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Launched on 2 November 2003, Philosophy for Business is an e-journal published by the International Society for Philosophers, looking at philosophical and ethical aspects of business practice.

We are aiming for a wide circulation to companies and corporations around the world, as well as academic philosophers.

In order to gain the widest possible readership, articles should be written in simple, non-technical language. The target length is 2500 words.

Some themes that we will be looking at:

   Globalization and monopoly
   Is business ethics possible?
   Philosophy of economics
   Practical ethics
   Idea of a code of conduct
   Freedom of speech
   Industrial democracy
   Whistle blowing
   Ecology and sustainability
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Geoffrey Klempner

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EDITORS

Daniel Silvermintz
Silvermintz@uhcl.edu

Tom C. Veblen
SuperBizRT@aol.com

Marco Senatore
marco.senatore@tesoro.it

Peter S Borkowski
p.borkowski@aui.ma

Dena Hurst
dena.hurst@appa.edu

Sean Jasso
sean.jasso@pepperdine.edu





International Society for Philosophers
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P H I L O S O P H Y   F O R   B U S I N E S S           ISSN 2043-0736
http://www.isfp.co.uk/businesspathways/

Issue number 12
27th September 2004

CONTENTS

I. 'Pragmatic Leadership: A candidate for supervision and management approach'
    by Ovidiu Gherghe

II. 'Ethical Personality' by Rachel Browne

III. 'Germanising Globalisation - Assessing the impact of globalisation on
    German business' by Angela Richards

-=-

EDITOR'S NOTE

Taking a lesson from the example of legal pragmatism, Pathways Moral Philosophy
student Ovidiu Gherghe observes that the pragmatic manager is one who is not
hung up on applying any particular 'theory'; one who continually learns from
the past and adapts his/ her approach accordingly; who sees no value in being
consistent 'at all costs'; and who is capable of taking in the the management
situation as a whole.

Rachel Browne cleverly contrasts the idea of a company 'credo' or written
ethical code with recent scientific research on a hormone which is claimed to
increase the tendency towards ethical behavior. A third alternative, which she
advocates, is that employees and managers alike should learn to do the
psychological work of developing good ethical relations, without relying on the
support of an external prop. 

The long social partnership between German business and the German work force -
preserved by stringent legislation - owes its survival to the policy of the
Allies after the defeat of Germany in 1945. The idea was that workers who were
sufficiently contented in their lot would be less tempted to embrace Communism.
PhD candidate Angela Richards in her complex and challenging article, describes
how, in the face of globalisation and the demands of a freer labour market,
Germany is looking for a middle way, which preserves as much as possible of the
structures which in the past guaranteed a loyal and committed work force. 

Geoffrey Klempner

-=-

I. 'PRAGMATIC LEADERSHIP: A CANDIDATE FOR SUPERVISION AND MANAGEMENT APPROACH'
BY OVIDIU GHERGHE

Abstract: The study of pragmatic philosophy can turn out to be very
useful when the focusing lens turns on itself for answers. My intent in this
article is to extract useful guiding principles from one field of study and
apply it to a new area of investigation. Such pragmatic method would attempt to
show how interdisciplinary applications should be encouraged. Beginning from a
pragmatic perspective in the field of law, I will take some basic expert
guidelines and investigate them by projecting them into the study of
management principles. By this correlation, I am trying to highlight the
advantages of pragmatic leadership evolving as a very effective
tool and its incline towards social balance. Finally, I am interested in
highlighting the grain of difference in terms of organizational strategy. That
said, I would like to be open-fronted about whose footprints I step in. For
those who truly want to know, that is no secret: I am searching in spirit of
the great William James and his goal of "positive" philosophy.

I

In his article What's Pragmatic About Legal Pragmatism?, [1] Davin Luban
investigates the question of relation between legal pragmatism and philosophical
pragmatism by summarizing the positions of two other major contributors: Thomas
Grey and Richard Posner. Although the study itself inclines towards disproval
of any binary opposition between the two subjects, the conclusion Luban reaches
tends to support the claim that legal and philosophic issues may have to be
looked from different perspectives. However, I would attempt to highlight the
positive application of such study by discharging the center of the debate, as
Posner points it out to be, namely a linguistic misapplication of the word
"realism." The first pragmatic suggestion is to skip over this clash. Our quest
is to follow if we can apply one set of conclusions to another field, and do so
in a philosophically pragmatic way. By skipping over the center of
debate we can concentrate on our original intent of shifting perspectives.
Since Luban is doing an investigative study in a pragmatic fashion, we are
interested into applying his conclusions to a new area of philosophical
study. Luban's focus of investigation serves as a springboard for applying his
pragmatic principles into a field that overlaps, but it is not apart from:
management inclusive of human relation principles which are efficient and
socially positive for short and long-term goals.

But first, I must anticipate a possible challenge. My mention of "skipping" and
"shifting" may be logically encountered as to be guilty of losing the validity
of the method, and of course, its outcome. It could be contested that by moving
away from the main center of the philosophical debate, one can never be sure of
any application following the summarization of pragmatic conclusions.
Therefore, such an argument may go, philosophy itself cannot be applied to
other areas. I would reply in a pragmatic fashion that the issue of whether
legal realism is opposed to pragmatic realism should
perhaps remain an active study of philosophical dialogue, just as much as other
classic and ongoing philosophical hot items (i.e freedom, equality, etc).
Applying conclusive strands of new knowledge to other areas does not lessen the
weight of the new conclusions, as pragmatic philosophy strives to improve
towards its positive goal by finding and employing useful tools. Our next step
is to list Luban's investigation findings, and prepare them for crisscrossing
into our conceptual pragmatic leadership study.

II

Luban concludes that Gray and Posner's agreed understanding of legal pragmatism
defines it as being an "eclectic, result orientated, historically
minded antiformalist." [2] Having extracted the seeds of agreement we
remain loyal to our positive approach. Luban introduces eclecticism by
employing a certain degree of doubt, a key feature to an inquisitive mind. The
philosopher would support the view that doubting has a certain central appeal
to philosophy as a whole. This pragmatic doubt is introduced through the
conclusion of eclecticism. Luban says "[t]he pragmatist mistrusts the
pretensions of totalizing Big Think theories to capture all that is important
in law." This grain of doubt is in actuality a positive outlook as it reveals
its open-ended approach. This is not the level and kind of doubt employed by
Descartes in his Meditations, nor is it something akin to Hume's
skepticism. Mistrust encourages dialogue. Luban seems to be very careful how he
is presenting his definitions, something very understandable considering the
linguistic center we discussed earlier. He follows his doubt with a statement
promoting open communication:

     "The pragmatist is willing to give every theory a hearing,
     however, and to appropriate insights from any source if
     they seem useful."

Already, our pragmatic shift can be applied in terms of effective and
positive management standards. We left behind the philosophical
forefronts of the linguistic and open debate only to clear the air for
pragmatic action. Eclecticism, therefore is a tool that seeks answers that
require a faster and more efficient solution to a task at hand. The pragmatic
leader is not concerned to denounce the expertise of those in higher positions,
i.e. the Big Thinkers, but only to move beyond abstract theory as their
decision-making process. This is a problem that has major implications to the
functioning of the overall benefit of the particular operation. Our positive
interpretation within the bounds of our managing principles would then be:
Eclecticism - the pragmatist's way of deriving ideas [3] for a task at
hand that encourages innovation, communication, effectiveness while at the same
time be justifiable from a legal parameter. Fast arriving situations requiring
efficiency in solving a certain issue is a positive beginning approach to a
pragmatic based leadership.

The second of Luban's conclusions has already been used to introduce our mini
examinations of pragmatic leadership: the fact that pragmatism is "result
orientated or instrumental." A management principle of good and
efficient action is a positive trait to be encouraged in all managed tasks, but
those involving direct human participation have an added bonus for the pragmatic
leadership method: a people positive approach. The long-term mutual benefits of
the group are being taken into short-term decision consideration of
particular and changing events. Having already established the
importance of communication, one can easily apply the model. This
instrumentalism is kept in check by our already established principles
of responsibility to social principles of fairness at a moral level. The
pragmatic leader sees tools as objects that must be devised in light of
multiple variables, a constant and gradual assessor, an evolving leader others
can find mutually stimulating; or so we hope.

Having already established our direction, we need to look at the next of
Luban's points:

     "... a pragmatist is historically minded though, oddly
     enough, this is for entirely future-directed reasons."

To consider the historical lens, means the cognitive connections between the
token-indexicals of the past with the future. Although a pragmatic leader is
inclined to arrive at the better possible solutions in a quick span of time, it
is through the requirement of the present time to make a decision.
"Historically-minded" should, in my opinion, be taken from a particular
standpoint and association with experience. The historical lens provides the
key to positive improvement, and the possibility to reach goals,
utilize resources and engage personnel. The last of Luban's criteria is that of
antiformalist inclinations. Luban says:

     

Once again, taken from its legal formulation to our practical approach to
positive management, one can see how easily the application between shifting
perspectives can be achieved. Pragmatic leadership is best practiced and
encouraged where the level of delegating responsibility allows for such
measures to be applied.

III

The possibilities for such inter-projections can be effective ways of handling,
usually minor, supervisory tasks, but as mentioned it is more efficient when
abstract tasks come into conceptual conflict with human relations and ethical
issues. This is not to forget that bottom line leadership usually aims for the
same unitary aims such as efficiency, resolution, balance and mutual harmony.
The pragmatic manager could stand against other approaches by effectively
communicating and remembering the overall task at hand is to offer the better
acceptable outcome. I hope that I was able to show how a pragmatic approach to
one problem ended up serving as a better guide to another issue. At the
beginning of this essay I talked about leaving the center issues of philosophy
aside. As promised, in true spirit of William James I would like to end with
the following window to pragmatic thought:

     variety in things?
     ... What our intellect really aims at is neither variety
     nor unity taken singly, but totality. In this, acquaintance
     with reality's diversities is as important as understanding
     their connection. Curiosity goes pari passu with the
     systemizing passion." [5]

FOOTNOTES

1. David Luban, "What's Pragmatic about Legal Pragmatism?" in The Revival of
Pragmatism: New Essays on Social Thought, Law, and Culture (Duke University
Press, 1999)
2. Ibid
3. The Oxford American Desk Dictionary and Thesaurus (Oxford
University Press, Berkeley second edition, 2001)
4. David Luban, "What's Pragmatic about Legal Pragmatism?" pg. 275
5. William James, "The One and the Many," in The Writings of William James:
A Comprehensive Edition, John J. McDermott, editor (The University of
Chicago Press, 1977)

(c) Ovidiu Gherghe 2004

E-mail: ovi1@bigfoot.com

-=-

II. 'ETHICAL PERSONALITY' BY RACHEL BROWNE

During my experience in the working world of the office, I wasn't aware of
philosophical ethics. I simply thought that there was a diversity of
personalities and some of these were very difficult and that the worst bosses
were the bullies. After many years of reading philosophical ethics, I still
feel that good ethics is a matter of well-balanced personality and that this
underlies successful human relationships.

Looking in the Financial Times, I find two very different approaches to
ethics, both new to me, and both casting doubt on the idea that personality has
a place in ethics. One source is psychological science, the other business
policy.

The first of the FT articles in (FT Magazine, Aug 28 2004) is on trust. The
writer is a professor of psychiatry. Trust is an ethical concept and held to
lie at the heart of good human relationships. The second article in the (FT,
Aug 31 2004) is on the "Credo" of Johnson & Johnson Inc. This Credo goes beyond
the code of conduct ordinarily employed by companies in that it is highly
explicit in the formation of a hierarchy in respect to the company's
responsibilities to others.

The J&J credo expresses ethical decisions already made on the importance of
groups of people. This is a form of practical ethics which categorises
stakeholders and ignores the individual: Personality is irrelevant. But here I
question whether the Credo can actually influence and improve a boss's
behaviour.

Firstly, though, an outline of the Credo.

The J&J Credo is, on the whole, extraordinary. It is not clear what the
underlying principles are and there is no theory to support it, although it is
known to have been established by the founder. The credo asserts a hierarchy of
responsibility. Firstly, responsibility is to "doctors, nurses and patients, to
mothers and fathers and all those who use our products". Secondly duty is to
suppliers and distributors. Thirdly duty is to employees; fourthly it is to
communities. Finally, it is to stockholders. (Why do J&J have a duty to
strangers as long as they are mothers or fathers before employees and
stockholders? Why aren't mothers and fathers subsumed under the category of
"the community"? Why not mention the mentally ill, the depressed? Perhaps these
are some of the unmentionable in the first category who are simply said to "use
the products"? To name them wouldn't look good - it isn't attractive to name
the truly vulnerable.)

What are the responsibilities that J&J holds towards it's employees? A
company employee makes this slightly more explicit when he is quoted as saying
"the credo says we should treat employees with respect and dignity".

According to the FT article the credo is the first thing you see on entering a
building of J&J. It could inspire confidence and trust in the company.
(Of course, it might cause a person to stand in front of it for hours trying to
figure out the reasoning behind it.) It could inspire confidence in
employees that they will be decently treated. But the bosses themselves are not
asserting the Credo. It has been written for them to follow. The question is how
are the bosses to do this and can the Credo actually make a difference.

From the employees' point of view, will the Credo be of any comfort? Given that
the Credo is an assertion, can assertions inspire trust? Not according to
research reported by Raj Persaud, professor and psychiatrist. Persaud reports
that Paul Andrews of the University of Mexico has found 'that no-one would want
to enter a personal or business relationship with a person they felt totally
unable "to read"'. The stress here is on "person" rather than "written credo".
Persaud reports research that shows that in our inter-personal relationships we
want to be trusted and to be able to trust others. Interestingly, a survey has
found that in a religious society there is less trust than in a non-religious
society. According to Persaud, Steve Knack of the World Bank's Development
Research Group has suggested that "if you find you cannot rely on your fellow
human being, the deep human need for trust is turned instead towards a higher
power": Or perhaps the written canon, the Credo or the code.

But the pertinent point in Persaud's article is that perhaps a company doesn't
need the Credo and the code of business ethics. Persaud reports that research
by Paul Zak, a neuroscientist at the Center for Neuroeconomic Studies at
Claremont Graduate University shows that the hormone oxytocin is directly
related to the extent we are willing and able to trust another person. Perhaps
hormonal stimulation will eventually lead to ethical behaviours. If a hormone
is responsible for trust, physical body states will be responsible for other
ethical behaviours towards others and will explain the nature of a person's
personality.

What is interesting in contrasting these two FT articles is that the Credo is
an attempt to influence the thought of bosses in respect to their ethical
relationship to employees. However, if ethical attitudes influence thought and
decision-making and these depend on the state of the individual's physical
hormonal state, rather than being influenced by external instructions, it isn't
obvious how the Credo will work.

Being told what considerations to have in mind is not obviously going to make
any difference to behaviour. Persaud reports that "our brain's receptors for
oxytocin are confined to relatively primitive areas not linked to conscious
control, judgement or planning". This means an ethical attitude will be in
place ready to guide judgement before the judgement becomes conscious. From
reading Persaud, we might suppose that we behave according to hormone levels
rather than on conscious reasoning.

However, we can always look beyond what we discover through the FT magazine. It
might be true that we respond to others in a certain way because of the nature
of our hormones. However, this does not mean that a Credo or ethical code
cannot affect our behaviour. Cognitive scientists have discovered that
"the initiation of a voluntary act occurs unconsciously, before a
subject is aware of the wish or urge to act".[1] The cognitive scientist,
Benjamin Libet's research has found no role for consciousness in "initiating a
voluntary act".[2] Having one's responsibilities in mind while thinking about
what to do, is not what gives rise to an act.

Since we tie judgement and rationality to conscious thought, it looks as if we
don't make conscious rational judgements at all. However, importantly, Libet
also argues that there is a place for consciousness in being able to "veto" an
urge to behave in a certain way. Taking the example of trust, it looks as
though a voluntary urge towards an act which exemplifies trust (or other
ethical attitude) will be driven by the release of a hormone which can then be
vetoed by conscious consideration. So when acting on a Credo, what is needed is
the constant vigilant conscious mental attitude of vetoing one's urges. The
principles of a code or the responsibilities outlined in a Credo would have to
be consciously brought to bear in all cases of decision making and action in
all situations where they are relevant in order to veto an inappropriate urge.
It is difficult to imagine this happening.

The idea of an ethical personality doesn't seem to have any place when we think
in terms of Credos and hormones.

Ethical personality might be found in the nature of a person's conscious
vetoing activity, which is a momentary mental action. A manager who is a bully
in a J&J office (if there such a person!) will veto his urges only if he is
highly committed to the Credo and brings it to bear on all decision-making. But
what is the ethical nature of vetoing? We don't think that an ethical action
comes from a momentary mental action, but is due to the whole character of a
person which has developed over the years.

On the other hand, personality traits taken as ethical urges which are
hormonally stimulated, such as the urge to trust, seem to be capable of being
reduced to the unconscious processes that take place prior to conscious
decision, judgement and action. The problem with this is that it would make it
difficult for a person to self-consciously develop his character so that he
ceased having an urge to bullying or disrespectful behaviour, for instance. Yet
it is part of our moral thinking that people can improve their characters by
conscious inner work.

How do Johnson&Johnson actually treat their employees and can they improve
their behaviour if it falls short of the Credo? According to cognitive
psychology, if a manager has the sort of personality that leads to bullying
behaviour, he can veto his urges to such behaviour. If Persaud is right, he can
adjust his hormonal states by finding out about hormonal correlates and the
relevant stimulants. The latter method might be available one day, but is not
available to J&J at the moment. The former method is available but it isn't
obviously in human nature to constantly veto one's urges to conform to a
written Credo. It is too much to ask that a manager change his innate
personality - if there is such a thing.

But this isn't even what J&J are asking. Rather obscurely, a J&J
employee is reported as saying "The ultimate objective is not to conduct our
business in line with the credo. The credo is our strategy."

If we understand "strategy" to be long term policy, in contrast to individual
actions which might be taken to be "tactics" it is difficult to see how the
Credo is to be adopted by the individual in a concrete situation when he needs
to consciously veto his urges. Perhaps this J&J employee is aware of the
problems that the Credo faces when consideration is given to how it is to
actually work in a particular situation.

We can always hope for a future in which the understanding of hormones has
increased to such an extent that good behaviour becomes natural. If this
happens in my life-time, I might even consider going back to the office.

But what will I learn? Will it become the case that I give up thinking that
good ethical relations are a matter of balanced personality? It seems difficult
to imagine. The problem is that there is a divergence between our ordinary
conceptual thinking and the scientific. If someone trusts me to do a job
properly, I cannot think it is because of her hormones. I think that she is
trusting. If I was to think that someone was vetoing their urges in accordance
with a Credo, I wouldn't think she was well-balanced. I'd think she was putting
subservience to a company before natural human relations.

FOOTNOTES

1. Libet, B. Unconscious cerebral initiative and the role of conscious will in
voluntary action in Behavioural and Brain Sciences, 8, 529-566

2. Libet B. Timing of conscious experience, Consciousness and Cognition 12
(2003) 321-331

(c) Rachel Browne 2004

E-mail: RachelEBrowne@hotmail.com

-=-

III. 'GERMANISING GLOBALISATION - REASSESSING THE IMPACT OF GLOBALISATION ON
    GERMAN BUSINESS' BY ANGELA RICHARDS

Globalisation is indisputably one of the greatest challenges facing
business at the beginning of the 21st century. In the Anglo-Saxon world reports
abound of companies successfully downsizing, restructuring, merging, outsourcing
and off-shoring in order to out-perform their competitors in an a global world.
But a myriad of factors can constrain businesses in pursuing such strategies,
not least their national context. National laws applying to the operation of
business entities as well as cultural traditions and attitudes of workforces
often hinder companies in their efforts to pursue new commercial strategies.
Nowhere is this more the case than in Germany. While some countries have
rapidly, and seemingly successfully set to work on transforming some of their
institutions in order to become more competitive and flexible, Germany has been
(according to many) woefully slow to embrace reform. This has resulted in
widespread criticism and heated debate, both within her own borders as well as
further afield.

In 1997, one journalist commented: 'As for the Germans, it must look as though
they are in love with the status quo.'[1] Others have labelled Germany
'incapable of reform' and bemoaned Germany's declining international economic
status, with the USA and 'even' the U.K. rapidly overtaking her.[2] Recently
Norman Tebbit (referring to Britain's economic record of the 70s) said that
Germany had caught the 'British disease', whilst, in the meantime, Britain had
been reformed and transformed. The symptoms of that disease are only too
well-known, - but can Germany really be likened to Britain of the 1970s?
Is German business really in a virtual straitjacket of outdated
institutions from which only Houdini has a hope of escaping - and which
jeopardizes Germany's chances of truly embracing the free market economics
associated with globalisation?

Recently, one journalist's question seemed to touch the deeper complexity of
the problem when he asked whether it was possible for Germany to make the leap
from a 'society of consensus' to a 'society of confrontation'[3] thus implying
that Germany's long post-war record of peaceful industrial relations and strong
economic growth will inevitably have to be replaced by something less fearful of
conflict and much more in tune with the harsh new world of global capitalism.
But this essay asks whether the choice has to be quite so stark and whether
Germany could perhaps even offer some sort of synthesis of social market
economy and neo-liberal economics. The reasons why this might be the case are
complex but are rooted in the very manner in which Germany has become
associated with the notion of consensus following World War II. An exploration
of her system of industrial relations is a good starting point.

Today's industrial relations system goes back to the late 19th century - when
Germany's somewhat late industrialisation was gaining pace. Whilst it developed
further during the Weimar Republic, it was in the more recent post-war
period when it became most deeply rooted in society and took on the
characteristics which make it what it is today. During this post-war period it
was politically expedient for the Western Allies to secure the full integration
of the workforce with both the employer and the state. The establishment of
strong, legally regulated sectoral trade unions ensured this occurred, as did
co-determination, a management-employee consultancy mechanism which was also
backed up by legislation. Germany's consensual system of industrial relations
had been thus largely imposed on business so that any growing socialist
sympathies, or worse still, sympathies with the communist regime of Eastern
Europe could be minimized and would, indeed be unlikely, if workers felt there
was no true reason to become dissatisfied with their lot. The Western Allies,
in particular the U.S. were keen to promote a social, political and economic
order that was favourable to their interests - interests that had grown out of
the political exigencies of the Cold War. It was vital that Germany acted as a
capitalist bulwark against communism.[4] Germany's post-war economic order
therefore had an almost purely political basis - one that fitted in perfectly
with the security concerns of the West faced with a communist East. With the
collapse of communism however, such geo-political considerations have been
swept away - but the institutions and mentality of that era clearly remain and
are still a major influence on German business today.

Indeed, today, trade unions still successfully negotiate wage agreements for
whole sectors of industry within the framework of a Wage Agreements Act. Under
the laws of co-determination employees sit on (and may vote in) company
Supervisory Boards (one-third labour representation in the boards of companies
with 500 employees and one-half representation in the case of companies with
2000 employees). These laws also provide for the establishment of Works
Councils at shop floor level to discuss workplace issues. These particular
institutions have remained largely unchanged since the 1970s but have come
under increasing pressure to reform. They are often cited as a major reason for
Germany's failure to attract foreign investment. Indeed, globalisation demands
that companies make rapid decisions on new business strategies, strategies that
do not always have time to be put to Works Councils and which could be thwarted
by worker representatives at Supervisory Board level. But despite these obvious
disadvantages, these institutions have a long and well-respected history and are
not likely to go away overnight. Furthermore, there is evidence that Germany's
consensual style of industrial relations may even facilitate certain companies'
strategies for change rather than hinder them.

Co-determination, for example, certainly seems to have often eased rather than
hindered company restructures. This was clearly found to be the case in a study
concerning the company VEBA AG,[5] where the smooth implementation of changes
within the company were seemingly facilitated by the high level of
codetermination enjoyed by employees.[6] BMW's decision to locate a large new
production plant in Leipzig is further evidence of the positive effect that
co-determination can have in a globalising world. The BMW Works Council
(operating under the laws of co-determination) drew up an agreement with
management regarding flexible working shifts, which made the location almost as
attractive as the Czech Republic as far as labour costs were concerned. And with
the cooperation of the trade union and workers council, Adam Opel AG recently
negotiated wage decreases with its employees in order to ensure one of its
plants remained open. Both management and workers have thus repeatedly shown to
what lengths they would go to avoid confrontation and achieve consensus.

But in today's climate of the primacy of economics over politics, issues such
as the preservation of consensus and tradition often take second place. There
can be no doubt that off-shoring, out-sourcing and down-sizing have become
buzz-words of today's management consultants. Such strategies, however, have
often worked very well in the Anglo-Saxon world but are not necessarily always
so relevant, or easy to implement in Germany. Although the reasons for this are
manifold, the key to Germany's stance today lies in the way in which state,
business and workers were locked into a deliberate pattern to achieve economic
growth with the minimum of conflict. That pattern was authored and politically
sanctioned by her Western Allies. The unique business practices which grew out
of this successfully operated within a social market economy for several
decades. These have become embedded in the consciousness of German businessmen
and workers alike. Even when other economies felt virtually forced to start
dismantling their welfare systems and adopt more global strategies, Germany
looked as though it could out-ride the neo-liberal storm despite her strong
Keynesian stance.

Indeed, Streeck[7] points out that the Modell Deutschland (German
model)[8] fared well during the 1970s. Even during the 1980s, despite its
frequently being doomed to failure by mainstream economists with their growing
emphasis on unfettered free markets and deregulation, Germany almost seemed to
prove that the soziale Marktwirtschaft (social market economy)
could guarantee business profits despite the simultaneous existence of a
generous system of social benefits. The German car industry, for example, was
far more successful than its British counterpart during this period.
Furthermore, the shock of steep oil price rises a decade earlier had left
Germany somewhat shaken but relatively free of the deep industrial unrest and
high inflation experienced by other western European economies, (in particular
Britain)[9]. In fact, at the time of German unification, West Germany was
internationally the most successful of the major economies. It accounted for a
larger share in world visible exports than Japan and had about the same share
as the USA.[10] Germany had a highly trained workforce, great technological
know-how and produced high-quality, high-cost goods. Despite its much
criticised high wage costs and dependency on export markets, economic growth
continued unabated.

The ideology of free markets, however, was exercising an ever firmer grip on
the majority of world economies by the beginning of the 1990s. It was backed up
by clear political will to go the free market way on the part of the US[11] and
driven and assisted by rapid technological change and innovation. Many agree
that this shift towards neo-liberal economics and away from Keynesianism
signalled the beginning of the sometimes rather nebulous term 'globalisation'.
All of this was occurring at a time not only when Germany was carrying the
additional burden of a defunct East German economy, but when the USA and UK
were showing increasing economic dynamism and re-expansion. This meant the ever
persistent concerns about Germany's high-wage economy becoming uncompetitive
came to the fore once again, but this time with a renewed vigour, clearly
reflecting a changing and much more competitive international climate. This
climate was to have little space for the consensus which had characterised
German business for so long and which Germany had prided herself on.

Castells[12] explores the pressures that globalisation began to exert on
Germany at company level. He points out, that with businesses interacting
increasingly on a global scale, companies around the world are bound to respond
to largely similar patterns of production and competition in similar ways,
despite their having to adapt to the unique social environments in which
they operate. Such adaptation has obviously led to pressures for all
companies, regardless of where they are operating. Furthermore, links between
business and government inevitably become strained. Firstly the state is able
to facilitate free competition, and thus business, to some extent,
needs the state. On the other hand, business and government are
decoupling as never before, with business trying to wriggle free of (often)
burdensome legal restrictions which remain in place often for the benefit of
society as a whole.[13] Additionally, the state must at least appear
reformist in order not to frighten off potential foreign investment. But
certain legislation remains firmly in place in Germany and continues to have a
major impact on business. Employment law, for example. protects employees in
the area of redundancy and imposes high social security costs on business.
Hobsbawm may not have specifically been thinking of Germany when he said
'economic activities do not and cannot exist in isolation from their context
and consequence'[14] but today's Germany must represent one of the most vivid
examples of a complex 'context' where business is finding it hard to wriggle
free of the influence of the state and is unpractised in doing so.[15] Germany
is clearly an example of a country which in many respects will have to undergo
a fundamental institutional face-lift, if it is to successfully adopt a purely
free-market economic strategy. Like a face-lift, however, the painful incisions
in the form of deregulation and flexibility cause much pain and do not
necessarily guarantee success.

Globalisation is thus only slowly reversing the political order on which the
post-war Wirtschaftswunder was based. The consensus and
partnership which has characterised Germany both inside the firm,[16] (between
employer and employee), and externally, (between the state and the firm) is,
however, certainly being put to the test. Such a reversal can obviously be
viewed in different ways. Some maintain that the push to reduce traditionally
high German wage costs and lengthen working hours means the human factor is
beginning to take second place to the efficient production factor, resulting in
increasing conflict and confrontation in German industry. Others argue that such
confrontation is unavoidable - only a tightening of belts will make it possible
for business to compete on the world stage and continue to provide any wages at
all, let alone high wages. What is clearly indisputable is that economic
considerations are overriding political ones as never before. Several
changes in German company law also clearly reflect this trend.

German joint stock companies have traditionally been strongly influenced by
banks and insurance companies, not only through their considerable shareholding
but also due to the key role they play on supervisory boards. In turn,
co-operative relationships among firms have been facilitated by the
influence of banks and insurance companies on supervisory boards in the German
corporate economy. Indeed, such insider relationships were part and parcel of
German style capitalism, in which industrial production was managed carefully
over long time horizons. The short-termism of shareholder value, so commonplace
(and crucial) since the onset of 'globalisation' was relatively alien to this
world. But in the wake of German unification and globalisation Germany's
political centre recognised more and more that in order to stimulate investment
and employment something had to be done to attract investors, who were clearly
avoiding the German market due to a lack of a stock market-oriented financial
services sector. Laws have subsequently been passed by the SPD government which
have not only increased the stock market's accessibility for small and
medium-sized firms (Neuer Markt) but have favoured investment capital over bank
financing of corporations. The raising of investment in the U.S. and other
markets has also been facilitated by the Investment Facilitation Act
(Kapitalaufnahmeerleichterungsgesetz). The Second Financial Market Promotion
Act obligates German companies to publicize information affecting the price of
their shares and to abstain from insider trading.

It has certainly been the pressures of globalisation that have precipitated
such changes, which, although somewhat incremental in comparison to the swift
establishment of capital markets in the Anglo-Saxon world, are virtually
revolutionary in a country which has had such a strong network of relations
between companies and institutional investors. The old patterns of shareholding
and share trading have been perceived in Germany as part of the public interest
since 1870 and could never be easy to dismantle overnight. But the fear that
investors would simply avoid Germany if things did not change, has
resulted in at least a certain degree of reform. Viewed like this, the post-war
order certainly seems to be eroding.

Nevertheless, a complete reversal of the institutions, traditions and mentality
that have developed in Germany over the last century and which gathered
particular strength in the post-war decades may prove impossible. But this
might not necessarily spell economic doom - which so many would have us
believe. Globalising markets may not necessarily signal the end of the
old German consensus as commentators predict. Just as every other country is
adapting and moulding their current institutions to suit neo-liberal economics,
Germany is trying to do so too, but perhaps (understandably) in a much more
guarded way, for fear of losing those institutions which have proved so
successful over so many years and which have not only secured high profits for
business but also a high degree of social cohesion in society at large.

Germany has often confounded her critics by continuing to attract foreign
investment despite her high wage costs. Her lead in the areas of technology and
engineering is still contributing to her export success and this has not gone
unnoticed by many foreign investors. The availability of supremely well-trained
staff (albeit at a cost) recently influenced the company AMD in its decision to
invest in a new micro-chip factory in Dresden. This location was preferable to
alternatives such as Singapore not only because of its proximity to the highly
respected research institute at Dresden's Technical University, but also
because the county of Sachsen would provide a pool of highly-trained
specialists. Such a story is not uncommon in Germany.

Indeed, Germany's export figures still remain very strong and her productivity
is high, despite high labour costs. Even labour costs themselves have developed
in a positive way over recent years, with workers remaining relatively modest in
their wage demands, aware of the necessity to continue the social partnership
between management and employees for the sake of their very jobs. Thus the very
instruments seen as hurdles to the new economic order have, paradoxically,
proved useful in enabling Germany to rise to the global challenge.

Furthermore, German business can hardly be accused of standing still in the
globalisation race. Companies such as Lufthansa and Siemens have relocated some
of their business activities to cheaper regions of the world, with considerable
success. Moreover, thousands of new small businesses have been set up in the
'information rich' sectors, often by Germany's younger generation, who have not
been so influenced by old traditions and are perhaps more open to flexible work
practices and the demands of international capital markets. Due to their size,
such companies can often circumvent co-determination laws[17] and can change
business strategy rapidly to suit changing market demands. This 'New Economy'
is still in its infancy but is gaining ground and still draws on Germany's
historical strengths - reliability; advanced technical know-how; and the
production of high-quality goods for niche markets. These relatively young
pioneers operate comfortably in a competitive capitalist environment and they
are less likely to mourn the loss of those institutions which had more
connection to their parents than themselves. This business sector, however, is
still relatively small and certainly cannot yet be seen as representing the
future of Germany. Germany's economic prowess still lies in her more
traditional industries such as car and chemical manufacturing - as well in
those sectors characterised by medium-sized businesses such as precision
engineering. It is the current day developments in these areas that
perhaps best predict the direction that Germany is moving in. Germany is still
highly successful in the area of production of high-quality, high-cost
specialist goods and continues to achieve success in niche markets.

In post-war Germany, the harsh realities of pure free-market economics were
tempered by political concerns for decades. As a result, people became used to
thinking in political and not just economic ways, and that has proved difficult
to change since the second post-war wave of neo-liberalism, (and ultimately
globalisation) began to establish itself at the end of the 1970s. Germany is
finding it hard to throw out the post-war baby with the post-war bath water and
this is clearly not because of any virulent anti-free-market sentiments or
natural aversion to neo-liberal economics,[18] but rather because Germany has
tasted the security and consensus that a Keynesian style socially oriented
order undoubtedly brought about. Ironically, certain post-war structures are
turning out to be useful under the new economic order and in many instances
appear to give German business the much needed edge over her competitors. But
Germany is still faced with much criticism with regard to her sluggish pace of
reform and is not likely to turn into a globalisation showpiece in the near
future. Furthermore, confrontation is certainly raising its head today as
Germans take to the streets in anger over Kanzler Schroder's attempt to remove
long-term unemployment benefits - something that was guaranteed during the era
of consensus for reasons already explained. Foreign business will not view this
positively - but it will nevertheless have to admit that German business still
seems to be holding its own and continues to excel. It remains to be seen just
how much Germany can hold on to its somewhat faltering economic prowess as
globalisation bites harder.

FOOTNOTES

1. Spiegel. Arbeit, Arbeit, Arbeit. Nr.17, 21 April, 1997, p. 25. (Translated
from the German)
2. Ibid. p. 24. (Translated from the German)
3. Quoted from the Guardian in Ibid. p. 24. (Translated from the German in
Spiegel article)
4. SCHMIDT, E. Ordungsfaktor oder Gegenmacht. Die politische Rolle der
Gewerkschaften. Suhrkamp: Frankfurt am Main, 1972.
5. ZUGEHOR, R. Mitbestimmt ins Kapitalmarktzeitalter? Mitbestimmung 5/2001, p.
41.
6. Co-determination has been notoriously difficult to evaluate in terms of
company production. See ADDISON, SCHNABEL and WAGNER, The Course of Research
into the Economic consequences of German Works Councils in British Journal of
Industrial Relations, Vol 42, Nr. 2, June 2004.
7. STREECK, W. German Capitalism: Does it exist? Can it survive? in Streeck, W.
and Crouch, C. eds. Political Economy of Modern Capitalism. Sage: London 1997
8. The German Model referred to a style of social market economy which was
perceived to be so successful in the post-war period that other countries even
took steps to emulate it. The Bullock Report, eg. was commissioned by the
British government in the 1970s with the success of German industrial relations
in mind.
9. KOCH, K. The German Economy: Decline or Stability? in eds. LEWIS, D. and
MCKENZIE, J. R. P. The New Germany, University of Exeter Press: Exeter, 1995,
p. 131.
10. STREECK op. cit. p. 5.
11. GOWAN. P, The Global Gamble, Verso: London, 1999. See also STRANGE, S. The
Retreat of the State: The Diffusion of Power in the World Economy. Cambridge
University Press, New York, 1996.
12. CASTELLS M. The Rise of the Network Society Oxford: Blackwell, 1996, p. 172.
13. This encompasses anything from consumer law to legislation relating to
social insurance.
14. HOBSBAWM, E. Age of Extremes. Abacus: London, 1998, p. 571.
15. STREECK, op. cit. p. 35. It should be borne in mind, however, that
Germany's post-war economy was a capitalist market economy, even though it was
a social market economy.
16. It should be emphasized here, however, that such consensus was developed
most fully in the post-war period for political reasons, despite the operation
of a free market economy.
17. Companies of less than 5 employees are not subject to codetermination laws.
18. Kanzler Erhard was a strong proponent of free markets during the 1960s,
although he was forced to temper his policies to suit the political concerns of
the Western Allies.

(c) Angela Richards 2004

E-mail: angelarichards34@hotmail.com

-=-

III. ISFP WEB SITE GOES MULTI-LINGUAL: CALL FOR TRANSLATORS

Last week, the first German and Italian versions of the International Society
for Philosophers web site were posted on the internet.

This is work in progress. If you are a German or Italian speaker and notice any
errors, please let me know.

The German translation is by Ute Sommer, a German businesswoman living in
Turkey. The Italian translation is by Angelo Bottone, a PhD student at
University College Dublin. 

These are the first of what I hope will be many translations.

The ISFP was founded with the mission to 'teach the world to philosophize'.
With versions of the ISFP web site in different languages, we could have the
potential to reach more people around the world than any philosophy
organization has reached before.
 
Currently, there are ISFP members in 63 countries: Afghanistan, Algeria,
Argentina, Australia, Bangladesh, Belgium, Brazil, Canada, Chile, China,
Colombia, Croatia, Czech Republic, Ecuador, Eire, France, Georgia, Germany,
Great Britain, Greece, Iceland, India, Iran, Italy, Japan, Hong Kong, Lebanon,
Loma-Togo, Luxembourg, Malaysia, Maldives, Malta, Manila, Mexico, Nepal,
Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Peru, Philippines,
Poland, Portugal, Puerto Rico, Romania, Russian Federation, Sierra Leone,
Singapore, Slovenia, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Tanzania,
Thailand, Turkey, United Arab Emirates, USA, Venezuela, Vietnam.

The majority of ISFP members receive the Philosophy for Business newsletter.

If any subscriber to Philosophy for Business reading this is bi-lingual or
multi-lingual, and confident in English, then I would like to hear from you.
This is your chance to help spread the word!

Geoffrey Klempner


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