Summary: Chapter 2: The Spirit of Capitalism

What does the term "the spirit of capitalism" mean? This term can only be applied to something that is "a complex of elements associated in historical reality which we unite into a conceptual whole from the standpoint of their cultural significance." The final concept can only come out at the end of an investigation into its nature. There are many ways to conceptualize the spirit of capitalism. We must work out the best formulation based on what about that spirit interests us; this, however, is not the only possible point of view.

To come up with a formulation, Weber presents a long excerpt from the writings of Benjamin Franklin. He says that Franklin's attitudes illustrate capitalism's ethos. Franklin writes that time is money, that credit is money, and that money can beget money. He encourages people to pay all of their debts on time, because it encourages the confidence of others. He also encourages people to present themselves as industrious and trustworthy at all times. Weber says that this "philosophy of avarice" sees increasing capital as an end in itself. It is an ethic, and the individual is seen as having a duty to prosper. This is the spirit of modern capitalism. While capitalism existed in places like China and India, and in the Middle Ages, it did not have this spirit.

All of Franklin's moral beliefs relate to their usefulness in promoting profit. They are virtues for this reason, and Franklin does not object to substitutes for these virtues that accomplish the same ends. However, this is not simply egocentrism. The capitalist ethic does not embrace a hedonistic life-style. Earning more and more money is seen completely as an end in itself, and is not simply the means for purchasing other goods. This seemingly irrational attitude towards money is a leading principle of capitalism, and it expresses a type of feeling closely associated with certain religious ideas. Earning money reflects virtue and proficiency in a calling. This idea of one's duty in a calling is the basis of the capitalist ethic. It's an obligation that the individual should and does feel toward his professional activity. Now, this does not mean that this idea has only appeared under capitalistic conditions, or that this ethic must continue in order for capitalism to continue. Capitalism is a vast system that forces the individual to play by its rules, in a kind of economic survival of the fittest.

However, Weber argues that in order for a manner of life so conducive to capitalism to become dominant, it had to originate somewhere, as a way of life common to a large number of people. It is this origin that must be explained. He rejects the idea that this ethic originated as a reflection or superstructure of economic situations. In Massachusetts, the spirit of capitalism was present before the capitalistic order took shape, as complaints of profit-seeking emerged as early as 1632. Furthermore, the capitalistic spirit took stronger hold in places like Massachusetts that were founded with religious motives than in the American South, which was settled for business motives. Furthermore, the spirit of capitalism actually had to fight its way to dominance against hostile forces. In ancient times and during the Middle Ages, Franklin's attitude would have been denounced as greed. It is not the case that greed was less pronounced then, or in other places that lack the capitalist ethic.

The biggest opponent the capitalist ethic has had in gaining dominance has been traditionalism. Weber says that he will try to make a provisional definition of "traditionalism" by looking at a few cases. First, there is the laborer. One way in which the modern employer encourages work is through piece-rates, for example paying an agricultural worker by the amount harvested. In order to increase productivity, the employer raises the rate of pay. However, a frequent problem is that rather than work harder, the workers actually work less when pay increases. They do this because they can reduce their workload and still make the same amount of money. "He did not ask: how much can I earn in a day if I do as much work as possible? but: how much must I work in order to earn the wage, 2 1/2 marks, which I earned before and which takes care of my traditional needs?"

This reflects traditionalism, and shows that "by nature" man simply wants to live as he is used to living, and earn as much as is necessary to do this. This is the leading trait of pre-capitalistic labor, and we still encounter this among more backward peoples. Weber then addresses the opposite policy, of reducing wages to increase productivity. He says that this effectiveness of this has its limits, as wages can become insufficient for life. To be effective for capitalism, labor must be performed as an end in itself. This requires education, and is not simply natural.

Weber then considers the entrepreneur in terms of the meaning of traditionalism. He observes that capitalistic enterprises can still have a traditionalistic character. The spirit of modern capitalism implies an attitude of rational and systematic pursuit of profit. Such an attitude finds its most suitable expression through capitalism, and has most effectively motivated capitalistic activities. However, the spirit of capitalism and capitalistic activities can occur separately. For example, consider the "putting-out system." This represented a rational capitalistic organization, but it was still traditional in spirit. It reflected a traditional way of life, a traditional relationship with labor, and traditional interactions with customers.

At some point, this traditionalism was shattered, but not by changes in organization. Rather, some young man went into the country, carefully chose weavers whom he closely supervised, and made them into laborers. He also changed his relationship with his customers by making it more personal and eliminating the middleman, and he introduced the idea of low prices and large turnover. Those who could not compete went out of business. A leisurely attitude towards life was replaced by frugality. Most importantly, it was usually not new money that brought about this change, but a new spirit.

Those people who succeeded were typically temperate and reliable, and completely devoted to their business. Today, there is little connection between religious beliefs and such conduct, and if it exists it is usually negative. For these people, business is an end in itself. This is their motivation, despite the fact that this is irrational from the perspective of personal happiness. In our modern individualistic world, this spirit of capitalism might be understandable simply as adaptation, because it is so well suited to capitalism. It no longer needs the force of religious conviction because it is so necessary.

However, this is the case because modern capitalism has become so powerful. It may have needed religion in order to overthrow the old economic system; this is what we need to investigate. It is hardly necessary to prove that the idea of moneymaking as a calling was not believed for whole epochs, and that capitalism was at best tolerated. It is nonsense to say that the ethic of capitalism simply reflected material conditions. Rather, it is necessary to understand the background of ideas that made people feel they had a calling to make money.

Analysis: Chapter 2: The Spirit of Capitalism

Many commentators on capitalism tend to assume or argue that its existence is inevitable, that it is fundamental to human nature, or reflects an important step in a universal series of stages. Weber's account brings such claims into question. According to Weber, the "spirit" necessary for successful capitalistic activities is not natural. Striving for profit is not the only way to approach economic activities; one could, for example, simply strive for subsistence or a traditional way of life. According to Weber, when capitalism does prosper, it does so because people have embraced and internalized certain values. These values, and not just human nature, make capitalism possible. Capitalism cannot then simply be a necessary step in the world's development, because in order for it to emerge, particular values must be present. Weber thus leaves space for the importance of ideas and culture in the history of human development.

Weber is also specifically replying to one approach to sociology and history, promulgated by many Marxists and often called "materialism." This approach sees all ideas and developments, including the spirit of capitalism, as a reflection or superstructure of economic situations. Economic interactions are the basis for all social institutions.

Religion itself is a product of such interactions; it cannot be a driving force of history. Weber's point is that for Western civilization to ever emerge out of feudal traditionalism, it needed to embrace a new set of values. These values couldn't simply have emerged out of the economic situation; we needed these values in order to rid ourselves of that situation. The formation of the values was influenced by economic situations, but not completely caused by them. According to Weber then, the materialist view is overly simplistic and not supported by the facts. Any complete understanding of historical progress would include a multiplicity of causes, and appreciate that the causal relationship between economic situations and religious outlooks goes both ways.

It is also important to notice the ways in which Weber attempts to define concepts like traditionalism and the "spirit" of capitalism. Weber relies heavily on anecdotes and case studies in order to give a sense for what these terms might mean; his discussion of the spirit of capitalism relies extremely heavily on the writings of Benjamin Franklin. This approach has both positive and negative attributes. His examples are carefully chosen and give a good grounding to his definition. However, because they are simply examples, they can potentially be attacked as not representative of a larger ethos. Weber's characterizations have indeed been attacked by some, and he has been criticized for not relying on more quantitative surveys.

Popular pages: The Protestant Ethic and the Spirit of Capitalism