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«Inaugural-Dissertation zur Erlangung des Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Johann-Wolfgang Goethe-Universität Frankfurt am ...»

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them to move into the growing cities. At that time, cities were not yet prepared to provide sufficient accommodation, and in the very beginning, also jobs. In setting private interests above the public‘s, the enclosures disrupted ―the fabric of society‖, literally ―robbing the poor of their share in the common, tearing down houses which, by the hitherto unbreakable force of custom, the poor had long regarded as theirs and their heirs‘‖.707 Workers had been ―crowded together in new places of desolation […]; the country folk had been dehumanized into slum dwellers, the family was on the road to perdition; and large parts of the country were rapidly disappearing under the slack and scrap heaps vomited forth from the ‗satanic mills‘‖.708 This vigorous description of the living conditions of England‘s workers is similarly vivid in Weber‘s image of the ―iron cage‖709, describing the forces behind Capitalism and its effect on cultural and social institutions as ―a veritable abyss of human degradation‖710.

A new institutional mechanism slowly transformed Western society to the belief that material commodities together with continuous economic progress and growth will lead to prosperity for the whole population. As outlined above, for such a mechanism to work, a market economy needed to facilitate the free, money-based trading of products. To ensure a frictionless production with the help of machines, all factors for production needed to be available for sale, including man and nature, with their prices also determined on a market.

This implies transforming man and nature into commodities, traded on markets that needed to be created first. It also meant that now instead of ―being embedded in social relations, social relations are embedded in the economic system‖.711 Even contemporary writers noticed that industrialization could not be stopped without risking the functioning of state and society but that at the same time its concomitants severely endanger the social environment.712 This view was supported by a strand of economic theory, constructed around Walras‘s ―general equilibrium‖ that for a long time limited its analysis to the functioning of markets. Other institutions were mostly regarded as hindrances for a proper price mechanism to work.713 As already indicated before, until industrialization even the national markets emerging during Mercantilism were ―merely an accessory feature of an institutional setting conPolanyi, 1944, p. 35.

Polanyi, 1944, p. 39.

Weber, 1976 [1930], p. 181.

Polanyi, 1944, p. 39.

Polanyi, 1944, p. 41f. and 57.

Braun, 1965, p. 63.

Amable, 2003, p. 26.

trolled and regulated more than ever by social authority‖.714 The extension of the market mechanism to labor was the consequence of capitalistic production in factories. A market system was needed to provide the factors for a fluent production. The law of the market turned labor into being a commodity which as a consequence also limited possibilities to decide how someone led his life.715 This also implies that the organization of labor needed to be changed which in the end fundamentally changed the lives of the common people. The outcome is a change of society‘s social institutions to serve as an accessory to the economic system. In an environment of rapid economic growth, increasing productivity and rising wealth, people could hardly survive on their own working power, ―detached from home and kin, torn from [their] roots and all meaningful environment‖.716 The emergence of Capitalism with its self-regulating markets separated society into an economic and a political sphere.717 Acts of production and of retail sale were disconnected in time and space by the intervention of a wholesale merchant who advanced money for the purchase of goods with the object of subsequent sale at a profit. Hence, Capitalism changed the thinking about economic issues in a ―thinking coming from the market‖ with a separately existing economic system being not a function of society.718 For the market economy to function properly, the subordination of all elements of society was needed, including man and land. The substance of society itself was comprised to the laws of the market.719 The market economy additionally transformed them into human commodities on a (labor) market for sale to entrepreneurs looking for factory workers. Polanyi defines labor as fictitious commodity, because as economic activity it is part of life itself and is not produced for sale, nor can it be sold or stored detached from life. What‘s more, the labor market cannot be left to the rules of a free market mechanism for this would lead to the destruction of the human being. Labor power has always to be considered as affecting the human individual who happens to be the owner – and provider –of this commodity. Therefore supply and demand cannot be flexible and frictionless; the price has to be stable at a minimum enabling subsistence.720 Polanyi, 1944, p. 67.

Wehler, 1987, p. 185.

Polanyi, 1944, p. 75 and 83ff.

Polanyi, 1944, p. 70.

Brunner, 1956, p. 33.

Polanyi, 1944, p. 71f.

Polanyi, 1944, p. 72ff.

Germany started to industrialize half a century after Great Britain, introducing Capitalism not until the middle of the 19th century. Germany took over many of England‘s technological innovations, being able to leave out the less successful steps towards industrialization. The industrialization went not as experimental, and thus, quicker once it got started because from the beginning large firms could be created to catch economies of scale.721 This meant that by learning from England's mistakes, and additionally due to social specifics, the changes were less extremely life-threatening, but still painful, depending on region and industrial sector. The peasants were not forced off the land by enclosures, but the economic change nonetheless radically altered social structures. In some cases such as that of the linen weavers, conditions turned out to be dramatic.722 In general, industrialization was a much slower process than in Great Britain, taking several decades, thus it did not take place as industrial revolution in the narrower sense.723 It is also important to note that the transition from a feudal to a modern society developed not linear and not at the same pace even within Germany due to its late unification only in

1870. Therefore, the traditional class system with its long-established conceptions and mentality existed parallel to industrial structures for several decades. Capitalism was not implemented frictionless or without resistance, but in the end was inevitable.724 As a result, the development in Germany ran along the same lines as in England. Borrowed technology ensured a high speed of development with German engineers learning through ―imitative acquisition‖725 from British techniques. Additionally no ‗old‘ industries existed that occupied working force but all investments could be directed into the sectors with the highest profit rates and the newest technology.726 This was possible after Germany got rid of many institutional, e.g. legal and customary, obstacles.727 One of the necessary prerequisites was the emancipation of peasants, which was mainly achieved after the agrarian reforms in Germany. Peasants were liberated with reforms such as the Stein-Hardenberg reforms in Prussia starting in 1807 with the abolition of feudal restrictions, although they were not accomplished for nearly 50 years.728 The feudal system of the Junkers still held its serfs like slaves. Socage and high duties left few Wehler, 1987, p. 68.

A detailed description of the increasing pauperism can be found in Wehler, 1987, p. 281ff and 652ff, who also provides an outline of the uprising of the linen weavers.

Kaschuba and Gall, 1990, p. 13ff. and Weber-Kellermann, 1982, p. 99f.

Wehler, 1987, p. 140.

Veblen, 1990 [1915], p. 187.

Borchardt and Cipolla, 1972, p. 29.f Veblen, 1990 [1915], p. 85f.

For a detailed description of the reforms and the German industrialization in general, please refer to Wehler, 1987.

resources that could be sold on a market.729 Additionally, the tradition of sovereign care and ―clement grace‖ protected the class society and its social and economic order even under the pressure of a growing population. This prevented economic change for quite a while.730 Riehl even claimed that aristocracy and peasants were the conservative core and ―mights of insistence‖, contrasting it with an image of a degenerated peasant who included all forms of rural life that did not fit into his idealized picture of the peasant.731 This assessment did not reflect but overstated reality, being dismissed as ideology by researchers such as Weber-Kellermann because it oversimplified the reality of village life which did not develop in a linear progress from traditional to feudal.732 Germany‘s territory was not unified, thus development proceeded unevenly with industrialization starting in its North-Eastern part. Nevertheless, under diverse institutional frameworks, technological and economic innovations took place in all parts, forcing agriculture eventually to transubstantiate to a capitalistic, commercialized production aimed at a market.733 This was accelerated by the increase of population by nearly 50 per cent between 1740 and 1820, mostly due to decreasing mortality rates rather than to rising birth rates. Together with the increasing pressure from international involvements in trade and politics this eventually made changes inevitable. Commercial centers arose, villages became industrial sites attracting rural population but also deconstructing the existing society.734 The first generation of factory workers were urban day laborers, craftsmen and journeymen of the lower end of the petty bourgeoisie. As agriculture changed very slowly, the peasants flooded into the cities in a second phase. Half-peasant subsistence work on small property combined with seasonal employment was not unusual for a long time. It served as social security during early industrialization. Nevertheless, rural workers became more important for industrialization in Germany than the skilled craftsmen who clung to the guild because freedom of trade-laws were not passed until the middle of the 19th century.

All in all, the totality of the English experience with sudden separation of house and business was softened by these regional characteristics.735 Borchardt and Cipolla, 1972, p. 46.

Böhme, 1973, p. 13.

Riehl, 1976 [1897], p. 268ff.

Weber - Kellermann, 1988, p. 10 and 46.

Wehler, 1987, p. 33 and 162ff.

Kaschuba and Gall, 1990, p. 12.

Bergier, 1976, p. 281, Wehler, 1987, p. 64-94 and Kaschuba and Gall, 1990, p. 15.

5.1.4. History and current state of China‘s economic development since 1978 Economic reforms since 1978736 In the 1980s, Deng Xiaoping in turning against Maoist ideology stated that ―development is the hard truth‖. In Mao‘s era, egalitarianism was regarded as more important than economic growth and made China one of the poorest countries at the end of the 1970s. The CCP realized that rapid growth was necessary to overcome poverty and to strengthen China‘s economy.737 Thus, the Chinese reforms were from their beginning neither voluntary nor intended to transform the economic system into a market economy. Rather, the CCP were forced to act as a crisis of agrarian production, the stagnation of the economy and a supply shortfall led to increasing discontentment of the population as a consequence of the Cultural Revolution that ended with the death of Mao Zedong on 9 September 1976, and of the Great Leap Forward of 1958-62, both devastating the rural economy and leading to the death of several million Chinese people.738 After Mao‘s death and the prosecution of the ―Gang of Four‖739, the CCP launched the „Four Modernizations― (of agriculture, industry, national defense and science and technology) in February 1978, together with a new constitution, adopted in March 1978. These policy measures were officially sanctioned by the Third Plenum of the Eleventh Central Committee of the CCP in December 1978.

Thus, reforms started in December 1978, led by Deng Xiaoping, who at that time – and for that matter never officially - had no official position as head of state or General Secretary. Nevertheless, he is the most important figure for the Chinese reforms until the early 1990s, when he died. He introduced a system that was governed by rule and a clear understanding of collective decision making without concentration of too much power as it was the case during Mao‘s time.740 The beginning reforms were called "socialism with Chinese characteristics" and aimed at improving the overall well-being of the Chinese population by economic growth. In the first phase of reforms until the early 1980s, agriculture was decollectivized and the country opened up to FDI. As a first result, agrarian output rose considerably. This is attributed to the fact that at the beginning of reforms the majority of This dissertation will only provide a brief summary of the Chinese reforms, as this work is rather interested in the mode of the transformation than its meticulous details. Also, extensive chronological outlines and analyses of the Chinese reform process can be found in large numbers elsewhere, for example in Naughton, 2007, Brandt and Rawski, 2008, Spence, 1991 and Chai, 1997. The development of the private sector and enterprise reforms will be analyzed in more depth in chapter 7.

United Nations Development Programme (UNDP), 2010, p. 105.

Heberer and Taubmann, 1998, p. 16, Spence, 1991, p. 574-583.

―The Gang of Four‖ was the name for the ―four radical leaders of the Cultural Revolution‖ (Wang Hongwen, Zhang Chunqiao, Jiang Qing and Yao Wenyuan) who were after Mao‘s death arrested and prosecuted on orders of Hua Guofeng, who followed Mao as chairman of the CCP. Spence, 1991, p. 650ff.

Shirk, 1993, p. 9.

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