The observation made by Weber was due to the fact that countries that seemed to be the most economically successful out of apparent economic success by Protestant countries-namely, the Netherlands, Northern Germany, and England-which also happened to have a stronger basis of capitalism. His argument was that Calvinism encouraged this sort of behavior compared to other religious institutions like Roman Catholicism or say, Confucianism. The idea was that people who worked harder provided more benefit to factory owners, and that is why capitalism succeeded to a greater degree in those countries.
However, economists have more recently criticized his theories on two fronts. One front, such as by Joseph Schumpeter, was that the merchant cities of Italy exhibited capitalist tendencies of concentration of capital and investment way before the rise of Protestantism. In essence, rather than some extraneous religious cause, Schumpeter argued that it was institutions that provided an area where capitalism could thrive, and that successful nations created a series of institutions and laws to support capitalism.
Another avenue comes from the 2009 paper "Was Weber Wrong?" where they argue that what Protestantism really brought about was an increased literacy rate due to encouraging everyone to read the bible in their own language. This increased literacy amounted to an increase in the human capital of Protestant countries, which is then argued to make them more productive: in other words, people who are able to read are going to be more productive or able to perform more skilled labor. Literacy is commonly used as a measure of human capital in many economic studies so this is a fairly accepted method of evaluating human capital. Their study had a bit of questionable rigor in that they used distances from Martin Luther's Wittenburg wrt. Germany in the 1900s (of which the censuses are questionable at best), but it did seem to indicate that literacy had improved significantly in areas where Protestantism had a stronger grip.
I'm confused, can you provide a reference for this claim? The Reformation occurs in the early sixteenth century and even the most liberal estimates I've seen for the beginnings of capitalist production point to the mid- to late-17th century with the end of the English Civil War and the rise of enclosure.
I only want to add to the comments here that Weber's "Spirit of Capitalism" book is a lot more subtle than most people realize.
It is a fairly dense, 'big history' treatise on the sociology of ideas... and it functions as an early cultural history, seventy years before anyone had access to the tools of cultural history. There's a LOT in that book... much much more than just the simplistic argument that protestantism "made" capitalism.
it offers a sociology of religion (at a time when religious topics were written on by religious people from sectarian perspectives... and religion wasn't really being written about from a secular perspective at all, except as critique)
It offers a sociology of ideas of differences in different types of German culture (i.e. north German vs. south German) at a time when there was a lot of pressure to see "Germanness" as a unified national (and yes, 'racial') identity;
It offers an engagement with Marx's theory of history from a non-Marxian (i.e. non-materialist) perspective, which is rare for the time (and way ahead of its time). This was really big, actually. Put differently, Weber takes Marx seriously enough to engage with Marx's arguments but from very different operating assumptions.
The standard gloss or one-line takeaway is therefore much much clumsier than Weber's book itself... and often horribly misleading.
To give one example:
Weber is not so much writing about capitalism as the spirt (German: Geist) of Capitalism... which is not at all the same thing. So yes, you can find plenty of historical articulations of capitalism in (say) 14th century Genoa... or (as we are learning today) the 15th c. Ming Dynasty... But while these saw functioning capitalist practices, neither of these cultures (as we would call them today) saw the pervasive, hegemonic "spirit" of capitalism--that is, the ideas that capitalism was a necessary, essential, and eternal truism--running through culture as a dominant ideological/philosophical strand.
Weber is often grossly misunderstood here. He is NOT arguing that (Catholic) Bavarians cannot be capitalists.
He is arguing instead that there is a peculiar ethic/spirit of capitalism that is particularly predominant in Protestant cultures for all of the myriad reasons (and they are myriad) that he describes. And this had an impact on historical development.