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

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Thus, in addition to a separation of society in a political and economic realm, both spheres were also associated with separate value and behavioral systems. This created a specific set of manners for entrepreneurs which have often been described as necessary for the development of a mature Western capitalistic system. In this environment, it is not the character or the individual personality of an entrepreneur that is important for doing business, but merely his actions in the process of business transactions. The private life of businessmen is not of interest anymore; it is regarded as totally detached from the actions conducted in the role as entrepreneur and underlies different rules.1437 Due to the increasing professionalization, the organization of a corporation becomes dissociated from the character of managers and entrepreneurs but is subject to other imperatives. ―Commercial honesty‖ equals ―contract morality‖ and thus, ―status has given place to contract‖ and ―economic relationships‖ lost their ―personal touch‖.1438 Once a corporation is established, it is neither the owner and nor the manager who is recognized as important factor to evaluate a company. The success and the reputation of a firm do not depend on the personality and connections of one specific individual, which might not even be known in person, but on the quality of its products.1439 This means that ―business relations in the West are more technical and company orientated with early recognition of the possible need for contractual formality‖.1440 The maximization of profit does not depend on the personality and connections of one specific individual but are replaced by contractual relations. The Western way of doing business is regarded as the only efficient and (transaction) cost minimizing one.

As has already been indicated above, in the early phase of industrialization, contractual security and control were not protected by government authorities. Therefore, entrepreneurs had to rely on trust-based networks to secure the quality of their products. Over time, entrepreneurs build up a certain status within society. Being economically independent empowered them to influence the organization of society and the state, especially concerning a legal framework for economic transactions. This in turn meant gains for civil liberties, like freedom of trade, private property, equality etc. Actually, local government and leadership of local parties were often in the hand of entrepreneurs.1441 After 1848 the interSombart, 1909, p. 709 and Sombart, 1978 [1930], p. 187.

Sombart, 1978 [1930], p. 122.

Sombart, 1978 [1930], p. 186ff.

So and Walker, 2006, p. 7.

Groppe, 2010, p. 318ff., Schäfer, 2009, p. 168, 136.

est in political participation trickled away and people felt increasingly well represented by the existing economic policy.1442 When SMEs became again more relevant during the 1960s, the (German) government began to systematically subsidize the Mittelstand for example in expanding the German anti-trust law to improve competition policies and regulations. As has already been mentioned earlier, apart from economic reasons, the legal framework also had the aim to support the middle class, which traditionally formed the buffer between the values of the upper and the working classes (see also chapter 6).1443 Political bodies and private economic associations tried to set up networks in a concerted action to promote economic growth. These networks were more based on formal and contractual relations and focused on economic functionality.1444 Additionally, administrative and financial support is given by economic associations, and infrastructure is provided by an actively involved local government.1445 Besides that, local trade chambers and business associations play an important role in coordinating lobby activities in favor of the (regional) network and also providing (market) information that are easily spread within a network. These organizations serve also as mediation- and sanctioning mechanisms and thus further stabilize local structures and enhance trust building.1446 Membership in associations and other official bodies facilitates thus access to business opportunities.1447 To be successful, entrepreneurs need to be able to navigate within these formal structures and position themselves strategically to negotiate on a political level.1448 It is a difficult or even impossible task to construct ―trust-built‖ networks from the ground up, without a local history of co-operation or a tradition of that kind, as ―civic traditions have remarkable staying power‖.1449 Even with massive support and subsidizing efforts from the German government and also from the level of the EU administration, designing ‗artificial‘ networks remains problematic.

However, in the Western case, ―[i]n order to survive and thrive, capital thus must exist in a mixed state of independence from and dependence on state power...Although the state‘s full economic power remains in the background during peacetime, it represents a key force shaping capitalist accumulation. Indeed, capital to thrive seeks reconstituted and Soénius, 2000, p. 443.

Berghoff, 2004, p. 122ff., 172ff.

Berghoff, 2004, p. 177ff., Lazerson, 1988, p. 331.

Putnam; Leonardi and Nanetti, 1993, p. 160.

Casson, 2001, p. 536f.

Fiedler and Lorentz, 2003, p. 54.

Kocka, 1975, p. 128.

Putnam; Leonardi and Nanetti, 1993, p. 157, similar in Dörsam and Icks, 1997, p. 44f.

expanding state power. A free economy thus requires a strong state that can effectively regulate markets, establish stable property rights and institute productive governance structures‖.1450

8.2. Entrepreneurs and the state in China 8.2.1. Entrepreneurs and the state

–  –  –

During reforms due to the ―pragmatic mindscape‖ of the Chinese people, a ―regional decentralization and fiscal federalism‖ led local governments to promote economic development.1452 Each region had its own experiments and structural learning processes which strongly depended on the tolerance and openness of local cadres, because the central government gave time and space to local governments in finding their own way of dealing with the reform process, so many provinces created their own hand-tailored set of rules.

Also, the Cultural Revolution left ―a vacuum of state authority in some communities […] [and] created an opening for private household industry‖.1453 Local cadres had strong incentives to promote the rural industry. Depending on the institutional environment in each locality, they supported the form of production that promised to generate the most profit and hence tax payments. Thus, either the collective sector (as for example in Wuxi) or the private sector (as in Wenzhou, see chapter 7.2.) was fostered.1454 Thereby local officials constructed ―a qualitatively new variety of developmental state‖,1455 acting more as rational economic than as political actors, responding to incentives and reacting to constraints.1456 ―Under the post-1980 incentive structure, the political ambitions of individual local officials became closely identified with the economic accomplishments of their domains. […] Whether officials aimed to climb the ladder of success to Beijing or to become leading figures on the local scene, their reputation was enhanced by industrial growth and McNally, 2007a, p. 183.

McNally, 2007a, p. 183, quote taken from Dickson, 2003, p. 159.

Zhu, 2007, p. 1507.

Whiting, 2001, p. 69.

Whiting, 2001, p. 3.

Oi, 1995, p. 1133, see also chapter 5.

Oi, 1999, p. 7.

local building projects‖.1457 Thus, the ―rapid takeoff‖ of the Chinese rural economy can be attributed mainly to ―local government entrepreneurship‖.1458 Official regulations and tax laws changed quickly and due to the decentralized character of the Chinese state, the degree of their implementation varied enormously.1459 Thus, reforms were mostly not active actions by the government but more a permanent ‗fencebreaking‘ and violating of rules by local cadres and the (rural) population. The most successful structures and ‗best practices‘ of provinces were often ex-post legalized by corresponding laws and applied to the entire country. The central government in that way accepted a moderate dissent as long as it did not question the political system as such.1460 It also found a way to react to strategic actions and even to employ them to survive the rapid changes in the economy and society. The change of state capacities by societal forces is rather seen as consolidation than as degradation.1461 As David Wank puts it: ―The key value of this network between firms and government is expediency. Although they used practices that deviate from central state policies and laws, local actors legitimate them by a logic that represent their practices as actually according with state intentions. This logic makes a distinction between the spirit and the stipulations of policy. The spirit is the policy‘s goal or intention, while the stipulations are the state-sanctioned behavior and procedures to attain it. According to this logic, since China is vast and has much regional variation, universal (i.e. national) stipulations often do not fit local conditions and, if rigidly adopted, might work cross-purposes with the policy‘s goal. Therefore, local actors justify deviant actions as necessary adaptations of central policies not only to ameliorate the policies‘ harmful effects but also achieve their goals‖. It is justified by local official in referring to ―the necessity of adapting to local conditions‖ and local history and traditions.1462 Even more so, rather than maintaining bilateral Guanxi connections to individual government officials, entrepreneurs are often connected to entire bureaus including their Guanxi to other government units.1463 This ―broad institutionalized support‖ is characteristic of these local network structures and often ―influence officialdom across local state-society borders‖.1464 Shirk, 1993, p. 189f., taken from fn 72 in Whiting, 2001, p. 108.

Oi, 1999, p. 2.

Krug and Mehta, 2004, p. 54f.

Heberer, 2002b, p. 6, 16; similar Holbig, 2002, p. 41.

Heberer, 2002b p. 26.

Wank, 2008, p. 108.

Wank, 2008, p. 114.

Wank, 2008, p. 115.

Hence, entrepreneurs, in pursuing their own goals, not only can have an effect on transforming the society in changing values and the attitude in favor of the economy, but unintentionally also changing the state structure.1465 This is possible because ―state structure and institutions …do not necessarily conform to the functional needs of a given accumulation regime. In that sense form does not follow functions, it rather problematizes function‖.1466 States thus cannot be viewed as ―solid, unchangeable and almost timeless […] monoliths animated by a single governmentality‖, with a specific ―essence, an immutable nature‖ and a clear, ‗natural‘ boundary to (civil) society. The state can rather be conceived as ―liquefied into incessant transformations of varying degrees and speed‖.1467 Hence, local authorities have to be seen as a unit that is separate from the central state as well society and their agendas.1468 Consequently, the private sector developed more rapidly in areas where state-owned enterprises (SOEs) were less dominant and proceeded very differently in different regions.1469 ―[I]n 1995…entrepreneurs were referring to new relations of ‗locality‘ between private firms and local state bureaus. Entrepreneurs and officials both spoke of a new aggressiveness on the part of local (city and district) government to cooperate with businesses and a new flexibility by bureaus for actions that deviated from central state policies‖.1470 Exogenous factors like the feature of global capitalism to support flexible, transnational Heberer, 2002b, p. 24, Biebricher, 2011, p. 12 in the manuscript. I am grateful to Thomas Biebricher for making the manuscript available to me.

Biebricher, 2011, p. 14 in the manuscript.

Biebricher, 2011, p. 3, 8f., 16 in the manuscript. Critical theory of the state challenges the idea of a state standing above society and the economy, being able to regulate these spheres impartially. Less than ‗the‘ state ‗act[ing]‘, ―it is rather warring state and non-state actors that do‖. (p. 5) It defines – in line with Foucault – that ―power comes from below and it is everywhere, if anything, the common sense perception of the state as a center of power is already one of its effects.‖ (p. 6) Thus, ―... one can define the state as an ensemble of socially embedded, socially regularized and strategically selective institutions, organizations, social forces and activities organized around (or at least actively involved in) making collectively binding decisions for an imagined community‖. (Jessop, 2005, p. 6) The state is understood as a ―social ensemble‖ with a ―specific, differential impact on the ability of various political forces to pursue particular interests and strategies in specific spatio-temporal contexts through their access to and/or control over given state capacities – capacities that always depend for their effectiveness on links to forces and powers that exist and operate beyond the state‘s formal boundaries. It follows that to talk of state managers, let alone of the state itself, exercising power is at best to perpetrate a convenient fiction that masks a far more complex set of social relations that extend far beyond that state apparatus and its distinctive capacities‖. (Jessop, 2005, p. 40.) Whiting argues similarly, coming, however, from a Weberian view. For her, the term state is only a ―convenient short-hand‖ as the state as an entity ―can[not] act in any meaningful ways apart from the individuals who populate its offices‖. For her, the state is ―a complex organization, staffed by individuals and composed of numerous agencies across various levels of administration that has a monopoly on the legitimate use of coercion and the authority to establish binding rules in a given territory‖. Whiting, 2001, p. 1, fn 2.

Oi, 1999, p. 9.

Zhu, 2007, p. 1507ff.

Wank, 2008, p. 107.

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