THE DEPRESSED BUSINESS CLIMATE

By Friedhelm Hengsbach

[This June 8, 2004 article is translated from the German on the World Wide Web,  http://wwwst-georgen.uni-frankfurt.de/nbi/pdf/beitrage/pers-k-txt.pdf.]


In the Gospel of Luke (Lk 12, 54-57), Jesus says to the multitudes, “When you see a cloud rising in the west, you say at once, `A shower is coming’; and so it happens. And when you see the south wind blowing, you say, `There will be scorching heat’; and it happens. You hypocrites! You know how to interpret the appearance of earth and sky, but why do you not know how to interpret the present time? And why do you not judge for yourselves what is right?”

Is the diagnosis of the economic and social situation comparable to a weather report? Does the prediction of the future of the economy and society resemble a weather forecast? The former president of the German Central Bank, Hans Tietmeyer, said several years ago that economic trends cannot be annulled by moral appeals or by parliamentary resolutions, as water cannot flow up the mountain. The bishop of Limburg, Frank Kamphaus opposed this with the remark that the system rules of the economy are not natural laws. The church, the town hall, the school and the hospital framed the village square in the middle Ages and no market could have occurred without these social institutions,

1. THE ECONOMY IN THE DEPRESSED BUSINESS CLIMATE

Viewing the economic situation like a weather situation is widespread among economic actors. One’s conduct must adapt according to whether the weather remains stable or changes. Households and businesses are forced to react to trends given to them that they presumably cannot influence.

1ST TREND: GLOBALIZATION PRESSURE

Corporate executives are not tired to pointing to the dramatic competitive pressure to which the German economy is exposed. The international wage rivalry compels businesses to massively reduce jobs in Germany. The tax competition of nation states leaves businesses no other choice than to shift the site of their production to neighboring eastern European countries. Competition and Germany’s quality as a location can only be maintained by lengthening weekly working hours, fewer days of vacation and canceling beloved holidays.

Is the globalization pressure a hard fact, a magic word or a weapon in the distribution battle? The pressure of the financial markets on European business philosophy, on the solidarian universally-financed security systems, on economic policy oriented in stability of currency and consolidation of public budgets and on businesses to cancel real investments that don’t match the yield of financial investments is certainly a hard fact. However it is also possible that “globalization” takes the rap as a symbol for everything incomprehensible after the secular turn of 1989. Pressure is exerted on dependent employees to accept work pay, working conditions with hardened mass unemployment and structural change in the international division of labor.

The German economy does not stand under an unparalleled globalization pressure. If this were true, the surpluses in exports and balance of payments would be impossible. Most foreign trade is transacted with developed industrial countries in Europe. When production is shifted, investment goods are exported. Jobs and income arise abroad. Purchasing power increases demand for German export goods. A distribution problem has to be solved, namely how the immediately affected share the increased prosperity resulting from the international division of labor.

2nd TREND: DEMOGRAPHIC DEVELOPMENT

Politicians frighten the population with the threatening picture of the demographic development as a key reason why the solidarian universally financed security systems cannot be financed any more. The rising life expectancy and the falling birth rate of Germans will diminish the geriatric quotient, the relation of the 15-65 year old population to the over 65 population from 4:1 in 2000 to 2:1 in 2040. The living generation bilks our children, a well-known population economist says.

That neither the legal pension security nor the legal public health systems suffer under a spending explosion and that the social state did not cause the hardened mass unemployment are usually ignored in the debate around financing social security systems. The chain of cause and effect runs the other way. Revenues are lost to the social systems. The discussion about the rising life expectancy and the sinking birth rate in Germany focuses public attention on a secondary arena. Firstly, life expectancy has risen and the birthrate has fallen for more than a hundred years. Secondly, they were neutralized in the past by the remarkable rate of productivity. Growth expectations, the level of employment and labor productivity decide over the economic output of a country, not the biological composition of its population. Eight farmers fed one non-farmer 100 years ago; nowadays one farmer can feed 88 non-farmers.

3rd TREND: GROWTH PREDICTIONS CORRECTED DOWNWARD

Economic experts correct the growth expectations downward. They cite stagnating domestic demand as the reason for the corrections. Its backside is a higher deficit of public budgets that is hardly avoidable. The adjustment of political decision-makers to this trend described by the experts amounts to saving, cutting and canceling public spending, particularly for social security and personnel in administration, education and health care. This reaction results from the Maastricht-criteria of the European Stability pact, it is said, that allows no other choice.

How the weak domestic demand can be revived through a pro-cyclical budgetary policy is hard to understand. Foreign demand will certainly affect the domestic markets. However the reduction of public demand is not acceptable as long as a depressed mood lies over private consumption and businesses are not inclined to make real net-investments. Public contracts give a stronger thrust to the domestic investment – and consumption dynamic than foreign investments alone…

Trend explanations are often misguided and risky. A supposedly unequivocal course of the trend is presented… To justify the so-called reform policy of Agenda 2010, vague philosophical-historical mega-trends try to describe an alleged causal motor of economic, technological or biological change… Trend theories are “great narratives.” Even if they plausibly explain biological, technical, and economic connections, they are too wide-meshed for social relations and for interactions between economic, social and political systems. They resemble weather reports and allow only one-dimensional reactions. On account of theoretical and practical scarcity, they offer no orientations that could be creatively interpreted and appropriated in action. In the following two orientations, the synthetic view and focus on the human future will be stressed as answers to the question about the future course.

2. THE SYNTHETIC VIEW

Regaining the synthetic view can be illustrated in the reversal of five contrasting examples.

1st EXAMPLE: MISGUIDED AGENDA 2010

The business climate has deteriorated again according to a report from the Munich if-Institute. The skeptical, resigned and depressed mood has not melted away through the Agenda but has hardened. What has gone wrong in the Agenda process?

Different commissions chosen for specific partial problems discussed the economic and social problems. There were reform commissions on federalism and sustainability, on population development, pension schemes, health reform and reducing subsidies. The great practical competence of the commission members who presented remarkable partial diagnoses and partial solutions is undeniable. However very different building blocks were brought together for the architecture of the Agenda. Considerable contradictions occur. For example, the dictate of saving, cutting and canceling strangles public and private demand. Lengthening working hours in civil service increases unemployment. Lowering the legal pension level leads to a heightened saving inclination of contributors without stimulating consumption. Higher consumption taxes and communal fees thwart the expectations tied to the tax reform. The co-payments for medicines and practice fees make a switchyard of public and private insurances out of the promise to stabilize social contributions.

The free choice of insurances and the competition of health insurances have effects that must be deactivated through structural adjustment of risks. The tax reform leaves the state poorer and wears out the public infrastructure until it is ready for the scrap heap.

2nd EXAMPLE: THE MICRO-VIEW

The micro-view sees the social environment exclusively from the personal perspective of the individual economic subject, the individual household or the individual enterprise. On account of exaggerated freedom pathos, individual persons are stylized as sovereign subjects of action who completely realize their projects and totally grasp the consequences of their actions. Systemic feedback that produce the opposite of what was originally intended are rated as external, independent variables. They are reinterpreted into magic formulas with irritating effects since the explanatory connection is hidden behind a veil and triggers a magical paralysis of acting persons.

The micro-view seduces interpreting hardened mass unemployment as a consequence of individual failure. The work capacity and work readiness of the unemployed is too weak. The number of unemployed will decrease if the placement agents of the Federal Labor Office accelerate their work.

The micro-view can appear in company or individual economic arguments. An individual entrepreneur is understandably unwilling when the bank refuses an advance credit or the sales markets are taken away. In this situation, he often criticizes excessive taxes, wages and non-wage labor costs. He fears shriveling profits as soon as co-workers demand higher wages. He sees collective wage agreements as obstacles and expects an economic upswing and more economic dynamic from longer working hours without wage bonuses. When all entrepreneurs pre4ss to lower costs, especially wage costs, demand for goods whose sales constitute the enterprise’s source of profit shrivels with a temporal delay. Keynes described this macro-economic feedback of an entrepreneurial micro-view as a cinema disaster.

3rd EXAMPLE: ISOLATED FINANCIAL MARKETS

The dream of boundless economic growth spread in the United States at the beginning of the 1990s. This dream was nourished by the driving forces of information- and communication technology, a high investment propensity of business, a credit-financed private demand and above all the combination of young dynamic entrepreneurs, new technologies and elastic capital markets.

Short-term subjective moods of economic subjects produced flighty price fluctuations on the securities markets and heated up the speculative stock market games. Theatrically gifted young entrepreneurs promise the blueness of the sky while naïve starry-eyed capital owners enter this game and force up capital market yields without keeping abreast of long-term businesses with their profit expectations realized from real investments.

4th EXAMPLE: HEGEMONY OF THE MARKET

Modern society has functionally differentiated itself in certain partial planes and abandoned reasonable forms of control Economic areas are assigned to the anonymous control of the market, money and competition, political power and the solidarian regulation of social risks. Would it be wise to leave partnerships to the control of money instead of love? Should the control of law in civil society or scientific reasoning be replaced with free enterprise competition? Partial spheres and society’s stability would suffer if the control of one sphere penetrates and subjugates other spheres like a foreign power.

A similar absurdity occurs when states, territories and communities are exposed to a free enterprise competition and hospitals, schools and public institutions arrange market games although the goods represents claims to basic rights. A public-private partnership in organizing the supply and demand of these goods would be much more reasonable.

5th EXAMPLE: THE OTHER SIDE OF THE COIN

In their last expert opinion, the council of experts described the situation of the world economy as follows: the crash of world trade and world production at the end of 2000, the gradual economic revival in the United States as the motor of the global economy, China’s extraordinary growth dynamic, recovery in Japan and considerable growth rates of several marginal European countries. Then the attention of the council of exper4ts turned to Germany. On one hand, they emphasize the high export demand from the intense worldwide economic interconnection and on the other hand the stagnating domestic demand described as structurally conditioned.

The structural explanation must often take the rap for what is overlooked (or one-sidedly filtered out) in models of explanation of those structures affecting labor as a production factor, the labor market, the collective representation of interests of dependent employees and employees’ solidarian systems, namely high income tax and fees, high wage settlements, exaggerated unemployment assistance and income support, inflexible industry-wide collective wage agreements, excessive protective rules and an inefficient public health system.

Other structural ruptures are easily ignored although they are not less important – the polarized income- and assets-distribution, the continuously weakened negotiating position of employees, unequal access to working conditions or capital income for insuring against social risks in a solidarian way and the violation of the golden rule of growth for many years. This rule says that profits from short-term financial investments should be less than the profits from real investments.

The other side of the coin relies on four insights. (1) A self-supporting dynamic of domestic investment- and consumer demand needs more autonomous private and public thrust than foreign investment. (2) Entrepreneurs who satisfy the vital needs of people through production and sales of goods deserve greater recognition than managers fixated on the company value so that the stock price is forced up. The interests of shareholders alone are served. (3) The states of the European Union should start an offensive investment program for the ecological conversion of the transportation system, energy production, agriculture and the chemical industry without being chained by the monetary and fiscal Maastricht criteria. (4) Communities should modernize the public infrastructure by giving contracts to private businesses that are financed by public funds.

3. THE HUMAN FACTOR

In the last chapter, the synthetic view of the business emerged from the narrow micro-economic and operational angle and included the macro-economic and social dimensions of entrepreneurial conduct and decisions. In this chapter, the work capacity of co-workers will be emphasized as the most precious resource of a business. What persons are needed? This question should be answered for three types of businesses.

1st BUSINESS TYPE: ON THE THRESHOLD TO THE SERVICE SOCIETY

The developed industrial countries stand at a turning point as agricultural societies faced a turning point 150 years ago. At that time 80% of the employed population were engaged in agriculture; today 2-4% are in agriculture.

The number of people in Western Europe enjoying a considerable material prosperity has grown. They strive for vital needs, for more quality of life and environmental quality, health, (musical) training, leisure time organization and culture, not for more material goods. New markets could open up in the future in person-oriented services. Industry, export and corporations alone will not produce full employment any more. Banks, insurances, trains, the postal service as well as businesses founded on the development of new information and communication technology are part of the service society and subject to a similar productivity pressure as industry. Businesses in the so-called knowledge society do not guarantee more employment as long as the knowledge embodied in the co-workers can be appropriated by the corporate elites without rewarding the original actors.

Since person-oriented service markets are opened up, businesses beyond the threshold of the industrial society are interested in employees with cognitive, practical and communicative abilities.

Cognitive competence includes abilities and skills in grasping data and information. This goes beyond the mere collection of information and data. Is the sorting of information a cognitive competence? Information must become knowledge and discovery. The distance of the perceiving subject to the perceived object, the power of discernment, is vital. The cognitive competence of co-workers includes judgment about what is important and unimportant, what is necessary, useful and welcome, that is common sense. In addition, discernment decides what is helpful and harmful, what is good and bad, what is just and unjust. The terms seeing and observing can seductively transport people into a neutral observer role. One only sees rightly with the heart. All knowledge remains superficial without personal engagement and binding opinions. Ability and skill in processing technical and economic knowledge is also part of cognitive competence. Finally, this competence includes a synthetic capacity to grasp technical, operational and economic connections as a unity and to creatively interpret a concrete situation drawing on a stored knowledge.

Practical competence means active knowledge. It includes instrumental, strategic and organizational abilities and skills in dealing with technical systems, market opening, gaining customers and creatively guiding work processes.

Communicative competence is team capacity, readiness for cooperation, linguistic ability, openness and interest in co-workers and strangers.

In contrast to the routine worker, the copyist of identical work processes and the simple, poorly paid services in the home and public institutions, the “knowledge worker,” often turns up in the euphoric descriptions of the new economy since the conventional forms and organizations of work are changed. He can recognize and solve problems and autonomously organize the work sequences and working hours as an entrepreneur of his own labor power. The “knowledge worker” internalizes the role of the entrepreneur exposed to market risk and identifies co0mpletely with his information- and communication work. Characteristic features of cognitive competence are projected in knowledge workers.

2nd BUSINESS TYPE: CIVIL-SOCIETY ACTOR

For 20 or 30 years, an increasing individualization and subjectivization has characterized developed industrialized societies. Women are not the only ones severed from conventional bonds of class, confession and family who strive for a self-determined life, an unmistakable identity and independent life projects. They partly succeed in realizing these designs against economic and political pressure.

Modern businesses in Europe understand themselves as elements of civil society and civil actors, not only as economic complexes or assets in the hands of shareholders. The responsibility that they assume is recognized and acknowledged under the term Corporate Citizenship in the General Public. This responsibility includes a broad spectrum of individual commitment, promises of sustainable economies and global engagement. For example, business leaders work for a week in a senior citizens’ home, live in a homeless shelter and accompany a supervised housing project for youths. Personal competence, working hours and funds are made available for social and cultural initiatives in which co-workers of businesses are engaged and assume sponsorships… Entrepreneurs say they want to devote attention to health protection on the job, respect the well-being of customers and clients and emphasize social development.

Businesses that understand themselves as civil actors are interested in co-workers who understand themselves as come-of-age subjects, living beings and sexual creatures.

The competence of come-of-age existence, the autonomy of the subject “able to tell his own story,” is one of the most precious resources that a business can gain.

The competence of inter-subjectivity and the capacity for partnership may appear as an anti-interest from the view of the business. The euphoria of the dynamic young entrepreneurs of the “new economy” to whom the border between gainful work and life was troublesome sounds more business friendly. However in the modern labor contract that superseded slavery and serfdom, the ends of dependent employees that have no price are respected in that the contract emphasizes the scarce asset “labor power,” not the person. This dividing line between dependent paid work and private self-determination, between work and life is not merely an additional cost-factor of business. The greater distance to everyday gainful work also promises an unexpected gain in creativity for the business.

Ecological competence means firstly sensitivity for the continuity of life in which individuals and society are embedded. It means secondly regaining autonomy, reawakening the inner clock and rediscovering the ability to adjust one’s movements to the change of day and night, workday and holiday and the change of the seasons. For very understandable self-interest, the businesses dismantle an economic regime that allows them to breathe without allowing a breather to dependent employees to escape the pseudo-promise of ever-faster, ever-better etc.

The desire of women and men to sovereignly determine their working method and way of life does not agree with the working hours they perform or are forced to perform. 50% of highly trained men and women work more than 40 hours and nearly 30$ more than 48 hours per week while the majority of employed women seek more part-time work if they can be relieved from housework and child care. Desired and actual working hours conflict. Businesses are well advised when they no longer impair the time autonomy of their co-workers. They could relieve women in private housework and childcare. Men should assume equal private house- and education tasks in the same way that equal access to gainful work is opened up to women. Businesses should understand that men’s quality of life increases with a greater distance from gainful work and growing sympathy for partnerships. They should at least raise the question of the compatibility of gainful work and private partnerships.

3rd BUSINESS TYPE: ELEMENT OF DEMOCRATIC SOCIETY

In the 50 years since the founding of the Federal Republic of Germany, democracy has spread as a form of life and lifestyle, not only as a form of political rule. In the course of their training in the factory, school and university, young persons have had positive experiences with democracy as a life form. The longings for economic, ecological, feminist and pacifist competence are nourished from the political and civil engagement of many citizens in o9ld and new social movements. In addition, the democratic consciousness since the peaceful revolution of 1989 has grown into a global dream that material prosperity and personal freedom, capitalism and democracy can be united – in the acknowledgement of civil freedom rights, economic-social claimant rights, political rights of participation and the right of people to independent development.

Rejecting such political competences of young persons who enter a business and expecting attitudes of silent adaptation, blind obedience and careless opportunism will drive the new co-workers into open opposition or inner emigration and create considerable control problems in businesses.

Therefore businesses that see themselves embedded in a democratic society should emphasize the competencies of civil courage, participation and moral orientation. The General Secretary of the United Nations stimulated a global social contract. Worldwide businesses commit themselves to the respect of human rights and strict work norms prohibiting child labor, forced labor and discrimination and encouraging conservation and environmentally friendly technologies.

The inclination to unconventional thinking, cooperative thinking and long-term thinking is an expression of the dignity of co-workers that has no price. This inclination is a valuable entrepreneurial resource and deserves unconditional ethical acknowledgment. The interest in intervening critically, actively participating in the processes of opinion-formation and decision-making and standing up for the consequences of joint decisions deserve great social respect. If these competences are positively treasured, motivation increases to the advantage of the business. The co-workers leave the role of unconcerned outsiders and define themselves as a contractual net linking all the engaged persons in the business.

Moral competence is committed to that inter-subjective understanding that does not stop at the limits of the team, clique, class and nation. The moral point of view consists in taking the standpoint of impartiality that respects others as inalienable individuals and members of a boundless communication community.


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