Religion and the Economy
Max Weber postulates in his book “The Protestant Ethic and the Spirit of Capitalism” the hypothesis that the work ethic derived from the Protestant religion that gives rise to modern capitalism. Weber supports his argument with the use of statistical studies showing that the predominantly Protestant regions are more successful than of the Catholic regions in Germany due to the concentration of a highly educated and skilled workforce, and the concept of “worldly asceticism” that encouraged capital reinvestment. And while, the connection between human and social capital as an expansionary force in output production is well established in economic theory (Adam Smith, Karl Marx, the Chicago School of Economics, and others); the hypothesis advanced by Max Weber that this skilled workforce is the direct consequence of the Protestantism ideal of “worldly vocation” ignores the rise of the trade unions from the medieval guild system as indicated by Lujo Brentano. Furthermore, many of these trade unions promoted nepotism and were discriminatory excluding Catholics from their ranks, the consequence of Bismarck’s policy of “Kulturkampf” that reduced the power of the Catholic Church in public affairs, and kept the Poles under control during the 1870s. As for his assertion of capital reinvestment as fundamental to the Protestant ethos; it is more likely that this reinvestment of capital came as a result of the population growth experienced during the first half of the century increasing from 21 million in 1815 to 34 million in 1865 and the industrialization during the second half of the 1800s generating a greater return on investment, thus making the opportunity cost compared to capital for reinvestment more expensive.
The problem with Max Weber’s hypothesis is that correlation does not imply causation. While the author mentions other possible reasons in his book for the economic progress in Germany’s Protestant regions, he grossly underestimates the importance of geographical advantages with its vast coal and iron deposits and the navigable waterways; the political and social stability after the unification of Germany and the construction of the railways as the principal factors. While Max Weber might argue that, the schism from Catholicism during Reformation precipitated the rise of modern capitalism transformed by the Protestant work ethics, higher education, and capital reinvestment. He definitely cannot assert that it changed the favorable geography of the region that made possible this economic expansion.