Business Management Theory

An organization needs to be able to have employees who are productive. This article will look at the theories of Max Weber, and Adam Smith.

Max Weber: The Bureaucratic Society

Max Weber is one of the most famous scientists, who worked with many disciplines (Sparrow & O’Connor, 2006). He was German-born in 1864 and died in 1920. His career includes; being a professor, editor of several journals, founding an institute for public administration, and teaching economics. In his book, The Bureaucratic Society (1884), he analyzes the nature of society in Germany and the American way of life.

Max Weber used a three-stage model for explaining bureaucracies, In the first stage (1884) he explains that the main reason why people are not happy with their lives is because of government control. He also stated that there were two classes of people; those in power and those at will. In the second stage, he explained how the state is set up to exercise its authority, as well as, the rights it gave to the citizens who had been deprived of them. At this stage, there was no individual freedom to question, choose or criticize the government, so they did not have any individual rights. If there were such rights, then, there would be no limitations placed on them. However, the people would not have their rights violated (Sparrow & O’Connor, 2006, pp. 1688). It is at this stage that people will become stronger because when all the rules are followed as well as when the state has the right to govern them, then, they will develop into more free and independent individuals. Finally, the last stage (1884) will see people having their own rules of living and their own rules while having these same rights (Sparrow & O’Connor, 2006, p. 1689). The three stages are based on how the government does things; the citizens do not have freedom at this stage because they can only be controlled by the government at all costs to the citizens.

Adam Smith: The Wealth of Nations

Adam Smith is a British economist born in 1723 and died in 1790. He studied law and Philosophy after his study and later became a lawyer in England. (Sparrow, 2002). As a lawyer, he played a key role in defending many people on charges of fraud and money laundering (Sparrow, 2002). In 1802 he published A Vindication of the Rights of Man, while still studying law and Philosophy. Adam Smith was an advocate of the state owning wealth. While looking at America’s economic practices, people saw him as being a man who believed that state-owned resources which it should use in order to create wealth. Smith believed that these resources could not just be used to produce wealth but could be used for the good of the community and the economy would prosper.

In Chapter 12 of The Tragedy of the Commons (1776), he argued that the owners of land should be allowed to sell the land at a certain amount of profit for the benefit of the whole nation. He further stated that the profits should be shared equally among the members of the population. After some time, Smith realized that he had failed in his arguments about property ownership. He wrote books like The Principles of Taxation (1776), and Essays in Revenue and Taxation (1777), which further argued for the idea that taxation should be left to the market to decide whether these resources can be used in a manner that benefits both the state and the general population.

Adam Smith’s view on private property is different from Max Weber’s views on property. Smith was a believer in a society where only wealthy people (wealth makers) had an equal share. Smith also argued that the owner of capital should allow others to take advantage of it, and make money, rather than using it for the purpose of creating wealth. Smith was a liberal in that he thought that the poor people should not suffer, and they should have a say in matters pertaining to their needs as well as rights. Smith believed that the rich people should not get richer, but rather, should work with the rest because they own other sectors of the economy. These ideas were reflected in many things written by Smith. For instance, in his Views Concerning Private Property (1751), which he felt a need to explain why people should have property. According to Smith, the rich will always get richer, and all else would follow in their footsteps (Brewster, Sparrow, and Harris, 2005). People will want to make as much wealth as possible. People should know that they have property they want to keep and they have something they want to keep and the best way to earn money is through land and people should try to find a situation where they can do this. One important thing in common sense is that you don’t earn money if you work hard for it, but by doing that, your fellow human beings will pay for you. Smith also taught that he thought that capitalism was better than communism because there was more opportunity to generate wealth. Therefore, the free market was the best.

Adam Smith was a conservative in that he believed that people needed to respect each other.

Adam Smith was a believer in the rule of law. Smith believed that the laws of one country were only fair to it, and therefore, those countries could not be unfair, and it was better to live under the protection of its laws than to live in ignorance of them. In this quote, Smith said, “I think mankind can best be educated by constant observation of the laws of the earth” (Brewster, Sparrow, and Harris, 2005).

Max Weber versus Adam Smith: Differences in Ideologies

Max Weber believed that the main reason why people did not want to work and would rather stay at home was that they wanted a life of leisure so that they could be able to care for their families and do other personal things. On the contrary, Adam Smith believed that, “The state ought to regulate everything within itself.” (Sparrow, 2005). He believed that this regulation came from the fact that people were selfish. They believed that, “The chief duty of the states is the maintenance of the peace, welfare, and security of their respective citizens” (Brewster, Sparrow, and Harris, 2005). He also pointed out that, “the rulers would be happier if everyone acted according to the spirit of justice, ‘love, honor, and principle; that if each man did what he could to promote the common interests, without violating others’ rights and privileges, each would be bound to do that as well” (Sparrow, 2005). However, he also wrote a book called Utilitarianism (1794), which deals with the effects of actions. According to him, it is the duty of a person to determine if an action is acceptable or not. Then again, he disagreed with Kantian ethics where he wanted to see an outcome, and nothing more. He believed in a state that believes in the principle of utility so that the people who are suffering have the highest chance of happiness, regardless of the consequences. Thus, according to him, “that happiness is good; whatever it means, such as any other good, is the product of principle, or utility” (Brewster, Sparrow, and Harris, 2005). This is the basis of utilitarianism. Thus, by taking the utilitarianist point of view Adam Smith had already established that Adam was against the principle of utility and at the same time, the notion of happiness had already gained popularity in the community. He wanted to make sure that people were living a happy life according to the principles of the philosophy of morality; he wanted to make sure that people were making sure that wealth accumulated for everyone. People were doing the best job they could do in order to fulfill their duties.

Max Weber and Adam Smith are two men that were both known for their ideologies and for being controversial in their beliefs and thoughts. Adam Smith and Max Weber both used a similar ideology of the primacy of society over individual interests (Sparrow, 2007). Adam Smith’s view of how the state had no right to make money was that it did not make money so there was no reason why the rich should be able to sell their property or to put it off. On the same note, Adam Smith stated that the state of society could not control money, but it could control everyone’s behavior, their feelings, etcetera. He, however, changed it a little bit before writing his book Economics and Political Economy. According to him, “the state cannot command persons to do what it pleases. Money cannot be made; men must voluntarily supply their means either in terms of effort or in their own will” (Sparrow, 2007). He believed that the primary responsibility of the state was to ensure that the economic well-being of the entire society was achieved. By ensuring that the economy grew and the social inequality of wealth was reduced. He also said it was a sign of trust between the poor and the poor. According to him, money could not be taken away from anyone in the world, and the world will always depend on the individuals to earn the money, buy the materials necessary for production as well as, make a living when they do so. However, he later said that the state owns none of the means the poor have to turn themselves into commodities. He also pointed out that the state has no moral right to give anyone anything, but it has no moral right to take away someone’s freedom and the ability to have their autonomy respected.

Brewster, C., Sparrow, P. and Harris, H. (2005) Towards a new model of globalizing HRM. The International Journal of Human Resource Management, 16 (6). pp. 949-970. ISSN 1466-4399 (special issue 'New models of strategic HRM in a global context ')