DOCUMENT 13 Werner Sombart's Modern Capitalism (1903)

Rudolf Hilferding

Source: Rudolf Hilferding, ‘Werner Sombart, Der moderne Kapitalismus^,, in Zeitschriftfur Volkswirtschaft, Sozialpolitik und Verwaltung, 12 (1903), pp.

A review of Werner Sombart, Der moderne Kapitalismus, Leipzig: Duncker & Humblot, 1902. Bd. 1. Die Genesis des Kapitalismus. Bd. 11. Die Theorie der kapitalistischen Entwicklung.

Introduction by the Editors

Of the many Marx-critiques at the turn of the twentieth century, two stand out in terms of originality and insight. One, which is widely influential to this day, is Max Weber's The Protestant Ethic and the Spirit of Capitalism-} the second, which nowadays is largely forgotten, is Werner Sombart's Modern Capitalism.^{[737] [738]} Sombart and Weber were contemporaries, who independently concluded that historical materialism, in the works of Engels and some leading Social Demo­crats such as Kautsky, had become much too one-sided in emphasising the dependence of culture upon economics. In 1905 Weber famously argued that the Protestant Reformation, most notably Calvinism, created the spiritual con­ditions for the ‘rationalisation’ of thought that attended accelerated capital accumulation from the sixteenth century onwards. Werner Sombart’s Mod­ern Capitalism, published in two volumes in 1902, pursued a related theme in arguing that Marxism systematically discounted the importance of ‘spirit’ in economic history.

Sombart’s work was inspired partly by Marx’s Capital and partly by Sombart’s own early association with the German Historical school (his teacher, Gustav von Schmoller, was the leading representative of the school from the 1870s onward and had a particular interest in identifying cultural trends through historical inquiry). Whereas authors of the historical school never attempted a comprehensive theory of causality, Sombart believed forms of economic organisation must ultimately be explained in terms of the cultural primacy of a particular view of the world.

Readers will recall that in the 1890s Sombart sympathised with Marxism, writing the review of Volume iii of Capital that we have included in this volume and that Engels described as ‘excellent’. But Sombart became increas­ingly sceptical, as did Social-Democratic revisionists, of the proletariat’s capa­city to develop a unifying class consciousness. Regarding the capitalist spirit of calculating entrepreneurship as the dominant cultural fact of modern times, Sombart took this particular attitude of mind to be the defining principle of recent economic history. Differentiating between handicraft production for use, and capitalist production for exchange, he explained the rise of modern capitalism in terms of the pursuit of profit and the spirit of enterprise (lim­itless acquisition and competition). Capitalism instrumentalises both nature and workers, culminating in an objectified ‘system’ that operates independ­ently of human will and is indifferent to the destruction inflicted upon earlier, more organic forms of civilisation.^[740]

Sombart’s ethical-cultural critique of capitalism obviously drew upon not merely the reactionary illusions of the German historical school but also Marx’s own commentaries on fetishism and dehumanisation in Capital and elsewhere.

Where he differed fundamentally, however, was in denying Marx's dialectical method and with it any explanation of how successive, thoroughly different stages of economic history might be logically connected. Historical periods were defined in terms of their specific ordering ‘principle' - which led Sombart to claim a theory of causality - but, as Rudolf Hilferding writes, there is in fact no explanation in Sombart's work of any causal connection between successive principles, which appear, therefore, as matters of pure contingency.^[741]

For Marx, the craftsman's concern with stability of social status reflected the fact that he produces for a known buyer in circumstances of simple com­modity exchange.

Rudolf Hilferding on Werner Sombart's Modern Capitalism

In his large, two-volume work, Modern Capitalism, Professor Werner Sombart attempts ‘to trace the capitalist system from its beginnings to the present day'. His book therefore sets out to be, first of all, an historical description of capitalism, a commendable task if only because it fills a notable gap in our literature on economic history. The wish has already been voiced long ago, in face of the growing number of monographs and detailed investigations in the field of economic history, for a synoptic presentation of the large amount of accumulated material. A field particularly neglected by research involved the origins of capitalism, as Marx described them for England in the chapters [of Capital] dealing with primitive accumulation, up to the triumph of the modern economic system in the last half century. It is really a peculiar phenomenon, often painfully felt, that we are frequently more familiar with the economic life of the Middle Ages than with that of our own time.

Sombart’s Modern Capitalism has thoroughly changed this situation. With particular reference to German conditions, we now have a presentation of economic life as it was shaped by the craft system.

The book then moves on to show us the rise of the capitalist economy. Here vast new material, in part unique, is elaborated in a clear and concise present­ation. Sombart places particular emphasis on the role played by the transfer of assets in the development of capitalism. He describes in detail the parti­cipation of the emerging merchant and usurer in the public revenues of the state and in the rents of feudal lords through the acquisition of landownership entitlements; the growth and accumulation especially of urban land rent; the urbanisation of the country gentry; and the colonial economy and its signific­ance for the accumulation of money.

These were the objective conditions of capitalism. In the resulting social milieu, the subjective conditions of the capitalist economy now became effect­ive. The acquisitive instinct awakened: the pursuit of profit, the prevalent motive of capitalist economic subjects, replaced the motive of the craftsman, his striving to gain a livelihood befitting his social status. Economic rationalism and ‘calculation’ [RechenhaJtigkeit: the capacity for calculating and accounting in business] developed.

This is followed by a comparison between German economic life in the mid­nineteenth century, the period of early capitalism, and that of the end of the nineteenth century, which shows the victory of capitalism first in the field of industrial production.

The second volume then shows us the re-foundation and reorganisation of economic life [by capitalism]. In new legislation it creates the form appropri­ate to its new content; and the development of new technology, which is here assessed from an economic point of view, brings about the ever richer devel­opment of that content. The stormy flow of the stream of modern life is vividly illustrated in the brilliantly written chapter on ‘The New Style of Economic Life', which shows the permeation of all action by the pursuit of profit. That is followed by a description of the development of modern agriculture and the dissolution of its old economic conditions. In the following section, Sombart then describes urban development: the origin and nature of the modern city. The ensuing chapters deal with the restructuring of demand and the reorgan­isation of commodity sales, which now have to satisfy the changing needs of consumption.

The second volume concludes with a ‘theory of commercial competition'. Sombart had already described how capitalism overcame the old crafts on all fronts; here, he gives us a systematic presentation of the reason why that victory was necessary. He begins by placing the discussion on a new, rational basis. The question under discussion is no longer the superiority of small or large-scale enterprise, but rather the adaptability of two different economic systems, that of crafts and that of capitalism.

Sombart attaches great importance to the distinction between a business [Betrieb] and the economy [Wirtschaft], and he precedes his work with an introduction elaborating upon it. A business is an institution for the purpose of performing continued work, i.e.

These are precisely the chapters that offer the greatest interest for us here in Austria, the promised land of middle-class politics for guild members. What Waentig's excellent book^{[746] [747] describes in detail - the complete uselessness of middle-class politics and its deleterious effect on general industrial develop­ment - is proved here to be a necessity in the context of a causal derivation. Sombart's compelling arguments, summarising everything that can be said against middle-class politics from a scientific and economic standpoint, can hardly be refuted. Middle-class politics will henceforth no longer be conduc­ted with scientific arguments. Austrian economists have every reason to give their full attention to this section of the book.}

But with this synopsis, which is naturally brief, given the large scope of the work, our task has hardly begun, for Sombart wants to offer more than economic history. His book also claims to be a theory; moreover, when he proceeds to define it more closely, it is to be an historical-social theory. Thus Sombart hopes, as he explains in his preface, to reconcile the contradiction between empiricism and theory and to point out new pathways for economic research.

So what is the essence of this historical-social theory? Sombart sees the ‘specificity of theory in ordering [historical events] from the point of view of a single explanatory principle'.⁰ Between the two explanations possible here [teleological and casual], he chooses the causal. This is because causal con­sideration of the nature of the modern economy, with its dependence on the dominant market laws, (which, like the laws of nature, do not care for determ­ination of aims by individuals), is more adequate than the teleological treat­ment. It is, therefore, the particular historical structure of capitalist society that decides the choice of causal explanation, whereas, for instance, explanation of the historical nature of an economy [Wirtschaft], consciously directed by the institutions of society, requires a teleological consideration.

At the beginning of the causal series, Sombart places human motives [die menschlichen Motive] in their particular historical configuration. He sees the world of crafts causally shaped by the desire of the artisans for a standard of living befitting their social status [standesgemaβ], while the world of capital­ism is dominated by acquisitiveness, by the quest for profit, whose bearers - the capitalist economic subjects, traders and businessmen - now remodel the craftsman’s world according to their wishes. Of course, those [ideal] motives cannot come into being at will. They are tied to a particular configuration of external conditions within which they occur. These objective conditions must be given in order to understand the effectiveness of the motives, the subjective conditions. Only in a peculiar world, such as the declining Middle Ages, could the emerging capitalist spirit produce our present peculiar economic system. There are thus, at any one time, various theories only for distinct social con­ditions, i.e. there are only historical theories and no general social theory. [In Sombart’s book] there is a theory of modern capitalism, but not a theory of cap­italism itself. The choice of the ordering principle is therefore not subjective: rather, history decides on the ordering principle at any one time. Mercantilism, in which the economy had to appear consciously regulated by social institu­tions, naturally sprang from purposeful ideas [Zweckgedanken]. In the classics, the casual and teleological points of view went side by side, but then Karl Marx undertook to explain the economic system from a strictly causal point of view.

Strict distinction between economic principles also underlies Sombart’s classification of economic systems, of which he distinguishes two according to their prevailing principles: the provision of goods and services to satisfy the needs and wants of the population [Bedarfsdeckungswirtschaft]^² and produc­tion for profit [Erwerbswirtschaft]. This looks like the adoption of an idea on which Karl Marx lays great stress; namely, that the purpose of simple com­modity production (as it developed historically, for instance, in the medieval economy) is use-value, while the purpose of capitalism is exchange-value, and therefore capitalist society can only be understood if one recognises the search for surplus value as its driving motive. But while in Marx this motivation, as we shall see later, grows out of the prevailing production conditions, Sombart postulates it as a precondition for the formation of these relations of produc­tion. Is the scientific purpose pursued by Sombart promoted in this way? His work is supposed to give a theory of economic development.^{[748] [749] He sees his chief task in the causal explanation of the objective facts of economic life; research therefore ‘necessarily always leads back in time from a phenomenon of the present to one of the past’ - a conclusion, says Sombart, which results in the ‘first attempt at a theoretical justification of the historical perspective in the field of economics’. However, it is difficult to suppress the sceptical question: Why on earth should an historical perspective for the presentation of economic history first be theoretically justified?}

But does Sombart’s approach really fulfil the task he set for it? If historical development is really presented in its continuous course, then the question naturally arises as to how one economy develops from another that preceded it. Here, Sombart’s theory lets us down completely. His two economic principles confront each other abruptly, without any attempt being made to establish a connection [between them]. And Sombart has to admit this himself when he suddenly declares that only when the economic principle shapes the economic order according to its needs do we posit it from the viewpoint of necessity, while the genesis of the economic principle itself we posit from the point of view of contingency.^[750] This looks like an admission that Sombart’s ‘historical- social theory’ is actually not a theory of development. That is proven especially by the chapter dealing with the emergence of the ‘new spirit’, i.e. with the subjective condition of capitalism. The ‘new spirit’, to our surprise, appears as an old spirit, as the auri sacra fames^{[751] [752] [753] with which humanity is constitutionally afflicted, and about which the tales of Midas and the Argonauts already tell us. But this spirit, the search for gold, for more and more of the glittering metal, only seizes mankind suddenly ‘in the fullness of time’ (Gal 4:4),16 as the Biblical expression goes, not quite exactly from an historical standpoint. Robber barony and sale of indulgences, gold rushes and alchemy, all tried to satisfy the craving for gold, and now arises the idea of putting economic activity also at the service of that purpose. The leitmotiv of economic activity ceased to be to achieve a standard of living befitting one’s social status, becoming instead money-making. ‘When, where, and how that thought first came into the world, will probably always be shrouded in impenetrable darkness’?7 And in this darkness the cruel author suddenly abandons the anxious reader, while he himself, under the protective cover of darkness, makes the salto mortale (somersault) across the chasm separating the world of the craftsmen from that of the capitalists. One cannot blame the reader if he refuses to follow Sombart in this death-leap of ‘historical social theory’. Painfully groping alone in the dark, the reader looks for means to illuminate the darkness and find a bridge over the gap. And it is not too difficult. He finds the means to do that in the chapters describing the objective conditions under which the ‘new spirit’ developed its effectiveness. To be sure, the bold jumper Sombart would look at this enterprise contemptuously. But it no longer frightens the destitute[754] to clash with Sombart here.}

In his preface, Sombart claims that the motivations of living people are the ultimate, primary active causes we can go back to.1^[755] In order not to fall into an extremely idealistic conception that does violence to the facts, Sombart tries to understand those motives historically. But since he sees them as the primary factors, he is forced to leave them just to follow one another, while the task of a theory of development should be to derive them from one another. The unity of human practice, from which the various maxims could have been identified as the consequences of determining factors at any one time, is thereby destroyed. There is suddenly a gap in the explanation in which one motive replaces the other; here the causal derivation stops, as Sombart himself must admit.

And Sombart’s standpoint necessarily had to lead to this result. We must, he says in the preface,^{[756] [757] go no further back than to human motives, because otherwise we are forced into an infinite regression, ‘which can find its end only in the understanding of the movement of the smallest parts and the laws regulating them’. Here we run into ‘the not yet bridged gap of psychological causation, which is different from mechanical causality’. Sombart seems to con­fuse here the ontological (metaphysical) question of the relationship between mind and matter with the question of the determination of human will by the configuration of the outside world. But while critical philosophy has proven the unsolvable metaphysical character of the first question and its false for­mulation of the problem,21 the second question is one whose correct answer is the fundamental condition of all social science. By confusing the two prob­lems, Sombart not only does not align himself with Karl Marx, but rather stands methodologically in sharpest contrast to the founder of the materialist concep­tion of history.}

The materialist conception of history - and we should not still have to explain today that this scientific view of history has nothing in common with any materialistic metaphysics - explains the social life and activity of people, i.e. of people engaged in activities relevant to historical development, from their relations of production, as the basic associative relationship.^{[758] [759] The ques­tion of whether motives or objective conditions are ‘primary’, a formulation of the problem that is really a repetition of the question of dogmatic meta­physics concerning the primacy of ‘spirit’ or ‘matter’, does not exist for the materialist conception of history. Rather, just as critical philosophy first made comprehensible our ability to understand nature by accounting for the world as our representation, and therefore as adequate for our thinking and accessible to the unity of thought, so the materialist conception of history also repres­ents nothing more than the substantiation of the possibility of social mon­ism. This is done by proving that the whole human environment, as [made up of] purely historical behaviour, first becomes operative when it is incorpor­ated into the unity of human action, that is, once it has become part of social life.}

But the foundations of the social existence of man - who is naturally associ­ated as zoon politikon (ζωον noXirixov: political animal) - which drive him for­ward in this associative relationship and therefore in his [historical] develop­ment, are the relations of production, [i.e.] human ‘subjective’ relations and not ‘objective’ conditions, which from this standpoint [of the materialist concep­tion of history] ultimately exist just as little as, from the standpoint of critical philosophy, do objective variables [Groβen-. quantities], which arise only from the subjective forms of intuition?³ By taking nature, the ‘milieu’, the ‘objective conditions’ as a mere substrate for the fundamental social relations between people, which they must enter into in order to earn a living, the unity of the process between man and nature, whose dialectical unfolding accounts for the changing content of history, appears in the production process.

But Sombart, who allegedly wants to develop further the ‘revolutionary’ con­cepts of Marx and reformulate them in evolutionary terms, is in reality far behind him when, instead of [upholding] monism, he separates out objective and subjective conditions in the manner of dualism, which are then to celeb­rate their union in the concrete course of history, while no one knows how and when and why.

But Sombart is driven even further. [He argues that] dualism pervades the whole of history. But this dualism occurs on one side, on the side of subjective conditions: a multiplicity of motives, depending on the historical eras, which face each other abruptly. The unity of the human psyche is thus lost, and we get a different psyche for every historical epoch. People’s behaviour is not regarded, for instance, as determined in a particular way in a specific historical period, but, on the contrary, human behaviour is seen as essentially different in different eras, and each time a different history develops according to the respective prevailing purposes. The causal analysis thus necessarily becomes teleological. That cannot be otherwise if it is assumed that psychological factors are the primary ‘causes’. As a matter of fact, [according to Sombart] it is the different purpose pursued by the economic subjects at different times that takes hold of the economy and makes it subservient to that purpose. From this basically teleological point of view it does not matter that the telos [the ultimate end of a goal-directed process] is every time historically different and is not Sombart’s telos but that of simple artisans or driven capitalists. The causal analysis would only be possible if the motives had been presented as an historical result, while in Sombart they are rather taken as a prerequisite. Since the diversity of motives is in reality the product of a long historical development, it is plainly wrong to take them as preconditions for a theory of historical development, while - once seen as products of history - they can constitute a starting point for a systematic ordering of economic systems. But since Sombart presents the motives - which to him necessarily appear as purposes that cannot be further derived [from other causes] - in diametrical opposition to each other, instead of seeing them only as different determined moments in the unity of the human will, he completely disrupts the continuity of historical development and is forced to become truly ‘revolutionary’, to use Sombart’s word. The emergence of motivation, which should be historically determined, remains unexplained. The motives appear to him as the deus ex machina [a god introduced into a play to resolve the entanglements of the plot], or rather the dei ex machina, because the worldly-wise Sombart is a polytheist. And against the charge of arbitrariness, which could so easily be made against the selection of motives, there is really no defence other than the one employed by Sombart: let someone else try something different - the typical excuse of bad poets against the objections of their critics, which they do not know how to rebut.

This abrupt juxtaposition [of motives] seems to originate in Sombart's aver­sion to ‘discursive political economy', whose findings, however, in our opin­ion, are able to make this mediation [Vermittlung]. The operating profit of the artisan is fixed in advance because a continuous change in technology, i.e. the qualitative change in production that characterises the modern economy, is impossible [in handicraft production]. Also, the quantitative expansion of pro­duction is confined to very narrow limits, both as regards the number of assist­ants and the prolongation of the working time. The personal intervention of the master [in the labour process] acts as a barrier, excluding in advance the possibility of an unlimited increase in revenues from a business. This makes competition in the modern sense impossible. As a result, the craftsman knows the outcome beforehand as more or less invariable; it can only be a question of relatively small differences in his conventional standards of living. It is differ­ent with the capitalist. The separation of ownership of the means of production and labour - and the relation between the means of production and the work­ers, is for Marx the objective criterion for distinguishing between economic systems, from whose diversity must be derived the diversity of precepts of the economic subjects - this separation makes possible the unlimited increase of revenue. The qualitative and quantitative changes in the production pro­cess provide the basis for capitalist competition, whose law necessarily forces upon the capitalist the continuous improvement and expansion of his busi­ness as an imperative for his preservation. From an economic point of view, he can only behave as if increasing his profits were his only motive, whatever may stir a beautiful capitalist spirit in particular cases. In purely economic terms: the conservative economic principle of the craftsman and the revolu­tionary economic principle of the capitalist follow necessarily from the fact that, generally speaking, simple reproduction is the law of motion of the craft economy, while reproduction on an expanded scale is the law of the capitalist economy.

The transformation of mental behaviour, however, occurred gradually and was not too difficult, probably often involving the same people, or at least people belonging to the same class. And in the beginning was the economic deed.^[760] At first the economy, particularly trade, was profitable; it was then continued and expanded because it was lucrative and initially allowed for a better living. The striving for better living standards gradually became the pursuit of profit - originally essentially the same striving for the customary livelihood, just intensified. Only the further development of capitalism turned the means, profit, into the purpose, through the laws of economic life itself, which turned the desire to make profit into a necessity on penalty of ruin in capitalist competition.

Thus, it is essential precisely for the historical presentation, which must be at the same time a history of development, to recognise the intrinsic connection of an economic system. This means, however, that theoretical or, as Sombart says, discursive political economy is necessary precisely for the completeness of historical comprehension. Even Sombart cannot entirely disavow this. Still, he is methodologically trained to reproduce blindly the heavy-handed dogma of the historical school, which confuses theory and history and declares political economy to be only possible as history. But Sombart wants to reduce ‘discursive’ economics to a propaedeutic that takes care of the necessary conceptualisa­tion, and he describes it as clumsiness on the part of the author to allow readers to know how he arrived at those concepts. But can there be anything more telling than the fact that here Sombart declares theoretical economy to be a private matter, giving an account of which is something superfluous?

We have seen how this standpoint fails in the historical presentation. Its starting point, the prevailing motives, is too narrow to encompass the entire area of historical development. If it does not stand out in Sombart’s account, it is because in his historical presentation in the first volume he essentially confines himself to describing the objective conditions of the origin of cap­italism, making no reference to motives at all, and only then follows the sphere of industrial life in its development. Here the pursuit of profit is an appropri­ate organising principle for the presentation, because it unfolds also in reality. Theory does not need to take anything else into consideration for the deriva­tion of its laws, but it is otherwise with the history of development. In the latter, proceeding from those single motives results in a one-sided view that actually does violence to the fullness of life. History is in reality a result of struggles, in which the combatants mass together in large groups - organised in the final analysis according to their economic interests - whose actions are guided by different, often opposing interests, all of which have a furthering or inhibiting impact on historical development.

With his prevalent motives (which become for him the only active ones), Sombart assumed the sole and absolute domination of a single class, and he neglected the impact of all others. If that already means a deficiency in the narrow circle of economic history - and we ascribe it to the fact that Sombart glides almost carelessly over the origins of the modern proletariat, which was often created out of formerly independent social strata by the most violent methods - it makes the establishment of a connection between economic history and general historical development even more impossible. To be sure, Sombart was misled into doing this by his stand on economic policy, by his tendency also to regard fUture development as a peaceful one resulting from the social policies of the capitalist class, and by his efforts to eliminate theoretically the contradiction between bourgeois and socialist society.

But where Sombart proceeds to a systematic presentation - particularly in the section called the ‘Theory of Industrial Competition' - he leaves his method completely aside and takes as the basis of his whole presentation and argu­mentation a theory of production costs. It is obvious that this whole section would not have been possible without the work of theoretical economics, on whose results it is based. Sombart can, in fact, so little dispense with theoretical economics that he rather presupposes its existence, thus unwillingly paying it homage.

So why does Sombart's work still bring much enlightenment and provide many insights into economic relationships? In our opinion, this is because the founder of ‘historical social theory' has tended in fact not to apply his method too strictly. It is not ‘history' that made the choice of the organising principles for Sombart. Rather, under the pseudonym ‘history' hides the name of Karl Marx.

The very fact that Sombart sees the driving force for the development of economic life solely in the economic sphere is a Marxian principle. The for­mulation of his economic principles is nothing but a re-application of Marx's teachings; except that Sombart splits the unity of the Marxist conception of history dualistically and thus arrives at the contrast between objective and subjective conditions, although often the practice of his presentation, but not his theory, knows how to overcome this dualism. It would be wrong to try to counterpose Sombart's theory, as idealistic or psychological, to the material­ist conception of history. It is none of the above because it is ultimately not deterministic, for the motives are posited one after the other as autonomous powers, independent of each other, instead of being derived from each other. But still: once their existence is admitted - and that they exist and must exist has been proved, in our opinion, by Marxism - they turn out to be felicitous organising principles of historical presentation.

But in those many chapters where the specific nature of his theory did not come to bear - and they constitute most of the book (which, therefore, despite Sombart's pursuit of uniformity, also has a dualistic character) - the reader is given the clues that allow him to establish the continuity of historical development. The economic historian Sombart has proved more fortunate than the social theorist.