Science, technology, engineering and mathematics (STEM) dominate the education systems. Indeed, another STEM changed the world in the 20th century: science, technology, economics and management. Economics replaced physics as the most wanted subject in Indian universities (which was when I graduated in the 1960s). Engineers from the Indian Institutes of Technology moved to the Indian Institutes of Management and then took leadership positions in businesses.
Three turns of the screw changed the civilization. The first was the shift from the humanities to the sciences, which scientist CP Snow described in 1959 as a “collision of two cultures”. The second was the belief that the growth of the financial size of the economy was a good measure of society’s progress. Personal wealth became a measure of human value and shareholder value of a firm’s management effectiveness. The third was a change in the aims of education, from ‘liberal’ education to improved ways of thinking, to ‘professional’ education on how to do things. Get it and earn more.
The world is beset by systemic problems—climate change, rising inequality and the geopolitical storm in Ukraine that has put humanity on the sidelines; The governance model of the 20th century will not solve the problems of the 21st century. The history that ended in 1991, according to Francis Fukuyama, is back with a vision of democracy triumphing over autocracy and borderless trade over national interests. The collapse of the World Trade Organization and the progress of NATO showed that under their high-minded objectives, global institutions were a means for powerful countries to dominate others.
In Corporate Governance, Milton Friedman’s assertion that a business should simply be a business, while good for shareholders, is not good for society and the environment. The concepts of corporate management have influenced the way other sectors operate. Management consultants who advise corporate leaders to increase shareholder value have become consultants to governments, international development organizations and social enterprises. Leaders from these regions meet annually in Davos to “change the world”. Business concepts provide them with a common language. The chief minister of an Indian state proudly called himself the CEO of his state in Davos to attract international investors at the turn of the millennium. ,
Friedman was the high priest of an ideology that urged governments to get out of the way and let the private sector do business. The role model for the latter was Jack Welch. During his two decades as head of GE, from 1981 to 2001, he transformed GE into the world’s most valuable company. He was worth $14 billion when he became CEO and $600 billion when he retired, and was crowned “Manager of the Century” by Fortune magazine. After retiring, he turned himself into a management guru in an attempt to set up a tough strategy. The new generation of business leaders.
Honest Business: Jack Welch’s “Gee Way” was founded on four ideas. One, the objective of a firm is to increase shareholder value. Second, the way to do this is through the pursuit of sustained efficiency; GE was praised for excellence in execution. It employed ‘black belt’ warriors applying tools like Six Sigma to overcome all inefficiencies. Three, humans are the means of improving the financial performance of the firm; Its intended “360-degree” evaluation pits employees against each other and drops the bottom 10%. Fourth, the strategy was a game of acquisitions and disinvestments, which were required to meet or beat analyst estimates, which GE did remarkably well.
Welch’s leadership model cannot teach national leaders a lesson. If the economy is not generating enough jobs, they cannot drive out surplus citizens. If growth is weak, they cannot buy another country to increase GDP, or sell a portion of their own to strengthen the balance sheet. However, countries follow such strategies in disguise. European countries increased their wealth during the colonial period by forcefully obtaining foreign resources. After colonialism, poor countries were motivated to attract investment by handing over economic sovereignty over domestic enclaves to foreign investors, which weakened labor and environmental laws, and these investors paid lower taxes than local citizens. .
Albert Einstein said that it is madness to solve problems in the same way that creates them. STEM has reduced disease and extended human longevity, but also created nuclear weapons of mass destruction and digital weapons of mass disruption. Professional managers have become mercenaries, ready to sell their skills to the highest bidder. Between the two world wars, after Einstein shook up science with his general theory of relativity, philosopher Henri Bergson warned: “Humanity groans, half crushed by the weight of progress … the soul, and the machine needs a mystic faith.”
This year, business leaders convened in a silent World Economic Forum in Davos after a two-year Covid break. Meanwhile the world has become more unequal. Every half hour during the pandemic, another person became a billionaire, while another million fell into poverty. Compassion for the powerless must be poured into a stem machine operated by the powerful. Economic principles must include concerns for equality in order to enhance productivity and growth. And ethical concerns should determine the goals of businesses pursuing efficiency and profits. The global consensus on the ends should guide the rule of the means.
Arun Mara is a former member of the Planning Commission and author of ‘Transforming Systems: Why the World Needs a New Ethical Toolkit’.