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The Irreligious Market Ethic

Do you know what the famous book The Protestant Ethic is about? Scholars of the twentieth century misinterpreted it, in some cases deliberately. Most people receive their ideas about Weber not from Weber but from Weberian scholars. So maybe you don’t?

The prose of most of Weber’s writings resembles physics or chemistry in its precision, and abstract philosophy or postmodern critique in the turgidity of its composition. These works of genius provided various of the enduring foundational concepts of social science.

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'The Protestant Ethic and the Spirit of Capitalism', in contrast, is short and readable, quite unimportant, and impossible to understand without reference to his other writings!

Weber was a complex bourgeois liberal intellectual who believed passionately in markets and law, meritocratic leadership, objectivity, and impersonal society. He viewed markets in secular rationalistic and evolutionary terms. His thesis was, if nothing else, a compelling critique of twentieth century ideologies. Given the combination of indispensable theory and unpopular ideas, scholars manoeuvred hard to take what they needed and hide the inconvenient parts.

To cut to the chase -- Weber’s theory of ethics in market society is irreligious

It has little or nothing to do with “culture”. In his introduction to The Protestant Ethic Weber almost disowns the book by warning the reader that the assembled essays “treat only one side of the causal chain”. In The Protestant Ethic Weber was just warming-up to the marathon exploration of all the links in the chain of causes that create and sustain capitalism.

In this post I will briefly: (1) disentangle the irreligious from the religious; (2) suggest secular factors that animate bourgeois business; (3) explain the vital economic double-ethic which preceded Protestantism.

All quotations are directly from Max Weber:

It helps to understand that Weber viewed the bearers of Protestant ideas who contributed to laying the ethical foundations for capitalism in early modern Europe as “social carriers of ideologies”. It was not a conscious delivery of capitalist ideology, of course. It was simply that Puritan sermons spread an ethos of methodical labour, honesty, prudence, thrift, deferred gratification, and so on, which coincided -- conveniently -- with the economic ethics of the rising business class. His explanation of religion as ideology emerges in the context of his general analysis of ideologies -- secular and religious -- and his criticism of contra-capitalist intellectuals. It implies the possibility (now?) of new secular ethical capitalist ideologies.

The spirit of capitalism was “a sort of liberal enlightenment” that looked favorably on business success.

There were “correlations between forms of religious belief and practical ethics”. Every scientist knows correlations are not causation. It would be “foolish and doctrinaire” to claim capitalism only evolved because of the Reformation attack on Catholicism and the rise of Protestantism. In northern Europe and the United States, Protestantism “helped to deliver the spirit of modern capitalism”. It was fortuitous circumstance that religious belief became an ideological carrier for the rational “ethos of the modern bourgeois middle classes”. Puritan sects were bearers for the asceticism and vocation for hard, methodical, and honest work that helped build the foundations of modern individualism.

A Protestant style of life coincided with the “self-justification that is customary for bourgeois acquisition: profit and property appear not as ends in themselves but as indications of personal ability”. Religious ideas were expressions of national character during the European middle ages, but were equally a product of geographic, political, and economic circumstances, and of the growth of cities, law, bookkeeping, and science.

Economic interests often lay behind the attitudes of Protestantism. Liberal enlightenment then rapidly stripped economic life of religious content. In the early twentieth century Weber declared the “religious root of modern economic humanity is dead”.

A modern ethic of capitalism originated in “social premiums” attached to ethical conduct that resulted from the spread of market relations. Bourgeois ethics, according to Weber, are the premiums placed on discipline, production, probity, and cautionary finance, which were founding principles of early capitalism. In capitalist society, moneymaking and capital accumulation are acceptable if “done legally” as expressions of “virtue and proficiency”.

Capitalists are driven by an impulse to make money, of course, but also by moneymaking morals and the “irrational sense of having done the job well”. You see this clearly because you know that “acquisitiveness” is by no means unique to capitalism and has been “at home in all types of economic society”. Let’s go one step further, said Weber: “Absolute unscrupulousness in the making of money has been a specific characteristic of precisely those countries whose… capitalistic development... has remained backward”.

Having twice said religion and market ethics simply “coincided” we should now go further back in history to understand the birth of (pre-Protestant) market ethics.

The key transition in the morals of economic activity is the gradual abandonment of the communitarian conventions of pre-capitalist society. Instead we see the emergence of universal economic norms. What are communitarian norms in this context? They are interpersonal rather than impersonal. They rest on relations of trust between persons in communities that are not mediated by third-party (state) legal norms.

The main point is that a sharp separation between the ethics of internal transactions and the ethics of external transactions holds back the development of capitalism. Weber called this problem the “double-ethic”. Traditional society does not approve when people profit from transactions with other members of their own community. On the other hand, it may be permissible to engage ruthlessly in economic dealings with outsiders.

Economic freedom within the community is deliberately limited, but external economic exchange is undertaken in an atmosphere of suspicion and hostility.

If a community’s maxim is that “brothers do not bargain with one another” then it may be taken for granted that the “market principle of price determination” is absent. Nationalism, which Weber described as “the pathetic pride in the power of one’s own community, or a longing for it”, preserves the moral double standard of hostility towards outsiders.

The transition to market society therefore requires a two-fold ethical transformation.

1. The transition destroys the ethics that subordinate economic exchange to social approval based on status, kinship, ritual, prohibitions on usury, or irrational limitations on the kinds of goods that can be exchanged.

2. The ethic that legitimizes cheating in exchange with people outside the community is eliminated. A condition of capitalist transition in the Western world, explained Weber, was a “lifting of the barrier between the internal and external economy, between internal and external ethics, and the entry of commercial principles into the internal economy”.

The marketplace breaks down all economically irrational ethics and forms of rulership that are obstacles to free exchange. Commercial principles are applied in the internal economy, while ethics of fair dealing are preserved and extended to the external economy.

Weber argued that when a market can “follow its own autonomous tendencies” it creates impersonal communities where economic behaviour is no longer oriented to brotherhood but rather to matter-of-fact calculation of profits, exchange, competitive survival. The ruling principle is “honesty is the best policy”. Honesty is the reputation mechanism encouraging repetition of exchange knowing that promises were kept and may be kept in the future.

To sum up:

Protestantism unintentionally performed the ideological function of legitimizing the acquisition of wealth through property and profit-making at a critical moment in the northern European transition to capitalism. Social premiums on personal self-control that regulated the conditions for religious salvation complemented the economic premiums that motivated entrepreneurs who seized the opportunity to become competitive on the eve of the industrial revolution. Equivalent ‘premiums’ soon spread to law and government.

This is not the end of the story! The next stage in the ethical transition was the industrial revolution and secular entrepreneurial innovation. That needs a post of its own.

Credits: References for all the above are in my book on capitalism and development. That's not a plug, just a reference!