Rhenish Capitalism

New Insights from a Business History Perspective

Christian Marx, Morten Reitmayer, Christian Marx, Morten Reitmayer

• Publisher: Routledge
• Year: 2022
• Print ISBN: 9781032193151
• eBook ISBN: 9781000540703
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Rhenish capitalism is an ideal-typical model of capitalism which is characterised by a bank-centered financing system, close economic ties between banks and companies, a balance of power between shareholders and management, and a social partnership between unions and employers. The West German economy of the 1950s to the 1980s is the prime example of that model of capitalism which contrasts with the liberal Anglo-Saxon forms of capitalism. In accordance with recent debates about Varieties of Capitalism, the authors argue that research on capitalism should pay more attention to change over time. The book also claims to put the firm into the centre of analysis.

The empirical contributions uncover the differences between French and German corporate governance practices comparing two European automobile producers (VW and Renault), analyse legal debates and practices of corporate control in post-war Germany, show the tension between national corporate governance and increasing internationalisation by reference to four major West German producers of chemicals, pharmaceuticals and fibres; and explore the opportunities encountered by German big banks vis-à-vis their customers from big industry. Furthermore, they show that coordinating culture in the supply relationship of the German automobile industry came under pressure at the end of the boom and stress the importance of communication processes as a basis for interest coordination in Rhenish capitalism.

The chapters in this book were originally published as a special issue of the journal Business History.

The concept of social fields and the productive models: Two examples from the European automobile industry

Morten Reitmayer

ABSTRACT

The article examines the possibilities of the combination of the concept of social fields, which was developed by the French Sociologist Pierre Bourdieu, and the concept of the Productive Models, which was developed by the French Regulation School. It is the aim to give a better understanding of the activities of the different groups of agents within the capitalist enterprise, and to look for the chances and risks of single firms to change their strategy of production. A case study dealing with the two European automobile producers, VW and Renault, tests the combination of both methodological concepts on an empirical level. The question is, whether one specific economic and political context of these activities can be designated as Rhenish Capitalism.

Introduction

Explaining the strategic decisions of economic enterprises is one of the most prominent tasks of business history. Great efforts have been made in this direction and not only following Alfred Chandler’s follows strategy’.¹Yet one of the results of the debate on Chandler’s predictions has been that there is not any proof for the existence of a single and universal capitalist logic that determines (successful) entrepreneurial decisions. Looking to the opposite direction, new fashions of management styles have followed each other repeatedly, each promising to have detected the ‘one best way’ for corporate strategy. This demonstrates the necessity to integrate cultural factors – for example the experiences and expectations of decision-makers, which have to be communicated properly – into any model of management practice. But this is not the task of this essay. Instead, I will examine some considerations from the corporate governance approach to reflect on some open questions regarding the analysis of business strategies. The concept of corporate governance originated as a means of controlling the top managers of large joint-stock companies for the benefit of shareholders by establishing a certain conduct of behaviour (‘corporate governance code’) and has been broadened by business historians for at least 15 years. One of the conclusions to be drawn from the current debate is the need to provide the corporate governance approach with a resilient theory of action.² Recent studies on the corporate governance of German corporations, such as Kim Priemel on Friedrich Flick, Bernhard Lorentz and Paul Erker on the Chemische Werke Hüls, Christian Marx on the Gutehoffnungshütte (GHH), or Johannes Bähr’s summary of corporate governance structures in large German industrial corporations during the Third Reich,³ tend either to privilege ‘structure’ over ‘strategy’ (that is, management action becomes more or less a functional result of the corporation’s government structure – it is significant that these authors frequently talk about the ‘corporate government structure’ or ‘system’, and not about ‘exercising corporate governance’), or to be orientated towards the dominating will of the entrepreneurial personality. Nonetheless, they are a great step forward in understanding the corporation’s problem of balancing different – and often conflicting – interests within its own organisation, and integrating them into a viable corporate strategy.⁴ But the epistemological problem identified by Chandler remains unsolved: the connection between structure and agency. It is not surprising that the studies named above did not bridge this gap, given that the corporate governance approach itself does not supply any means to do so. Only Marx took the next step, significantly by introducing the concept of ‘network agency’ (derived from sociological network analysis) to explain the specific way governance was exercised within the GHH.⁵ This demonstrates the necessity to amend the corporate governance approach by adding a suitable theory of action. In my view, two key tasks must be accomplished by the new model: First, all relevant groups of agents who are able to influence the drafting of corporate strategy have to be identified and analysed regarding their agency, their interest, their power, and attitudes. Second, the model should enable business historians to embed their findings on the corporations in question into a broader context of the industrial branch, the markets concerned, and of the national economy. In this context, there is a third task to be mastered: the explanatory model should help to distinguish key features of Rhenish Capitalism within the field of corporate governance analysis. It should extend and complete the various theories and approaches or practices of research of corporate governance problems by developing a workable, resilient, and compatible concept of social action.

The first step towards a model is to conceptualise the economic enterprise as a place constituted by certain economic and social (and political) action. This means the corporation or part of a corporation are understood neither as a determined function of an economic structure nor as the institutional appendix of free entrepreneurial will and vision, but rather as a scene of confrontations. This scene is occupied by very different groups of agents: shareholders and creditors with their various different interests (such as their investment horizon), rival management factions, different groups among the workforce (highly or lesser qualified staff, experts inside and outside the production processes, immigrants and natives, men and women, office staff and manual workers, younger and older employees), suppliers and customers, but also external consultants and ultimately (since, after all, they can influence the actions of all of these groups) even competitors. This list reveals the closeness of our project to the stakeholder approach, although the last points go beyond it.⁶ This approach was a great step forward as older economic and business history was unable to envisage makers of business strategies beyond the groups of owners and managers.⁷ One difficulty of the stakeholder approach which was often criticized is the problem, ‘who (or what) are the stakeholders of the firm?’ Mitchell, Agle, and Wood have clearly described the tasks involved:

We will see stakeholders identified as primary or secondary stakeholders; as owners and nonowners of the firm; as owners of capital or owners of less tangible assets; as actors or those acted upon; as those existing in a voluntary or an involuntary relationship with the firm; as rights-holders, contractors, or moral claimants; as resource providers to or dependents of the firm; as risk-takers or influencers; and as legal principals to whom agent-managers bear a fiduciary duty. In the stakeholder literature there are a few broad definitions that attempt to specify the empirical reality that virtually anyone can affect or be affected by an organization’s actions. What is needed is a theory of stakeholder identification that can reliably separate stakeholders from nonstakeholders. Also in the stakeholder literature are a number of narrow definitions that attempt to specify the pragmatic reality that managers simply cannot attend to all actual or potential claims, and that propose a variety of priorities for managerial attention. […] What is needed also is a theory of stakeholder salience that can explain to whom and to what managers actually pay attention.⁸

The focal point here is that the stakeholder approach still maintains that a firm’s management owns the solely legitimate authority for decision-making, and the stakeholders will only influence management. But this normative approach hampers the empirical analysis of key decisions: With their actions, stakeholders (or: agents and groups of agents) do not pursue an imaginary company objective, but instead conduct their decisions, alliances, and confrontations primarily with regard to the use of company resources and the distribution of profits from the utilisation of the goods produced. At the same time, these confrontations are characterised by repeated new attempts to reach a consensus on company goals and the strategy required to achieve them – irrespective of the means by which this consensus is reached. Moreover, business history has a long tradition of identifying decision-makers beyond the boards of management.

Yet adopting this perspective also demands a series of breaks with some conventional presuppositions and analytical models of economic and business history, as well as the history of (industrial) labour: a break with the market as the prerequisite and dislocated place for the exchange of goods between anonymous and fully informed utility maximisers without any social existence, with the company as a leadership-free cluster of contracts, mutual obligations, and resulting rights of disposal,⁹ with an entrepreneurial figure seen either as a genius innovator (as in the Schumpeter reception) or as the utiliser of information,¹⁰ with the ‘culture’ of a company as a conflict-free instrument of integration and open to manipulation,¹¹ but also with the idea that a commercial enterprise is completely free when it comes to selecting its business strategy or in its search for the ‘one best practice’ of corporate strategy, or that it does so as a result of, at most, historically sedimented path dependencies.

Admittedly, recent business history, especially with a contemporary focus, has disentangled itself from these default values, whereby in particular individual subgroups of the workforce have been examined in a much more differentiated manner than before.¹² On the other hand, in the course of this necessary correction, the context of action – that is the agents’ framework of options – which determined the scope and boundaries of their actions, sometimes went missing. This framework of options is first and foremost defined by the permanent viability of the capitalist firm that employs those groups. This viability, in turn, is dependent on the company’s ability to find a coherent profit strategy (more on this concept below) and to anchor it among the groups of agents involved in a consensual manner. Therefore, within the field of economic and business history it remains highly desirable to investigate the systemic connection between the profit strategies of corporations and the interests of the agents involved, and so also the strategic decisions which accomplish those strategies.

Above all, examining the firm as a social and political place therefore also means pursuing the company-related relationships of conflict, competition, and consensus between all the aforementioned groups of agents, while also keeping an eye on the social organisation of value creation in the firm. In my view, for this purpose it is appropriate to refer to some concepts from sociology and political economy. Therefore, I propose to combine the concept of Social Fields, developed by Pierre Bourdieu, with that of ‘Productive Models’, which was developed by members of the French Regulation School (or: Approach), and in the process to pick up on part of the critique of the Regulation Approach.

In the following I shall first briefly outline Pierre Bourdieu’s concept of the social ‘field’ and the resulting term ‘strategy’, before then discussing a series of concepts and thoughts – which can be combined easily with these analytical instruments – from the field of political economy or recent economic sociology, in particular the French Regulation Approach, on questions concerning the conditions for the success of proper organisation of work within the firm. This approach does not only distinguish quite systematically different ‘productive models’ (for example ‘standardised mass production’, ‘innovation and flexibility’ or ‘quality production’¹³); it also elaborated the idea that corporations have to establish a ‘governance compromise’ among all of the groups of agents involved, which is as permanent as possible, in order to be able to operate successfully. Within the horizon of this conceptual setting, I wish to introduce two case studies for what I believe to be a successful application of these concepts in the second part of this essay: strategic decisions to change the established productive model in the cases of Volkswagen and Renault will be re-examined so as to broaden our understanding of the possibilities and limits of business strategies. The aim of this undertaking, therefore, is to develop a framework that is able to solve the double problem of business history: to explain the internal processes which result in a company’s business strategy (without ignoring external agents in the strict sense), and to place the company into its broader context of suppliers, available workforce, creditors, competitors, and national or international market structures.

The field analysis approach

Let us begin, therefore, with a brief sketch of Bourdieu’s field analysis approach. The concept of a ‘field’ in the double sense – as an arena of agents who struggle for profits, as well as a structure of positions, which are located by the agents’ capital – derived from Bourdieu’s attempt to overcome the dichotomy between the rigidities of structuralism on the one side and the ‘subjectivist’ or ‘spontanistic’ sociology on the other. The result was his ‘theory of practice’, laid do...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Citation Information
• Notes on Contributors
• Preface
• Introduction: Rhenish capitalism and business history
• 1 The concept of social fields and the productive models: Two examples from the European automobile industry
• 2 Corporate law and corporate control in West Germany after 1945
• 3 Between national governance and the internationalisation of business. The case of four major West German producers of chemicals, pharmaceuticals and fibres, 1945–2000
• 4 Financing Rhenish capitalism: ‘bank power’ and the business of crisis management in the 1960s and 1970s
• 5 Supplier relations within the German automobile industry. The case of Daimler-Benz, 1950–1980
• 6 Confrontational coordination: The rearrangement of public relations in the automotive industry during the 1970s
• Index