Must-Read: : The Near-Death of Liberal Capitalism: Perceptions from the Weber to the Polanyi Brothers: “Karl Polanyi and Max Weber held radically different views of liberal capitalism…
…[Weber] poured most of his energies into… the “Sociological Categories of Economic Action” (chap. 2)… because with the war’s end radical political and economic changes were occurring or seemed possible…. He opposed… efforts to socialize key industries primarily because Germany needed to attract foreign capital and secondarily because nationalized industries could be more easily seized by the Allies. He wanted to see the war economy end quickly and the currency stabilized… [via] the reintroduction of a functioning gold standard. In Economy and Society Weber warned:
It is only with the greatest caution that the results and methods of the war economy can be used for the critique of the substantive rationality of other forms of economic organization. The war economy is in principle oriented to a single clear goal and can use powers that in peacetime are available only in the case of “state-run slavery.” Furthermore, it is an economy with an inherent attitude of “going for broke.”… Hence, however illuminating the wartime and immediate postwar experiences are for recognizing the range of economic possibilities, it is unwise to draw conclusions from wartime in-kind accounting for its suitability in a peacetime economy with its long-run concerns.
Weber and Schumpeter… had their famous falling-out in a Viennese coffeehouse in 1918. Weber, “who took nothing lightly,” and Schumpeter, who “took nothing hard,” recalled Somary who witnessed the scene, clashed over the Russian Revolution. Schumpeter welcomed it as a laboratory experiment… for Weber it was going to be “a laboratory heaped with human corpses.” When an enraged Weber stormed out, a smiling Schumpeter remarked: “How can someone carry on like that in a coffeehouse?”–the proper place for irony, never seriousness.
The Austro-Hungarian economists were, however, not primarily coffeehouse intellectuals. Most had business experience…. Gustav Stolper narrowly missed becoming Austrian deputy minister in the Empire’s final hours and Republican minister of finance in 1921. Schumpeter succeeded in 1919 but quickly failed…. Karl Polanyi’s call, still made in The Great Transformation, for taking land, labor, and money out of the market was at the time frequently heard from the left and right. But many liberal economists too recognized that massive state intervention was inevitable…. Stolper believed that the institution of soviets, of works councils, was here to stay. In… central and eastern Europe a new state, new tax system, new currency, and new economy had to be established under the most difficult of conditions, which proved frustrating to liberals and socialists alike….
In the early postwar period many emigrants and many of those who claimed to have been “spiritual migrants” (innere Emigranten) hoped for some mode of socialist reconstruction, Christian or secular, of western Europe between Soviet Communism and American capitalism…. Karl Mannheim, more social philosopher than economist, pleaded for… “planning freedom.” Alfred Weber… embraced “free socialism and democracy”…. Karl Polanyi could not but find himself disappointed about the resurrection of liberal capitalism…. It is true that Western Europe developed a range of mixed economies, but few contemporaries anticipated the restoration of a capitalist world economy on the scale that became visible from the sixties on…