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

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During the Ming and Qing dynasties, businesses were owned by families and Chinese merchants depended to a large part on social networks.1243 The Chinese family system traditionally exhibits a high degree of social solidarity before the background of parental authority connected with obedience and respect of the children which also means that individuals define themselves through the family and through relations to others.1244 The majority of people traditionally lived on the countryside, where clans dominated the villages.

Property rights in the Western sense were hardly known, the clan fulfilled duties like acting as juridical authority and lending money.1245 From a Western point of view it could rather negatively be argued that the clan filled an institutional gap that in the West was occupied by the state.

As already been outlined in depth in chapter 5, Max Weber describes the ―sib fetters of the economy‖ that from his point of view prevented the emergence of Capitalism in China in the 19th century.1246 For him, the Confucian culture of authoritarianism, hierarchy and ethnocentrism fosters economic activity in the form of family businesses rather than large corporations.1247 Weber presents Confucianism as based on conservatism and traditions instead of change and innovation and thus as impedimental to rational bourgeois Capitalism.1248 Further obstacles are the requirement of Chinese families for strict obedience to parental authority. This and the distribution of resources according to the status within the family generated a lack of work discipline. Open positions had to be filled with family members and thus labor could not be acquired from a free labor market. Additionally, due to the fact that sons inherit equal shares of their father‘s company by tradition, these family businessKrug, 2002b, p. 133 and Gold, 1985, p. 674.

Faure, 2006, p. 19.

Joy, 2001, Levy, 1949, p. 208f.

Goode, 1970, p. 297f.

Weber, 1968, p. 86-97, citation from p. 95.

Zurndorfer, 2004, p. 17.

Balazs, 1977 [1964], p. 18f.

es were never able to grow over a certain size.1249 Weber accounts the patrimonial order of the state and the importance of kinship organization and thus "the unbroken and continued existence of the cohesive sib and the pre-eminent position of its head" for the inhibition of a bourgeois Capitalism.1250 Weber comes to the conclusion that ―Confucian rationalism meant rational adjustment to the world; Puritan rationalism meant rational mastery of the world‖.1251 In contrast to the harmony-seeking Confucianism, Protestantism was able to shatter the fetters of the sib.1252 Weber also considered the time and effort required to establish Guanxi networks as distracting from business. For those reasons, family businesses have been replaced by professionally run bureaucratic corporations in the West which helped Capitalism and the industrial revolution thrive. Weber predicts the same for China, if Chinese people free themselves from family obligations.

Interestingly, Weber also argues that Confucian cultures are able to absorb Capitalism more easily than other non-Western societies. The reason for this he attributes to the specific role of family networks and the importance of learning for Confucianism.1253 Even though the very same culture did not develop Capitalism on its own, it easily adapted it and institutional factors, such as family and networks, which previously inhibited its emergence, became essential components of its structure.1254 Consequently, the prerevolutionary institutions, which prior to 1949 supported the more impedimental features, supported the features that foster economic success in a competitive international capitalistic environment after 1978.

The revitalization of institutions regulated economic transactions in the private sector, complementing the existing institutions. Among the renewed institutions family enterprises and personal networks were the most efficient response to the particular problems of the Chinese economy after its entrance in the global market. A kind of collective memory enabled the emergence of a private sector in reviving traditional long-known institutions.

The collective times seemed to have built-up urge for more autonomy which then erupted in massive entrepreneurial endeavors, especially in certain rural areas. Entrepreneurial inParsons, 1967 [1937], p. 542, Whyte, 1995, p. 1001.

Weber, 1968, p. 66.

Schluchter, 1983, p. 41 and Weber, 1968, p. 248.

Weber, 1968, p. 237.

Weber, 1968, p. 248.

Hamilton, 1984, p. 397.

stincts were preserved and could flourish with the institutions provided by economic reforms.1255 This shows the resilience of traditional business practices.1256 The transformation process initiated in 1978 brought many changes to organizations, production and consumption but also to the thinking of people. In 1992, economic development received another push by Deng Xiaoping‘s legendary ‗trip to the South‖, to the Special Economic Zone (SEZ) of Shenzen, and his call for opening up and economic reforms (see also chapter 5). Beside the large SOEs of the planned economy, especially in rural areas small, privately-owned enterprises were established. These firms were mainly run by families, creating a private sector. Family enterprises worked according to the principles of the market economy, giving time and space to the entrepreneurs to find their own way of doing business in those instable and risky circumstances.1257 This newly created private sector was established in coexistence with the state sector. Prices instead of being planned and thus fixed were set on markets with the facilitation of market entrance and exit. There were no clear regulations determining which sector would follow the rules of the free market or continue to be led by bureaucracy.

Until the economic policies of 1978, the notion of private capitalist entrepreneurs has not existed in the CCP‘s ideology.1258 While merchants were not well respected and did not enjoy high social status under socialism, they were able to produce and supply products of higher quality than the state grocery stores and thus rose in status together with the establishment of a market economy. Furthermore, due to monetary incentives and competition with the more flexible privately-owned small family firms, also SOEs gradually changed to a more profit-oriented production. Thus, the today‘s SOEs of China have not much in common with the SOEs in the beginning of reforms. Additionally, the dual-track system and a labor market were established that led to competition for better products and employees. Talented workers changed to private firms because of better payments, making those enterprises in turn even more productive. This spurred competition with the formerly plan-protected SOEs that during reforms often also lost the privilege of the ‗iron rice bowl‘, hence did change or lose their system of social health care and pension funds.1259 The attitude towards work, money and relationships was transformed due to better economic conditions and the rising importance of market forces. The emergence of private Whyte, 1995, p. 1015, Krug, 2002b, p. 133, Yang, 2002, p. 466ff., Peng, 2004, p. 1059 and Gold, 1985, p. 674.

Faure, 2006, p. 28f.

Krug, 2002b, p. 131f. See below the example of Wenzhou below.

Baek, 2000, p. 63.

Shirk, 1993, p. 42.

firms created a new class of individual entrepreneurs and managers who became very quickly enormously wealthy. Most of these newly set up enterprises were run by families, producing a wide range of products, making their profit only from the market. While in the 1980s entrepreneurs were still seen with mixed feelings, their reputation aggrandized in more recent times. The Marxist view of entrepreneurs as "seeds of Capitalism" and thus exploiters slowly seized to exist.1260 The slogan ―Serve the people‖ (wei renmin fuwu) became ―Serve the people‘s currency (=RMB)‖ (wei reminbi fuwu).1261 Although Chinese entrepreneurs as such do not form a class in the sense of a social formation like the German bourgeoisie, they are nevertheless a dynamic element of political and social change. They could seek leading positions in politics or society to influence social values, but Chinese entrepreneurs seem not to have this in common with their European counterparts.1262 They are lacking a shared identity, probably because they stem from different backgrounds (former peasants or so-called ‗self-made men‘ alongside former state officials and other long-established elites).1263 Other authors argue that ―a newly affluent parvenu stratum of entrepreneurs and professionals has arisen to form a new class whose wealth is rooted not in the political order—as with the old state socialist redistributive era elite—but in the rise of a market capitalist economy‖.1264 But even though they all belong to the ‗new rich‘1265 and thus economic elite, they do not form a middle class or bourgeoisie. If they have the potential to form a strategic group is not yet clear and is viewed differently within the literature.1266 ―The middle class is not a simple concept but is made up of different elements and is itself often regarded as stratified: …the middle classes are now generally seen in industrialized societies as the large, middle sectors of contemporary hierarchies of economic wealth, social status and political power, identified as much by their consumption and adherence to style as in socio-economic terms….Starting with the early nineteenth century, the bourgeoisie were a new middle class created by the process of industrialization. They were the captains of industry whose ownership of the means of production – extraction, processing and manufacturing activities – drove induShirk, 1993, p. 42.

Yang, 1994, p. 161.

Heberer, 2002a, p. 121f. Please refer to chapter 8.1. for a analysis for the German bourgeoise.

Huang Ping, 1997, p. 235f.

Nee and Opper, 2010, p. 4.

Goodman, 2008a.

Cf. Heberer, 2002b, p. 12. Heberer argues that China‘s entrepreneurs are still in ‚status nascendi‗ to form a strategic group. I follow more Kellee Tsai arguments here, see Tsai, 2005. For a more detailed discussion, please refer to chapter 8.2.1.

strialization, and they became a middle class because they were neither the landed aristocracy on the one hand, nor ordinary townspeople on the other‖.1267 However, in contrast to the population of most developed countries, Chinese people still adhere themselves to the working class.1268 Mostly, private entrepreneurs do not strive to become interconnected over horizontal ties, be it informal or more formal ones. Not least, because collective action within an authoritarian state is still a sensitive issue and the political circumstances rather support individualism in the sense that each entrepreneur relies on his Guanxi to selected government cadres.1269 Social clubs were founded but are not considered as central places for doing business and ties to local officials are considered as more important. Still, membership is regarded as status symbol and membership rates accordingly are very high to make it more exclusive. It is more a place for showing off the accumulated wealth than for engaging in business negotiations.1270 Goodman draws three conclusions from his research: ―The first is that the new entrepreneurs are a complex and not a simple social category, including not only owner-operators in the private sector but also managers of state-, collectively-, privately-, and foreign-owned enterprises, as well as oftentimes confusing combinations of these various sub-categories. The second relates to the wealth of the new entrepreneurs. While there were some disastrously unsuccessful entrepreneurs and others who were only of moderate wealth, many were not just comfortably well off by the standard of their local economy…but were clearly the rich and the superrich….The third overall conclusion limits such arguments by highlighting the close institutional and associational links between the new entrepreneurs and the party-state: they are neither independent of nor excluded from the political establishment, which on the contrary seeks actively to incorporate them if there is no pre-existing relationship‖.1271 A civil or public spirit and a sense for community in the form of individual commitment and volunteering are not yet highly developed (however, the willingness for donations rose considerably in the aftermath of the earthquake in Southwest China in May 2008). Still, volunteer work for social or public causes is still very uncommon.1272 Heberer traces that back to historical reasons. Empathy for people outside one‘s network (the ‗inner circle‘ of family, clan or village) is relatively low, which impedes the development of civil traditions. Modernization processes also often led to the disintegration of traditional communiGoodman, 2008b, p. 23f. See also chapters 4 and 8 for a more in-depth definition of the concept of middle class and bourgeoisie.

Chen, 2002, p. 410.

Cf. Heberer, 2002b, p. 13.

Pearson, 1997, p. 114f.

Goodman, 2008b, p. 27f.

Heberer, 2010, p. 4.

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