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

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Wenzhou‘s entrepreneurs seem to have survived the crises without substantial losses. Not least, because they "prefer being head of a cock than tail of a phoenix", as a Chinese saying describing a preference for decision-making power goes. One article even claims that only about two percent of businesses failed. ―The figure is not significant. It would be similar at normal times‖.1409 Many companies made decisions before the most difficult time. The widely travelled Wenzhou people smelled the downtown early and the message spread quickly through their network of family, friends and business acquaintances, enabling those at home to prepare for the worst. "Because we noticed the crisis early, there was no panic or bewilderment when it really landed," says Xu. "We were very clear about what we should do. We had a strategic plan and took countermeasures.[…]At the forefront of China's development of small private enterprises, Wenzhou's economy was affected early and deeply by the global turmoil. But the city maintained growth of 8.1 per cent in gross industrial product value last year. In January, bank loans to businesses rose markedly, electricity demand rose, and employment, especially of technical skilled workers, was high. For most companies, it was business as usual.[…]"They are signs of an upcoming economic revival. Wenzhou has stood the test. It is likely to walk out of the economic difficulty ahead of other cities in this country".1410 Firms can survive economically difficult times because ―family and close friends were willing to work without salary and benefits for months, in some cases even putting up money to prevent cash flow problems‖.1411 On the other hand, extensive political Guanxi networks are a key element for success. As one entrepreneur argues: ―Guanxi are more important than capital. If you have Guanxi, you will have access to capital. However, if an entrepreneur has capital but no Guanxi, his/her business cannot survive‖. He adds that he spends approximately half of his time cultivating Guanxi ties, particularly with government officials.1412 All in all, there is evidence that Wenzhou actually uses the features that this works strives to define as typical for Guanxi Capitalism and points also to the fact that it might be a sustainable form of Capitalism.

Asia Pulse, 2009.

Asia Pulse, 2009.

McNally; Guo and Hu, 2007, p. 14.

McNally; Guo and Hu, 2007, p. 14.

8. Guanxi, entrepreneurs and the state Laws control the lesser man.

Right conduct controls the greater one.

Chinese Proverb

8.1. The bourgeois entrepreneur, networks and the state In contrast to the rather dire experience of the former peasants and now working class, the industrial revolution has been a quite positive for the middle and upper classes. For a successful industrialization it was necessary that enough talented people had the desire to become entrepreneurs1413, for which plenty of economic opportunities, an absence of barriers caused by traditional (feudal) structures like the estates and the guilds and a change of the value system that tolerated profit-oriented occupations were needed. Hence, within this class, people were able to mostly gain from industrialization, especially the middle class as the bearer of business in the emerging market economy.

Beside the preconditions mentioned above, in the beginning of industrialization, personal connections also played an essential role, but those were not restricted to the family.

However, the family has been particularly important during this process as it served mostly as resource for material wealth or social capital such as long-established knowledge of production methods and connections.1414 It also often financed newly established enterprises and provided support in economically difficult times.1415 If business was flourishing the entrepreneurial families were able to provide employment, but if otherwise, they did not hesitate to exploit the physical capacities of the workers without much consideration of the consequences. Polanyi depicts these early English entrepreneurs as being mostly indifferent to the fate of their workers as long as private or public matters did not add or affect their profits. The effects of the destruction of family life, the degradation and devastation of neighborhoods and existence, the deterioration of craft standards and the pollution of the environment were disregarded because for the most part the middle class merely believed in the beneficence of gain.1416 ―This attitude meant a great incentive to the acquisition of wealth, and is also, perhaps, one source of the rather smug self-righteousness often thought typical of the bourgeois‖.1417 In Polanyi‘s presentation, in contrast to the proletarians being physically dehumanized, the members of the For a working definition of the entrepreneur, please refer to chapter 4, fn 443.

Wehler, 1987, p. 191f.

Kocka, 1976, p. 164ff.

Polanyi, 1944, p. 133.

Parsons, 1928, p. 43.

owning class, especially the entrepreneurs, were depicted as morally degraded. The traditional values of a Christian society with its responsibility for the poor were ignored and replaced by the sole concern of maintaining ones reputation among one‘s peers. ―To the bewilderment of thinking minds, unheard-of wealth turned out to be inseparable from unheard-of poverty―.1418 However, this attitude slightly changed during the 18th century, when labor laws came into effect (please refer also to chapter 5.2.). In Germany, which industrialized some decades later and much more slowly than Great Britain, consequences were not as extreme. Here, entrepreneurs adopted a more thoughtful and caring attitude towards their employees. Being a bourgeois entrepreneur, success and a morally upright behavior necessarily belonged together (see also below).

The advantages of the upper class were not only due to economic reasons, they were probably even more due to cultural issues developed in the environment of the bourgeois lifestyle, which was dominated and influenced by the entrepreneurs and their values. However, during the early phase of industrialization, the boundaries between public life and private sphere were not yet clearly defined and business and household were still under them same roof, which meant that family life had to be organized accordingly.1419 Roughly from the 19th century, the bourgeois household ceased to be significant as economic unit and became merely a safe place to retreat, clearly distinct from business life shaped by competition, self-interest and profit orientation. Instead of the family seizing to bind the members of the household to a set and planned future in a system determined by birthgiven social status, the individuals now were freed and increasingly master of their own destiny.1420 This was accompanied by a shift in regarding the family as refuge from the rigor of daily working life. When economic production shifted to factories, it led to a separation of private and public life, appreciating the moral and emotional value of family life at least for those who could afford it. This individualism and the retreat to privacy led to an emphasis of the family, here meaning the spouse and the children. Domesticity and marriage out of romantic love, instead of strategic marriages connecting families and their corporations, were quite uncommon before, but they increasingly were held in high esteem.1421 ―The rigid separation of the private interests of the business man from those of the business unit; not necessarily a spatial separation, though this comes to be usual, but in thought and for purposes of calculation the individual is split in two. One is a producer Polanyi, 1944, p. 102.

Groppe, 2010, p. 148.

Egner, 1985, p. 156.

Trumbach, 1978, p. 6 and 71.

who as such is part of a great mechanistic system with no individuality of his own. The other is the consumer, who has still part of his life left to devote to his family, recreation, cultural interests etc.‖ (please refer to chapter 5.2.2.).1422 The separation of the rationality of business and the sentimentality of the family went along with the polarization of gender roles in creating a female and male environment.1423 Family happiness and domesticity implied that the bourgeois woman as mother and housewife stayed at home, which initially was impossible for the poorer working class families. This established a new ideology that defined the ‗nature-given‘ characteristics and talents of women and men.1424 The man had to work outside the house, whereas the woman had to administer the household, being a mother and maintaining a family life. She had to arrange a homely atmosphere where her husband could relax after work, but at the same time it was considered as ‗ladylike‘ to delegate the housework to servants. Women were forced to devote their life to otiosity. Through this she lost her external contacts and her sphere of influence was diminished until she was solely dependent on her husband.

Additionally, in contrast to husband and wife being together responsible for the functioning of the traditional household, the bourgeois wife merely represented an orderly household, giving soirees and obeying social obligations such as charity activities. The ‗natural‘ characteristics of men were being active and rational, whereas women were considered passive and emotional ‗by nature‘, predestining them for their roles in the economy and politics and the family, respectively. The household turned from a production into a consumption unit, secluded from economic activities. The family was regarded as ―foundation pillar of society‖.1425 The entrepreneur turned into a central figure for economic and social development that had to meet demands of the now increasingly differentiating realms of business and the family.1426 In the case of the German bourgeois ‗ideal-type‘ entrepreneur, the status within society depended beside his social background mainly on his autonomy, talent, diligence, conscientiousness which also required a high degree of individualism, adherence to the law and an interest for politics.1427 But these attributes were meaningless without economic success, which had also to be reflected in a concern for public welfare to be socially acceptable, as mentioned above. Entrepreneurial families developed a distinct attitude, which Parsons, 1928, p. 38.

Egner, 1985, p. 158f.

Kaschuba and Gall, 1990, p. 13.

Sieder, 1977, p. 158ff., Dülmen, 1995, p. 231f.

Schäfer, 2009, p. 116, similar Groppe, 2010, p. 59, 148, 285, 301.

Hettling, 2000, p. 324f., Wehler, 2000, p. 182.

separated them from the working and the upper class (the gentry), forming a new social group. Main principles of their lifestyle included honorableness, diligence, rationality and innovativeness. They had a distinct conception of the organization of society and the state and their role therein.1428 Although often just newly established as elite and new ‗upper class‘, they were not open for social climbing nor was economic success and achievements alone sufficient to enter their circles.1429 The bourgeoisie1430 as such was therefore not a social formation that defined itself by occupation or income, but more a ‗cultural structure‘ for which a certain attitude and shared values were necessary.1431 Society described as that was an important part of reinforcing and stabilizing Weber‘s ―iron cage‖ of modern capitalism. Being a bourgeois meant to become an individual forced to forge your own destiny and develop your own value system with the family and privacy as a central instance.1432 Together with this development, personal connections were replaced by contractual relations quite early during the process of industrialization. Contracts were conceived as far more (cost) efficient and were made possible when the state emerged as regulative authority to pass laws and legislation to secure economic transactions and thus could enforce the formal contractual arrangements through law. The Western orientation towards contracts does not consider other ways of reducing transaction costs, such as systems of trust as provided by Guanxi.1433 The tendency towards juridification of hitherto unofficial norms was already established by Roman law, which regulated the relationships between individuals (ius est ad alios).1434 On the one hand this involves an increase of personal freedom; on the other hand it makes relations less personal and takes away the security of traditional social formations.1435 The notion of the morally upright bourgeois was quickly overcome and replaced by the conception that in a matured capitalistic system the spheres of private life and business should be and increasingly actually were separated. Before that, only the morally sound lifestyle of a ‗good citizen‘ led to success in doing business in creating trust in the persona of the entrepreneur. Only a person who overall exhibited moral behavior was regarded as trustworthy in a business context.1436 Groppe, 2010, p. 76, 300f.

Wehler, 1989, p. 318f., Gall, 1993, p. 7.

For a more detailed definition of the bourgeois, please refer to chapter 4, fn 469.

Schäfer, 2009, p. 39.

Hettling and Hoffmann, 1997, p. 341, 350, 359, Nipperdey, 1998, p. 43.

Tilly, 1995, p. 41, So and Walker, 2006, p. 17.

Heilbroner, 1993, p. 50, Pohl, 2002, p. 115.

Groppe, 2010, p. 289.

Sombart, 1978 [1930], p. 121f., Groppe, 2010, p. 53.

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