Tuesday, May 13, 2014

The Death Of Political Capitalism

I stumbled with a paragraph from Max Weber quoted by Gary North in Volume 5 Appendix D of the latter's economic commentary on Exodus:

The closest connection between ethical religion and rational economic development—particularly capitalism—was effected by all the forms of ascetic Protestantism and sectarianism in both Western and Eastern Europe, viz., Zwinglians, Calvinists, Baptists, Mennonites, Quakers, Methodists, and Pietists (both of the Reformed and, to a lesser degree, Lutheran varieties). . . . Indeed, generally speaking, the inclination to join an ethical, rationed, congregational religion becomes more strongly marked the farther away one gets from those strata which have been the carriers of the type of capitalism which is primarily political in orientation. Since the time of Hammurabi political capitalism has existed wherever there has been tax farming, the profitable provisions of the state’s political needs, war, piracy, largescale usury, and colonization. The tendency toward affiliation with an ethical, rational, congregational religion is more apt to be found the closer one gets to those strata which have been the carriers of the modern rational enterprise, I.e., strata with middle-class economic characteristics. . . .

Before giving my comment, I would like to add two additional paragraphs from North himself: 

Men’s universal understanding of the civil law reduces the arbitrary decisions of the authorities, and this in turn reduces a major area of uncertainty. This reduction in bureaucratic arbitrariness reduces production costs. 

Yet it is not simply the universality of the legal system that is important. Specific aspects of the legal system, such as the honoring of private contracts, the respect for private property, the nondiscriminatory nature of the tax system, and the restriction of the civil government to the preservation of order, primarily by preserving public peace and preventing private fraud and coercion, have made it possible for capitalism to flourish. 


In the above paragraphs, we notice three things: 

First, according to North, Weber distinguished between "political capitalism" and "modern rational enterprise," which the former describes as "market capitalism" elsewhere. 

Second, we also notice based on Weber's statement that the more religious the people became, the lesser was their inclination to political capitalism and the greater was their tendency to embrace market capitalism. In today's debate, libertarians commonly understand political capitalism as related to statism in the forms of interventionism or crony-capitalism. So following Weber's line of thought, we could say that the greater the commitment of the people to faith communities, the less statist they become and the more they are inclined to free market. 

Third, this insight is from North. Paraphrasing the two paragraphs, we could say that the more people understand the nature of civil law and its "specific aspects," the more the power of bureaucracy is reduced, and the more free market flourished. 


Let us now consider three implications from the above assessment. If the assessment of both Weber and North is correct, it tells a lot about our present situation. Most people these days are increasingly becoming more statist. This is particularly true among large number of intellectuals. They hate free market and they are inclined to favor the expansion of government bureaucracy. Based on the above assessment, this deterioration is just an indication of growing irreligiosity and ignorance of civil law. 

Let us advance this idea further. If both Weber and North are correct, it therefore follows that in the past we have a precedent how to kill political capitalism and advance market capitalism. This was done through religious revival and education of the people in civil law. In order to materialize the first means, what is needed is for the Church to preach the gospel. Moreover, concerning education in civil law, this is best done by recovering the heritage of classical liberalism. Furthermore, for people to appreciate market capitalism, retrieving the Austrian school is the suitable task. 

Finally, we could also say that the humanist and the atheist's argument that religion is a major source of wars and deaths is not at all credible at least as far as Weber is concerned. It is argued that the world will be more peaceful without God and without religion. This is a dangerous proposition for in 20th century alone, it is actually atheistic and humanistic ideas in the forms of socialism and Marxism using the power of the state that committed far greater crimes against humanity. 

Source: North, G. 2012. Authority and Dominion: Economic Commentary on Exodus Volume 5. Dallas: Point Five Press. 

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