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«Inaugural-Dissertation zur Erlangung des Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Johann-Wolfgang Goethe-Universität Frankfurt am ...»

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ism, the head of the household lost his main function, to protect and to organize the work within the family household. He also lost his power over family members who were not bound to the strict hierarchy anymore.430 This type of Capitalism not only needs a certain attitude, but is also considered as an age of separation, by which not merely separating the pre-modern traditional economy from the modern, capitalistic one is meant, but also the separations taking place in people‘s private lives. To achieve this, Capitalism needs to destroy and override all traditional socio-cultural structures of society to prosper. Weber‘s concern was mainly with the cultural significance of Capitalism which had constituted a completely new epoch of evolution in economy and society, breaking with the old economic order and challenging the existing institutions. In that sense it artificially constructed the notion of a traditional economy separated from the emerging modern, capitalistic economy, which as the main characteristic exposes the accumulation of wealth that goes far beyond the former pure satisfaction of needs.431 Related to the aim of money acquisition is that gain is sought without limits such as the needs of a standard of living or any other notion of traditional contentment. Hard work is considered a duty and a moral obligation that requires discipline and control. It is ―systematic, continuous rational honest work in the service of economic acquisition‖. Although in former economies greed and ―the universal reign of absolute unscrupulousness in the pursuit of selfish interests by the making of money‖ existed, they were driven by an ―uncontrolled impulse‖ of ―ruthless acquisition‖ which lacked the discipline and rationality of bourgeois Capitalism.432 This separates the modern human from the traditional which – at least in the philosophical thinking of the time - ―contrary to the ethical feelings of whole epochs‖433 - did not strive to earn more and more money but were content in the Aristotelian sense to lead a ‗good life‘. This Weber refers to as ―backward‖; Calvinism gave people the means to ‗overcome traditionalism‘ and expose ‗a cool self-control and frugality which enormously increase performance‖.434 ―The sole purpose of his life-work, to sink into the grave weighted down with a great material load of money and goods‖ and the difference between the ―hand-to-mouth existence of the peasant‖, the ―privileged traditionalism of the guild craftsman and of the adventurer‘s Capitalism‖ can only be understood from the viewpoint of Calvinism and its role for the development of rationalism and hence capitalisEgner, 1985, p. 140f.

See Köster and Plumpe, 2007, p. 4, 6.

Weber, 1976 [1930], p. 54-67.

Weber, 1976 [1930], p. 73.

Weber, 1976 [1930], p. 63.

tic economy.435 Nearly the same description of capitalistic characteristics can be found in Sombart, as described in chapter 4.3., but Weber adds religion as the main cause for that development. Thus, a certain spirit is the prerequisite not the result of Capitalism.

Weber chose Calvinism for that purpose because it especially represents the asceticism that shows the closest affinity to the spirit of Capitalism. It rests on predetermination which committed the believer to an active, ascetic, this-worldly life with work being a sign of true faith and self-confidence that oneself was among God‘s chosen. ―Labor must […] be performed as if it were an absolute end in itself, a calling‖.436 This also cultivated an impersonal attitude toward the duties of an office and fostered the individualism necessary to rationally organize labor in a competitive world. Through the notion of predestination Calvinism also created an ―inner isolation of the individual‖.437 This derives from the fact that no worldly agency exists between the individual and God as would be the case in Catholicism. For Calvinists, other humans might only endanger the election by God, therefore individuals need to separate themselves from their fellows to ensure their own election.438 Furthermore, although the election by God is predetermined before one is even born and the ‗outcome‘ cannot be changed ‗ex post‘, Calvinists still work hard, as success in life and work means that one belongs to the chosen ones. It is a mechanism to overcome this uncertainty. Thus, rationality is not only restricted to the economic realm but also has an effect on how people lead their life in general.439 Max Weber believed that Capitalism will always and inevitably lead to a rising bureaucratization and rationalization and thus mass production, which does not leave space for outdated socio-cultural structures like small family-owned businesses: ―The modern capitalist enterprise rests primarily on calculation and presupposes a legal and administrative system, whose functioning can be rationally predicted, at least in principle, by virtue of its fixed general norms…The modern enterprise finds incompatible the theocratic or patrimonial governments…whose administrations operated according to their own discretion and, for the rest, according to inviolably sacred but irrational traditions…The specific features of modern capitalism, in contrast to these ancient forms of capitalist acquisition, nowhere developed in such irrationally constructed states….‖.440 Max Weber assumed that it is the nature of modern Capitalism to impose a unique institutional structure on the existing Weber, 1976 [1930], p. 72, 76.

Weber, 1976 [1930], p. 62.

Weber, 1976 [1930], p. 108.

Parsons, 1967 [1937], p. 525f.

Kromphardt, 1991, p. 40.

Weber and Roth, 1978 [1922], p. 1394f.

traditional society to develop, with obsolescent cultural idiosyncrasies being replaced. A market economy arose where instead of an economic life embedded into society, social institutions served as mere accessories to the economic system. The economy became an autonomous system which was dominated by a rational spirit based on efficiency and profitability and at least similar institutions no matter where it arose.441 For this, personal relationships had to become less important and had to be replaced by contractual relations.

Enterprises grew in size and were put under efficient rational management and thus become increasingly independent of specific individuals. Impersonal bureaucratic authority replaced the traditional, personal authority. Additionally, "administrative staff should be completely separated from ownership of the means of production or administration".442 In this view, social institutions serve as mere accessories to the economic system instead of the economy being embedded into society. The economy becomes an autonomous system which is dominated by a rational spirit based on efficiency and profitability. When enterprises grow in size and are put under efficient rational management, they become increasingly independent of specific individuals. Impersonal bureaucratic authority replaces the traditional, personal authority. As mentioned before, the growing bureaucratization of the enterprises with the sole aim of profit maximization not only had separated the sphere of business from the sphere of the household, but also corporate from personal property. The character of the entrepreneur increasingly became unimportant for the success of a firm and the maximization of profit does not depend on the personality and connections of one specific individual. In contrast, it was organized in a way to be maximally independent of a certain individual. Therefore, the development of capitalistic societies is connected with increasing rationalization, bureaucratization and professionalization; personal connections and the family do increasingly not play an important role for doing business but are replaced by contractual relations. In addition to the increasing integration of enterprises in relation to rising bureaucratization Weber also analyzed the development of the so-called middle classes that serve as buffer between working and upper class and who derive their position also from their authority with this bureaucratic system in the economic and politics (see also chapter 7). However, he emphasizes the significance of the entrepreneur for capitalist production and in this precedes the famous work of Schumpeter and by the noWeber; Henderson and Parsons, 1947, p. 338f.

Weber; Henderson and Parsons, 1947, p. 331.

tion of a charismatic leader of a bureaucratic corporation he furthermore precedes the thesis of the ‗managerial revolution‘.443 As has previously been said, the rational characteristics of state and economy in a capitalistic society are associated with a whole set of values that constitute Weber‘s ‗spirit of Capitalism‘. Most importantly, money acquisition is now treated as an end, rather than a means and is not seen as evil any more, although the entrepreneur is still careful of the ―ethical limitations‖ given by religion. Those constraints given by religion seized over time in a matured Capitalism, and with ―the dying out of the religious root, the utilitarian interpretation crept in unnoticed‖ - but the point for Weber is rationality as the major force people follow and that keeps things ‗orderly‘.444 As he says ―the Puritans wanted to work in a calling; we are forced to do so‖, finding ourselves inside the ―iron cage‖.445 Weber‘s image of the ‗iron cage‘ is at the same time prison and home. Within, it is possible to construct personal relations, but at the price of giving up individuality and freedom.446 In conclusion, the system of modern Capitalism in Weber's sense is constituted in a process of rationalization under the conditions described above. The autonomous and actively-participating citizen of occidental cities is the main agent of the process, supported by the instructions and value-system of Calvinism. Weber's system of modern Capitalism is constituted in a process of rationalization, which needed to overcome the traditional family-based institutions to create an economic order that could be based on propertyless wage labor and thus, be successful. Weber‘s Capitalism is designed as an ideal-type that does not exclude the existence of a real type, hence, differently developed forms of Capitalism. The ideal-type contains characteristics that need not exist in reality in their pure form and is thus a utopia.447 However, for Weber the notion of rising rationalization and bureaucratization in combination with growing enterprises, which through the professionalization of the Schefold, 2004b, p. 455. An entrepreneur in Schumpeter‘s sense is a ―man of action‖ who innovates and by that induces changes to an economy and is differentiated from capitalists and other business owners such as shareholders or what is also called by Schumpeter ―the static leader‖. An entrepreneur‘s strength lies in pioneering new products (‗new combinations‘) or methods of production, taking on risk financially and otherwise. His ―creative destruction‖ often results in the failure of competitors. The term ‗entrepreneur‘ stems from a French verb of the 13th century (entreprendre), which means ‗doing something‘ or ‗undertake‘ and became a noun during the 16th century, which was for the first time used academically by Richard Cantillon.

Later itwas taken on for example by Jean-Baptiste Say and John Stuart Mill. Throughout this dissertation the term ‗entrepreneur‘ is used in Schumpeter‘s sense. Schumpeter and Röpke, 2006 [1912], chapter 2, Swedberg, 2007, Sobel, 2008, Schumpeter, 2000 [1928].

Weber, 1976 [1930], p. 177.

Weber, 1976 [1930], p. 181.

Sennett and Bischoff, 2005, p. 151. The ‗iron cage‘ is by others also interpreted as coerce from which people seek to escape and something where they can never feel at home in.

The abstract notion of the ideal-type structures reality in bringing historical configurations in context that itself is shaped by rationality. Ideal-types therefore correspond to a specific form of rationality. See Schefold, 2004b, p. 453, Parsons, 1928, p. 31, Weber, 1988 [1922], p. 190ff., Weber, 1976 [1922].

entrepreneur also becomes increasingly independent of certain individuals are necessarily connected to Capitalism.

4.3. Werner Sombart’s approach to “Modern Capitalism” Werner Sombart (1863-1941) is one of the most famous members of the Youngest Historical School. In line with the research program of this school (see above), which combines an historical and a theoretical approach, he analyzes the phenomenon of modern Capitalism, particularly the reasons for its emergence. He ―claims to have made the first scientific approach ever to the concept of ‗capitalism‘‖.448 In doing so, he goes beyond the theoretical horizon of the stages theory of the German Historical School because he uses more than one criterion to characterize an economic epoch.449 In trying to systemize economic life and defining economic systems, he ―targets the phenomenological description of a formal connection brought about by a unity of inner orientation‖, but is actually ―talking about what was later to be called economic style‖.450 Instead of the notion of stages, he uses the term economic system, which for Sombart is defined as a meaningful portrayal of an economy, which basic principles reveal a specific form.451 Sombart wants to identify the basic structure of an economy and construct a theory within an economic system to understand the meaning of economic activity.452 An economic system for him is a ―particular organization of economic life within which a particular mental attitude predominates and a particular technique is applied‖,453 and thus ―a number of spiritual and material, natural and artificial circumstances‖.454 It is not a mechanism assembled from individual components.455 Each economic system is connected with a certain epoch in history and its material definition has to include three aspects: a certain form of organization based on private initiative and exchange, sophisticated technology, and a mental attitude or spirit. Essential to this thought is the rational capitalistic Schneider, 1996, p. 31.

Schefold, 1988, p. 241f., See also Chapter 4.1 and 4.5.2.

Schefold, 1995, p. 224, also Schachtschabel, 1971b, p. 12.

Schachtschabel, 1971b, p. 13.

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