Small-Scale Business in Germany: The Flexible Element of Economic Growth

Abstract

Abstract Small-scale business was a flexible element of economic growth in Germany,1 and it was flexible in two ways: First, it transformed itself from a pre-modern and anti-industrial stronghold of corporatism to a competitive partner in a rapidly changing industrial society. Secondly, in providing technology-intensive services and tailor-made applications, it paved the way for the advance of mass-produced industrial goods into domestic markets. Earlier than industry, small-scale business blurred the distinction be tween manufacturing and services, thereby reconciling economies of scale in industrial production with growing diversity on the side of consumption. Rather than direct competition and marginalization, co-evolution of small and big business has been characteristic of the last century of German economic history. To be sure, the position of small business during this period was always challenged, and survival was never guaranteed. Only by flexibly adapting to new functional requirements in an economy that was ever more dominated by large enterprise, did small-scale business continue to flourish. Small-scale business did not control the many vicissitudes to which it was exposed. It is no surprise, therefore, that small businessmen mostly tried to resist the transformation of the German economy, which at the same time they were so successfully helping to bring about. And, when it came to institutions, small business never lost its historical backward orientation, inventing traditions of a golden past that never was. Thus, despite well-proven adaptability, the mentality of its entrepreneurs, as well as a large portion of the institutional arrangements and legislation for small firms, can only be understood if viewed against the back gound of retro spective ideals.