Protestantism and Capitalism: A Causal Connection?

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ne aspect of the rise of the new in­dustrial order has been the subject of frequent debate. According to R. H. Tawney, in Religion and the Rise of Capital­ism (1926), and Max Weber, in The Protes­tant Ethic and the Spirit 0/Capitalism (translated, 1930), the Reformation and the rise of the Protestant ethic did much to promote the Industrial Revolu­tion and the emergence of capitalism. We have already seen that Catholic teaching, with its roots in Aristotle, was hostile to the growth of the new industrial order. The teachings of John Calvin (1509-1564) and his followers, however, were compatible with eco­nomic activity; and the Weber-Tawney thesis is that they contributed directly to the rise of the capitalist system. We­ber and Tawney have been criticized by many writers, but both were careful scholars who recognized the tremen­dous difficulties in assigning a se­quence of causal relations among religious ideas, economic action, and economic institutions. They were aware, for instance, that causality can also run from economic institutions to

religious ideas, and that the Industrial Revolution and the development of capitalism might equally well account for the development and acceptance of the Protestant ethic. On balance, how­ever, they concluded that changing re­ligious thought effected the profound change in the structure of the society, rather than the other way around.

Scholastic dogma had maintained that success in economic activity as manifested in individual wealth was a strong indication of sinful behavior— charging excessive prices, lending at high rates of interest, devoting too much attention to the pursuit of gain and too little to the search for salva­tion. According to the Protestant ethic, economic success bespoke predestina­tion for eternal salvation. The Protes­tants also believed that hard work was good for the soul and that conspicuous consumption was to be avoided. The re­ligious views stressing the virtues of work and saving have been regarded as major factors in promoting the emer­gence of modern economic society.

SMITH'S ANALYSIS OF MARKETS AND POLICY CONCLUSIONS

There are two possible approaches to the writings of Adam Smith. One is to examine the overall theoretical structure and the policy implications that are either inherent in the theoretical system or stated explicitly by Smith. Another is to examine the theoretical structure in detail to evaluate its internal consistency or lack thereof. We will use the first approach because Smith's importance in the history of economic thought is a result of (1) his broad understanding of the interconnectedness of the economy and (2) his influence on economic policy. Smith is still read today for these insights, not for his contributions to the technical part of economic theory. Our task, therefore, will be to take a broad

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view of Smith's theoretical structure and to examine the policy conclusions that flow from a more detailed economic analysis. Smith's great strength as an economist lay in his vision (1) of the interdependence of the segments of the economy and (2) of the policies to be followed to promote the wealth of a nation. He was not an economist in the narrow sense of the word, but rather a philosopher who pointed the way toward economic development and affluence. His impact on subsequent economic thinking with respect to policy has been equaled by few.

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