the Development of Capitalism), the development of capitalism in Britain owed much to the rise of individual workers and craftsmen as capitalist employers. The working class is the real motor of capitalist development in driving productivity gains both in terms of expertise and know-how in the sphere of production, and in terms of wage antagonism in the sphere of consumption. The New Deal is - as a crisis of capitalism - very instructive in this regard. Then it was the capitalist State that had to legislate the organisation of the labour force so as to revive consumption (aggregate demand) and investment (higher productivity). This is what constitutes the Demokratisierung as a central concept in Weber’s theorisation of industrial capitalism. The other central concept, of course, if the Rationalisierung of industrial production made possible by the “exact calculation” (exakte Kalkulation) of profit in monetary terms through the discipline of the market mechanism - enabled in turn, as we saw above, by the formal freedom of workers.
Two elements, then, two ingredients characterise the specificity of capitalism: - the first is the production of social needs through the privatisation of social means of production and most important of the labour force through market forces, through private bidding. And the second is the satisfaction and determination of these needs through the mechanism of the market as well! But in both cases it is the formal freedom of workers that guarantees (a) the existence of multiple capitalists and thence the competition for workers among capitalists; (b) the free antagonism between workers and capital in the process of production; and (c) the relatively free choice of consumption by workers. The market mechanism is all here. The formal freedom of workers is the political and institutional framework that sets up the market mechanism by (i) ensuring that workers do not own means of production; (ii) workers are forced to sell their labour-power; (iii) that they do so as individuals and not in associations; (iv) that workers are paid money wages and not through barter or other arrangements with capitalist employers; (v) as a corollary, workers are free to purchase products with their wages from any owner.