Hellerian Capitalism III: Complex Causation



Today I present a wonkish post on causality which is section 3 of an unpublished chapter sent to Princeton and Yale in 2003 at a time when almost no one was writing conceptually in non-Eurocentric post-Cold War ‘big idea terms about good capitalism, the economic sociology of capitalism, institutional sequencing in developing countries, institutional causes and consequences of capitalist development crises, and the beneficial role of ideology in capitalist transitions. My proposed title for a book on these themes in 2003 was Ideal Capitalism

The following section, which I've edited slightly to make it more readable, focused on a debate involving two top Weber scholars - Randall Collins and Stephen Kalberg. 

It occurs to me now that a fresh field called ‘a new sociology of economic history’ might in the future display some useful comparative advantage in innovative theorisations of large scale socio-economic causality.


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Chapter 4: Capitalism by Michael Heller (2003)
Section 3: Multicausal Institutional Interactions

A justifiable objection levelled against some theories of capitalism’s emergence is that they suggest linear monocausal transitions. By contrast the Weberian method employed in the present study requires an assumption of multi-causality and multiple domains of interactive conditions. It is misleading to speak -- as some Weberian scholars do -- of capitalism’s institutional prerequisites and preconditions. Alexander Gerschenkron in his classic study Economic Backwardness in Historical Perspective (1962) parodied Weber’s argument in an effort to ridicule monocausal determinism. Yet the method Gerschenkron outlines is really in complete contrast to the preferred Weberian approach:

“Very frequently, a rather curious procedure has been followed. One first takes a look at something like an ‘ideal type’ of preindustrial economy, say, the medieval economy in Western Europe of the fourteenth century, and emphasises a social framework within with the opportunities for growth were rather restricted. Thereupon, in a cinematographic shift, attention is moved to a modern industrial economy. The change in landscape is naturally striking. The inventory of economic progress enormous: a large politically and economically unified territory; a legal system assuring the rights of the individual and satisfactory protection for property; a store of technological lore; increase in productivity in agriculture rendered possible by the elimination of the open-field system and distribution of common pastures; availability of labour supply of various skills; and entrepreneurial group willing and able to calculate and to innovate; availability of capital for long-term investment; non-existence of guild restrictions; wide and absorptive markets; and so forth and so on.
Then, with a slight twist of the pen, all those basic traits of a modern economy are declared to be ‘prerequisites’ of industrial development. This, no doubt, has discouraging implications as far as the development of backward countries is concerned. Have they really to create all those conditions before they can embark upon the process of industrialisation? Obviously some of the factors listed are not prerequisites at all, but rather something that developed in the course of industrial development. Moreover, what can be reasonably regarded as a prerequisite in some historical cases can be much more naturally seen as a product of industrialisation in others. The line between what is a precondition of, and what is a response to industrial development seems to be a rather flexible one.”

Gerschenkron’s concerns are understandable. We can see how capitalism looks in the modern world. But how do we know which are the truly dispensable and indispensable conditions of its existence? In what order, if any, must they evolve? These questions are crucial for the future of capitalism in transition. Without answers to them policy makers in developing countries are less likely to make correct decisions about the sequencing of reforms, let alone about more fundamental choices between models of development. For these reasons the distinction between ‘conditions’ and ‘preconditions’ is no trivial matter.

Much confusion results from an unfortunate habit in Weberian literature of referring to “preconditions” of capitalism. In Weberian Sociological Theory (1986) Randall Collins attempts to systemise a “series” of linked determinants in a Weberian causal chain of “institutional preconditions for capitalism” which “fell into place for the first time” in Europe during the middle Ages. These ‘preconditions’ are not dissimilar to the ‘conditions’ I summarised earlier [*see first post in the Hellerian Capitalism series]. 

Collins likewise deals with four more or less equivalent categories of development -- ethics, law, bureaucracy, and political representation -- and writes that large-scale capitalism requires “destruction of the obstacles to the free movement of or economic transfer of labour, land, and goods”, “creation of the institutional supports for large-scale markets, especially the appropriate systems of property, law, and finance”, the “bureaucratic state” and “citizenship rights”. 

I follow Collins in juxtaposing institutional ‘conditions’ or ‘developments’ in the emergence of capitalism against the ‘traits’, ‘components’, or ‘characteristics’ of capitalism. However, Collins does not maintain a clear distinction between these sets of concepts. He describes the characteristics, for example, as “rationalised technology, free labour, unrestricted markets for mass-produced products, and the entrepreneurial organisation of capital”. In addition there are important differences of emphasis between us regarding the features of each condition. Collins summarises the “preconditions” of capitalism as “a combination of the bureaucratic state with political citizenship, resulting in a calculable legal system; as well as a methodical, nondualistic economic ethic”. In Chapter 9 I will explain why the ‘citizenship’ condition is an earlier phase of the political transition to free representation. 

A more significant criticism, however, is that the focus on “preconditions” takes attention away from the variable intermeshing and reciprocity of the conditions of transition. It is surprising that the notion of “precondition” should be associated with Weber’s theory at all. Weber always dealt with multiple evolutionary conditions of capitalism which feed on one another in a continuous and simultaneous processes of institutional upgrading. Although Weber did clearly identify broad trends such as rationalism and impersonality as value-normative preconditions of the progress toward capitalism, he studiously avoids construing them as mechanical orderings of specific institutional conditions of transition. 

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On the other hand, neither Weber nor Collins suggests development unfolds through calculable temporal chain reactions. In an introduction to The Protestant Ethic (1905/1920) written fifteen years after the book’s first publication, Weber admitted to having treated “only one side of the causal chain” in that early and now easily criticised examination of the ethical-cultural conditions of capitalism. In all his subsequent writing Weber’s arguments adhere carefully to a multi-causal method of analysis. Collins acknowledges as much in reference to factors of bureaucracy, politics, law and ethics - “Weber’s constant theme is that the pattern of relations among the various factors is crucial in determining their effect upon economic rationalisation”.

Guenther Roth’s introduction to Weber’s Economy and Society (1922/1978) similarly notes that Weber’s historical models explore “logical states or conditions”. His “developmental schema left the actual historical sequences open”. Weber’s comparative analysis was “directed toward establishing with the aid of his typologies, (1) the differences between modern and older conditions, and (2) the causes of the differences… In the absence of a reductionist one-factor scheme and of historical one-way streets, the relationship of economy, society and polity became for Weber a multi-faceted set of problems”.

Even though Weber himself did not theorise or offer clear statements on the generalised interaction of principal causal elements of capitalist transition, it is possible, as Stephen Kalberg shows, to reconstruct Weber’s multi-causal mode of analysis from his empirical writings. In his book Max Weber’s Comparative Sociology (1994) Kalberg quotes Weber’s warnings against “strong’ causality” or a “world formula” of modernisation.

Linear “causal chains” tend to be insensitive to gradations, weights or intensities of causality. Kalberg persuasively criticises linear development models – including concepts of causal chain and the so-called “prerequisites” of change - on two broad grounds. In the first place, causal chains obscure the distinction between “facilitating” and “necessary” causal forces. Weber took care to weigh the comparative strength of causal forces. A “condition” signifies a “necessary” force for the attainment of a given end. Weber often used the term “favourable” when discussing the factors that facilitate a development. 

In a second line of argument against causal linearity Kalberg defends the less easily grasped theoretical logic of interactional analysis. Concepts of linear causality do not permit examination of the ways in which “configurations of forces interact in a dynamic fashion” to influence developmental outcomes. Any hypothesised set of relationships between causal factors needs to take into account the interactional effects within and between domains of social action (such as rulership, law, economy, or religion), as well as interactions between antecedent factors and present factors, and the ways in which these interactions between causal forces are influenced in a variety of social or cultural settings by the unique “conjunctural” contexts which often cannot be anticipated. 

The portrayal of pluralistic causality that Kalberg detects in Weber’s writing is one of tremendous and inescapable complexity. I argue that one of the important implications of Weber’s method is that in drawing attention to the interactional factors facilitating a development it also reveals factors of social action which, by refusal or inability to interact, impede the forward development of all of these domains. For example, an existing social order which would be deemed incompatible with capitalism may defend and maintain itself, or new social orders may be created which similarly block the institutional transition.

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Analysis of interactions between societal domains does not tell the whole story. We must be attentive also to the finer tuned normative and procedural elements that enable an understanding of the interactional aspect of an institutional condition. It is the latter aspect that makes the condition absolutely indispensable. It is a question of digging below a ‘condition’ to unearth its root interactional function. A full interpretation requires appending relevant normative-procedural orientations to the set of institutional conditions. Only by examining these abstract action orientations can it be seen that empirical institutional elements of capitalist transition truly interpenetrate each other. 

Singling out the normative-procedural orientation (notably impersonality) is a necessary step towards identifying which core conditions share the central orientational pattern. It is then easier to perceive why so many traits of capitalistic action may survive in the absence of holistic orientations, and why the mode of institutional interaction, if it exists at all under such conditions, is thereby unsustainable. Unless normative orientations of capitalism are factored into the interactional analysis one really does not advance greatly beyond a haphazard distinction between ‘favourable’ and ‘necessary’ conditions of transition. 

For example, a claim that rational rulership, capital accounting, or class distinctions are all ‘necessary’ for capitalism is not matching equivalent categories. Here it would appear that Kalberg loses the essential thread of Weber’s overall argument when applying his methodological distinction to capitalism’s conditions and characteristics. Because Weber never definitively categorised them as such, it becomes a matter of interpretation whether the characteristics mentioned earlier are ‘favourable’ for capitalism’s development or ‘necessary’. Kalberg correctly lists militarism, population growth, the emergence of a money economy, overseas trade, urbanisation, and acquisitive motives as ‘favourable’. But Kalberg muddles the ‘necessary’ conditions by including rational rulership, money, profit-making, markets, the development of social classes, technology, and science, on the grounds that Weber regarded them as exclusive to the Western world. 

Adhering to what I believe to be Weber’s underlying intention, and for the sake of clarity and focus, I restrict my definition of the ‘conditions’ to market ethics, formal law, rational administration, and competitive politics.

Only rulership based on competitive free representation furnishes the normative orientation that enables the rulership to interlock -- structurally and functionally -- with matching conditions of transition. Likewise in markets, a necessary normative pattern is given by regulated free competition, but not by capital accounting. In law and administration the equivalent function might be the checks and balances facilitated by procedural impersonality

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I discussed in general terms the interaction between institutional conditions in capitalism by which market ethics, law, administration and politics function with one another, share normative or procedural orientations, and evolve proportionally

Yet none of the recurrent dimensions of Weber’s multi-causal analysis are exceptional in their own terms. What is unique about Weber’s approach -- Kalberg is right to highlight it -- is systematic incorporation of various causality analyses simultaneously in exhaustive empirical investigations of the world’s cultural, legal and political systems. Weber’s heuristic frames of reference draw on frequently repeated concepts and procedures of analysis which isolate, define and measure interpenetrations what Kalberg calls the “causal action-orientations”. 

The multiple forms of simultaneous and reciprocal causality which Kalberg finds in the Weberian schema fall within two broad temporal and contextual categories. Firstly, the impacts which social, cultural, intellectual, legal, economic or political sub-systems have on evolving social orders can be identified either at one point in time or as historical developments. We can think, for example, of how a new property right may impact synchronically (at one point in time) on behavioural orientations in economic action, administrative governance, or political choice making. Legacies of conventions or customs impact diachronically (through time) on a social order. Legal systems are shaped by older systems of law, just as business ethics and political choices are shaped by cultural mores. 

Secondly, every element of causality has a discrete “conjunctural” component. Contextual factors permit or prevent crystallisation of causal forces. For example, a new behavioural orientation or social order may be the outcome of autonomous innovation rather than something dictated by older or prevailing social orders. More often than not conjunctural social situations simply affect the nature of the implantation of an action orientation. 

Thus, the same universal institutional condition, such as the legal regulation of economic competition, has differing impacts depending on the social context in which it appears. This is another way of saying that the action-patterns are ‘socially embedded’. 

The prevalence of conjunctural interactions between or within institutional spheres can explain why social change is often the unintended consequence of action. Some things cannot be predicted because they lack unequivocal reference to a universal or established pattern of institutional interaction. Weber’s analyses of social and economic change are uniquely attentive not only to variable social settings, but more generally to multi-causal forces combining in each instance. As Kalberg writes, linear conceptualisations of causality can be oblivious to “the embeddedness of single factors in discrete social contexts and the ways in which varying contexts may assert diverse influences upon these single factors”. 

A multi-causal mode of analysis may be particularly useful for discovering why a development is prevented. There is often a “contextual constraint” on actions which require the prior existence of conditions which have not yet evolved. In the conceptual terms of Talcott Parsons which were employed in an earlier chapter of this book, the potential for realising desired forms of policy agency may depend on a certain minimum preceding development of structural conditions. It was Parsons, in particular, who emphasised that Weber was especially interested in identifying the contextual constraints which prevented the emergence of modern bourgeois capitalism outside of the Western countries.

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A consequence of continuous intermingling of causal forces is that societies never experience a sharp or decisive breaks between traditional and modern orders, only limitless articulations, combinations and transitional phenomena between a distant past, a not so distant past, and the here and now. Historical regularities of action survive to condition the interactions of institutional domains. History haunts the present. At best we can only ascertain relative strengths of transformative and non-transformative forces in order to encourage rational judgements about the adaptive efficiency of the specified interactive conditions of transition. 

Thus, the four ‘necessary’ conditions of transition I have identified (market ethics, law, administration, free representation) act upon each other to produce uniform outcomes that arise slowly from multiple particularities and ‘favourable’ contexts. Focusing on these interactional dynamics helps to avoid the error of historicism. Weber’s method is in complete contrast to Karl Marx, who claimed the “capitalist process of production proceeds under definite material conditions which are simultaneously the bearers of definite social relations”. The historicist (Marx), as Karl Popper noted in The Poverty of Historicism (1957), “believes in his favourite trend, and conditions under which it would disappear are to him unthinkable… [He] cannot imagine a change in the conditions of change”. 

In Marx’s case the definite trend was “the means of production monopolised by a certain section of society”. Weber shows the reverse to be true. The capitalist process proceeds under variable material conditions and is the product of variable social relations. The only ‘definite’ thing about capitalism, in those few advanced societies where the interactional momentum has acquired an irreversible and relentless autonomous force of its own, is reciprocal adaptation of ethics, law, administration and politics in ways that effectively prevent permanent monopolisation from occurring. We could say, therefore, that only the effective interaction of the regulative domains permits the emergence and reproduction of capitalism. Capitalism ‘stores up’, as it were, the social value of its interacting institutions.

Analysis of conditions preventing or facilitating a significant development presupposes unique non-linear interactions between various domains of human action, and past and present forces of change. There are no single causes. 

Weber wrote in The Methodology of the Social Sciences (1949):

“It is to be emphasised once and for all that a concrete result cannot be viewed as the product of a struggle of certain causes favouring it and other causes opposing it. The situation must, instead, be seen as follows: the totality of all the conditions back to which the causal chain from the ‘effect’ leads had to ‘act jointly’ in a certain way and in no other for the concrete effect to be realised. In other words, the appearance of the result is, for every causally working empirical science, determined not just from a certain moment but ‘from eternity’.” 

Only the totality can be deemed ‘universal’ and ‘necessary’. Being valid across space and time, these conditions most certainly are not culturally relative. ‘Necessity’ arises in so far as conditions of transition are functionally interactive. Each implies the other, and functional roles and positions of primary agents of change in each domain are interdependent with roles and positions in other domains. These conditions are reciprocally transformative. During transitions to capitalism the ethical, legal, administrative and political conditions evolve in reasonable proportion. 

The “conditions” are sufficiently small in number to be easily understood by the policymaker who puts them in operation. We have thereby avoided a further problem Gerschenkron alluded to in the passage cited earlier, namely that if the conditions of transition are not kept to a manageable minimum developing countries will be discouraged from trying. 

[end]


Postscript 2014:

In later drafts of my book the early criticism of Collins and Kalberg evolved into an argument (starting pp 37-40 in Capitalism, Institutions, and Economic Development) that despite the logics of necessary and/or favourable multi-causal interactions between institutions (market ethics, law, administration, and representation) it was not at the same time incompatible or contradictory to argue for a “Weberian sequence” of capitalist transition. I had foreshadowed this in a footnote I wrote in the original 2003 Capitalism chapter:

“There is, however, the possibility of carefully establishing accurate linear historical causality in specific empirical instances. For example, the formation of an economic ethic which arises from market exchange precedes the formation of law in most cases. Sometimes it is also apparent that rational law, administration and political representation determine each other disproportionally.”

In the final book this idea had become a theory of rapid three- or four-stage crisis-induced causal policy sequences of capitalist transition applicable to many if not most developing countries --  markets to law, law to bureaucracy, and bureaucracy to democracy. Readers can judge for themselves whether the latter position is justifiable while remaining loyal to Weberian multi-causality. 

On further reflection now -- while preparing this blog post -- I see two ways of justifying linear causality. Firstly, as argued in my 2009 book, economic crises provide windows of opportunity to shift the transition rapidly forward. But it may be practical only to focus on one transition at a time (market liberalisation and/or rule of law before wholesale administrative reform and before full democracy). In addition, political exigencies of classic development crises -- e.g. interest group configurations, leadership, international context -- tend usually to suggest the priority of economic and legal reform.

Secondly, the underlying thesis (then as now) is the existence of an imperative structural process of depersonalisation which is the principal element binding or determining otherwise indeterminate interactions between institutional spheres. In other words, depersonalisation can possess its own semi-autonomous power of selective or sequenced structural determination. It may cause linear shifts (e.g. ‘law first’ or ‘administration first’) that precede the ideal of holistic ‘modern’ institutional interaction. This is an idea I’m working on again presently as I read about early modern English institutional history. 

Perhaps the last point might be clarified in a future segment ‘IV’ of Hellerian Capitalism which in the original 2003 chapter was titled The Developmental Model. 




Michael G. Heller ©2014

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