Content

"Unorganization: The Global Handbook" is made up of the following sections:

1. Introduction

2. A description of the unorganized world

3. Economic capacity

4. Effects of globalization

5. Nation states

6. Neonazi racism

7. Causes of racism- societal systems such as communities

8. European economic measures (are positive)

9. European social and political policies (are negative)

10. Immigration policy

11. Color conscious policy

12. Asian values

13. Multi-cultural business relationships

14. Economizing versus strategizing

15. Behavior of transnationals

16. Transnationals must economize

17. Industrial policy

18. Feedback

19. Bibliography

 

 

Introduction

 

The world has changed in the past few years from being an orderly organized world into a global diverse unorganized world. For example, people are traveling more widely, companies are doing business in more countries, national has been replaced in emphasis by global, regional trading blocks have been set up all around the world, trade is getting freer, the Internet and other technologies are making global communications cheap and easy.

 

These and other changes have significantly increased the global aspects of our lives and require us to change the way we think and act about the world if we are to thrive on the opportunities that it presents. There are wide and deep implications for both politicians and managers acting in this unorganized world. "Unorganization: The Global Handbook" is designed to both explain the global unorganized world, how if differs to the old orderly organized world, and set out ways in which we can change for the better and think and act in this global world.

 

I will begin by explaining how the world has changed and what the new unorganized world is.

 

 

A description of the unorganized world

 

Throughout this text I talk about "the new unorganized world". "Unorganization" is my banner term to describe a number of political, economic, social and technological trends that have occurred and are continuing:

 

Political factors: Respect for and certainty about the purpose and role of central institutions such as governments, royalty and work organizations has disintegrated.

Economic factors: Freer market economies have developed internationally throughout the world as the central planning by governments in communist systems has been disgraced.

Social factors: Certainty about behavioral norms regarding everything from the role of women to jobs for life has disappeared. The unorganized world combines lifestyle changes (mobility, divorce and working mothers), demographic changes (family, security fears) and technological changes (new telecoms services such as position location).

Technological factors: Technology has changed the way we live and work. Everything from telephones to televisions are firmly established in our lives.

Let's now have a look at globalization and its effects.

 

 

Economic capacity

 

The unorganized world contains a great deal of economic capacity. We are living in a world that is simultaneously larger yet smaller. In the post-communist world, great wide areas of the world are opening up to freer markets. Yet, infrastructure provision such as telecommunications is simultaneously making these areas reachable and connected. These parallel trends combine to mean that the large but yet small world has enough economic capacity and space for all honest people (later referred to as economizers") to prosper and yet for all dishonest people (later called "strategizers") to be stopped. This trend does not depend upon individuals moving, for example, to Russia. However, local visits and presence is certainly the best way to get to know the local people. Individuals can now reach world markets from wherever they are using communications technologies. This means that geographical location is becoming less important, whilst ability to understand and closely serve that country's needs becomes more important. As the Coca-Cola Company put it: "The number of consumers we can actively reach out to with our products climbed from less than 2.2 billion in 1984 to more than 5.2 billion in 1994. The number of countries in which we are actively conducting business totaled more than 195 in 1994, while the number of nations where we do not do business dwindled to fewer than 20." (COCA-COLA COMPANY, 1994).

 

 

Effects of globalization

 

Not everyone is fully convinced that the effects of globalization and the increasingly international outlook are significant. In an editorial called "Why geography still matters", the ECONOMIST states that "The clich' of the information age is that instantaneous global telecommunications, television and computer networks will soon overthrow the ancient tyrannies of time and space. Companies will need no headquarters, workers will toil as effectively from home, car or beach as they could in the offices that need no longer exist, and events half a world away will be seen, heard and felt with the same immediacy as events across the street- if indeed streets still have any point... The conceit that advanced technology can erase the contingencies of time and place ranges widely." (ECONOMIST, 30/07/94). I refute these views. Time and space will be easier to navigate because individuals will be freed by technologies from the shackles of being physically present in institutions. The future is not overly concerned with time or place, as there will be more space but more time to navigate it, and less time needed to navigate it. Fewer people will be locked into working from 9am to 5pm, and they will be judged more on the quality of the results they produce, rather than the time taken to produce them.

 

"Yet such [technological] developments have made hardly a dent in the way people think and feel about things... What your neighbours (or your kith and kin [family]) do affects you. The rest is voyeurism... The reason lies in the same fact of life that makes it impossible really to understand from statistics alone how exciting, say, China's economic growth is unless you have been there to feel it." (ECONOMIST, 30/07/94). The Economist's analysis is static, insofar as it does not account for the fact that new technologies will alter how people feel about events such as persecution around the world. Personal contacts established using technologies will mean that connected people will more closely relate to persecuted people. Just because I don’t live where a tragedy has taken place, or belong to the community there, does not mean that I cannot grieve for those affected. Ignorance of other countries will be dispelled. Interest in countries and regions increases when people know people from those countries and find out how much in common they have. A country's unemployment statistics are a lot more meaningful if you know people in that country. This interest is spurred, for example, by meeting people in your own home country, and this often leads to a visit to see that country at first hand. Interest does not disappear once that country has been visited and subsequent events can be better understood in their local context from first hand knowledge of that country.

 

Beware of outmoded thinkers such as Robert Reich, a one-time US labor secretary, who warn of the ""darker side of cosmopolitanism" (LASCH, 12/03/94). Without national attachments, people are said to have little inclination to make sacrifices or to accept responsibility for their actions. "We learn to feel responsible for others because we share with them a common history... a common culture... a common fate." The internationalization of business enterprises has apparently produced a class of people who see themselves as "world citizens, but without accepting... any of the obligations that citizenship in a polity normally implies." (LASCH, 12/03/94). This is plainly false, history is outdated and culture is more homogeneous. National history, culture and citizenship do not have much relevance in the new international world.

 

 

Nation states

 

The concept of nation states is under review in the unorganized world where borders are less of a constraint on individual flexibility. "The world of the late 20th century... is now united, through the agency of the market, as it never was before. Capital and labour flow freely across political boundaries that seem increasingly artificial and unenforceable. Popular culture follows in their wake". (LASCH, 12/03/95).

 

The trouble with nation states is that "Political parties, trade unions, lobbies: all developed with the main goal of steering the nation in one direction or another, through the control of or influence over the state." (MORTIMER, 6/4/94). The larger the population, the more diverse it is likely to be, and the more likely it is to set up such institutions to communicate its point of view. As populations become more diverse, it becomes harder for a single national government to adopt policies that closely meet the requirements and demands of all of the country's citizens. People with common interests may decide to set up their own political party, or if they are located in a common geographical area, break off from the nation and set up their own country. Twenty new nations declared independence between 1990 and 1995, most from the former Soviet Union. (ECONOMIST, 29/04/95).

 

Nation states encourage people to think in terms of them and us, rather than recognizing the global similarities between people. "The European Union plc is not engaged in a zero-sum struggle for economic survival with the US, Japan, or even China Inc. On the contrary, peaceful economic relations with other countries offer opportunities for mutual enrichment." (FT, 9/3/94). If the United States grows, the growth in other countries does not fall, often, it rises as well. "...competitiveness is a zero-sum way of seeing the world. It is possible for all countries to improve their welfare, even if none become more competitive relative to others. It is because of the zero-sum approach inherent in the concept [of competitiveness] that it has the potential to so much harm." (BRITTAN, 25/05/95). "Competitiveness is a goal for businesses, not countries or regions of the world... Against whom should the world become more competitive? The moon, or Mars?" (BRITTAN, 25/05/95). There are enough jobs to keep much of the world employed if the structures and systems that prevent entry into new markets and jobs can be broken down. This is true because of the flexibility of markets and the power of the economic development process. In a world economy with free trade, labor, product and capital markets, zero-sum games are irrelevant. It is the claim that zero-sum games exist which fuels policy making such as protectionism that actually causes the zero-sum games that the interventionist politicians and nationalists speak of.

 

"Many neo-liberal economists believe that maximum national flexibility is achieved by allowing maximum flexibilities for individuals. However, flexible behavior by some agents may result in a reduction in overall flexibility. A good example is the case of capital flight, where the flexible reaction by individuals to a 'national' crisis can lead to foreign exchange crisis and eventually to collapse in investments, which will even further reduce the flexibility of the national economy." (HA-JOO-CHONG, 1995). This statement assumes that national flexibility is more important than individual flexibility, and ignores the underlying reason why capital flight occurs: because individuals have lost confidence in financial institutions and national governments. The response of those individuals in removing  their capital is perfectly justified.

 

This criticism of the impact of globalization on nation states continues with the statement that some assets are more flexible than others and that less mobile but complementary assets will suffer from globalization as the more mobile assets relocate. "In a world with more than one nation, if different assets have different abilities  to move across the national border, an increase in the flexibility of action by those who own the more mobile factors (e.g. financial capital, professionals with foreign language skills) may result in a reduction in national income, which may reduce the flexibility of the national economy." (HA-JOO-CHONG, 1995). This assumes that borders and nations matter more than the opportunity for those individuals to choose where to locate. Nations and borders are becoming increasingly less relevant in an open and connected and mobile world. The accepted wisdom is no longer relevant. That people are still fighting over land in this information age seems remarkable. In the unorganized world, the only property worth owning is intellectual property. The only matter that matters is brain matter.

 

"The more successful members of the human race can now participate directly in the global economy and culture, through multinationals and other non-governmental organizations, without needing a nation-state to represent them; and the less successful find the states which claim to represent and defend them are increasingly less able to do so in practice." (MORTIMER, 6/4/94). Unfortunately, individuals are still restricted from exploiting the world-wide economic capacity by artificial constraints that reduce their freedom. As we will see, these constraints include national borders, immigration policy, identity cards, racism, culture, as well as highly regulated economic models such as that of Germany and that proposed for the European Union. There is a wonderful story about how Chairman Mao, former leader of China "took a dislike to sparrows- they devour grain. So every household was mobilized. We sat outside ferociously beating any metal object, from cymbals to saucepans, to scare the sparrows off the trees so they would eventually drop dead from exhaustion". (WILD SWANS). This policy precludes mass migration across national borders, ignores the external cost of noise pollution, and imposes the will of one politician irrespective of the opinions of the general public.

 

Too much of our success in life is dictated by the accident of where we are born. If we are born in China, then we are doomed to a life in which individual achievement and independence is subservient to the state. I was born in Britain and am therefore a British citizen and as such I have to pay British taxation rates and abide by British laws. I had no choice over where I was born, and I have little but increasing choice over whether I can avoid paying those taxes or consider myself British. At least individuals have more opportunity than ever to emigrate to other countries in the unorganized world. And when the countries look at your application for residence, they look at you the individual, and what you unique skills and knowledge are.

 

 

Neonazi racism

 

To demonstrate the problems caused by highly organized economies, I will now describe the structure of the German social market economy. I believe from personal observation that this structure has significantly contributed to the increase in neonazi racism since reunification between East and West Germany. Firstly, I will give some background to the neonazi problem and then describe my own opinions on its causes.

 

I lived, studied and worked in Germany for a year in the mid-1990s and learnt a great deal. "One area of crucial importance is the fostering of youth exchanges between Britain and Germany. Helping younger people to become familiar with life in each other's countries contributes to breaking down barriers and destroying cliched views." (GEHRELS, 26/05/95). I certainly benefited from meeting many German people; professors, businesspersons and students, many of whom I liked. It is the ingrained institutional structure of Germany that does not mesh well with the unorganized future world. Germany is only discussed because it is a prime example of over-regulated countries. For other cases see, for example, the discussion of Japan in the "Government’s role in economies" section.

 

Whilst staying in Germany, I ran into a group of neonazis in a newsagents in a main railway station. I said "Good morning" as usual to the sales assistant who I had gradually got to know due to my daily visit to purchase an English-language newspaper. One of the neonazis asked if they could speak to the manager, saying as I laid my Financial Times on the counter that "foreign" newspapers should not be sold. The right wing extremist asked me if the FT was a communist newspaper because he said pink-colored papers were extreme right publications in Cuba. I smiled inwardly over this misunderstanding and explained to him that the FT is a free-market, capitalist paper. He told me that "island apes" (I am British and Britain is an island) such as myself should stay at home if we wanted to read such propaganda. I did not agree with him and read out loud the headlines about European airline subsidies by national governments and farmers rejecting agricultural reform. I said that if he was against European integration then he should allow overseas newspapers to be sold so that pro-Europeans can read all about our poor relations.

 

Neonazi racist activity increased considerably after German reunification in 1989. Extreme right wing supporters are a small but violent minority of the German population. German ministers estimate that 42,000 Germans were members of the 80 plus far right wing groups. 78% of these neonazis are aged between 14 and 20 years old, with a further 18.5% between 21 and 30 and only 3% older than 30 and 1% female. (BUNDESPRESSEAMT, 23/12/94). From 1990 to 1994, 49 non-German people were killed in neonazi attacks. In 1992 alone there were 20,000 racist incidents across Germany including 2,000 attacks on non-German people and 17 deaths. (WATSON, 1993). There were attacks against non-German people, Jewish, homeless and disabled persons.

 

Neonazis in Germany comprise two main groups. One group is made up of young people who read in the daily tabloid newspapers about the supposed shortage of jobs and flats, apparently due to the flow of guest workers and asylum seekers into Germany. According to government officials, 79% of the supporters of extreme right wing policies have been educated to comprehensive school level and only 4% have studied at public grammar school. Less than a quarter have completed an apprenticeship. (BUNDESPRESSEAMT, 23/12/94). On the other hand, the second main group of neonazis consists of university students, 30,000 of whom are said to read the right wing magazine "Young Freedom" (STAUNTON, 1/1/95).

 

German reunification between East and West had positive economic effects between 1990 and early 1991. The generous mark for mark conversion of the Ostmark currency into Deutschmarks created considerable purchasing power in the East where private saving levels had been high. Exports from West to East Germany boomed, for example, of household goods and cars. The German economy grew by 4.2% in the first quarter of 1991. This economic growth was however not self-sustaining over the medium term because the East German economy was generating no significant sources of income of its own, such as from exports. East German citizens were living off accumulated past savings. (WATSON, 1993).

 

Two factors accounted for the increasing xenophobia in Germany. Firstly, the economic situation inevitably worsened after 1991 as savings were run down and financial transfers to the East burdened West Germany. Secondly, immigration to Germany was increasing from a relatively high base (WATSON, 1993). Rising unemployment began in the second half of 1990 with the restructuring of the East German economy by the Treuhandanstalt, the government agency responsible for privatization of East German industry. It is not surprising that the restructuring of a formerly communist economy caused economic turbulence. Years of damage cannot be reversed overnight. Those who promise otherwise are misleading.

 

There were 3.5 million unemployed people in the whole of Germany by 1991. An additional 2.1 million people were taking part in job creation programs, 1.7 million of whom were in the East. (WATSON, 1993). The number of non-German people living in Germany was twice the number of unemployed. A close relation exists between the level of unemployment and the acceptance among the general public of the extreme right wing groups. When unemployment and recession threaten, people worry about keeping their jobs and feel suspicious about non-German people who could replace them at work. It is however simplistic to make non-German people the scapegoats for the insecurity of the German population. In these turbulent and fast-moving times, stability and security do not exist and those who hanker after them are deluding themselves. In the unorganized world, there is no such thing as security. Those who promise it are liars. Those who seek it are human.

 

The second factor behind the rise in extreme right wing influence was the increasing concerns amongst the German population about the flood of non-German people into Germany. The non-German people comprise of asylum seekers and emigrants. In 1991 and 1992 a total of 1.5 million non-German people entered Germany after the collapse of the Confederation of Russian States. One third were emigrants, two thirds were asylum seekers. The emigrants are ethnic Germans who have the right to settle in Germany if they can prove their German origins. Additionally, approximately 500,000 illegal immigrants entered Germany who had not applied for asylum or as emigrants. Most entered Germany via the East where the majority of neonazis were located (WATSON, 1993). Neonazi groups called Germany a land of immigrants and called for restrictions on non-German people. They wanted to create a new German identity with a more self-confident Germany basing its foreign policy on domestic interests. (STAUNTON, 1/1/95). However, a new German identity should not imply the rejection of all other identities. The identity should be based on current and future realities, according to relationships in unified Germany and in Europe and with East European countries.

 

Fortunately, the rising neonazi support did not last long. After the deaths of so many non-German people, the public and public authorities took measures against xenophobia. Millions of people demonstrated against racism and new state measures were introduced which set up a special branch of the constitutional authority to deal with right wing extremism. Many neonazi groups were banned. Sympathy towards right wing viewpoints sank (WATSON, 1993). Attacks on the homes of asylum seekers fell from 381 in 1992 to 120 in 1993. Right wing attacks fell to 2,232 cases in 1992, a 15% reduction compared to 1991 (BUNDESPRESSEAMT, 25/05/94).

 

 

Causes of racism- societal systems such as communities

 

I attribute the racism in Germany to the highly regulated German society that restricts individual flexibility and freedom. Individuals must periodically register at public offices, and this can only be done during their limited opening hours. Individuals must wait in queues. This is not of course unique to Germany, but in the twenty-first century, patience will not be a virtue, instead impatience will be a right. Guest workers must register with the authorities every three months, and their identity cards are checked by the police every few days in the search for illegal immigrants. All of the queuing and form filling saps life by impeding individual freedom. Life saps at the human spirit until we die. Children are happy and energetic and grow progressively more deflated. Childhood ends where compromise begins. Pretty soon after you graduate and get a job, parental pressure mounts for you to get your own place and find yourself a husband or wife. That is the time to depart overseas!!

 

It is compulsory to carry an identity card in many countries around the world, including Germany. In the early 1990s, the then British government considered following Germany and introducing identity cards to appeal to the ever fewer middle class voters who are still locationally fixed and in stable employment. But they would do so only by impeding the freedom of the diverse majority. In other words, this is a mere vote-seeking policy measure. Identity cards do not mesh with today's diverse and mobile European Union. As a British national in Britain I never have a problem with police and immigration authorities. However, in Spain I might, and as the European Union hopefully widens toward Eastern Europe and toward the South, this diversity will increase and identity cards will become more and more of a reason for any flawed officials harboring prejudice against minorities to exercise it.

 

Even as a European Union citizen I should have registered with the German authorities to indicate my residence in the particular area I was living in. I did not register and was able to live and work in Germany without institutional hindrance, probably because I am an "Aryan", a white person who the nazis thought were superior human beings. Within the freedom of the single market, EU citizens should not have to register with the commune in which they are living. Such regulations look increasingly restrictive as populations become more mobile and more diverse.

 

The German government attributes problems such as xenophobia to a breakdown in social structures and values. They believe that this has lead to a weakened sense of community as institutions such as families and the church have become less important. (FEDERAL PRESS OFFICE, 1994). "Community" is a very hard term to define and yet it is used by interventionist politicians to justify policy making. Almost everyone emphasizes the importance of communities. "The dance like everything else in campus life, like the committees and clubs and football games: you didn’t do things solo, you participated, you belonged to a community that tirelessly wove its web of relationships. You did things with others or not at all. You didn’t exist without the others". (LABRO, 1986). The point is that you may not have or want other people constantly around you, and you can form and maintain relationships using technologies such as e-mail. The future is all about electronic communities.

 

Older management theorists such as Charles Handy and Peter Drucker are strong advocates of maintaining communities. For example, Drucker says that "Unless there’s first a functioning civil society, the market can produce economic results for a very short time- maybe three to five years. For anything beyond those five years, a functioning civil society- based on community organizations like churches, independent universities, or peasant coops- is needed for the market to function in its economic role, let alone its social role." (SCHWARTZ AND KELLY, 1996). As we see later in the "Industrial policy" section, social and economic goals are not mutually exclusive, with economic growth often stimulating sustainable social improvement.

 

Communities are geographically fixed and hence do not generally encourage understanding towards strangers, of whom in a mobile world there are increasingly many. It is often difficult for people moving into an area to gain acceptance from people already living in the community- not on the basis of who they are and whether they are decent people or not, but just because of where they live!! Obviously, in the unorganized world, there are far more mobile people relocating into different areas (and different countries) and these attitudes must change. How can community be a good thing if you are alienated by the people who live there? Communities in which there are few non-German people are generally far less tolerant and open minded toward people of different nationalities. People in the community matter, the community itself is irrelevant. Individuals should not limit their communications to people who live in their physical, geographical community: I may live next to strategizers. Instead we will use technologies to build electronic communities forming networks between like-minded individuals wherever they may be.

 

The German government reacted to the increased neonazi activity with new institutional supports such as central officials, special commissions and task forces (GERMAN EMBASSY, 3/12/92). There is an unfortunate tendency in Germany to attempt to solve the problems faced by individuals by connecting them to institutions. By institutions I mean static organizations in a negative sense whose members are people with shared interests. The trouble with such institutions is that membership allows certain privileges. For example, kindergarten places are allocated to the children of church members in Germany in preference to non-members because these nursery schools tend to be run by such religious institutions. Differences in opinions between different organizations cannot be bridged at institutional level because of the complex and involved nature of the problem. Understanding can best be built up at individual level, where the problem is caused.

 

The underlying cause of the racism is I believe the configuration of German societal institutions, such as transportation, school and living facilities, which separate people of different nationalities from each other. For example, the school system separates non-national pupils from German pupils. It is not enough that there are millions of non-German people at German schools if they go to separate schools from German pupils. The vast majority of German born pupils attend a public grammar school, whereas the non-German pupils generally go to a comprehensive. Contact between people of different nationalities thereby remains limited and consequently understanding as well. Different youth groups are not integrated and university students have no real understanding of other young people because they have never lived their lives next to one another. Ignorance exists among the educated and the uneducated. The neonazis view non-German people using stereotypes, because they don't actually personally know any non-German people.

 

In another example, "Japan, with a Jewish population of fewer than 2,000 may seem an unlikely home for anti-Semitism." However, a magazine shut down after denying that the holocaust mass murder of Jews by the Germans took place before and during the second world war. Transnational corporations withdrew advertising support from the magazine. (Notice that government intervention to ban the magazine was not necessary, consumers stopped buying it and companies stopped advertising in it, forcing it to close). "That the average Japanese citizen would never meet a member of the Jewish faith in his [or her] life provides fertile ground for negative stereotyping." (TERAZONO, 4/2/95).

 

The housing system in Germany also separates people of different nationalities, with the non-German people living separately in their own parts of towns and cities. Some would say that they prefer to live in areas where their cultural needs are closely catered for. Indeed, I have heard of cases in which non-national shopkeepers have refused to serve national citizens in an attempt to get them to move out of the area and allow more non-national people to move in. This is simplistic, in that it does not make economic sense to refuse custom, and because it assumes that there are a limited number of houses available and so houses occupied by national citizens equate to the loss of availability of houses for non-national people. There are no zero-sum games, or there would not be if the housing market was not riddled with policy distortions from governments offering mortgage tax relief and banks offering mortgages.

 

It is a shame that some Asian people in Britain consider it necessary to relocate to housing offered by ethnic housing associations exclusively for non-national families. By the mid-1990s there were 60 such ethnic housing associations letting 15,000 properties. The need for such housing arose in part from racism toward these people, ranging from "a frosty neighbour or a taunt to a brick through a window or physical assault". (PEPINSTER, 18/06/95). Racism fosters further racism by segregating the whites from the non-whites. Some white families have been accepted into association homes, and this should continue, with housing not allocated on the basis of ethnicity. Rather, homes should be built for economic reasons (that is to say, because there is a demand for, and shortage of, such properties) to meet the needs of people, whoever they are. Areas consisting of homogeneous types of people are static and insular. Frankly, they are boring.

 

The problem of racism can begin to be solved by increasing the degree of contact between individuals of different nationalities. People who work with one another in factories or study next to each other at schools develop a better understanding of each other. Indeed, the German government considers the integration of non-German workers to be far advanced. More than two million non-German people work alongside German people. Conflicts between employees of different nationalities are seldom seen to occur in the workplace. Prejudices are unlearned and perceptions of "foreignness" reduced, important preconditions for open-mindedness (BUNDESPRESSEAMT, 20/11/94). With overseas travel increasing, we are all foreigners, all over the rest of the world. Racism, defined as the dislike of people of different nationalities, is not viable or relevant in a diverse unorganized world.

 

One way of reducing racism and freeing individuals from institutions is by downstructuring societal systems. Governments should abolish registration in communes and also identity cards and recognize the limited effectiveness of further societal institutions. The principle should be never to create a new institution without abolishing at least two outdated ones. For example, the World Trade Organization (WTO) replaced the General Agreement on Tariffs and Trade (GATT), WIPO and UNCTAD. A lean state with a limited government role and deregulation in the economy helps increase freedom, making interpersonal understanding easier and helping with the real integration of people from different nationalities. Transnational corporations should be encouraged. The positive effects of these sorts of measures have already been seen at European level.

 

European citizens have the freedom to travel to other European Union (EU) countries and live and work there. Free movement around the EU facilitates cultural exchanges between citizens of different member states. This is the basis for increased understanding. People can get to know each other without limitations imposed by politicians and institutions. In this way, human understanding can be sought, relationship by relationship, and ignorance fought. More and more Europeans of different nationalities will marry each other as people realize that they have more in common than differences such as nationality. Pure races such as those sought by the original nazis are scarcely still existent, and the neonazis should recognize this. With the unorganization of the world economy, coupled with the downstructuring of societal systems and because of the increasing cultural exchanges, I don't think that a fourth German Reich is possible.

 

 

European economic measures (are positive)

 

(For more discussion of issues relating to Europe, see the special report "euHOPE or euROPE" at www.unorgan.com/europe.htm).

 

The continued widening of the European Union (EU) would be positive in increasing diversity and facilitating closer contact between people of different nationalities. The EU is expected to widen past the current 15 members in around the year 2000 to encompass first Estonia, Hungary, Czech Republic, Slovenia, Poland and Cyprus and then Latvia, Lithuania, Slovakia, Bulgaria and Romania (Wall Street Journal Europe, 15DEC97). What is very interesting in terms of encouraging diversity is that the EU is also looking outwards toward the southern Mediterranean. In the medium-term, a free trade agreement is planned between the EU and twelve potential partners: Morocco, Algeria, Tunisia, Egypt, Jordan, Syria, Lebanon, Israel, the Palestinian autonomous territories, Turkey, Cyprus, and Malta. The last three of these countries are candidates for full EU membership. (GARDNER, 17/05/95). As more member states are accepted, it becomes harder to get consensus on any policy measure, due to different interests and circumstances. This is a good thing insofar as European institutions recognize it and reduce their policy making by encouraging subsidiarity, which "simply means doing things together only if you can do them better than separately." (ECONOMIST, 21/05/94).

 

The end of 1992 saw the introduction of the Single European market, with the goal of free movement of goods, services, capital and people within the European Union. The single market has a positive effect on European Union citizens; who can for example study at universities in other member states, with entitlement to the same treatment and benefits as students born in the country where the host university is located. The single European market has not yet however been fully implemented.

 

For instance, markets such as telecommunications should be fully deregulated because they are important enhancers of mobility and contact. "The same is true of energy, another industry where the liberalising impulse has faded. High fuel prices and travel costs not only reduce West Europeans' living standards directly; they also eat away at the competitiveness of the industries on whose profits the maintenance of those [living] standards ultimately depends." (ECONOMIST, 13/08/94). Privatization is recommended even in markets such as airlines which have already been deregulated. "...governments protect their national carriers both by restricting foreign airlines' access to their airports and by pressing the European Commission to approve yet more state aid for airlines that in a free market would go out of business." (ECONOMIST, 22/10/94). Let them go bust, because ability is more important than nationality.

 

Economic measures must be introduced before political measures can follow, because the necessary deregulation and privatization will cause economic change and turbulence at national level. European policy limits the decision independence of national governments. Germany cannot introduce the European social charter and simultaneously deregulate its national labor market. European firms cannot compete because of the higher social costs from the social charter, therefore they protest against deregulation that would increase competition. Employees have the right to work anywhere in Europe, and yet the social charter hinders labor market flexibility.

 

The advantages and strengths of Europe lie in its diversity of people, cultures and places. "If Europe has a genius, a single defining characteristic, it is diversity. In no other region is such intense intellectual, cultural and linguistic variety packed into so small an area." (DE JONQUIERES 9/3/94). On the other hand, Europe's relative lack of ability to compete in dynamic industrial sectors is also sometimes attributed to cultural diversity: "The explanation for this mismatch of talent and commercial success lies in a mix of history, geography and culture. For all its size, America has a common language and a well-defined view of the way the world should work... If you fail with one American start-up then you can move on to another. By contrast, the EU is a patchwork of individual nations, with different cultural values from one another- if your European start-up fails, don't bother to try again- and mutually incomprehensible languages..." (ECONOMIST, 22/10/94). There is a tendency for nationalist people to ascribe problems to cultural differences, however, the key contributor to the disadvantages and weaknesses of Europe are the burden of regulation that hinders the freedom of individuals and organizations. Europe is full of great places to visit, but not to do business in. Autonomy for individuals gained through the single European market should not be impeded by overreaching European institutions.

 

We will now discuss how whilst these economic measures are positive, the planned European social and political measures are negative.

 

 

European social and political policies (are negative)

 

Jean Monnet, founder of the European Community, said in 1952 that "The wisdom of Europe cannot be based on goodwill alone. The tragic events we have lived through and are still witnessing may have made us wiser. But men pass away; others will take our place. We cannot bequeath them our personal experience. But we can leave them institutions. The life of institutions is longer than that of men; if they are well built, they can accumulate and hand on the wisdom of succeeding generations." (TIME, 19/09/94). The relative longevity of institutions is not a sufficient justification for their existence; lessons learned can be bequeathed via the media and communications, and it is not necessary to accumulate and hand on wisdom because the world changes so quickly that experience is irrelevant. "The essence of Jean Monnet's legacy to European politics is a simple idea. Just as, within a nation, the rule of law constrains individual freedom, for the sake of social peace, so too, among nations, the rule of law should make egotistical and bellicose behavior impossible." (ECONOMIST, 21/01/95). Europe is still trying to implement fully Monnet's vision of ever closer union, nearly 50 years on and in completely different world economic circumstances. In a world with economic capacity, such egotistical behavior can be stopped. Not only that, but building more powerful institutions is a prime example of the egotistical behavior it seeks to prevent!

 

The European Union (EU) has increased the freedom of individuals with the single economic market, and then just a few years later it is considering taking this away with European political and social integration. The EU wants to centralize policy making thereby increasing institutional influence over individuals. This is a great human tragedy; our need to take things to their absolute "logical" conclusion, and our inability to be satisfied with the middle way. European bureaucrats implement something and are then under pressure to implement something else to keep the momentum going. Managers and politicians are judged on measures introduced and proposals made. People need to face up to the ambiguity of the unorganized world and exercise discipline in letting policy directions evolve over time. Governments in the twenty-first century should be judged more on their policy making restraint, and not criticized for running out of policy making initiatives if little legislation is planned.

 

From the viewpoint of the individual, the Maastricht treaty and the deepening of the EU are negative, as are policies such as the Common Agricultural Policy (CAP), the social charter and the Schengen agreement for travel within member states without the requirement to carry passports. All increase the power of institutions over individuals.

 

The Maastricht treaty aims to implement a single European currency, a common foreign and security policy and closer political union. None of these goals are viewed as desirable by honest people: "In the best technocratic tradition, Maastricht established the deadlines, the criteria and the tasks for each player in the European concert. But real-life events proved too complex, spontaneous and diverse to follow the designs of diplomats and the parameters of politicians." (CSABA, 9/5/95).

 

It is not difficult for a person attuned to the unorganized world to find fault with the proposed single European currency, called the "euro". What sounds good in theory, with the convenience of a single currency for business and travel, is impossible to maintain successfully in practice. It relies on newly created central institutions rather than markets setting the level of economic variables. A common central bank institution must set a single rate of interest. This requires similar economic conditions and similar economic policies at the same time. However, there is no way of ensuring that these criteria are set at the appropriate level. Indeed, the same level is unlikely to be appropriate for all countries. Meeting the criteria may not ensure that the single currency will work, or that once met the member countries will be able to maintain these targets throughout a full economic cycle. Another difficulty with common interest rates is that external structural disturbances such as German unification affect different economies in different ways. (CHOTE, 3/4/95). Couple these external shocks with the varying requirements of economies and the most sensible exchange rate policy is one in which currencies float in free markets. External disturbances are likely to be more frequent in the complex, interdependent world. The egos in Europe are plainly unwilling to learn from their past mistakes, such as the European Exchange Rate Mechanism which Britain was forced to leave or face economic ruin- all for an exchange rate. Never mind the people. Again we see how institutions predominate over individuals. I will always remember a university professor telling me that if national governments did not meet the pan-European criteria, the result would be poverty. Read these words, institutions should not predominate over individuals. The euro is doomed to inevitable failure- the only question is how soon it comes and how many people and politicians are displaced in the fallout.

 

Before further enlargement of the EU can successfully take place, a further negative EU policy, the Common Agricultural Policy (CAP), must be radically reformed, "because extrapolating the present level of subsidies to a farm-intensive country such as Poland would bankrupt the EU budget." (BARBER, 10/05/95). The CAP is a highly distortionary policy that protects the powerful vote-rich agricultural lobby. This situation is exacerbated by static outmoded institutions such as the UK National Farmers Union and the European Commission's agricultural directorate. (FT, TROUBLE AHEAD FOR THE CAP). By artificially raising prices above their market levels, the CAP causes more farming to be carried out than economic development justifies. Higher food prices mean that consumers and taxpayers suffer. The OECD estimated that the CAP cost each person in the then 12-member EU $385 in 1993. (MAITLAND AND HARGREAVES, 3/10/94). Higher prices lead to misplaced resources; with too much food generated in developed countries, and too little in developing countries. When the CAP was modified to pay farmers for setting aside a proportion of their arable land from production, grain shortages then pushed internal EU prices further above world prices. (FT, TROUBLE AHEAD FOR THE CAP). This occurred because the policy makers were unable to determine the correction proportion of land to be put aside. This is just like the minimum wage level and the exchange rate mechanism currency rates: policy makers do not have the competence to intervene in the market system without causing damaging distortions.

 

The ECONOMIST described lobbying such as that undertaken by the agricultural industry as "one of the chief weaknesses of late-20th-century democracy... There is in principle nothing wrong with lobbying; the people who take the decisions, in any field, should be the target of as much argument and persuasion as possible. Lobbying goes wrong when special interests use their money to cross the line between persuading politicians and buying them." (DATE UNKNOWN). When bidding, honest people state clearly, comprehensively and accurately the obligations they are willing to undertake and the assumptions that underlay them. Should the contract be won, they then act honorably in fulfilling these undertakings. For example, the Netherlands government cleverly turned the bid document submitted by the licensee of the second mobile telephone network into the license itself.

 

There are similarities between the damaging Common Agricultural Policy and the EU social work charter. "While some policies to increase the flexibility of labour markets have recently been adopted in Europe, most of these measures attempt to correct distortions stemming from labour market regulations rather than to change the regulations themselves". (FT, 9/5/94). "A close parallel to such tinkering can be found in the EU's approach to reform its common agricultural policy, with its set asides [of land] and similar command and control mechanisms. Just as the CAP has created butter mountains, so labour market interventions have created mountains of surplus labour".

 

The damaging social work charter comprises of a raft of directives concerning working time and conditions. For example, the flexibility of employers to employ different types of worker is reduced, and their costs increased, by regulations in the social charter which, for example, give part time workers the rights to similar benefits as full time workers. This is the European bureaucrats observing the positive trend towards part-time work, and stopping it by legislating. These measures distort the labor market by encouraging people to pursue part-time work whilst simultaneously encouraging employers not to take on part-time workers. As per the impartial spectator principle, workers should be able to gain employment of the type and at the wage they themselves are willing to accept. Rather than directly legislating to give women employment rights; such as maternity leave, all employees, regardless of sex, should have the flexibility to take sabbaticals for travel, learning or for whatever reason.

 

As a director at the Confederation of British Industry explained: "The problem is that social policy has been too much concerned with the rights of those in employment and too little directed towards what would help the 20m out of work in the EU find jobs. The result has been both inflexibility in labour markets and high social costs for every person employed across much of Europe." (GILBERT, 30/12/94). Unemployed people are immobile because they get generous benefits from the welfare state. Employed people are immobile because they are bound by benefits to institutions. Social contracts between workers and companies reduce the flexibility of both parties. Companies are obliged to provide expensive and compulsory benefits to employees. Anything compulsory is inflexible. Employees are locked into hierarchies because membership, however repressive, has its privileges. This leads to static labour markets, inconsistent with dynamic product markets. It is an ironic paradox that: "In theory Europe's citizens, now guaranteed freedom of movement and residence by the Maastricht Treaty, will go where the benefits are best. In fact, few do. One reason is that the largest social benefits tend to require contributions from employer and employee; so the migrant must first find a job." (ECONOMIST, 12/03/94). It is not worthwhile for those individuals trapped in hierarchies by organizational benefits to move, because benefits accrue to those with jobs. The current reality is one in which unemployed people cannot get jobs because they are too costly to employers and have little incentive to get jobs because of the welfare state.

 

"But there is no miracle cure for Europe's joblessness short of thinning the welfare cushion that makes unemployment preferable to many sorts of work. The unemployed might then price themselves into some kind of job. And even this hard-headed logic can work only up to a point. Already, Europe's big cities are scarred by ghettos of the unemployed, uneducated and disaffected- an "underclass-in-waiting", the politicians fear, if Europe deflates the welfare cushion too hard and too fast." (ECONOMIST, 22/10/94).

 

The social charter is obsolete because there are no certain jobs anymore and no careers. It is very unlikely that workers will stay with one company during their entire working life, yet hierarchical benefits encourage this, and prevent smooth transition between companies. Hence, a dynamic labour market is needed if people are to be able to find jobs in different organizations. Diverse industries with mobile workers in complex environments are needed, yet excess regulation is suited to stable industries with static workers in stable industry environments. The former British Prime Minister John Major accurately described the social charter as "stuck in the groove of the old corporate, centralized, over-regulated Europe." (FT, 2/6/94). We will see later how downstructuring towards collapsible corporations calls for organizational benefits such as pensions to be privately held and not employment related.

 

At least European social policy is now being based on greater realism. "The change has been driven by pressure from many European employers about competitiveness and cost burdens on business, and by high unemployment and budget deficits. The upshot is that there is now much less enthusiasm for the legal imposition of minimum labour standards in all member states." (FT, 13/04/95). The new aim is to "reconcile the twin objectives of economic growth and social progress- a new European model". (GARDNER, 30/05/94). Interventionist politicians always make these sorts of claims. Economic and social aims do not need to be reconciled because they are not opposites- economic growth is the best way of reducing unemployment and thereby achieving social progress. The Eurocrat’s egos and the unorganized world environment are what need reconciling.

 

"Western Europe does not provide an optimal model for balancing freedom with regulation. The system that prevails there is too weighed down with over-regulation and over-control. The welfare state, with its generous transfer payments unconnected to achievement, undermines the basic work-ethic and thus individual responsibility. There is too much protectionism. There is too much bureaucracy. The visible manifestations of Western Europe's failure to reform include a wasteful and socially explosive rate of unemployment- and one which seems, moreover, to respond little to changes in the rate of economic growth and in the business cycle. The main cause lies not in an excess supply of labour, nor in a lack of demand for labour, nor in immigration, nor in lack of technological progress, nor in excessive imports of South-East Asian products, nor in the cheap labour of Eastern Europe. The factor that comes closest to explaining the problem is the excessively high rate of domestic wages relative to workforce productivity."

 

"The wage-rate is high because it has broken from its microeconomic foundation at the level of the firm, to be determined instead at macroeconomic level between the state and labour unions; and it is then raised higher still by the addition of mandatory costs imposed by the state. Put simply, Europeans have to reconcile their rewards with their achievements, otherwise some of them will be out of work for ever." (KLAUS, ECONOMIST, 10/09/94). As we will see with transnationals, foreign wage competition is irrelevant because of the world economic development process. We need to concentrate on getting our national houses in order (by reducing government involvement) rather than worrying about myths such as competitiveness.

 

 

Pan-European infrastructure projects that span national boundaries have advantages and disadvantages. For example, the European Union is planning "The Trans-European Network- a vast grid of roads, railways and canals linking Europe's main economic and industrial centres." (EUROPEAN, 17/06/94). High speed rail links are planned, along with 55,000 kilometres of new roads by 2005; 12,000 of which will be on motorways. It is positive that links with non-EU countries are also being built; for example, the motorway from Nuremberg in Germany to Prague in the Czech Republic, and the road through northern Greece to the Turkish border, plus a motorway from Greece to the Greek-Bulgarian border. This infrastructure would help to complete the single market:

 

"No European can feel pleased at the delays in air travel caused by incompatible and inadequate air traffic control systems. Nor is it acceptable that it costs three times more to make a phone call across national boundaries than it does inside them. Equally, British ministers should be ashamed that trains will creep to London when the Channel tunnel opens next year [1994] because a high-speed link on the British side has not been built." (FT, 13/12/93).

 

"Transnational co-ordination is sensible where the benefits of investment spill over from one country to another. It is, for example, hard to see how a single private enterprise could address Europe's air traffic problem". (FT, 13/12/93). European co-ordination can add value, as in the case of Global System Mobile (GSM), a digital mobile telecommunications standard, established in Europe, and increasingly becoming a world-wide standard. But European co-ordination in high definition television standards failed, hardly surprising when a bunch of subsidized public and private hierarchies such as Groupe Bull, Siemens and Philips were coordinated by a supranational state bureaucracy.

 

The Financial Times described these infrastructure projects as "a wasteful irrelevance", and "unattainable". (FT, 29/04/94). "The reason is that the networks the programme aims to integrate are mostly operated by monopolies, which have long enjoyed immunity from competition in return for staying within national or regional borders. It is their introverted attitudes and stubborn determination to cling to historic privileges and captive markets- not the existence of national borders per se- which pose the biggest obstacle to a true single market in Europe." (FT, 29/04/94). "... national monopolies in the transport, telecommunications and energy are the root cause of fragmented networks. Public-sector monopolies have little incentive to look beyond their national frontiers, while their monopoly status has prevented private operators building transnational links instead." (DIXON, 21/02/94).

 

"Failure to keep up the attack on monopolies will enable them to hijack the trans-European networks plan, at the expense of the rest of the economy. Truly open markets, by contrast, could render such a grand, officially-planned scheme unnecessary by stimulating service providers spontaneously to innovate, compete and collaborate across borders." (FT, 29/04/94). "The priority is to open up the provision of infrastructure to competition. This would provide extra sources of finance, while ensuring that investment responds to commercial needs rather than political fancies." (FT, 13/12/93). National governments should ensure that the pan-European transport projects that receive public assistance are economically and environmentally viable. Indeed, the EU promises that projects "should be expected to produce a substantial net benefit to society, taking into account also the external costs and benefits". (TUCKER, 2/6/94). The private sector should preferably finance, build and operate such infrastructure, to minimize the EU's involvement and influence in coordinating the projects and ensure commercial viability. Even if the policy seems to be positive on the face of it, it is unlikely that the public sector can implement it.

 

On the face of it, it would seem illogical for a globally attuned person supporting the single market with its free movement of people to oppose the Schengen internal border agreement that removes the internal borders between EU member states. This is indeed welcome in line with the view that borders are artificial constructs that hinder the mobility of individuals. In theory, EU travelers between Schengen member states "will be treated as if they were on domestic journeys. Non-EU visitors arriving in one of those countries will subsequently be able to move without further checks to any of the others. That already happens at most of their land borders. The new move means it will happen at airports, too." (FT, 20/03/95). The Schengen agreement is a negative policy because it simultaneously tightens the external borders around the member states, discriminating against citizens from non-member countries.

 

(For more discussion of issues relating to Europe, see the special report "euHOPE or euROPE" at www.unorgan.com/europe.htm).

 

 

Immigration policy

 

Immigration authorities world-wide should treat non-nationals without prejudice. Many asylum seekers are searching for freedom from abusive political regimes. They are met by race anxious immigration policies. Nation governments defending their outmoded nation states worry about large numbers of people of different races descending on their nations. Ideally, outmoded governments should suffer from their freedom-impeding polices, as honest citizens emigrate. A new balance of immigration could be introduced by human rights organizations, which compares the inflows and outflows of immigrants and indicates a country's desirability as a resettlement location. In fact, the example of Turkish guest workers in Germany shows that the benefits from their presence far outweighs any costs. The majority of Turkish people in Germany perform manual jobs which the Germans themselves are no longer willing to carry out. The presence of the Turkish people indicates their continuing preference to settle in Germany, and brings a diversity to Germany that would otherwise be lacking.

 

Politicians can either realize that talent is the only prejudice, or take the view that racism still exists, and devise affirmative policies to counterbalance it. "The best argument for colour-conscious policies, and it is a powerful one, is that society is not colour-blind, so it is naive to ask the law to be. Yet here lies a contradiction. Colour-conscious policies, by their nature, institutionalise one of the most biologically suspect and politically mischievous of all ideas: the idea that human beings come in kinds... But there is no such thing as a general person, and as races mix, the already contentious concepts of "black" and "white", or "Asian" and "Anglo", become ever more senseless". (ECONOMIST, 15/04/95). In these racially diverse times, color-conscious policies inevitably distort because they cannot legislate for the diversity which mixed relationships bring. Policy classifications are then increasingly hazardous because they categorize human beings on the basis of accidents of birth such as nationality.

 

 

Asian values

 

Some people with outmoded attitudes argue that the economic success of countries in Asia can be attributed to "Asian values". These are similar arguments to those used by the German government regarding societal institutions such as communities. Asian values are described as "communitarian, not individualistic; respectful of authority and hierarchy, eschewing opposition; and state interventionist, even into the private space of individuals." (CHO KONG, 1995). For instance, Singaporean schools teach five shared values: "Nation before Community and Society above Self, Family as the basic unit of Society, Community support and respect for the Individual, Consensus not Conflict, and Racial and religious  Harmony." (FT, 24/02/95). These values are mixed up because  they claim that society, community and nations still count, which I do not believe. People matter. Other commentators have argued that "there is a specifically Asian set of values of hard work, saving, education, self-discipline, respect for authority and loyalty to family" as opposed to "Western 'permissiveness', laziness, family fragmentation and lawlessness". (CABLE, 1995). These are general (and therefore hazardous) statements for a diverse Asia. Hong Kong holds very free market oriented economic views, whereas Singapore does not. As anyone who takes the slightest notice when reading this text can understand, I do not hold with the Asian values. There are common communication and behavior that work globally, as will now be discussed.

 

 

Multi-cultural business relationships

 

This section will challenge all those who are not open minded towards people of different nationalities. These days, it is becoming increasingly untenable to be suspicious of people of other nationalities and races given increased contact through increased travel, telecommunications, trade and transnationals. It is increasingly impossible to survive in an inner city as a racist. By the year 2000, it is forecast that California will be made up of 48% whites, 32% Hispanics, a term for Mexicans and Spanish speaking people, Blacks 7%, and 13% "Asians" comprising of Koreans, Japanese, Vietnamese, and Chinese. (ROGALY, 29/04/95). It is not Blackpool where we holiday these days, but Thailand. Go to a large bookstore and you can buy maps showing every street around the world. Please face the reality of diversity.

 

Fueled by an international sub-culture, there are many similarities between people of different nationalities. Universities have students from most countries in the world. "What the sons and daughters of an overseas alma mater take home with them today, though, are enduring linkages with other cultures by way of faxes, E-mail and satellite television, not to mention transnational corporate and professional ties." (TIME, 5/12/94). "...the markets on which the fortunes of the new elites rely are tied to enterprises that operate across international boundaries. Their loyalties- if the term is not itself anachronistic [irrelevant]- are international rather than national or local. They have more in common with their counterparts in Brussels or Hong Kong than with the masses of people in their own country who are not yet plugged into the network of global communications. (LASCH, 12/03/95).

 

As companies, products and markets become more transnational, managers will increasingly hold cross-border responsibilities and will therefore need to be culturally and internationally aware. This awareness will facilitate better exchange of ideas, expertise and skills, and aid more effective cross-border collaboration. Diversity in cultures and lifestyles brings many advantages such as creativity. These advantages do not however arise automatically. Multi-cultural relationships encounter problems which single nation groupings routinely and instinctively overcome, such as differences in attitude, behavior, values, experience, background, expectations, language, culture, prejudices, stereotypes and assumptions. Cultures also diverge on observation of hierarchy and authority. Trust is difficult to develop when people have different ideas. (HOULDER, 5/4/95).

 

Indeed, many doubt the ease with which different people can develop effective relations. People need "a readiness to enter a room in the dark and stumble over unfamiliar furniture until the pain in our shins reminds us of where things are." (TROMPENAARS, IN PETERS, 1994). "In many cases, especially where the local culture bottles up problems by discouraging open criticism, the gung-ho "universalist" manager will not even perceive them." (LORENZ, 23/04/93). A study of European management style found that "Europeans are "handicapped by their sophisticated world outlook that sees every country and culture as different and deserving of tailor-made treatment." (LORENZ, PAEAN). "At the end of this [Trompenaar's] treatise, the human reaction is to throw your hands in despair at the hopelessness of it all." (PETERS, 1994).

 

Open and honest communication is a very powerful tool when it comes to realizing effective international understanding. It is better to point out differences in opinion when they arise, rather than bottling issues up. Honesty in communication is fundamental for accountability and understanding. If eye contact is made to indicate trust and not as a sign of anger, aggression or intimacy, then this should be communicated so as to avoid misunderstanding.

 

Good international managers are not gung-ho but sensitive and approachable and behave in a real and accountable way towards people of their own and other nationalities. They embrace the variety which different cultures and paradigms bring. "The goal must be to create managers with the capacity to transcend culture, to find the universals and build multi-billion dollar businesses around them." (HAMEL IN CRAINER 1995). Getting to know people from different countries soon gives you some indication as to how they are going to react in particular situations. Consistency in behavior helps build understanding and trust. To achieve effective international communication we need to recognize that preconceptions are misconceptions (in all matters, national or international) and learn to assume nothing and keep open minded. Humor helps. People need to be sensitive and resilient. A willingness to accept that you are not as competent and familiar as you are in their own environment is necessary. "We need a certain amount of humility and a sense of humor to discover cultures other than our own." (PETERS, 1994).

 

The very fact that the person is of a different nationality tends to alter an attuned person’s behavior and attitude favorably. "Establishing a situation that is unfamiliar and slightly uncomfortable forces people to look at things differently." (BARSOUX, 8/7/94). People tend to view problems more objectively, listen, be tolerant, discuss, take a broader perspective and see different perceptions as a creative challenge. It should be recognized that the person predominates over the country in which they were born. Whilst recognizing that nationality plays an important part in shaping a person's behavior, we should not assume that an individual displays all the assumed categories of behavior belonging to that nationality. The very categorization of nationalities into cultural groups encourages stereotypes and should hopefully become more difficult and less relevant in a mobile and integrated global economy.

 

Such attuned behavior towards people of different nationalities is relevant not only at the level of individuals, but also for cross-border mergers and partnerships, which would be facilitated by a common behavioral mode. Outmoded nationalism was "clearly at work in the decision last year [in 1993] by Swedish shareholders to torpedo the Renault-Volvo marriage and in the collapse of Alcazar, the planned merger of Austrian, Dutch, Swiss and Scandinavian airlines" (OWEN, 7/3/94). European mergers and acquisitions will continue to be complicated by differences in management style and shareholder expectations. But where the underlying commercial logic is sound, these cultural and organizational strains are usually manageable." (OWEN, 7/3/94). If the benefits from the marriage sufficiently outweigh the barriers to the realization of the benefits, then globally attuned people would have sufficient incentive to overcome the barriers. As we will discuss later, transnational companies operating in several countries with decentralized strategic decision making are more likely to be able to manage cross-border relationships, such as alliances and mergers. "Companies are unlikely to disperse much divisional and corporate decision-making away from their home base until they internationalise the mentality of their top management." (LORENZ, 27/04/94). Open-mindedness is the only way in the twenty-first century, when at individual and organizational level, opposites attract, and variety is the spice of life.

 

We must see beyond institutional baggage such as passports and borders, and at individual level, color and culture. These are mere artificial constructs designed to keep the world from collaborating and ensuring that the world's combined economic performance is less than the sum total of its resources. This need not be the case, because there is sufficient economic capacity for all good people in the world whoever and wherever they are, to prosper through technological capitalism.

 

To conclude this section, individuals must recognize that in a complex, diverse and fast changing unorganized world, diverse opinions from many different people are needed if the complex issues that the world faces are to be resolved optimally. The world must get real, because middle class, white males cannot on their own generate the right solutions for all of today's problems. Each of us should recognize that the only prejudice is talent, simply because they're aren't enough competent people such that we can afford to discriminate according to nationality, gender, sexuality, color or anything. Get real, please. Else stagnate.

 

We will now move on to discuss a major player in the global unorganized world: the transnational corporation. We will analyze the role and effects of transnationals using a tool called "economizing", which will now be explained.

 

 

Economizing versus strategizing

 

To make the changes necessary to survive and thrive in this unorganized world, everyone needs to adopt economizing rather than strategizing viewpoints. I think that the best mode of thinking, attitude and behavior that individuals can adopt in the unorganized world is that of "economizing", which is now described.

 

Professor Oliver E. Williamson first coined the terms economizing and strategizing in his article "Economizing, Strategizing and Economic Organization". Both economizing and strategizing are attitudes and mode of behaviors that affect how individuals interpret and handle situations. According to Williamson, strategizing perspectives are concerned with power, whereas economizing is concerned with efficiency. Strategizing describes how many politicians and managers currently behave. Strategizers play games, promising much and delivering too little, too late, manipulating situations for their individual gain whilst ignoring the losses thereby incurred by other individuals. The simplest view of economizing is as getting real, connecting to other individuals, maximizing individual achievement and behaving with honesty and integrity. "If you get the form of things right, every peril can be tamed". Williamson believes that "economizing is more fundamental than strategizing- or, put differently, that economy is the best strategy." (WILLIAMSON, 1994).

 

Williamson applied the concepts of economizing and strategizing to describe how economic firms should optimally be organized. Organizations should aim to "organize transactions so as to economize on bounded rationality while simultaneously safeguarding them against the hazards of opportunism." (MOORE, 1992). "To man’s limited powers of knowing and conceiving which bounded rationality acknowledges, Williamson adds- to complete his explanation of human conduct- opportunism; by which he means "self-interest seeking with guile". Opportunism involves subtle forms of deceit and "more blatant activities such as lying, stealing and cheating." (MOORE, 1992). "The principal ramifications of these behavioral assumptions for economic organization are these: (1) all complex contracts are unavoidably incomplete and many complex incentive alignment processes cannot be implemented (because of bounded rationality); (2) to rely on contract-as-promise is fraught with hazard (because of opportunism)." (WILLIAMSON, 1994). The result is that "If economic organization is formidably complex, which it is, and if economic agents are subject to very real cognitive limits, which they are, then failures of alignment [between the over-organized organization and the unorganized environment] will occur routinely. Excesses of waste, bureaucracy, and slack are mainly explained, I submit, by failures of alignment." (WILLIAMSON, 1994).

 

This increasing bounded rationality, i.e. a limited understanding of events, as the world gets more unorganized has wide and deep consequences for the effectiveness of politicians and managers. They should recognize and economize on bounded rationality, by, for example, the simple avoidance of policies and interventions. Individuals are smart enough to rationally appraise their own personal circumstances but governments cannot understand the needs and motivations of other people. We are clever enough to make our own decisions but not to make them for other people.

 

 

Behavior of transnationals

 

This section will describe the differing viewpoints about transnational corporations held by strategizers and economizers. The strategizers take a negative view of transnationals, seeing them as dominating international trade for their own selfish gains, with strategic decisions the exclusive remit of the firm's highest management. On the other hand, economizers view transnational corporations as positive organizations whose activities efficiently respond to and facilitate world-wide economic development.

 

Because of the trends described in the section called "A description of the unorganized world" such as the existence of free markets and new technologies, transnational corporations (and individuals) can now trade in world markets from wherever they are. This means that geographical location is becoming less important, whilst ability to understand and closely serve that country's needs becomes more important. The globalization we saw in the last sections has lead to a considerable increase in the number of transnational corporations. The OECD defines globalization as a "widening and deepening of companies' operations across borders to produce and sell goods and services in more markets." (NORMAN, 14/11/94). "The number of "transnational corporations" in the world's 14 richest countries has more than tripled in the past 25 years, from 7,000 in 1969 to 24,000 today". Transnationals "control about a third of all private sector assets, and enjoy world-wide sales of about $5.5 trillion- slightly less than America's GDP [Gross Domestic Product i.e. economic activity] last year." (ECONOMIST, 30/07/94).

 

 

Why organizations exist

 

Economic activity can either be coordinated by entrepreneurs in markets or by managers in firms. "To understand why, consider that all organizations must choose between making the goods or services they need internally, or buying them through market transactions with external suppliers. General Motors, for example, must decide whether to make tires or buy them from a tire manufacturer. ... market transactions often require higher coordination costs than internal coordination within the firm. For example, to buy something in a market, you may need to compare a number of potential suppliers, negotiate contracts, and perform formal accounting for the money that changes hands. But a market purchase has the advantage of allowing the buyer to benefit from the supplier’s economies of scales [because they make a lot of tires for other firms as well] and to choose the best product currently available as needs change." (BRADLEY ET AL, 1993). The costs of using the market arise from the necessity to find out what the relevant prices are. Other market costs arise from negotiating and concluding a separate contract for each transaction that takes place in a market. These costs would be reduced within a firm from negotiating one longer-term contract rather than a series of contracts within a market. (COASE, 1937). This is a cost benefit analysis as we saw at the start of the book.

 

A "firm will tend to expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange in the open market or the costs of organizing another firm." (COASE, 1937). Production is viewed as a set of activities, for example, the production of pins involves drawing metal into thin wire, then cutting and pointing the metal. Each of these activities can be carried out using either the market or within the firm. Hence, Coase explains how the decision to use the market or the firm is made and defines the size of the firm. This logic will prove important again later when see how applications of new technologies such as the Internet and electronic agents are reducing the costs of using the market such as putting a bid out, finding out information and negotiating. This is the economic rationale behind collapsible corporations.

 

Coase views transnationals in a basic economizing way. He defines the firm as a means of coordinating production within the firm without using external markets. (COASE, 1937). Transnational firms arise where this production coordination takes the firm across national borders. Economizers explain transnationals by combining Coase's analysis of transnationals as products of the benefits of internalization across borders with developments in internal organization that have made control of such international operations across many countries possible, i.e. internalization plus organization. Coase explains when and why firms substitute market transactions organized using the price mechanism with the firm organized by an entrepreneur. If production was coordinated everywhere by a complete set of perfectly efficient market transactions, there would be no non-market transactions because the introduction of non-market transactions could not improve efficiency. If all coordination could be organized using the price mechanism then for the firm to arise there must be costs of organizing production using the price mechanism.

 

However, strategizers believe this basic economizing view focuses on ownership of the firm rather than the more important control of the firm. Coase himself has admitted that he placed undue emphasis on the role of the firm as purchaser of factors of production and on the choice of contractual arrangements (COASE, 1991). Nonetheless, the firm must purchase factors of production to run its business and each activity in the production process is considered in turn using the Coasian approach. It is true to say that Coase does not recognize the significance of intermediate modes of organizing production such as subcontractors. By allowing only the extremes of market or non-market transactions, Coase limits the firm's options for organizing, and its size. Coase sees subcontractors as firms, but separate firms under separate legal ownership. The strategizers see the subcontractors as part of the firm because the firm's directors control them. Strategizers would counter that you do not need to understand the production process itself to make decisions based on market versus non-market costs. However, these activity decisions are not strategic decisions made only be the firm’s top management, but are likely to occur at the operational level. Strategic decision makers decide the broad direction of the firm: the decision to produce pins.

 

Strategizers (COWLING AND SUGDEN, 1994) view firms as essentially about decision making. Control implies the ability to determine broad corporate objectives and direction of the firm despite resistance from others (ZEITLIN, 1974). (Strategizers often talk about negative concepts such as resistance). Broad corporate objectives are strategic decisions such as geographical location; the choice to become a transnational is thus a strategic one. Control as defined implies something beneficial and utility conferring in having control. The implication is that those in control can take firms in directions that suit their own interest rather than those that suit the general good. Expansion of the firm implies that control is retained.

 

Based on this thinking, strategizers arrive at the following definitions of a firm and transnational. A firm is a means of coordinating production from one center of strategic decision-making. A transnational arises when this coordination takes a firm across national borders. Such coordination can take place within the legally defined boundary of the firm, but the firm is also able to exercise control over the production activities of a separate firm that it does not own. For example, when subcontracting, the firm is said to be able to become involved in the coordination of production and exert substantial control over the subcontractor. Hence, the definition of a transnational by strategizers includes both those firms owned and those controlled by the transnational. On the other hand, Coase takes a narrower view and focuses solely on ownership. To illustrate the difference between Coase and the strategizers, consider the real world example of Benetton, the clothing firm. (MITTER, 1986). Benetton employed 2000 employees in eight factories in Northern Italy. Additionally, the firm used subcontractors that employed a further 4,000 employees. Coase would view the size of the firm as 2,000, the strategizers as 6,000 because the firm controls the subcontractors.

 

The strategizing paradigm overstates the control exercised by the transnational's management over organizations such as subcontractors outside its legal boundaries. For example, the five forces framework (PORTER, 1994) details five competitive forces that act to erode long-term industry profitability. These forces are the threat of new entrants, rivalry among existing competitors, the bargaining power of buyers, the bargaining power of sellers and the threat of substitute products or services. These competitive forces work to reduce the bargaining power of transnationals. Suppliers with their own decision makers are by no means under the effective control of transnational strategic decision makers. Suppliers are relatively powerful in several situations. If the transnational is not an important customer of the supplier. If the subcontractor's parts are differentiated from those available to the transnational from other sources. If  the transnational would incur switching costs when changing suppliers, or if the subcontractor's part is an important input to the transnational's business.

 

Whereas Coase concentrates on firms or markets, the firm could also make use of intermediate modes when organizing production, such as subcontracting, partnering, licensing, franchising and collusion (WILKINS, 1986). Such intermediate modes can be both contractual e.g. licensing and/ or behavioral, for example, collusion. This goes some way to reconciling the economizers who focus on contracts and the strategizers who consider behavior to be important. However, the size of the transnational is still overestimated, because the transnational will not always be the controlling partner in the intermediate mode relationship. The true size of the transnational is therefore larger than that defined by Coase, smaller than intermediate modes and smaller than that viewed by the strategizers. Strategizers choose a very broad definition because they argue that transnationals adversely dominate modern economies.

 

Independent companies without any contractual relations can combine their complimentary capabilities to add value to a mutual end customer. New technologies are reducing the transaction costs associated with organizing economic activities using the market rather than internally within the firm. Such partners are only going to be willing to work with one another if mutual trust and gain ensues. Hence, the extent to which companies are introduced into customer opportunities is inversely related to the extent to which these companies display economizing behavior. The more economizing you are the more successful you are in the marketplace because the more partners you have to call on or be called into to serve a customer. The more top managers strategize, the less control you have over other partners. These ex-partners will then go off and introduce their customers to your competitors, further reducing market domination. Strategizers must economize to retain their power base.

 

Strategizers argue that firms arise not to reduce costs but because a few in the firm, namely its top directors, take the strategic decision to set up a firm or a factory. They therefore exercise control of the firm's broad direction irrespective of the wishes of other individuals not involved in making the strategic decisions. People are adversely affected by the strategic decisions but do not participate in making them. The so-called voluntary exchange principle does not hold. The voluntary exchange principle states that transactions will be undertaken if they make both parties better off.

 

Individuals are free to voluntarily decide whether to enter a transaction and can thus veto, for example, the move from markets to firms if working in the firm would leave the individual worse off. (SUGDEN, 1994). In other words, the principle holds if the employee values the pay received more highly than the discomfort of work. Simultaneously, the employer must consider the labor received at least as valuable as the employment cost incurred. The principle holds even if the mode of work changes and is relatively worse for the individual but still worth the wages. Later we see how technological capitalism truly realizes the voluntary exchange principle and allows individuals far more choice as to how they earn a living.

 

A strategizer (MARGLIN, 1974) explains how strategic decisions control employee actions. Before factories arose production was organized in a "putting out" system in which separate production tasks were carried out by workers in their own homes at a pace they themselves dictated. Factories in which strategic decision makers dictated when and how much work was done under one roof replaced putting out. Factories arose to allow the capitalists to control the work process and thereby increase profits by decreasing worker utility, for example, reducing the flexibility of employees in setting their own work times. Workers moved into factories despite being worse off from this, and exchange is not voluntary. The worker choice is either to work in the factory or not to work at all, the choice between working at home and working in the factory does not exist. The firm’s top management decides how to organize production and not the workers themselves. Top managers make the strategic decisions according to what best suits their own preferences. Hierarchy lacks redeeming economic purpose and operates entirely in the service of power. Managers exploit workers and hierarchy is the organizational device with which this is achieved. Later we see how this rationale is increasingly incorrect in the unorganized world where economizing individuals can earn a living outside of the hierarchy.

 

Another strategizer claims that firms establish production facilities in other countries, i.e. become transnationals, because they have ownership advantages that are specific to their firms. There are costs of operating at a distance that include travel, time lost in communicating information and decisions and misunderstandings that cause errors. Local firms do not face these costs and so have a cost advantage. (HYMER, 1960). Economizers explain how distance costs are not necessary for transnationals to be established. Firms can compensate for distance cost disadvantages and compete by using their ownership advantages such as unique patented technology and better management that allow costs to be lowered and competitive with local companies. Indeed, reaping the benefits of your efficiency by using it in different countries is economizing behavior. Technologies such as Internet e-mail facilitate communication irrespective of geographical distance.

 

Economizers (WILLIAMSON) explain that firms are transaction cost economizing, or in other words, efficiency instruments. Cost excesses are principally due to inferior organization and maladjusted operations, for example, putting out. Economizers do not deny that managers sometimes pursue their own interests rather than those of the organization as a whole. However, "any extended period neglectful of efficiency is dangerous to the well being of the firm; and this threat serves to curb management's self-indulgent decisions" (MOORE, 1992). Strategizing is ruled out because it is not sustainable behavior over time. The firm as a power and control tool is reliant upon and constrained by economizing. The assertion that firms are subversive forces aimed at controlling workers is rejected because economizing is socially valued in improving efficiency, and firms thus serve affirmative economic purposes.

 

One of the supposedly negative economic phenomenon which strategizers attribute to transnational behavior is short-termism, based around the claim that communities are interested in long-term prosperity which transnationals located there do not share. Financial markets that demand quick returns from transnational investments compound this. Time and time again articles appear which praise the supposed superiority of the German and Japanese economic models that have cross-shareholdings between several firms, such as suppliers at various stages of production. However, this system frees managers to pursue their own objectives rather than making them accountable to shareholders. The ECONOMIST wrote an editorial called "Hotels and planes, In praise of short-termism in business". (27/01/96). It views short-termism as being useful in making company management accountable to stockmarket analysts and speculators who demand that companies do not underperform relative to their competitors.

 

A Financial Times editorial repeated the commonly held view that government policies have been successful by encouraging in this case home ownership (FT, 5/6/95). The distortions from these policies which resulted greatly contributed to the large numbers of people who subsequently suffered from "negative equity"; whereby properties are worth less on the housing market than their mortgaged value. Politicians then call for more policies to correct this policy distortion in order to win back home owning voters.

 

As I responded in a letter published in the Financial Times, "it is sad but true that householders need to blame the government for their own housing investment decisions. Individuals are trapped for the long term in their houses and in their organizations because of policies from the government, banks and hierarchies. The dormant state of the housing market is not so much a good thing because it "ought to inspire the same long-termism in would-be home buyers that is considered desirable in business". In what would be a fast and flexible world without distorting policy making, the apparent problem of "short-termism" would be an irrelevant myth and not an evil perpetuated to justify more policies. What is short-termism anyway? These days, in the short term, we are all dead." (BUCKINGHAM, 8/6/95). These days the long term is the next ten minutes. The world is changing so fast that long term commitments such as 20 year mortgages are inevitably hazardous for the prosperity of individuals. Short termism, seen as avoiding irreversible commitments is a good thing! Renting homes may be "dead money" when compared to paying back a mortgage, but better that than a dead person!

 

Another tendency in a world dominated by transnationals is so-called "uneven development", the claim that the economic system tends to produce under-development as well as development, and poverty as well as wealth. A typical strategizing world view (HYMER 1972) attempts to explain uneven development using an approach with three stages. Firstly, the development in the internal structure of the firm, secondly, the accompanying changes in management activities, and finally, how the organization of the transnational is linked to the organization of the world economy. Firms are described as having developed in three stages, from small factory firms to firms based on functions to firms with multiple divisions based on products. The divisional firm facilitated the addition or sale of semi-independent divisions with little disruption to other areas of the company. This removed the constraints of organization and control on geographical expansion. Parallel to the evolution in the internal structure of the firm has been an evolution in the activities that the firm’s management undertake. In small factory firms a single entrepreneur made all tactical, operational and strategic decisions. In the functional firm strategic decisions were separated and made by a head office that coordinated and controlled the functions. Tactical and operational decisions were made within the functions themselves. This evolution continued in the divisional firm with strategic decisions made by a general office that oversaw the head offices, operational decisions made within the head  offices,  and tactical decisions within the divisions.

 

From an economizing point of view (WILLIAMSON), the divisional firm evolved as a result of two problems. Firstly, managers exhibit bounded rationality which limits their ability to understand the complexity of the organization's diverse activities. Because of management's limited cognitive capacity, strategic decisions were separated from operational ones. The second driver behind the development of the divisional firm is opportunism; the pursuit of sub-goals by strategizing employees attempting to secure more resources than their real work would warrant. The strategic decisions are separated to safeguard the resource allocation process. The divisional firm is seen as an economizing response to strategizing behavior and not to facilitate game playing by top management. (MOORE, 1992).

 

Strategizers take their argument further by claiming that the structure of the world economy mirrors the structure of the divisionalized firm. (HYMER, 1979). Production activities are spread around the world depending on the availability of production inputs such as labor and raw materials and the market the production can serve. Operational decisions are however more geographically concentrated because they require more skilled workers with access to decision support services such as technology and communications infrastructure. These operational decisions tend to be made in large regional cities such as Hong Kong, and many transnationals will locate in these cities to gain access to these services. Production location decisions are strategic decisions that the game-playing directors make according to the relative attraction for achieving their personal goals. Strategic decision making will be concentrated in few locations, mainly world capitals such as London, Tokyo and New York, proximate to the government, media and capital markets. This uneven development will be further increased by the fact that the major centers will attract the best professionals such as doctors and lawyers. The structure of income and consumption across the world will therefore reflect the corporate hierarchy. The important thing is that a few strategic decision makers at the top of the organizational hierarchy control the location of all of these activities. Strategizers (COWLING 1991) therefore describe economies dominated by transnationals as subject to simultaneous centralization  of strategic decision making and decentralization of production. Shifts in the location of production do not imply a relocation of strategic decision making. Production moves from developed  countries to less developed countries in the course of economic development as and when free trade allows such movement.

 

Strategizers (COWLING AND SUGDEN 1994) refute the criticism that this world view is too simplistic given the complex markets in today’s ever more unorganized world. They admit that various transnationals produce in various ways and that not all transnationals divide their decision making in such a clear cut way. They view organizational forms such as stand-alone affiliates that carry out many functions for themselves as consistent with strategizing because the strategic functions such as corporate finance are controlled and carried out by the headquarters. Complex integration strategies where some functions are centralized and others decentralized from the transnational's headquarters are similarly explained. Strategizers view flexible specialization merely as part of long-term development of transnationals in which they are continuously reorganized to suit the strategic decision maker's objectives. Flexible specialization entails firms appearing to replicate themselves as autonomous but interrelated firms, along with a reintegration of decision conception and execution. A few strategizers according to their own goals control the location of all of these production activities.

 

 

Transnationals must economize

 

Economizers (BARTLETT AND GHOSHAL 1989) refute this argument by arguing that centralized decision making is problematic. When decision making is centralized and the sole overriding remit of top managers, problems arise the unorganized world. With centralization, the firm’s headquarters is responsible for making the strategic decisions that the subsidiary then adapts to the local environment and implements. But this substantially limits the effectiveness of the transnational as it attempts to impose inflexible decision making processes in diverse and changeable external environments. Complex strategic demands are broken down into simplistic central and local components. By casting national operations as implementors and adaptors of global directives, with directors formulating the strategies grossly under-utilizes the transnational's human assets.

 

This is not sustainable over time because those transnationals that manage their operations in an economizing way perform better than the strategizers by fully utilizing the capabilities of all of their employees around  the world. In the medium-term, the position of the strategizers will be precarious and its ability to make self-centered decisions will be severely restricted. Again we see  that economy is the best strategy. In the unorganized world, strategizing management will be forced by competition to decentralize the transnational's strategic decision making. They will have to give more responsibility and influence to employees around the world. This will be beneficial to these individual’s development, the development of the local economy and the transnational's development. Extended periods of strategizing will cause employees to leave to join or set up economizing firms and the likely removal of the strategizers from their top management positions as shareholders become dissatisfied with the transnational's poor relative performance. The contention that strategizers retain control despite the decentralization of their company’s operations is incorrect because the directors have no choice but to cede increasingly more of their central control in order not to lose all of it.

 

This is a step in the right economizing direction for organizational forms. Hierarchy is simply not sustainable given the external environment and customer and competitor trends. I am able to oppose hierarchies and yet support transnationals because the diversity and complexity of world-wide operations erodes the effectiveness of hierarchical organization. This chapter has argued that the world economy has unorganized and transnationals have rightly changed their structures to keep up with these changes. The transnational's "aim is to pit all the company's resources, wherever they are, against its competitors. That means not only moving production facilities around to benefit from the quickest brains or the cheapest hands, but also breaking down internal barriers to the free movement of people and, particularly, of ideas. The "multicultural multinational", as some are calling this new animal, is based on two ideas about modern business life. First, that innovation is the key to success. An organization that relies on one culture for its ideas and treats foreign subsidiaries as dumb production-colonies might as well hire subcontractors. Second, that technology is slowly making the world seem smaller. It is now possible for software writers in Bangalore and Palo Alto to work together on programs, even if the programs then have to be specially tailored for local markets." (ECONOMIST, 30/07/94).

 

The way that the organization of transnationals has evolved is positive. However, I do not believe that these trends have yet gone far enough. As we will read in the coming sections, organizations are still too hierarchical and top managers do still dominate the activities of their direct employees far too much. However, as new technologies are widely applied by organizations and individuals, the decentralization of management decisions will continue in the form of "downstructuring" and the very nature of organizational structures will change and become "collapsible corporations". The fundamental reason for this change is that it is necessary to improve the work environment of individuals and the performance (and therefore profitability of firms). This is possible because of the falling transaction costs of using the market rather than firms to organize economic activities as applications of technologies such as electronic agents take over much of the burden of organizing economic activities.

 

I will now discuss the effectiveness of governments setting industrial policies in the unorganized world.

 

 

Industrial policy

 

Given the complications in setting policy because of the increasing bounded rationality in the increasingly unorganized world, policy strategizers (COWLING 1990) have started to call for government planning within the market system. (Planning alone having failed in communist systems, socialists now reluctantly admit markets have a role). They say that neither extreme should be pursued, but instead the free market system should be supplemented by government planning. Planning and markets are considered to be complements and not substitutes. Both governments and markets have an appropriate role to play. Government planning should be limited to the strategic oversight of a limited array of key strategic industries. No operational intervention should occur and government would not oversee many industries.

 

Strategizers use the example of Japan as an important example of success of taking a developmental approach to industrial policy. They explain Japan's previous economic success in policy making terms, such as predatory price techniques, distribution systems, "cultural" factors, industrial policy and the like. Economizers attribute it to the rigorous pursuit of efficiency (WILLIAMSON, 1994). For example, Japanese lean production techniques have been explained as an attempt to shorten the time between the company receiving an order and receiving payment for that order. This time is reduced by eliminating non-value adding wastes, including work that adds no benefit to the end customer service or product (OHNO, 1988). The general requirement for downstructuring does of course extend to the organizational structure of Japanese firms (as with all firms) which incorporate defunct characteristics such as lifetime employment, rigid hierarchical structures and very limited advancement opportunities for young women. Once recruited into a company, employees are heavily socialized and have scant opportunity to ever change firms.

 

In Japan, government ministries, predominantly the Ministry of International Trade and Industry (MITI) targets certain key economic sectors after wide-ranging consultation with industry. Japanese industrial policy has long featured a consensus approach to policy making in which the people who make the strategic decisions was broadened slightly to include civil servants, politicians and industrialists. There is also close cooperation between government and industry, however the government's role is limited to issuing paternalistic advice and guidance to Japanese firms. Instead of encouraging competition, the Japanese policy makers foster a balance between competition and oligopoly (an industry with a handful of dominant firms) that is appropriate to ensure competition is not excessive and firms are of sufficient size to incorporate advanced technology. MITI set up so-called deliberation councils that are said to have a greater capability for dispassionate analysis of strategy options than the involved firms themselves. Additionally, MITI undertakes proactive research of trends to prepare the economy to meet problems or opportunities before they arise or pass by. Policy strategizers therefore conclude that the success of the Japanese economy could not have been achieved without the government's role in developmental industrial policy.

 

Economizers such as SCHULTZE 1983 have argued that there is no reason to think that MITI's influence, on balance, improved industry location decisions in any way. It is likely that the high quality of Japanese management would have meant that firms would have made similar decisions as MITI did. All the government would have to do is create a favorable investment climate by removing entry and exit barriers to industries. It is unlikely that public sector personnel; even if hired from the private sector, are better able to plan than private entrepreneurs motivated by the incentive of personal profit. These entrepreneurs have specialized knowledge about products, markets, customers and competitors, rather than simply research information.

 

As the Japanese economy has become more diverse and developed and relatively open to free trade and capital flows, MITI's policies have proven less successful. It did not foresee the importance of strategic industries such as robotics and prevented restructuring in the petrochemical industry, organizing it as a cartel and thereby increasing industry costs. Governments cannot play an interventionist role in developed and complex economies because they do not have the resources to intervene in all industries. Selective interventions are inevitably distorting towards targeted sectors because they cannot account and plan for the diverse opportunities and developments faced by firms in the unorganized world. For example, economizers see little scope for industrial policy to solve the issues that the Japanese economy will face in the unorganized world of the twenty-first century such as the reluctance of its workers to take holidays. (COPPLESTONE, 1995).

 

To its credit, MITI has recognized that Japanese industrial policy has been too planned and regulatory for developed economies. The 1995 MITI white paper on trade called for the economic system to be adjusted to incorporate market mechanisms more fully; thereby reducing the level of government planning. Otherwise Japan will fall behind in world-wide economic development. Only drastic deregulation will allow Japan to compete successfully, because regulations and lack of competition caused a high cost structure and kept prices high. At least Japan has begun to refrain from policy making, unlike Germany, another large and successful economy not configured for the twenty-first century. Importantly, the MITI white paper concludes that "It is necessary to recognize that Japan's economic system, which has supported our past economic growth, is no longer able to adapt to the changing international environment." (NAKAMOTO, 22/05/95).

 

I agree with KRUGMAN’s assertion in "The Myth of Asia’s Miracle" that output (economic growth) has increased primarily due to an increase in inputs such as new infrastructure including roads and buildings. Economic efficiency comes from an increase in output per unit of input. (KRUGMAN, 1996). This has not occurred to any great extent. When I was over in China at the end of 1995 I saw this for myself. I took the ferry from Hong Kong to Zhuhai, a special economic zone near Hong Kong. The main road out of the ferry port was brand new and had several lanes. However, there was no traffic using the infrastructure- apart from a few bicycles. I went into shops in the streets adjacent to that main road and the proprietors slept on beds in the corner. They looked surprised to see me when they woke up, and not just because I was a Westerner, but I don’t think they expected any customers. Similarly, I was driven on the main road between Guangdong and Shenzen on the brand new motorway but none of the locals could afford the road tolls and we were the only vehicle early that morning. Indeed, all of the road lights were switched off because the electricity could not be afforded. There is very little point in having buildings if there is no business going on there. Once again, business is important and not busyness!!

 

In fact, Asian and European economies need to follow a similar path. For example, when answering calls for a larger welfare state in general, and pensions in particular, Asian people should bear in mind the sorry state that similar Western measures have brought about, as the state role has widened and deepened. The key to sustained Asian economic growth is an approach that emphasizes individuals exercising self-discipline, self-reliance and self-employment. However, these individuals are nonetheless linked by technologies to companies and families as a context for achieving and celebrating their success. The East must avoid following the West's development route: instead of going from individual to institutional supports as the West did, they should go from institutional supports (such as industrial policy) to individuals. The West needs follow the same process: shifting focus from institutions to individuals. In other words, irrespective of the past, every country should be following the same development route, because the world is open and interrelated and differences are becoming mere distinctions in the globalized economy.

 

Governments should not adopt a direct policy approach such as that taken by Japan which involves targeting key industries and managing transition across sectors as the economy develops. Targeting is sub-optimal due to the information and incentive constraints faced by the public sector (BURTON 1983). Public sector institutions do not have the level of specialist information or the profit motive required to innovate (develop products and services that better meet the user’s needs). Economizers (BURTON) define industrial policy as government interference in the process of economic development. An economy develops from enterprise experimentation with innovations in emerging industries couple with retrenchment in mature industry sectors. This process combines experimentation by new firms in new industries with retrenchment in declining sectors. Economizers view government policy aimed at managing the transition between economic sectors as the economy develops as damaging. Government intervention prevents the process of economic evolution from occurring smoothly. Hierarchies, trade unions and government policy interventions prevent flexible responses to external economic changes. BURTON recommends that economic evolution is encouraged through increased competition from the deregulation of product and labor markets and the removal of government imposed entry barriers. In doing so, all governments should do is honor any undertakings previously made to existing investors concerning the time frame in which further competition will be introduced, because this is honest behavior.

 

Transnationals will oppose any policy measures that reduce their ability to pursue their efficiency objectives in an economizing way. Policy interventions to prevent the redistribution of production may actually encourage it if transnationals respond by locating new production elsewhere. It is this institutional baggage that causes economic problems, and not the existence of such problems which justifies such institutional baggage, including industrial policy. Indeed, industrial policies concerned with promoting dynamic economic development actually hinder economic evolution by attempting to directly develop the economy.

 

Governments should not therefore policy make but instead remove the barriers to an efficient economic evolution process as economies develop. An example of a move, albeit gradual, towards a less interventionist policy stance is the 1994 European Union Industrial Competitiveness Policy which abandoned the selection of national champions and protection of industry sectors. Instead it adopted measures such as increased competition and a streamlined role for public authorities. For example, the lengthy drug approval process was to be improved in key industries such as biotechnology. Firms making sound commercial decisions to undertake research and technology may still miss market opportunities because of the licensing bureaucracy. (EU, 1994). This policy is a positive move away from direct support for the key biotechnology sector to the removal of barriers to market success for private sector biotechnology companies. The EU's objective is to make its member states an attractive location for the development of such technologies, while protecting the environment and the public's health. Do not misinterpret my support for EU policy, the person responsible for it has the title "Head of Unit, Competitiveness and general questions of industrial policy". A precarious strategizing title and role if ever I heard one!

 

Conclusions

The unorganized world is smaller, more diverse, more global, more connected than ever. You will go to more places and more diverse people will populate your places. This presents unprecedented opportunities for wealth creation and sheer enjoyment of the color and diversity of the people and places on this wonderful planet. Whether you see it as such, and so thrive in it, depends upon your ability to abolish the orderly static organized notions of outmoded constructs such as nations, protectionism and adopt positive and open-minded attitudes about people. Enjoy the unorganized world!

 

Feedback

Feel free to email Simon Buckingham, the author of this book at simon@unorgan.com with comments and queries. Every week new articles about "unorganization" are published on the www.unorgan.com web site, which already contains a great deal of additional relevant information.

 

Bibliography

 

Listed below are the author, title, publication and year of publication for all of the sources quoted in "Unorganization: The Global Handbook". Please note that the section called "Books" on the front page of www.unorgan.com reviews many of these books and many others that of interest to you.

 

 

Anchordoguy, Mastering the market: Japanese government targeting of the computer industry, In Industrial Organisation, 1988.

 

Bailey, Harte and Sugden, Making Transnationals accountable: A significant step for Britain, 1994.

 

Barber L, Opportunity for fine-tuning, FT, 10/05/95.

 

Barber L, Hopes of wider union turn to fear of no union, FT, 9/12/94.

 

Barsoux, Start slow, end fast, FT, 8/7/94.

 

Bartlett and Ghoshal, Managing across borders: The transnational solution, 1989.

 

Bradley S, Hausman J and Nolan R, Globalization, Technology, and Competition, 1993.

 

Brittan S, Time to bury those league tables, FT, 25/05/95.

 

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