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Max Weber

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America's great transition from a feudalistic to an Industrialized society was spurred by an economic growth of the 19th century. The changes in American society as well as American business practices would be vast .The perspective of our Sociological founding Father Max Weber and his analysis of another change in American Society; his view points on modernity, the rise of capitalism as well as Bureaucracy make tangible points to set the stage for a crisis in America that takes in 2008. Weber predicted that in a crisis Bureaucracy will only fail if there is mismanagement, incompetence and/or abuse of its organizational system. He predicted to fix a system that has went array one would have to balance the effects of Bureaucracy to the peoples needs/desires for capitalistic gain. Karl Emil “Max” Weber was born in Prussia in the mid-1800's. Max Weber, (2006) German sociologist. (n.d.). Retrieved October 10, 2015. During this era, the Industrial revolution was in full swing brushing off the ideals of a traditional economy and embracing the new ideas of Modernity. Weber was not unaffected by these ideas and described the emergence of modernity, through the rise of capitalism. Weber noted that the this new economic system yielded old leadership he described as the charismatic, Authoritative and Traditional leadership. He outlined that Capitalism would bring a prosperity the likes people have never experienced. The positive affects of Capitalism he noted were an increased knowledge of skill-set, a change from reasoning to Rationalization and an efficiency in production. Weber outlined Rationalization in financial terms, as the assessment of benefits and costs of any project. Smith, A. (1974). He described the positive effects of Capitalism as the ability for individuals to think freely without a divine authoritative figure. He believed that out of Capitalism would emerge a new governmental order of Bureaucracy. page1 Weber believed that Bureaucracy produced efficiency through a set of policies, procedures carefully measured to ensure that the individual did not experience its negative effects. Weber was cognizant that with this new found freedom of capitalism and all of its responsibilities that it brought about; society as a whole would have to continue to weigh its affects on the individual and address them. He noted that the negative effects of Bureaucracy and called them the Disenchantment or the detached individual. Bureaucracy can be repetitive, ex filling out paperwork or constantly following orders despite your own personal objections). He stated that the individual can experience feelings of detachment to their work, become dehumanized to the process, stifle creative thoughts and create a hierarchy of agencies within organizations. Weber cautioned against the dismissal of these negative effects as the most dangerous times for the individual as each member of the Bureaucratic process was a vital piece in a puzzle. He foresaw the trickle down effects of those feelings to the employees everyday life as a worker would no longer be valued by the skill set you obtained but only by how well someone would pay you for it. The individual was slowly being replaced with the monetary contribution it brought to the world. He called this phenomenon the Iron Cage. Weber foresaw how the negative effects of Bureaucracy would effect society as a whole. He noted that the polices and procedures put into place that was to rigid would destroy efficiency in an organization. He warned that the business owners and its employees would continue to conflict with one another as the individual will continue to struggle to put his own individual desires and needs over Bureaucracy. He believed that the individual will always struggle to do what was best for society rather than what was better for himself. These sentiments will echo continuously even after Weber's death and publication of various books. As America continued to move through the Industrial to the Technological industry Bureaucracy and government increased. Society relied more and more on public institutions to carry out the public2 purposes of the people. In 2008, the Financial Industry entered a crisis like none has seen in decades. In tracing the cause of the crash of 2008, one would have to understand the fiscal policies that were deregulating before this event. Firstly, the American government created two important Financial institutions that guide finical systems and help to create economic policy. The Central banks and the Federal Reserve in the United States(FED). These Institutions help to ensure that the economic growth, financial stability and maintain oversight on other Banking industries. The Central Bank has the power to provide other Banks with money as a last resort, however said banks are required to have collateral as insurance. The FED purpose throughout it's lifetime has remained consistent in its overarching goals of continued monitoring and lending of money. Secondly, during the Reagan years a steady growth in economic deregulation policy continued as banks were given more freedom to expand without oversight. In the year 1978 until 2000 legislation was passed allowing most banks to expand into other sectors of the banking industry. In 2000, the Commodity Futures Modernization Act passed deregulating the trades commission from oversight of derivatives as well as credit default swaps. This will prove very costly to Americans, as Banks took on even more financial products without any oversight. The more glaring signs of trouble is when financial institutions like AIG, Bank Of America and JP Morgan Chase started to grow so much in other Financial products such as derivatives and insurance that they became a “too big to fail” company. The Securities and Exchange Commission (SEC) was unable to utilize any of their regulatory power as it had no jurisdiction over the agency. Americans would soon learn that the only legislation passed in regards to supervision would be voluntary. As redlining prevention legislation passed; underhanded mortgage practices continued. The destabilization as well as the housing market bubble bursting came to fruition. Americans learned that many Financial institutions used predatory lending practices on home1 mortgages or sold some of the debt to other institutions as well as cut some of these sub-prime3 mortgage debt into pieces and bundled them with solid investments. These complex financial transactions was a contributing factor to the widespread decline of major financial institutions. Bernanke, B. (2013). The Federal Reserve hands were tied as legislation only allowed them supervision on certain Firms. They were also unclear in understanding as to why the collapse was hitting so many firms at once. Weber's warnings about Bureaucracy and Disenchantment of workers would be a clear understanding as to how he would have fixed the crash. The abuse of Capitalism and greed that economic growth brings, for Weber has always been the struggle between paradox’s. Weber's assessment of the 2008 crash would be to identify the individuals who are impacted the most by the disconnect to their jobs. The lost souls that he has identified that has continued to plague the financial system must be fired. Weber would further identify that the deregulation of banks are a direct reflection of corporate greed as well as Bureaucratic mismanagement. He would identify many of the issues that led up to legislation being passed to stop supervision of the Financial Institutions as a clear mismanagement of resources. Weber would have implemented immediate investigations into the reasons why this type of legislation was passed in the first place. Weber would have continued with the bailout of Banks and during the crisis as he did not believe as would his predecessor Karl Marx in a Revolution of a proletariat class. Weber would have save the Banks as he believed an economic growth is positive for a society who prospers together. He would have identified the good in Bailouts and trusted the people to ensure that there would be a sense of moral compass for the individuals who caused the Collapse in the first place. Weber believed in the strength of the people and resilience. If alive today he would have implemented more government such as a watch dog group to ensure that the they never fell victim to corporate greed again. The implementation of these steps will ensure that Society as well as consumer confidence is at the forefront of a crisis. Weber believed that government efficiency was needed but Society's relationships to their fellow man will prevail.

Resources

Max Weber | German sociologist. (n.d.). Retrieved October 10, 2015, from http://www.britannica.com/biography/Max-Weber-German-sociologist

Smith, A. (1974). Foundations of sociology (p. 41). Rochdale [England: Panparameter.

Bernanke, B. (2013). Response to the Financial Crisis. In The Federal Reserve and the Financial Crisis (1st ed., p. 86). Princeton, New Jersey: Princeton University Press

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