Economic Sociology: Karl Marx And Max Weber

 

  Economic Sociology: Karl Marx And Max Weber

 

Gaurang Sahay

There exists a long and rich tradition of economic sociology or sociology of economic life, which roughly begins around the turn of the twentieth century. This tradition has generated both important conceptual ideas and significant research results, which we now present and set in perspective. Economic sociology has peaked twice since its birth: in 1890–1920 with the classical theorists (who were all interested in and wrote on the economy), and today, from the early 1980s onwards. A major thread in the tradition of economic sociology is that investigation must combine the analysis of economy or economic interests with an analysis of social structures or social relations.

 

Classical Economic Sociology

The first use of the term economic sociology seems to have been in 1879, when it appears in a work by a British economist W. Stanley Jevons. The term was taken over by the sociologists and appears, for example, in the works of Durkheim and Weber during the years 1890–1920 (sociologie économique, Wirtschaftssoziologie). It is also during these decades that classical economic sociology is born, as exemplified by such works as The Division of Labor in Society (1893) by Durkheim, The Philosophy of Money (1900) by Simmel, and Economy and Society (produced 1908–20) by Weber. These classics of economic sociology are remarkable for the following characteristics. First, Weber and others shared the sense that they were pioneers, building up a type of analysis that had not existed before. Second, they focused on the most fundamental questions of the field: What is the role of the economy in society? What is relationship between economy and society? How does the sociological analysis of the economy differ from that of the economists? What is an economic action? To this should be added that the classical sociologists were preoccupied with understanding capitalism and its impact on society—“the great transformation” that it had brought about.

In hindsight it is clear that several sociological works published before the 1890–1920 period in one way or another prefigure some of the insights of economic sociology. For example, the role of labor in society is emphasized in the work of Saint Simon (1760–1825), who also helped to popularize the term industrialism (cf. Saint-Simon 1964). The work of Alexis de Tocqueville (1805–1859) is full of sharp, sociological observations is something that most sociologists would agree on. That he also made contributions to economic sociology is, however, less known (Tocqueville [1835–40] 1945, [1856] 1955; cf. Swedberg 2003, 6–8). Of these various precursors we will concentrate here only on Karl Marx, a towering figure in nineteenth century thought.

Karl Marx

The task that confronts economic sociology today is to extract those aspects of Marx’s sociology that are useful in building economic sociology.

Marx made a study of all kinds of structure: economy, polity, culture and social structure believing that reality exists at the level of structure and structural relations rather than at the level of individuals. For him, different kinds of structure together constitute a social formation. Social formation is not an expressive totality of an essence such as economy but a ‘complex whole’ in which various levels or instances or structures – such as, economy, polity and ideology – are interrelated and relatively autonomous of each other. For Marx, structures and their elements are related to each other in both relatively autonomous and interdependent ways. The elements and levels of the structures and the relationship between them may be of different natures and weightings.

For Marx, economy has a sociological character because it consists of both relations of production and forces of production. Relations of productions denotes relations between people who participate in the process of production. Such people differentiate from each other in terms of classes. So, relations of productions denote differentiated positions occupied by different classes in the process of production. Forces of production denotes labour power, objects of labour, means of labour and knowledge, skills and other such expertise. Thus, class character of economy as well as the elements of knowledge, skills and other such expertise tell us that economy is not only material but has also a social character.

In Marxist framework one of the structures of ‘social formation’ always dominates the functioning of ‘social formation’. Althusser calls that structure ‘structure in dominance’ (Althusser, 1986). Dominant structure can be any structure – economy or polity or culture or ideology – depending on the situations. Dominant structure is identified not by counting the number of functions it performs in a ‘social formation’ but by finding out whether it performs functions of relations of production. As Godelier writes, “it is not enough for a single structure to assume several functions or any one function in order to be dominant but that it must necessarily take on the functions of relations of production” (Gldelier, 1977: 36). That is why, as Godelier further argues, kinship structure is the dominant structure in Inca social formation because it performs the functions of relations of production. It is the kinship structure that stratifies people in Inca social formation (Godelier, 1977).

Since, unless and until, a structure performs functions of relations of productions it does not become dominant one, Marx argues that economy plays the determinant role in the functioning of social formation. As Godelier argues, “the determinant role of the economy does not contradict the dominant role of a superstructure like kindhip, but is expressed through it” (Godelier, 1973: 366).

For Marx contradiction in a social formation that lead to a transformation in it is located not only in the economic structure but also in social, political and cultural structures. It is the combination of different kinds of contradictions located in different structures that lead to transformation in a social formation or replacement of one social formation by another social formation. To quote Althusser, “The ‘contradictions’ is inseparable from the total structure of the social body in which it is found, inseparable from its formal conditions of existence, and even from the instances it governs; it is radically affected by them, determining but also determined in one and the same movement, and determined by the various levels and instances of the social formation it animates; it might be called ‘overdetermined in its principle’ (Allthussser, 1986:101).

Marx’s point of departure is labor and production. People have to work in order to live, and this fact is universal (Marx [1867] 1906, 50). Material interests are correspondingly universal. Labor is social rather than individual in nature, since people have to cooperate in order to produce. Marx severely criticized economists for their conceptualisation of individual as isolated individual; and he himself spoke of “social individuals” (e.g., [1857–58] 1973, 84–85). The most important interests are also of a collective nature—what Marx calls “class interests.” These interests will, however, only be effective if people become aware that they belong to a certain class (“class for itself,” as opposed to “class in itself”; Marx [1852] 1950, 109). Marx severely criticized Adam Smith’s idea that individual interests merge and further the general interest of society (“the invisible hand”). Rather, according to Marx, classes typically oppress and fight each other with such ferocity that history is written with “letters of blood and fire” ([1867] 1906, 786). Bourgeois society is no exception on this score since it encourages “the most violent, mean and malignant passions of the human heart, the Furies of private interest” ([1867] 1906, 15). In various works Marx traced the history of the class struggle, from early times into the future. In a famous formulation from the 1850s, Marx states that at a certain stage the “relations of production” enter into conflict with “the forces of production,” with revolution and passage to a new “mode of production” as a result ([1859] 1970, 21). In Capital, Marx writes that he has laid bare “the economic law of motion of modern society” and that this law works “with iron necessity towards inevitable results” of revolutionary change ([1867] 1906, 13–14).

A positive feature of Marx’s approach is his insight into the extent to which people as a collective have been willing to fight for their material interests throughout history. He also contributed to understanding how large groups of people, with similar economic interests, under certain circumstances can unite and realize their interests.

Max Weber

Among the classics in economic sociology Max Weber (1864–1920) occupies a unique place. He laid its theoretical foundation and carried out empirical studies. The fact that he had worked as a professor of economics and consistently tried to understand the origin of modern capitalism was no doubt helpful in his efforts to build foundation of economic sociology.

Weber’s academic training was broad in nature. His two dissertations—one on medieval trading corporations and the other on the sale of land in early Rome— were relevant topics for understanding the rise of capitalism. Those works, in combination with a commissioned study of rural workers, earned him a position in economics in the early 1890s. In this capacity he taught economics but published mainly in economic history and in policy questions. Weber wrote, for example, voluminously on the new stock exchange legislation.

Toward the end of the 1890s Weber fell ill, and for the next 20 years he worked as a private scholar. In these years he produced his most celebrated study, The Protestant Ethic and the Spirit of Capitalism (1904–5), as well as studies of the ethics particularly economic ethics of the world religions. From the very beginning Weber set aside the topic of “economy and society” for himself. The work that today is known as Economy and Society by Weber consists of a mixture of material. In 1919–20 Weber also taught a course in economic history that resulted in a book General Economic History. Though primarily a work in economic history, it contains interesting material for the economic sociology.

Much of what Weber wrote in the area of economic sociology can be found in Collected Essays in the Sociology of Religion (1920–21) and Economy and Society (1922). The former contains a revised version of ‘The Protestant Ethic and the Spirit of Capitalism” (1904–5; revised 1920) and voluminous writings on the economic ethics of the Confucianism, Hinduism, Islam and Judaism and a few other texts. The material in Collected Essays concerns mainly the sociology of religion but is of great interest to economic sociology. The most influential study in Weberian economic sociology is The Protestant Ethic and the Spirit of Capitalism.

In the book Weber argues that the most defining feature of modern Western society is industrial capitalism that has been shaped by a thoroughgoing and all encompassing formal or instrumental rationality. The development of rationality in this form, as Weber argues, has happened due to the prior development within individuals of a certain highly peculiar kind of rational inner orientation which has been singularly caused by the Protestant ethic.

According to Max Weber, modern capitalism did not develop or could not have developed directly and ‘naturally’ through a gradual process of rationalization from earlier forms of economy. Instead, the development of modern capitalism required a radical breakthrough in the domain of attitudes and dispositions – a breakthrough that Weber attributes to the religious ideas of Reformation. The religious ideas of Reformation logical generated by M. Luther and J. Calvin led to the development of what Weber calls ‘worldly asceticism’ that resulted in the direction of unrelenting work and methodical self-control, a decisive impetus to the development of modern industrial capitalism.

In Protestant Ethic and Spirit of Capitalism, Weber traces the development of worldly asceticism to four conceptions of the Reformation doctrine:

1. Luther’s conception of calling: It granted full moral and religious dignity to ‘worldly’ activity. The holiest task was to demonstrate one’s faith through activity in ordinary social and economic settings.

2. The Calvinist conception of an absolutely transcendental deity: It made true mystical union with God inconceivable. Therefore, the believer had to think of himself as an active ‘tool of the divine will’, as an instrument serving to ‘increase the glory of God’ through intense, single minded, rational worldly activity (PESC: 113-14, ES: 546).

3. The Calvinist doctrine of the general abhorrence of all sensuous and emotional elements in culture and in religion: It puts a premium on strictly impersonal, radically individualistic, and thoroughly anti hedonistic activity (PESC: 105-06, 109, 224).

4. The central Calvinist conception of predestination: It made individual powerless to affect his salvation and equally powerless to know his predetermined fate. In response to this, Puritan pastors came to recommend intense, methodically controlled activity in a worldly calling as a means of ‘attaining certainty of one’s own election (PESC: 111), and they interpreted worldly economic success as a sign of God’s blessing, thus relieving the intolerable psychological uncertainty imposed by doctrine of predestination.

Thus, Weber presented worldly asceticism – the disposition to work intensely and methodically in a worldly calling – as the practical-psychological consequence of the theoretical doctrines of the Reformation that contributed significantly in building the tremendous cosmos of capitalist economy by placing premium on continuous work in a calling and the acceptance of the accumulation of wealth as a sign that one’s work had found favour in the sight of God; and more importantly contributing to the formation of a ‘specifically bourgeois’ economic ethic – to what Weber calls the ‘Spirit of Capitalism’ – and thereby to the ‘ascetic rationalization of the whole economic life’.

While he was writing The Protestant Ethic and Spirit of Capitalism Weber published an essay, “‘Objectivity’ in Social Science and Social Policy,” that summarized his theoretical views on economic sociology. In this work he argued that the science of economics should be broad and umbrella-like (Weber [1904] 1949, 64–65). It should include not only economic theory but also and economic sociology. Weber also proposes that economic analysis should cover not only “economic phenomena” but also “economically relevant phenomena” and “economically conditioned phenomena” (64–65). Economic phenomena consist of economic norms and institutions, often deliberately created for economic ends—for example, banks and stock exchanges. Economically relevant phenomena are noneconomic phenomena that under certain circumstances may have an impact on economic phenomena, as in the case of ascetic Protestantism. Economically conditioned phenomena are those that to some extent are influenced by economic phenomena. The type of religion that a group feels affinity for is, for example, partly dependent on the kind of work that its members do. While economic theory can only handle pure economic phenomena (in their rational version), economic history and economic sociology can deal with all three categories of phenomena.

A somewhat different approach can be found in Economy and Society. The first chapter of this work contains a general sociological analysis. Two concepts are important building blocks: “social action” and “order”. In the former, “action,” defined as behavior invested with meaning, is qualified as “social” if it is oriented to some other actor. An “order” is roughly equivalent to an institution, and it comes into being when social actions are repeated over a period, regarded as objective, and surrounded by various sanctions. Economists study pure economic action, which is action exclusively driven by economic interests (or “desire for utilities,” in Weber’s formulation; [1922] 1978, 63). Economic sociologists, however, study social economic action, which is driven not only by economic interest but also by tradition and emotions; furthermore, it is always oriented to some actor(s).

If one disregards single isolated actions, Weber says, and instead focuses on empirical uniformities, it is possible to distinguish three different types: those inspired by “convention,” by “custom” (including “habit”), and by “interest” ([1922] 1978, 29–36). Most uniform types of action presumably consist of a mixture of all three. Actions that are “determined by interest” are defined by Weber as instrumental in nature and oriented to identical expectations. An example would be the modern market, where each actor is instrumentally rational and counts on everybody else to be so as well. Weber emphasized that interests are always subjectively perceived; no “objective” interests exist beyond the individual actor. In a typical sentence Weber speaks of “[the] interests of the actors as they themselves are aware of them” ([1922] 1978, 30). He also notes that when several individuals behave in an instrumental manner in relation to their individual interests, the typical result is collective patterns of behavior that are considerably more stable than those driven by norms imposed by an authority. It is, for example, very difficult to make people do something economic that goes against the individual’s interest. A sketch of Weber’s economic sociology in Economy and Society yields the following main points. Economic actions of two actors who are oriented to one another constitute an economic relationship. These relationships can take various expressions, including conflict, competition, and power. If two or more actors are held together by a sense of belonging, their relationship is “communal”; and if they are held together by interest, then their relationship is “associative” (Weber [1922] 1978, 38–43). Economic relationships (as all social relationships) can also be open or closed. Property represents a special form of closed economic relationship.

Economic organizations constitute another important form of closed economic relationships. Some of these organizations are purely economic, while others have some subordinate economic goals or have as their main task the regulation of economic affairs. A trade union is an example. Weber attaches great importance to the role in capitalism of the firm, which he sees as the locus of entrepreneurial activity and as a revolutionary force.

A market, like many other economic phenomena, is centered around a conflict of interests—in this case between sellers and buyers (Weber [1922] 1978, 635–40). A market involves both exchange and competition. Competitors must first fight out who will be the final seller and the final buyer (“competition struggle”); and only when this struggle has been settled is the scene set for the exchange itself (“exchange struggle”). Only rational capitalism is centered around the modern type of market (Weber [1922] 1978, 164–66). In so-called political capitalism the key to profit making is rather the state or the political power that grants some favor, supplies protection, or the like. Traditional commercial capitalism consists of small-scale trading, in money or merchandise. Rational capitalism has emerged only in the West.