«Inaugural-Dissertation zur Erlangung des Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Johann-Wolfgang Goethe-Universität Frankfurt am ...»
The second meaning of Capitalism according to Dobb identifies it with production for an anonymous market with the motive to gain. This definition was created by the German Historical School375 and its concept of development, but associated with a modern monetary economy as the term Capitalism was hardly ever used. Development for the Historical School meant, roughly speaking, that there is a distinction between the natural economy of Yang, 2000, p. 481.
Köster and Plumpe, 2007, p. 4.
Parsons, 1928, p.646.
The German Historical School (19th century till First World War) regarded history as the key source of knowledge about human actions and economic matters, since these are culture-specific and hence not generalizable over space and time. Thus, the universal validity of economic theorems was also rejected. The School preferred reality, historical, political, and social as well as economic empirical analysis, to self-referential mathematical modelling. Most members of the school were also Kathedersozialisten, i.e. concerned with social reform and improved conditions for the common man during a period of heavy industrialization.
Members of the Older Historical School were Wilhelm Roscher, Karl Knies and Bruno Hildebrand, Gustav Schmoller was part of the Younger Historical School and Max Weber, Arthur Spiethoff and Werner Sombart were famous members of the so-called Youngest Historical School. Rieter, 1994.
the mediaeval time and the money economy which followed to that.376 The Historical School emphasizes ―the area of the market as defining the stages in the growth of the modern economic world‖.377 For the authors belong to that school of thought, every economic stage also comes with an increase in morality and ethical progress (Sittlichkeit). Most explicitly this is elaborated by Hildebrand, an important member of the Older Historical School, in his work on economic stages. He strongly believed that morality is improving in the course of time and stressed the importance of the forms of economic communication and transactions (by which he means the succession of barter, money and credit). Therefore his stages are natural economy, monetary economy and credit economy.378 His theory already points to the idea of economic style (see below, chapter 4.5.3.). Similarly, also Karl Bücher, a member of the Younger Historical School, developed a stage theory, based on progress in social integration. He defined the stages of hunting and gathering, household economies, city economies and national economies. He is also famous for spurring the socalled Bücher-Meyer controversy379 on a methodological level.380 The Historical School, with its relativity of economic systems and epochs associated with particular characteristics without general economic laws necessarily needed, has an important influence on Weber and Sombart, who are part of the Youngest Historical School, and for the emergence of the so-called ‗intuitive theory‘.381 However, as stated above, the Historical School hardly ever uses the term Capitalism because the aforementioned need to draw a line between traditional and modern economy does not fit into their theory of evolutionary stages with uninterrupted economic development. In contrast, Weber and Sombart both regard the need for a concept that reflects the disruption between the two economic orders as essential, which led them to the development of the notion of the ‗spirit‘ of Capitalism in their works.382 Stage theory is an idea of the 19th century and is closely connected to the notion of constant development (both material and a progress of morals), but the idea itself can already be found in Aristotle and in the 18 th century in authors like Adam Smith among others. This dissertation refrains from a detailed discussion of the theory of the economy of stages. See for example Hildebrand, 1971 and Bücher, 1917. For a detailed discussion, see Schefold, 1996 and Schefold, 2004a. An overview can be found in Schachtschabel, 1971a.
Dobb, 1947, p. 6.
Hildebrand, 1971 and Hildebrand and Schefold, 1998, for a discussion see Schefold, 2004a, Schefold, 1998, p. 407 and Schefold, 1996, esp. p. 178ff., 186.
See Finley and Bücher, 1979 for details. The Bücher-Meyer controversy took place in the 1890's, opposing Bücher's primitivistic view of the antique against Meyer's concept of modernism, hence analyzing the antique as a capitalist society.
Bücher, 1971, Schefold, 1998.
Salin, 1967, p. 180ff. and Schefold, 1996, p. 187. Please refer to chapter 4.5.3. for a discussion of the notion of the ‗economic style‘ and ‗intuitive theory‘.
Köster and Plumpe, 2007, p. 5f.
The third meaning of Capitalism is derived from Marx383, the most important forerunner of Weber and Sombart, with whom most people identify the term and the concept of Capitalism. He associates Capitalism with a certain mode of production, which includes that the ownership of means of production is concentrated within a certain class of the society, which consists of only a small group of private owners. In contrast, a propertyless work force emerges, which through the specific process of production is inseparably bound to contract labor. Such created labor-power is free from feudal obligations but also free from ownership of means of production.384 In Marx‘ notion of Capitalism labor itself becomes a commodity for which a market has to be created. This was possible through the emergence of the ‗double-free‘ class of laborers, the proletarians. For those people the sale of their labor power is the only way to make a living, thereby giving the owner of the means of production the possibility to exploit them.385 This means that workers do not get the full value of their work but only a fraction, which is defined through wage. The surplus labor is appropriated by the ‗capitalists‘. The production of commodities becomes anonymous, made for unknown demand and therefore creates ―anarchy of production‖.386 Capitalism for Marx is an epoch in social and economic development, connected to a certain period in history.387 Although Sombart and Weber define this the same way, both push ahead in their works, which separates them from Marx but also from each other.
Marx ‗historical materialism‘ is the starting point of Weber‘s thinking and more notably, Sombart‘s, who goes beyond that method to create his own type of ―cultural morphology‖.388 He provides a multicausal explanatory model for the origins of the capitalistic spirit.
Modern Capitalism has shaped the culture of all the societies in which it emerged, beginning with Europe since the late 18th century. However, the cultural impacts of Capitalism are extremely varied, depending on the institutional preconditions dominant in a country.389 Yet, it has some key concepts to it, like the profit motive, human desire and the market economy. The capitalist system is one based on private ownership and consolidation of the means of production, where the production of commodities is guided by a profit motive to satisfy human desires. The standard textbook defines this principle as ―the study See Marx, 2000 . Marx‘ theory of Capitalism will not be discussed in detail as it is outside the scope of this dissertation. Please see for example Bertram Schefold‘s essays on Marx in Schefold, 2011a.
See Kromphardt, 1991, p. 20 f.
Dobb, 1947, p. 7.
Marx, 1970 , Vol. 1, chap. 15, section 8.
Parsons, 1928, p. 642.
Parsons, 1928, p.646 and Sombart, 1987 [1908-1927], Vol I,1, preface to 2nd ed. and introduction.
Screpanti, 2001, p. 255. See also chapter 3.6.
of human choice in using scarce resources to satisfy unlimited wants‖.390 The operations of the market economy determine how much is invested, how goods are distributed and in general decide about production, pricing of goods and services. Economic growth since the industrial revolution has been consistently strong, life expectancy has increased considerably, and child mortality has decreased in every developing region of the world.391 Additionally, one of the most important features of Capitalism is competition. It promotes progress which also encourages entrepreneurs to use their knowledge and resources to accumulate profits. This is complemented by a culture of desire which means that the higher the desire of consumers for certain goods, the more can be sold on a market, which then expands and which results in an increase of profits. Capitalism organizes itself in complex decentralized systems without the need of external guidance or planning mechanisms. The transactions on free markets serve as price signal and the system regulates itself.
Private enterprises and ‗free‘ markets are seen as the core of Capitalism, giving the state only the role as ‗night watchman‘ that sets the legal framework of the economy and protects private property.392 In a more recent definition, McNally names the ―three basic elements of capitalism‖ as ―the drive to amass capital; the emergence of market society; and the bifurcation of secular authority‖.393 The third element means that ―an autonomous, self-directing economic realm appears that assures the continued existence and social influence of capital-holders […] The power structures of ‗the state‘ and ‗the economy‘ become different realms, each with its own logic, yet a need to coexist in the same territory. […] [I]n order to survive and thrive, capital must exist in a mixed state of independence from and dependence on state power‖.394 Heilbroner adds that although markets are the main organizing principle and exercise competitive pressure via the price mechanism, ―Capitalism is a much larger and more complex entity than the market system we use as its equivalent. […] The market system is the principal means of binding and coordinating the whole, but markets are not the source of capitalism‘s energies or of its distinctive bifurcation of authority‖.395 Capitalism is based on the accumulation of capital and the dynamic of exchanging money for goods and vice versa, which is the ―major organizing basis for sociopolitical life‖.396 Capitalism is always seeking new production opportunities to further expand and therefore is not only See for example Samuelson and Nordhaus, 2010, Bofinger, 2007 or Mankiw, 2007.
Heimann, 1956, p. 512f.
Friedman, 2002, p. 4, McNally, 2007b, p 18.
McNally, 2006, p. 2.
McNally, 2006, p. 5.
Heilbroner, 1993, p. 96.
Heilbroner, 1985, p. 143.
open for change and progress, but simultaneously demands it in the economic, social and political sphere.397 Another important element of Heilbroner‘s definition of Capitalism is the emergence of a ‗capitalist‘ class and their rise ―from a subordinate position within society‖ to one with control over strategic resources and social functions which triggers the aforementioned bifurcation of authority.398 Other definitions define Capitalism as an amoral process of unlimited accumulation of capital by formally peaceful means. The repeated reinvestment of capital into the economic system with the aim of drawing profits, combined with wage labor and competition results in the dynamic of the capitalist system. The capitalistic system demands at the same time a high level of commitment of workers, especially on the managerial level to create a meaning for their lives – a modern form of the spirit of Capitalism. In Boltanski‘s sense of the term the ‗spirit of Capitalism‘ is an ideology that justifies the involvement into the capitalist system.399 This involvement includes being part of what Boltanski within his approach to Capitalism terms ‗project-based polis‘. For him the model of a hierarchical and integrated large-scale corporation that is so important for Weber‘s view on Capitalism has been replaced by a „network metaphor‖.400 Tobias ten Brink distinguishes five structural characteristics of capitalist system, which he differentiates from a capitalist society that also has to include institutions such as housework, family and cultural factors. He names the horizontal axis of capitalist competition which describes the decentralized structure of capitalist markets that guides cooperation and competition between companies that leads to capital accumulation and innovation.
Next he lists the vertical axis of capitalist social relations, namely the conflict between labor and capital over the participation in the processes of decision-making, planning and controlling production, distribution and consumption. The third feature consists of the monetary and fiscal relations, the fourth is the role of the state in capitalist systems and the interaction between economic and political actors. The fifth dimension of a capitalist system is its international and transnational embeddedness.401 As this last point indicates, Capitalism is often described as a global system. Globalization has increased the mobility of people and capital since the last quarter of the 20th cenHeilbroner, 1993, p. 134f. A similar definition can be found in Boyer, 2010.
McNally, 2007a, p. 182f. and Heilbroner, 1985, p. 41.
Boltanski and Chiapello, 2001, p. 462, Boltanski; Chiapello and Tillmann, 2006, p. 43.
Boltanski and Chiapello, 2001, p. 470.
ten Brink, 2010, p. 4ff. He defines the specific combination of characteristics in China as market-liberal state capitalism as a consequence of the strong role of the state and the symbiotic relationship with companies. However, he mainly focuses on state-owned enterprises and leaves aside the private sector and its dynamics.