"The Chinese Family and Economic Development: Obstacle or Engine?" by Martin King Whyte, in Economic Development and Cultural Change (Oct. 1996), 11 30 E. 59th St., Chicago, 111. 60637

Only a few decades ago, Western and Chinese scholars saw the close-knit extended family as a serious obstacle to China's eco- nomic development. But in recent decades, notes Whyte, a sociologist at George Washington University, the experts have made an extraordinary, 180-degree shift: they now portray the family as the engine of economic growth.

During the 1950s and '60s, "moderniza- tion' theorists such as sociologists Talcott Parsons and Marion Levy, Jr., and historian Albert Feuerwerker argued that family oblig- ations interfered with efficient economic operations. Nepotism prevented family-run enterprises from hiring and rewarding the best employees. Distrust of impersonal busi- ness relationships led them to cultivate guanxi-extensive networks of personal con- nections with nonrelatives. In the scholars' view, this wasted time and energy while gen- erating graft and corruption. Moreover, Chinese "family loyalty, filial piety, and rev- erence for ancestors," Whyte says, seemed to inhibit entrepreneurship. And family-based organizations tended "to remain small and undercapitalized."

When the Chinese Communists, who were ideologically hostile to the family, sought to eliminate it as a production unit in the mid-1950s, many modernization theorists saw this in at least a somewhat positive light.

Since then, however, the economic suc- cess stories written by the Chinese popula- tions in Taiwan, Singapore, and Hong Kong-and since 1978, in China itself-have turned the scholarly consensus around.

Loyalty to family is seen today as "a very strong source of motivation and perfor-mance," Whyte reports. For the sake of fami- ly, young Chinese study diligently and, once on the job, work hard, put in long hours, accept lower pay, and stay with the firm, ana- lysts now point out. Scholars such as Susan Greenhalgh, an anthropologist at the University of California at Irvine, argue that the Chinese family can provide unusually large material incentives to the adult sons who manage its enterprises. Diversified fami- ly firms can easily shift funds from one sub- sidiary to another if one runs into trouble.

These strengths, Greenhalgh says, encour- age "the emergence of highly motivated, risk- taking entrepreneurs." The small size of fam- ily firms now seems an advantage to many observers, keeping start-up costs low and allowing "rapid and flexible responses to changing market conditions," Whyte notes. Even the guanxi networks now look like a net plus, permitting family firms to overcome the disadvantage of their limited size.

These new perspectives are not merely the product of experts' fickleness. In cer-tain respects, Whyte points out, the Chinese family itself has changed. "Traits such as high fertility, extreme subjugation of women, and the autocratic power of the senior generation" are things of the past. The weakening of the elders' power, in par- ticular, "means that founders of family-run firms need to provide more incentives and autonomy" for their grown sons. The "anachronistic" Chinese family firm, he concludes, may well continue "to pose a major competitive challenge to modern corporations in the West."