Weber’s Economic Sociology of Modern Capitalism

(lecture 2, HSS203)

Weber (1864) came to intellectual age when Marx’s work on capitalism defined the cutting edge of historical and sociological studies.

Weber’s cultural theory was influenced by his social origin in the German middle class, and his own religious root- Protestant.

Weber’s Methodology

Weber sought to develop general concepts which identified empirical processes; then to apply his concept to understand historical events, such as the rise of capitalism in the West; For Weber, sociology is a discipline dedicated to developing general concepts which can be applied to explain the particular events that historian study.

Verstehen “understanding and interpretation of meaning”

Weber believed that causality is established when a process is understood. Weber believed social scientists have advantages over nature scientists, as they themselves are participating, they can understand the social world better.

Verstehen involves knowing the subjectivity of actors; not intuition, but based on the research interviewing, field observation and reading text.

Use of Ideal type analysis

Identify the main attributes of a class of phenomena based on extensive research, distill the essence of a class of phenomena, in capitalism case, rather focusing on particular capitalists, Weber developed ideal-type of modern Calvinist entrepreneur.


Weber’s methodological individualism

Weber believed that sociology must build its theories on the basis of understanding social action at the individual level. He assumed rational action which is that actors pursue interests oriented towards utility in their economic behavior. Weber always reduces large scale of structures to the action of individuals, their action and motivation.

(Durkheim took the opposite approach; he thinks that social phenomena only can be understood in a large scale, individual’s action is decided by one’s societical contexts)

Marx’s materialism

Marx theory on emerging of capitalism thinks that economical material forces determine the political and social structures- superstructure. Industrial revolution led the changing of means of production, which also altered the relationship between bourgeois and proletariats. That class struggle finally leads to development of capitalism and the social structure and orders therein.

“The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of consciousness. The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness”

Weber disagreed with Marx’s materialism approach. Instead he sought to demonstrate that religious-cultural beliefs have an independent causal effect. He believed that ideas form interest; interest guides one’s action.

For Weber, rationalism was the essential spirit of modern capitalism. Rationalization is the process whereby an increasing number of social actions and interactions are based on considerations of efficiency or calculations rather than motivations derived from custom, tradition or emotion.

The features of capitalism society: rational calculation of profits and losses; book keeping etc.

The difference between modern and traditional capitalism:

Traditional capitalists live for substance, the economy drive was just for living, and once enough for living, the drive disappears; Modern capitalists have disciplined obligation to work as calling, to maximize profit. The link of these two, according to Weber was Protestant Reformation.

Traditional form of capitalist enterprise has the same form of capitalistic organization: the activity was of purely business like; the use of capital, turned over in the business, was indispensible; the objective of economic process, the book keeping was rational; however, it lacks of the spirit which animated the entrepreneur: the traditional manner of life; the traditional rate of profit; the amount of work; the manner of regulating the relationships with labour and the market strategy and customer services. (Ideal type of traditional capitalist firm)

Modern capitalist firms seek to engage the final customers and serve customers’ need directly; to low the cost and product maximum volume; to maximum profit as the ultimate goal.

Weber sought to show the effect of ascetic Protestantism – inner worldly orientation- extended rationalism to economy and society. Weber thinks that Western civilization decisively shaped by a methodical way of thinking, first developed by the Greeks, revived during Renaissance, though the same rationalization was developed in Asia, but was not as scientific, political, economic nor artistic form as emerged from the West.

Protestant Ethic

Weber starts with a simple observation: in countries with mixed religious composition, business leaders, skilled workers, technical workers and professional tend to be overwhelmingly Protestants.

He then proceeds to eliminate spurious correlations, such as level of cultural development. He shows that Protestants are much more heavily represented in modern firms whether in Germany or Poland, though Germany is culturally more developed than Poland.

(Cultural develop theory claims that more Protestants represented was due to the more culturally developed area or nations; however, Weber was enable to show that regardless the origin of countries, Protestants are more likely to be at top level in society, e.g., Germany and Poland,)

He rejects “inheritance theory” that differences between Protestants and Catholics predated the Reformation.

(Inheritance theory claims that the more developed economically are more favoured by natural resources and situation, in particular a majority of wealthy towns, went over to Protestantism in the sixteenth century. The results of circumstances favour the Protestants even today…Weber shows that whether economically developed or not Protestants are much more heavily represented in capitalist industries)

He finally rejects Minority Status theory which suggests ethnic and religious minorities may be driven to capitalist enterprise by society’s prejudice. Weber shows whether Protestants are in the majority or minority, they still are much more numerous than Catholics in modern capitalist enterprises in Europe.

Therefore, Weber says “Protestants have shown a special tendency to develop economic rationalism which cannot by observed to the same extend among Catholics either in the one situation or in the other. Thus the principle explanation of this difference must be sought in the permanent intrinsic character of their religious beliefs, and not only in their temporary external historical political situations.”

Weber rejects historical materialism; he thinks greed often stands in way of capitalism. Greed was present in societies that did not become capitalist. “It is not capital as Marx argued, but the spirit of capitalism that enabled Western capitalism developed.” A new type of workers saw working as calling for God, a new type of entrepreneur that saw money making as an end itself. Both are able to free themselves from traditional practices and engage in economic life with a new spirit.

Weber further rejects the idea that the spirit of capitalism is part of the rationalism of Western thought as a whole. In fact, the sense of calling in Calvinism was far from rational, but the psychological mechanism in Calvinism translated religious devotion into practical economic actions, which finally led capitalism fully developed.

Calvinism and Predestination

God’s predestination in salvation left believers in anxiety. The only way of assurance is by the way of living. The Calvinist needed to consider himself as one of chosen and good work and profits were not only the will of God but the works of God through him. It is proof of grace and sign of election. Ascetic and frugal living is desirous by God. Thus capital accumulation increases overtime. On the other hand, lazy, unwilling to work is sign of lack of grace.

In summary, the Protestant ethic is a core element of the cultural belief that gave rise to Western capitalism. In order to prove one’s worthiness of ultimate salvation, one needs to demonstrate faith through worldly action by ascetic, hard working manner with sense of calling to maximize the profit.