Economic Life in the Modern Age

Werner Sombart

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781351326582
• Edition: 1
• Topic: Economía
• Subtopic: Teoría económica

Werner Sombart (1863-1941) may well have been the most famous and controversial social scientist in Germany during the early twentieth century. Highly influential, his work and reputation have been indelibly tainted by his embrace of National Socialism in the last decade of his life. Although Sombart left an enormous opus spanning disciplinary boundaries, intellectual reaction to his work inside and outside of Germany is divided and ambivalent. Sombart consistently responded to the social and political developments that have shaped the twentieth century. Economic Life in the Modern Age provides a representative sampling of those portions of Sombart's work that have stood the test of time.The volume opens with a substantial introduction reviewing Sombart's life and career, the evolution of his major intellectual concerns, his relation to Marx and Weber, and his political affiliation with the Nazis. The editors' selection of texts emphasizes areas of Sombart's economic and cultural thought that remain relevant, particularly to those intellectual trends that seek a more broadly based, cross-disciplinary approach to culture and economics. Sombart's writings on capitalism are represented by essays on the nature and origin of the market system and the diversity of motives among the bourgeoisie and the proletariat. Also included is an excerpt from Sombart's controversial The Jews and Modern Capitalism, exploring the widely perceived relation between economic life and Judaism as a religion. In essays on the economics of cultural processes, Sombart's comprehensive and expansive idea of cultural science yields prophetic insights into the nature of urbanism, luxury consumption, fashion, and the cultural secularization of love. The volume's final section consists of Sombart's reflections on the social influences of technology, the economic life of the future, and on socialism, including the influential essay "Why is there no Socialism in the United States."Encapsulating the most valuable aspects of his work, Economic Life in the Modern Age provides clear demonstration of Sombart's sense for fine cultural distinctions and broad cultural developments and the predictive power of his analyses. It will be of interest to sociologists, economists, political scientists, and specialists in cultural studies.Nico Stehr is professor at the Max Planck-Instit³t f³r Meteorologie in Hamburg. Reiner Grundmann is professor at the Aston Business School of Aston University in Birmingham, U.K.

I
The Nature of the Economic Market System

1

Capitalism

The Concept of Capitalism

The concept of capitalism and even more clearly the term itself may be traced primarily to the writings of socialist theoreticians. It has in fact remained one of the key concepts of socialism down to the present time. Nevertheless, it cannot be said that a clear-cut definition has ever been attempted. Even Karl Marx, who virtually discovered the phenomenon, defined only certain aspects of capitalism as the occasion required. When the term is used by socialists in any definite sense it has the character of a political byword with a strong ethical tinge.

Despite the fact that capitalism tends to become the sole subject matter of economics, neither the term nor the concept has as yet been universally recognized by representatives of academic economics. The older German economists and to a much greater extent the economists of other countries rejected entirely the concept of capitalism. In many cases the rejection was merely implicit; capitalism was not discussed at all except perhaps in connection with the history of economic doctrines, and when it was mentioned there was no indication that it was of particular importance. The term is not found in Gide, Cauwes, Marshall, Seligman, or Cassel, to mention only the best-known texts. In other treatises, such as those of Schmoller, Adolf Wagner, Richard Ehrenberg, and Philippovich, there is some discussion of capitalism but the concept is subsequently rejected. In the newer economics it is recognized as indispensable or at least useful, but the uncertainty as to its exact meaning is generally expressed by quotation marks about the word. Representatives of this school are little inclined to attempt the constructive development or more accurate analysis of the concept.

The works of Sombart are the first in which the concept of capitalism has been definitively recognized as fundamental to the system of economic thought. Here it is demonstrated that capitalism designates an economic system significantly characterized by the predominance of “capital,” and it is argued that the word “capitalism,” which by its very etymology suggests this feature of the economic system, must be retained as the appropriate term for it. The fact that this term has received a negative ethical emphasis in socialist literature should not qualify its use as a completely non-ethical designation for a definite economic system, particularly since there is apparently no better substitute.

Capitalism as a specific economic system cannot be understood without an analysis of the concept of economic system with a view to pointing out the function of this concept in economic science. Economic life is distinguished as a particular sphere of cultural life by the principle of “economy.” This principle as a logical concept is removed from the realm of space and time, but “economy” in the sense of economic life is an existential complex with definite spatial and temporal aspects. All culture, and consequently all economy, is historical. As there is in the abstract no religion, no art, no language, no state, but merely a certain religion, a certain art, a certain language, a certain state, so there is no economy in the abstract, but a particularly constituted, historically distinguishable economic life.

The task of all the cultural sciences is to find ways and means by which to grasp cultural phenomena in their historical singularity. A certain field of culture is rendered scientifically mature when science learns to determine its place in history on the basis of its concrete historical manifestations and to distinguish it in its characteristic phases from other concrete manifestations of the same cultural principle. This is achieved by the introduction of a formative conception not derived from empirical observation, which makes possible the construction of systems. Thus linguistics utilizes the conception of inherent language form, the science of religion the conception of dogma, the science of art, the conception of style.

Economic science likewise requires a constitutive conception in order to arrange its material in systems. The function of such a conception is to enable us to classify the fundamental characteristics of economic life of a particular time, to distinguish it from the economic organization of other periods and thus to delimit the major economic epochs in history. A conception which will make possible the systematization of economic phenomena must be derived directly from the notion of “economy,” the essentials of which it must comprise, collate, and connect—and not merely in their abstract form, not merely as ideas, but in the concrete, as definite historical facts. These requirements are satisfied by the general conception of the economic system. By an economic system is understood a mode of satisfying and making provisions for material wants which can be comprehended as a unit and wherein each constituent element of the economic process displays some given characteristic. These constituent elements are the economic spirit or outlook—the sum total of the purposes, motives, and principles which determine men’s behavior in economic life—the form of economic life or the objective system of regulations of economic relations, and the technology employed in economic processes. Defined more precisely, an economic system is a unitary mode of providing for material wants, animated by a definite spirit, regulated and organized according to a definite plan, and applying a definite technical knowledge.

It will be observed that the economic system is superior to all other systematizing conceptions hitherto employed, because they stressed merely single, prominent characteristics and made it possible to distinguish only single aspects of economic life, whereas the conception of the economic system is broad enough to comprehend every aspect. On the other hand, it is definite enough to encompass the historical concreteness of economic life and is thus far superior, for the purpose of framing a system, to purely formal ideas such as that of national economy (Volkswirtschaft). Finally, it is general enough to permit application to every conceivable economic institution, from the most primitive to the most highly developed.

The Spirit of the Capitalist System

The special character of capitalism will be brought out most clearly if we consider separately the characteristic forms which the three constituent elements—spirit, form, and technology—assume in the capitalist system.

The spirit, or the economic outlook, of capitalism is dominated by three ideas: acquisition, competition, and rationality.

The purpose of economic activity under capitalism is acquisition, and more specifically acquisition in terms of money. The idea of increasing the sum of money on hand is the exact opposite of the idea of earning a livelihood, which dominated all precapitalistic systems, particularly the feudal-handicraft economy. In pre-capitalistic systems, economic as well as all other thought and action was centered about the human being. Man’s interests as producer or as consumer determined the conduct of individuals and of the community, the organization of the economic life of society as a whole, and the ordinary routine of business life in its concrete manifestations. Goods were produced and traded in order adequately to meet the consumers’ needs and to provide an ample livelihood for producers and merchants; the standards for the expectations of both consumers and producers were fixed by long established usage. The category of qualitative use value was the determining principle of valuation. All social and individual norms affecting economic processes were grounded in human, personal values. On the other hand, in systems dominated by the idea of acquisition the aim of all economic activity is not referred back to the living person. An abstraction, the stock of material things, occupies the center of the economic stage; an increase of possessions is basic to all economic activity. The idea of such an economic system is expressed most perfectly in the endeavor to utilize that fund of exchange value which supplies the necessary substratum for production activities (capital).

While acquisition constitutes the purpose of economic activity, the attitudes displayed in the process of acquisition form the content of the idea of competition. These attitudes, which are logically inherent in acquisition, may be described as freedom of acquisition from regulation by norms imposed upon the individual from the outside, the lack of quantitative limits to acquisition, its superiority over all other aims, and its ruthlessness.

By reason of its freedom from regulation capitalism rests essentially on the individual’s assertion of his natural power. Every economic agent may and should extend his sphere of action as far as the complete exercise of his powers will allow; in case of failure, however, he completely foregoes assistance. Economic activity is closely associated with personal risk, but the economic agent is free to strive for economic success in any way he chooses provided he does not violate the penal code.

There are no absolute limits to acquisition, and the system exercises a psychological compulsion to boundless extension. The fact that capitalistic enterprise has as its purpose a certain mode of utilizing a stock of goods signifies a complete divorce of the aims of capitalistic economy from the personality of the economic agent. The abstract, impersonal character of the aim indicates its limitlessness. Activity in the capitalistic system is no longer determined by the needs, quantitatively and qualitatively limited, of one person or of a group of persons. Profits, no matter how large, can never reach a level sufficiently high to satisfy the economic agent. The positive drive toward boundless acquisition is grounded in the conditions of management. It is empirically true, though not logically inevitable, that any enlargement of business reacts to its own advantage, at least quantitatively through an extension of its sphere of exploitation and sometimes also qualitatively through a reduction of costs. This provides the stimulus to the continuous expansion of a business, often contrary to the expressed wishes of its owners and managers. In this peculiar orientation of human activity upon an infinitely removed goal lies the reason for the dynamic potency of the capitalistic system, a potency which renders intelligible all its remarkable achievements.

Acquisition therefore becomes unconditional, absolute. Not only does it seize upon all phenomena within the economic realm, but it reaches over into other cultural fields and develops a tendency to proclaim the supremacy of business interests over all other values. Wherever acquisition is absolute the importance of everything else is predicated upon its serviceability to economic interests: a human being is regarded merely as labor power, nature as an instrument of production, life as one grand commercial transaction, heaven and earth as a large business concern in which everything that lives and moves is registered in a gigantic ledger in terms of its money value. Ideals oriented upon the value of the human personality loosen their hold upon man’s mind; efforts for the increase of human welfare cease to have value. Perfection of the business mechanism appears as the only goal worth striving for; the means become an end. The vague notion of progress comes to include only such developments as advances in technology, reductions in costs, increase in the briskness of trade, growth of wealth. Fiat quaestus et pereat mundus.

Acquisition which is quantitatively and qualitatively absolute degenerates eventually into unscrupulousness and ruthlessness. Business draws practical conclusions from the revolutionary supremacy of its ideals and seeks, without consideration for any conflicting interests, to clear all obstacles to the limitless and unqualified exercise of acquisition. The intensity of the acquisitive drive attains a point at which all moral and temperamental inhibitions disappear and all conflicting drives become inhibited. The business man is “unscrupulous” in his choice of ways and means, because the selection is based exclusively on their serviceability in the achievement of the final goal, on their usefulness as instruments of acquisition.

When the direction of economic affairs is oriented solely upon acquisition it is inevitable that those modes of economic behavior should be adopted which seem most rational, most systematic, best adapted to the purpose in hand. In the old, precapitalistic economic organization, which is essentially traditionalistic and static, there sets in a process of rationalization representing a manifestation of the dynamic principle. Economic rationality is thus the third dominating idea of the capitalist system.

Economic rationality is manifested in several aspects of the capitalistic business management—its predilection for long-range planning, for the strict adaptation of means to ends, for exact calculation. The genuinely capitalistic enterprise is managed on the basis of a plan which extends as far as possible into the future, thus leading to the introduction, among other things, of roundabout methods of production. The execution of the plan is accomplished by means which are painstakingly examined with reference to maximum serviceability for the purposes in hand—a vivid contrast to the ill-considered employment of means in more traditionalistic economies. Underlying the planning and its execution are the evaluation and registration of all business facts in precise quantitative terms and the coordination of these records as a significant whole. This adherence to exact accounting is only natural in a situation where all economic acts are regulated in accordance with their pecuniary value and where management looks to maximized profits as its ultimate aim.

Rationalization permeates, of course, the entire scope of business and affects its technical as well as its commercial aspects. It introduces into the sphere of production the most “rational” methods and stimulates thereby the development of scientific technology. It creates rational factory management and leads to proper departmentalization and departmental coordination. The rationalization of the procedures of manual labor results in the employment of the individual worker most serviceably with respect to the ultimate capitalistic aim. On the commercial side rationalization affects the purchase of production equipment and materials, the sale of the ready product at the most suitable time or in the best market, the creation of new outlets, whether through clever salesmanship or through the development of new forms of retailing.

Economic rationality penetrates gradually into other cultural spheres, reaching even those which are only remotely connected with economic life. Under its influence, all untamed natural growth disappears and, where it proves disturbing, even the aesthetically-pleasing individual is mercilessly weeded out. The idea of strict adaptation of means to ends, one of the essential ideological props of capitalism, permeates the totality of culture and leads in the course of time to a purely utilitarian valuation of human beings, objects, and events.

While individual action under capitalism is informed by the idea of highest rationality, the capitalistic system as a whole remains irrational, because the other dominant capitalistic idea, that of acquisition, of the unrestricted assertion by the individual of his power, leaves the regulation of the total economic process to the uncoordinated discretion of individual economic agents. From this coexistence of well nigh perfect rationality and of the greatest irrationality originate the numerous strains and stresses which are peculiarly characteristic of the economic system of capitalism.

The Form of the Capitalist System

The objective, institutional order of capitalism is characteristically free. The dominance of economic individualism has its counterpart in the far-reaching independence of the individual economic agents. The restrictions which law and usage impose upon them affect only the most marginal of their activities; essentially restrictions are intended to forestall merely criminal dealings, leaving a wide area of discretion to the individual. “Economic freedom,” an aspect of the philosophy of natural rights, assumes, when regarded as an element of the economic order, the form of a system of positive rights conferred upon the individual by law and morals; these positive rights constitute the substance of economic liberalism.

Capitalistic business is typically private, so that economic initiative is lodged with enterprises which are actuated by the quest for private gain. These enterprises, subject to little regulation from the outside, assume the full risk of failure but enjoy also the unrestricted chance of success. Their activity keeps the economic machinery of society in motion.

The structure of capitalist economy is aristocratic. The number of economic agents is small as compared with the total number of persons participating in economic life, with the result that a large majority is subject to the power of a few economic agents. In a regime of economic freedom the relation between the economic agent and the persons controlled by him takes appropriately the legal form of a free contract. The dominance of a minority is explained by the fact that because of the high standard of technical knowledge and organizational skill required under capitalism people of average abilities and fortunes are incapable of assuming the direction of production and can therefore no longer act as economic agents as they could under the handicraft system.

The capitalist system, based as it is upon highly developed occupational specialization and functional separation, is marked by a high degree of decentralization. The principles underlying the division of labor in capitalist industry differ from those which governed handicraft economy to the extent that the segregation of a certain range of activities into a distinct branch of industry is determined not by the outlook and limitations of a living personality but by purely material factors, the causal sequences of the technological processes. Organic articulation enforced by an active, creative person is superseded under capitalism by purposefully directed mechanistic separation and coordination. The degree of specialization depends ultimately upon the advantages which it may bring to the private economic agents in their pursuit of profits.

Capitalist economy rests upon an exchange basis, the links between its constituent elements being the connections and relations established in the market. All production is intended for the market, is characteristically limited to the production of saleable goods; all products enter into commercial traffic. Similarly all means of production emerge from exchange transactions, are purchased in the market. No less important is the fact that the connection between economic agents and the persons controlled by them is established by contract entered into in the market; labor is thus treated as a species of saleable goods. The relationship between wants and their satisfaction through production is established indirectly through the medium of price, which regulates the quantity and character of output. Since the guiding principle of capitalism is gain, there is production only if prices yield profit, if they offer to the individual enterprise the prospect of economic success. This system of satisfying wants is therefore flexible, unlike the systems found in economic organizations oriented directly upon the satisfaction of needs. Distribution of the results of production, involving as it does a conflict between various groups, particularly between the two great classes of recipients of surplus value and of wages, is likewise regulated through the mechanisms of pricing.

Finally, the organization of production under capitalism is not limited to any single form. Although large-scale production predominates, production on a small scale (e.g., domestic system) has also its place in the system.

The Technology of the Capitalist System

The technology of the capitalist system must satisfy certain conditions. To begin with, capitalist technology must insure a high degree of productivity. It cannot fall below a certain minimum, because capitalist organization of production, involving necessarily the differentiation between the work of organization and management on the one hand and that of technical execution on the other, would then be impossible. For example, as long as every hunter can manage to subsist on the yield of his daily hunt, there is no room for a ca...