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Modern Capitalisms by Max Weber


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Banking and taxation - Types of banks
Principles of Trading System Design

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Modern Capitalisms by Max Weber.

Capitalism is present whenever the industrial provision of needs of a human group is carried out by the method of enterprises, irrespective of what the need is involved.

The existence of modern-capitalism which is of rational capital – it is the norm for all large industrial undertakings which are concerned with the provision of everyday want. It involves:

The appropriation of all physical means of production eg. Land, apparatus, machinery, tools etc. as disposable property of autonomous private industrial enterprises.

It involves freedom of the market, which is the absence of irrational limitations on trading in the market. Such limitations might be of a class character, more like, if people are been restricted based on their class(class monopoly).e.g. if the townsmen were not allowed to own an estate, or the knight or peasant to carry on industry; in such cases neither a free labour market nor a commodity market exist.

Capitalistic accounting presupposes rational technology, which is one reduced to calculation to the largest possible degree, which implies mechanization. This applies to production and commerce, the outlays of preparing as well as moving goods.

Calculable law- in order for the capitalistic form of industrial organization to operate rationally, it most be able to depend upon calculable adjudication and administration

There must be free labor- persons must be present, who are not only legally in the position but are also economically compelled to sell their labour on the market without restrictions.(rational capitalistic calculation is possible only on d basis of free labor)

The commercialization of economic life- the general use of commercial instruments to represent share rights in enterprise and also in property ownership.


Commercialization involves: - the appearance of paper representing shares in enterprise and paper representing rights to income, especially in the form of state bonds and mortgages indebtedness.

In modern economic life the issue of credit instrument is a means for the rational assembly of capital- the stock company belongs to this kind of illustration- share capitals may be brought together for d purpose of anticipating revenues, instead of borrowing money from foreign financier, the political authority leases its revenues to a stock company, so when there is war, the government can have a money to depend on, which is going to be from the stock company, so this will avoid taxing the community.

There are two types of organisations, distinguished under the stock company: which are, large enterprises of an inter-regional character which exceeded the resources of a single commercial house, and second, inter-regional colonial undertakings.

Inter-regional enterprises: it could not be financed by individual entrepreneurs, so the city went in front of the public, inorder for them to buy shares, it was done by arranging the citizens in groups according to the taxes paid or their wealth and reserving a definite fraction of the capital for each class. The whole enterprises represented a stock company only in an embryonic sense. Official supervision was exercised over the conduct of operations.

The consequence of this structure is the absence of fixed capital, d distribution of the   dividends was carried out in an irrational way according to d gross income alone, without reserves of any kind. All dt was necessary was d removal of d official control and d modern stock company was at hand.

The great colonization companies formed another preliminary stage in the development of modern stock company. The Dutch and English east India companies, which were not stock companies in the modern sense, it distributed its shares among them, not permitting all the stock to be bought up by a single city, the state administration was also able to buy some. Modern capital accounting was absent because there was free transferability of shares.

The financing of state needs through stock companies didn’t go well since then, because some European states e.g., Germany, Italy, great Britain start thinking of having a budget, instead of public revenues, of which, there are certain money for certain situations, like war.


Before mercantilism there were two systems which are- the dominance of fiscal interest and of welfare interest

The text gave examples of some countries that prevent the development of a deliberate economic policy. E.g.:

China its political system had passed through some changes, which had a highly developed foreign trade. Later the Chinese economic policy turned to external exclusiveness to the extent that the entire import and export business was in the hands of only 13 firms and was concentrated in the single port of canton. Internal in the sense that the policies were dominated by religious considerations. (Only on occasion of natural catastrophes were abuses required into).

148 JAPAN- there was stabilization of class relations, it was feared that foreign trade would disturb conditions as to the distribution of property

KOREA- ritualistic grounds determined the exclusive policy, if foreigners were to come into the country the wrath of the spirit is to be feared.

The caste system made a planned economy impossible, an additional consideration was that Hinduism strongly condemned travelling abroad, one who went abroad had on his return to be re-admitted to his caste.

The ecclesiastical property communities, especially the monasteries, supported a very rational economic life, which cannot be called capitalist economy but which was the most rational in existence.

Frederick 2 established the public peace but in general pursued a purely fiscal policy favouring merely the rich merchants, to them he granted privileges, especially customs exemptions.

The customs policy was in the hand of the territorial princes, with a consistent effort to encourage industry.

There dominant objectives were:

To favour local as against distant trade, especially to promote interchange of goods between the towns and the surroundings country, export duties were always to be maintained higher than import duties.

To favour local merchants in the customs

The city merchants were giving privileges, Louis the rich of Bavaria prided himself on suppressing the rural merchants.

The custom policy as a whole is dominated by the fiscal point of view and that of maintaining the traditional standard of living. This also applies to the custom treaties which go back to the 13th century. Sometimes wholesale trade was allowed and retail was prohibited, it’s always fluctuating.

The first trace of a rational economic policy on the part of the prince appears in the 14th century in England. This introduced MERCANTILISM by ADAM SMITH


It’s a kind of external economic policy, where by a state import at the lowest price and sells much higher. With the purpose of strengthening the hand of the government in its external relations. It signifies d development of the state as a political power, which is to be done directly by increasing the tax paying power of the population.

This system was supported by the doctrine of the balance of trade, which taught that the country will be impoverished if the value of imports exceeds that of exports; this theory was first developed in England in d 16th century.

An economic theory common in Europe from the sixteenth to mid-eighteenth centuries which stressed the importance of a country's balance of trade and so its accumulation of wealth in the form of bullion or specie (coin). Mercantilism promoted government intervention to maximise national wealth; it favoured the regulation and protection of trade so that exports increased and imports were held to a minimum. Adam Smith, in his Wealth of Nations, strongly criticised mercantilists. He and other critics opposed the idea that one nation should or could grow rich at the expense of others.

Mercantilism brought the idea of monopoly, so new industries were allowed to import only on the basis of a royal monopoly concessions and were to be kept under the permanent control of the king with a view of fiscal exploitations.

Mercantilism finally disappeared in England when free trade was established.


The germs of modern capitalism must be sought in a region where officially a theory was dominant, which was  distinct from that of the east and of classical antiquity and in principle strongly hostile to capitalism, the Jews were an outcast people in the middle ages, they were like d guest-people standing outside of political society. They weren’t received into any town citizenship group because they could not participate in the Holy Communion.

Judaism maintained the universal dualism, out of this dualism followed the sanctioning of other irrational economic affairs, especially tax farming and political financing of all sorts. But all this was pariah capitalism, not rational capitalism such as originated in the west. In consequences, hardly a Jew is found among the creators of the modern economic situation.

Judaism was not a notable significance for modern rational capitalism, since Judaism made Christianity which latter hostility to magic. Christianity was Possible and gave it d character of a religion essentially free from magic. The dominance of magic outside d sphere in which Christianity has prevailed is one of the most serious obstructions to the rationalisation of economic life.

Magic involves a stereotyping of technology and economic relations; it can only be broken by great rational prophecy.

The idea was that in order to be holy, every human have to be a monk, because monks dedicate their time to God, magic was not fully conquered but it wasn’t common and regarded like it used to.

Acceptance into a sect was conditioned upon a strict inquiry into one’s ethical conduct. Membership in a sector which did not recognize the Jewish distinction between internal and external moral codes guaranteed one’s business honour and reliability and this in turn guaranteed success

Calvinism also brought the idea that man was only an administrator of what God have given him. It condemned enjoyment but permit that everyone should work together, with its rational discipline, as the religious task of the individual.

Out of this system, the word CALLING was derived- it expresses the values based upon rational activity carried on according to the rational capitalistic principle, as the fulfilment of a God given task.

The concept of the calling quickly gave to the modern entrepreneur, a clear conscience and also industrious worker; he gave to his employes as the wages of their ascetic devotion to the calling. one of the major elements of the spirit of modern capitalism, rational conduct based on the idea of a calling, was 'born' from the spirit of Christian asceticism. The same values exist in both, with the spirit of capitalism simply lacking the religious basis.

Economic ethics arouse against the background of the ascetic ideal; now it has been striped off its religious import. This is end of the early period of capitalism.


Capitalism: An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

Enterprises: A business organization. Industrious, systematic activity, especially when directed toward profit: Private enterprise is basic to capitalism.

Mechanization: the act of implementing the control of equipment with advanced technology; usually involving electronic hardware; 'automation replaces human workers by machines

Commerce: Commerce is the exchange of something of value between two entities. That 'something' may be goods, services, information, money, or anything else the two entities consider to have value. Commerce is the central mechanism from which capitalism is derived.

Labor: That which requires hard work for its accomplishment; that which demands effort

Stock company: A company or corporation whose capital is divided into shares.

stock: Units of ownership in a corporation represented by shares.

share capitals: The equity of a company contributed by shareholders

revenues: Earnings; what a company makes in monetary terms from its activities. Not to be confused with profit, since expenses have to come out of revenue.

Caste: A social class separated from others by distinctions of hereditary rank, profession, or wealth.

capitalist economy: an economic system based on private ownership of capital

fiscal policy: is the means by which a government adjusts its levels of spending in order to monitor and influence a nation's economy

balance of trade: The balance of trade is the difference between the value of the goods and services that a country exports and the value of the goods and services that it imports. I

monopoly:  A situation in which a single company owns all or nearly all of the market for a given type of product or service.

Antiquity: Ancient times, especially the times preceding the Middle Ages

Judaism: The religious doctrines and rites of the Jews as enjoined in the laws of Moses.

pariah capitalism: The word pariah, which can be used for anyone who is a social outcast, independent of social position, recalls a much more rigid social system, which made only certain people pariahs. The caste system of India placed pariahs, also known as Untouchables, very low in society.

Hostility: An act of an open enemy; a hostile deed; especially in the plural, acts of warfare; attacks of an enemy.

Magic: The art that purports to control or forecast natural events, effects, or forces by invoking the supernatural.

Monk: A man who is a member of a brotherhood living in a monastery and devoted to a discipline prescribed by his order

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Vizualizari: 1537
Importanta: rank

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