Monday, February 25, 2013

Max Weber's Economic Framework

Max Weber, he of The Protestant Ethic and the Spirit of Capitalism, developed a three point framework in which to evaluate state economic policy.

Actually, in General Economic History he divided it up into traditional economic policy and rational economic policy.

Under the old tradition, states had two objectives.  First, they wanted money from the land they controlled.  Weber calls this the "fiscal interest."  Second, they wanted to continue the "customary standard of living."  Weber called this the "welfare interest."(p.344)

I think that we tend to underestimate the importance of this traditional economics.  Really, the whole policy of the modern administrative welfare state is to attempt to satisfy the universal instinct to continue in the current ways and preserve the current standard of living.

It is the modern, rational approach to life, instantiated in the progressive businessman, that brands this old idea as a chimera.  In the modern economy--really in life itself--you gotta keep moving.  Otherwise you suffocate and die.

But most people hanker after a cloud-cuckoo land in which their yearning for an uneventful, secure life is realized.  Hence the medieval guild, the modern labor union, the wails from people on "fixed incomes" when anything goes wrong.

The modern era features the rational state and a rational approach to economic policy, i.e., policy based on a theory.

The first modern theory was mercantilism, according to Weber.  Here the state realizes that its revenue depends upon the ability of the economy to yield revenue.  The idea is to treat the state as a business, buying low and selling high.  Here is Weber in General Economic History:
Hence mercantilism signifies the development of the state as a political power, which is to be done directly by increasing the taxpaying power of the population.(p.347)
That's why the mercantilists thought that a country became powerful with a trade surplus.  It meant that specie would flow to the exporting state, money that could be taxed.  Flowing from that was the idea that the trade of the country should be conducted by the merchants of the country, and carried in ships owned by the merchants of the country rather than others.  We can see that this attitude survives today in the notion of crony capitalism and the shuttling of bankers between banks and government.

But the independent class of entrepreneurs didn't like mercantilism, because it shut them out.  And then came Adam Smith arguing that free trade, rather than government managed trade, was the way to riches.  This new thing, pushed in Britain by the Puritans, was "capitalism oriented in relation to market opportunities which were developed from within by business interests themselves on the basis of saleable services."(p.350)

The power of Weber's analysis allows us to see that all three approaches to the national economy are still fighting for influence.  The average person wants only to maintain their standard of living.  The government and the ruling class wants to increase their power.  And the businessmen (crony capitalists excepted) just want the freedom to create and sell products.

Under Ronald Reagan, the state became more powerful because it stepped back and allowed a hundred flowers to bloom.  Under Barack Obama the state becomes less powerful because it insists on controlling everything.  As it says in the Tao:
The ordinary person who uses force,
will find that they accomplish nothing.
Oh well.  Every generation must learn its lesson the hard way. 

No comments:

Post a Comment