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Students need to design a digital poster outlining examples of company failure due to cultural mistakes. Explain why companies failed to understand cultural differences (ex, language, religion, norms and values, diversity, leadership, time management etc) and explain why you think it is important & interesting issue. Critically assess what can and should be done about cultural differences, that is, how can or should we operate business to address the cultural issue and the challenges involved. Suggest corporate strategy for managing cultural differences.

Assignment criteria

Students should demonstrate a good understanding of company failure due to cultural mistakes.
They shall demonstrate an understanding of what is meant by managing cultural differences.
Students should attempt to apply a couple of academic references in their work, at least from the reading list.
Students should be able to assess the wider implications of the cultural impact on a business/market/industry.

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WALMART’S DOWNFALL IN GERMANYWALMART’S DOWNFALL IN GERMANY
DUE TO CULTURAL MISTAKESDUE TO CULTURAL MISTAKES

Walmart is a retail corporation that manages a chain of supermarkets, grocery stores, and discount stores, headquartered
in the United States. This case study about Walmart’s downfall is really interesting given that Walmart is a retailing giant
with successful cross-border entrances however experienced a major defeat in the German market due to mismanagement
of cultural diversity. It shows how crucial attention to culture is for a multinational enterprise. Culture cannot be ignored!

CUSTOMER ISSUES
Walmart failed to analyze the
practiced culture in the local
markets in Germany.
They failed to understand the
German customer and their
demands which led to poor
customer retention.
The German customers felt that
the over-friendliness and chatty
behavior of store employees was
unauthentic.

EMPLOYEE ISSUES
Walmart imposed American employee
management practices to the German
workforce.
Spying on employees was prominent
and employees were not allowed to
build personal relationships with one
another. [2]
Negligence of German unions for
employee related matters.
Employees wages were reduced to cut
cost in order to lower prices to compete
against rivals in the market. [3]

LEADERSHIP ISSUES

Power gap caused by Authorial
decision-making strategy.
Disregarding feedbacks from
employees for the development of
the company.
Wal-Mart leadership’s strategy in
Germany was self-centred and not
adaptive. [1]

1. AHMAD RASHEED 24804171. AHMAD RASHEED 2480417
2. EDWIN SOMMY 24802302. EDWIN SOMMY 2480230
33. EMMANUEL ENEKWECHI 2481620. EMMANUEL ENEKWECHI 2481620
44. KAMRAN JAMSHAID 2475987. KAMRAN JAMSHAID 2475987
55. MOHAMMAD SHAHZAR BAIG 2467387. MOHAMMAD SHAHZAR BAIG 2467387
66. NOFAL AMIN 2457216. NOFAL AMIN 2457216
77. PRINCE AGYEMANG 2475028. PRINCE AGYEMANG 2475028
8.8. PRISCILLA GELI 2467008 PRISCILLA GELI 2467008
9.9. SANA AZHAR RASHID 2480181 SANA AZHAR RASHID 2480181

1. Culture problems faced by Walmart
2. Solutions to these cultural issues
3. Effective Corporate strategy

[1] MBA Knowledge Base, n.d. Case Study: Wal-Mart’s Failure in Germany. [Online]
Available at: https://www.mbaknol.com/management-case-studies/case-study-wal-marts-failure-in-germany/#:~:text=Cultural%20Insensitivity%20was%20the%20major,prevailing%20German%20law%20and%20regulations.
[Accessed 28 02 2022]
[2] [3] BohatALA, n.d. Walmart Cross-Cultural Issues Case Study Analysis. [Online]
Available at: https://bohatala.com/walmart-cross-cultural-issues/
[Accessed 28 02 2022].
[4] Banerjee, S. B. & Linstead, S., 2001. Globalization, Multiculturalism and Other Fictions: Colonialism for the New MIllenium. SAGE, 8(4), pp. 683-722.

REFERENCES

INTRODUCTION

ISSUES WALMART FACED

1.Proper analysis of German customers to identify
their taste and demands.

2.Extensive study of the German culture to
implement German-friendly policies.

3.Hire local leaders.

4.Frequent feedbacks from customers and
employees.

5.Recruitment of a customer experience team
dedicated to developing and implementing good
customer experience strategy.

6.Implement strategies to drive employee
engagement and retention.

CONCLUSION
Considering the various issues Walmart faced as a result of negligence to cultural
diversity, it is evident that culture is crucial, powerful and requires care.

Hence, the corporate strategy of Walmart should be focused on ensuring the
localisation of leadership for effective integration of local cultural values into
their organisational policies to ensure good management.

Additionally, decision-making powers should be decentralised to facilitate
flexible management of cultural differences for effective customer and employee
engagement .

STRUCTURE

Marking criteria

Poster:

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Relevance of selected information

Good use of images

Evidence of creativity in the work

Use of suitable fonts (clear typeface and size)

Depth of analysis – WHY the strategy is proposed

Good use of academic literature – Application of Freeman et al. and relevant theories and concepts

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Why the World Isn’t Flat

Author(s): Pankaj Ghemawat

Source: Foreign Policy , Mar. – Apr., 2007, No. 159 (Mar. – Apr., 2007), pp. 54-60

Published by: Slate Group, LLC

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I SN ‘T F LAT
Globalization has boundpeople, countries, and markets closer than ever,

rendering national borders relics of a b)gone era-or so we’re told. But a close

look at the data reveals a world that’s just a fraction as integrated as the one

we thought we knew. In fact, more than 90 percent of allphone calls, Web

traffic, and investment is local. What’s more, even this small level of

globalization could still slip away. I By Pankaj Ghemawat

I deas will spread faster, leaping borders.
Poor countries will have immediate access
to information that was once restricted to
the industrial world and traveled only slow

ly, if at all, beyond it. Entire electorates will learn
things that once only a few bureaucrats knew.
Small companies will offer services that previously
only giants could provide. In all these ways, the com
munications revolution is profoundly democratic
and liberating, leveling the imbalance between large
and small, rich and poor.” The global vision that
Frances Cairncross predicted in her Death of Dis
tance appears to be upon us. We seem to live in a

world that is no longer a collection of isolated,
“local” nations, effectively separated by high tar
iff walls, poor communications networks and mutu
al suspicion. It’s a world that, if you believe the

Pankaj Ghemawat is the Anselmo Rubiralta professor of

global strategy at IESE Business School and the Jaime and
Josefina Chua Tiampo professor of business administration

at Harvard Business School. His new book is Redefining
Global Strategy (Boston: Harvard Business School Press,
September 2007).

most prominent proponents of globalization, is
increasingly wired, informed, and, well, “flat.”

It’s an attractive idea. And if publishing trends
are any indication, globalization is more than just
a powerful economic and political transformation;
it’s a booming cottage industry. According to the
U.S. Library of Congress’s catalog, in the 1990s,
about 500 books were published on globalization.
Between 2000 and 2004, there were more than
4,000. In fact, between the mid-1990s and 2003,
the rate of increase in globalization-related titles

more than doubled every 18 months.
Amid all this clutter, several books on the subject

have managed to attract significant attention. During
a recent TV interview, the first question I was asked
quite earnestly-was why I still thought the world
was round. The interviewer was referring of course
to the thesis of New York Times columnist Thomas
L. Friedman’s bestselling book The World Is Flat.
Friedman asserts that 10 forces-most of which
enable connectivity and collaboration at a dis
tance-are “flattening” the Earth and leveling a
playing field of global competitiveness, the likes of
which the world has never before seen.

54 FOREIGN POLICY

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Why the World Isn’t Flat i

It sounds compelling enough. But Friedman’s
assertions are simply the latest in a series of exag
gerated visions that also include the “end of history”
and the “convergence of tastes.” Some writers in
this vein view globalization as a good thing-an
escape from the ancient tribal rifts that have divided
humans, or an opportunity to sell the same thing
to everyone on Earth. Others lament its cancerous
spread, a process
at the end of
which everyone
will be eating the
same fast food.
Their arguments
are mostly charac
terized by emo
tional rather than
cerebral appeals,
a reliance on
prophecy, semiotic
arousal (that is,
treating everything
as a sign), a focus
on technology as
the driver of
change, an empha
sis on education
that creates “new”
people, and perhaps
above all, a clamor
for attention. But they all have one thing in common:

They’re wrong.
In truth, the world is not nearly as connected

as these writers would have us believe. Despite talk
of a new, wired world where information, ideas,
money, and people can move around the planet
faster than ever before, just a fraction of what we
consider globalization actually exists. The por
trait that emerges from a hard look at the way
companies, people, and states interact is a world
that’s only beginning to realize the potential of true
global integration. And what these trend’s backers
won’t tell you is that globalization’s future is more
fragile than you know.

THE 10 PERCENT PRESUMPTION
The few cities that dominate international finan
cial activity-Frankfurt, Hong Kong, London,
New York-are at the height of modern global
integration; which is to say, they are all relatively
well connected with one another. But when you

examine the numbers, the picture is one of extreme
connectivity at the local level, not a flat world.

What do such statistics reveal? Most types of eco
nomic activity that could be conducted either within
or across borders turn out to still be quite domes
tically concentrated.

One favorite mantra from globalization cham
pions is how “investment knows no boundaries.”

The io Percent Presumption
Immigrabon (to Population) U j l l

Phone Call Revenues _

Management Research _

Direct Investment _ l

Private Charity I j l
Management Cases l j / Patents _
Porfolio Investment i

Trade _

10% 20% 40%.60% 80% 10% .
Levels of Internationalization Across Industries

But how much of all the capital being invested
around the world is conducted by companies outside
of their home countries? The fact is, the total amount
of the world’s capital formation that is generated
from foreign direct investment (FDI) has been less
than 10 percent for the last three years for which
data are available (2003-05). In other words, more
than 90 percent of the fixed investment around the

world is still domestic. And though merger waves
can push the ratio higher, it has never reached 20 per
cent. In a thoroughly globalized environment, one
would expect this number to be much higher
about 90 percent, by my calculation. And FDI isn’t
an odd or unrepresentative example.

As the chart above demonstrates, the levels of
internationalization associated with cross-border

migration, telephone calls, management research
and education, private charitable giving, patenting,
stock investment, and trade, as a fraction of gross
domestic product (GDP), all stand much closer to
10 percent than 100 percent. The biggest exception
in absolute terms-the trade-to-GDP ratio shown

56 FOREIGN POLICY

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at the bottom of the
chart-recedes most
of the way back down
toward 20 percent if
you adjust for certain
kinds of double
counting. So if some
one asked me to guess
the internationaliza
tion level of some
activity about which

had no particular
information, I would
guess it to be much
closer to 10 percent
the average for the
nine categories of data
in the chart-than to
100 percent. I call this
the “10 Percent Pre
sumption.”

More broadly, these
and other data on
cross-border integra
tion suggest a semi
globalized world, in
which neither the
bridges nor the barriers
between countries can
be ignored. From this
perspective, the most
astonishing aspect of
various writings on
globalization is the
extent of exaggeration
involved. In short, the
levels of internation
alization in the world today are roughly an order
of magnitude lower than those implied by global
ization proponents.

A STRONG NATIONAL DEFENSE
If you buy into the more extreme views of the
globalization triumphalists, you would expect to see
a world where national borders are irrelevant, and
where citizens increasingly view themselves as
members of ever broader political entities. True,
communications technologies have improved dra
matically during the past 100 years. The cost of a
three-minute telephone call from New York to
London fell from $350 in 1930 to about 40 cents

in 1999, and it is now approaching zero for voice
over-Internet telephony. And the Internet itself is
just one of many newer forms of connectivity that
have progressed several times faster than plain old
telephone service. This pace of improvement has
inspired excited proclamations about the pace of
global integration. But it’s a huge leap to go from
predicting such changes to asserting that declining
communication costs will obliterate the effects of
distance. Although the barriers at borders have
declined significantly, they haven’t disappeared.

To see why, consider the Indian software indus
try-a favorite of Friedman and others. Friedman
cites Nandan Nilekani, the CEO of the second-largest
such firm, Infosys, as his muse for the notion of a flat

MARCH I APRIL 2007 57

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I Why the World Isn’t Flat 1

world. But what Nilekani has pointed out privately is
that while Indian software programmers can now
serve the United States from India, access is assured,
in part, by U.S. capital being invested-quite literally
in that outcome. In other words, the success of the
Indian IT industry is not exempt from political and geo
graphic constraints. The country of origin matters
even for capital, which is often considered stateless.

Or consider the largest Indian software firm, Tata
Consultancy Services (TCS). Friedman has written at
least two columns in the New York Times on TCS’s

Latin American operations: “[I]n today’s world,
having an Indian company led by a Hungarian
Uruguayan servicing American banks with Monte
videan engineers managed by Indian technologists who
have learned to eat Uruguayan veggie is j’ust the new nor

mal,” Friedman writes. Perhaps. But the real question
is why the company established those operations in
the first place. Having worked as a strategy advisor to
TCS since 2000, I can testify that reasons related to the
tyrnnyof ime zones languages, and the need for

proximity to clients’ local operations loomed large in
that decision. This is a far cry from globalization pro
pf”On ens orft-citeJd1 worldNA in which1A geog’%raphy,1K Ilan

gug,addstne dn’ mttr

Trade flows certainly bear that theory out.
Consider Canadian-U.S. trade, the largest bilateral
relationship of its kind in the world. In 1988, before
the North American Free Trade Agreement (NAFTA)
took effect, merchandise trade levels between Canadian
provinces-that is, within the country-were estimat
ed to be 20 times as large as their trade with simi
larly sized and similarly distant U.S. states. In other

words, there was a built-in “home bias.” Although
NAFTA helped reduce this ratio of domestic to inter
national trade-the home bias-to 10 to 1 by the

mid-1990s, it still exceeds 5
to 1 today. And these ratios
are just for merchandise; for
services, the ratio is still sev
eral times larger. Clearly, the
borders in our seemingly
“borderless world” still
matter to most people.

Geographical boundaries
are so pervasive, they even
extend to cyberspace. If there
were one realm in which
borders should be rendered
meaningless and the global
ization proponents should be
correct in their overly opti
mistic models, it should be
the Internet. Yet Web traffic

within countries and regions
has increased far faster than
traffic between them. Just as
in the real world, Internet
links decay with distance.
People across the world may
be getting more connected,
but they aren’t connecting
with each other. The average

South Korean Web user may be spending several
hours a day online-connected to the rest of the
world in theory-but he is probably chatting with
friends across town and e-mailing family across the
country rather than meeting a fellow surfer in Los
Angeles. We’re more wired, but no more “global.”

Just look at Google, which boasts of sup
porting more than 100 languages and, partly as
a result, has recently been rated the most global
ized Web site. But Google’s operation in Russia
(cofounder Sergey Brin’s native country) reaches
only 28 percent of the market there, versus 64 per
cent for the Russian market leader in search serv
ices, Yandex, and 53 percent for Rambler.

58 FOREIGN POLICY

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Indeed, these two local competitors account for
91 percent of the Russian market for online ads
linked to Web searches. What has stymied Google’s
expansion into the Russian market? The biggest
reason is the difficulty of designing a search engine
to handle the linguistic complexities of the Russian
language. In addition, these local competitors are

more in tune with the Russian market, for example,
developing payment methods through traditional
banks to compensate for the dearth of credit cards.
And, though Google has doubled its reach since
2003, it’s had to set up a Moscow office in Russia
and hire Russian software engineers, underlining
the continued importance of physical location. Even
now, borders between countries define-and con
strain-our movements more than globalization
breaks them down.

TURNING BACK THE CLOCK
If globalization is an inadequate term for the current
state of integration, there’s an obvious rejoinder:
Even if the world isn’t quite flat today, it will be
tomorrow. To respond, we have to look at trends,
rather than levels of integration at one point in time.

The results are telling. Along a few dimensions,
integration reached its all-time high many years ago.
For example, rough calculations suggest that the
number of long-term international migrants amount
ed to 3 percent of the world’s population in 1900
the high-water mark of an earlier era of migration
versus 2.9 percent in 2005.

Along other dimensions, it’s true that new
records are being set. But this growth has hap
pened only relatively
recently, and only after
long periods of stagnation
and reversal. For example,
FDI stocks divided by GDP
peaked before World War I
and didn’t return to that
level until the 1990s. Sev
eral economists have
argued that the most
remarkable development over the long term was the
declining level of internationalization between the
two World Wars. And despite the records being
set, the current level of trade intensity falls far short
of completeness, as the Canadian-U.S. trade data
suggest. In fact, when trade economists look at
these figures, they are amazed not at how much
trade there is, but how little.

It’s also useful to examine the considerable
momentum that globalization proponents attribute to
the constellation of policy changes that led many
countries-particularly China, India, and the former
Soviet Union-to engage more extensively with the
international economy. One of the better-researched
descriptions of these policy changes and their impli
cations is provided by economists Jeffrey Sachs and
Andrew Warner:

“The years between 1970 and 1995, and especially
the last decade, have witnessed the most remarkable
institutional harmonization and economic integration
among nations in world history. While economic
integration was increasing throughout the 1970s and
1980s, the extent of integration has come sharply
into focus only since the collapse of communism
in 1989. In 1995, one dominant global economic
system is emerging.”

Yes, such policy openings are important. But to
paint them as a sea change is inaccurate at best.
Remember the 10 Percent Presumption, and that
integration is only beginning. The policies that
we fickle humans enact are surprisingly reversible.
Thus, Francis Fukuyama’s The End of History, in
which liberal democracy and technologically driv
en capitalism were supposed to have triumphed
over other ideologies, seems quite quaint today.
In the wake of Sept. 11, 2001, Samuel Huntington’s
Clash of Civilizations looks at least a bit more pre
scient. But even if you stay on the economic plane,
as Sachs and Warner mostly do, you quickly see
counterevidence to the supposed decisiveness of
policy openings. The so-called Washington Con
sensus around market-friendly policies ran up

against the 1997 Asian currency crisis and has since
frayed substantially-for example, in the swing
toward neopopulism across much of Latin America.
In terms of economic outcomes, the number of
countries-in Latin America, coastal Africa, and
the former Soviet Union-that have dropped out
of the “convergence club” (defined in terms of
narrowing productivity and structural gaps vis-a-vis

We have to entertain the possibility that globalization may

be incompatible with national sovereignty-especially

given voters’ tendency to support more protectionism.

MARCH I APRIL 2007 59

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i Why the World Isn’t Flat i

the advanced industrialized countries) is at least
as impressive as the number of countries that
have joined the club. At a multilateral level, the sus
pension of the Doha round of trade talks in the
summer of 2006-prompting The Economist to
run a cover titled “The Future of Globalization” and
depicting a beached wreck-is no promising omen.
In addition, the recent wave of cross-border mergers
and acquisitions seems to be encountering more
protectionism, in a broader range of countries, than
did the previous wave in the late 1990s.

Of course, given that sentiments in these respects
have shifted in the past 10 years or so, there is a fair
chance that they may shift yet again in the next
decade. The point is, it’s not only possible to turn
back the clock on globalization-friendly policies,
it’s relatively easy to imagine it happening. Specifi
cally, we have to entertain the possibility that deep
international economic integration may be inherently
incompatible with national sovereignty-especially
given the tendency of voters in many countries,
including advanced ones, to support more protec
tionism, rather than less. As Jeff Immelt, CEO of GE,
put it in late 2006, “If you put globalization to a

popular vote in the U.S., it would lose.” And even
if cross-border integration continues on its upward
path, the road from here to there is unlikely to be
either smooth or straight. There will be shocks and
cycles, in all likelihood, and maybe even another
period of stagnation or reversal that will endure for
decades. It wouldn’t be unprecedented.

The champions of globalization are describing
a world that doesn’t exist. It’s a fine strategy to sell
books and even describe a potential environment
that may someday exist. Because such episodes of
mass delusion tend to be relatively short-lived
even when they do achieve broad currency, one
might simply be tempted to wait this one out as
well. But the stakes are far too high for that. Gov
ernments that buy into the flat world are likely to
pay too much attention to the “golden straitjacket”
that Friedman emphasized in his earlier book, The
Lexus and the Olive Tree, which is supposed to
ensure that economics matters more and more
and politics less and less. Buying into this version
of an integrated world-or worse, using it as a basis
for policymaking-is not only unproductive. It is
dangerous. E9

[ Want to Know More?

For more of Pankaj Ghemawat’s writings on the state of global integration and business strategy,
see his Web site, Ghemawat.org. His book Global Strategies in a World of Differences (Boston:
Harvard Business School Press) is due to be published in September.

For a glimpse into the worldview of globalization proponents, there’s no better stand-in for the genre
than Thomas L. Friedman’s The World Is Flat: A Brief History of the Twenty-First Century (New
York: Farrar, Straus and Giroux, 2005), or his Pulitzer Prize-winning foreign affairs column in the
New York Times. To read more on the inevitability of technological advancement, see Frances
Cairncross’s The Death of Distance: How the Communications Revolution Will Change Our Lives
(Boston: Harvard Business School Press, 1997).

The Economist offers a harsh critique of Friedman’s analysis in “Confusing Columbus” (March
31, 2005), and Richard Florida offers his take on the state of globalization in “The World Is Spiky”
(The Atlantic, October 2005).

For the latest installment of FOREIGN POLICY and A.T. Kearney’s measurement of the world’s
most integrated nations, see the sixth annual “Globalization Index” (November/December 2006).
In “How Globalization Went Bad” (FOREIGN POLICY, January/February 2007), Steven Weber,
Naazneen Barma, Matthew Kroenig, and Ely Ratner explore the hidden dangers of a world whose
integration relies on a single superpower.

>>For links to relevant Web sites, access to the FP Archive, and a comprehensive index of related
FOREIGN POLICY articles, go to www.ForeignPolicy.com.

60 FOREIGN POLICY

This content downloaded from
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All use subject to https://about.jstor.org/terms

Contents

p. 54

p. [55]

p. 56

p. 57

p. 58

p. 59

p. 60

Issue Table of Contents

Foreign Policy, No. 159 (Mar. – Apr., 2007) pp. 1-16, 1-8, 17-96

Front Matter

And the Winner Is… [pp. 1-1]

Letters

Debating Castro’s Legacy [pp. 4, 6, 8]

Cut out the Bias [pp. 8, 10, 12-13, 15]

Making News in Seoul [pp. 15-16, 18-19]

In Box [pp. 22-24]

Think Again

China [pp. 26-28, 30, 32]

Prime Numbers

Iraq’s Sticker Shock [pp. 34-35]

Essays

Who Wins in Iraq? [pp. 38-51]

Why the World Isn’t Flat [pp. 54-60]

The FP Index

Inside the Ivory Tower [pp. 62-68]

The FP Memo

How to Topple Kim Jong Il [pp. 70-74]

In Other Words: Reviews of the World’s Most Noteworthy Books

The American in Paris [pp. 76-78]

Bosnia’s Magical Realism [pp. 78-81]

Global Newsstand: Essays, Arguments, and Opinions from around the World [pp. 88-91]

Net Effect: How Technology Shapes the World [pp. 92-93]

Missing Links: Rogue Aid [pp. 96, 95]

Back Matter

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Organization Studies
2016, Vol. 37(9) 1209 –1225

sagepub.co.uk/journalsPermissions.nav
DOI: 10.1177/0170840616656152

www.egosnet.org/os

Politics and Power in
Multinational Companies:
Integrating the International
Business and Organization
Studies Perspectives

Mike Geppert
Friedrich Schiller University of Jena, Germany

Florian Becker-Ritterspach
University of Applied Sciences, Berlin, Germany

Ram Mudambi
Temple University, USA

Abstract
The study of power and politics in multinational companies (MNCs) has been a niche area of study for
both scholars of organization studies (OS) and international business (IB). Further, the awareness of each
research community with regard to the efforts of the other has been rather superficial. Hence, bridge-
building efforts to cross-fertilize ideas developed in IB and OS in order to enhance our understanding
of the nature and role of politics and power in the MNC are overdue. In order to develop the basis for
integration, we trace the conceptual developments in the two disciplines, that enables us to highlight
particularly promising opportunities for integrative advances. Using a typology which differentiates among
four ‘faces’ of power in the study of management and organization, we discuss how focusing on each of
these four dimensions may help us to both see and make sense of different aspects of power relations and
facets of politics in MNCs. We then use the ‘four faces’ framework to outline how OS and IB approaches
can be integrated to develop a more complete understanding of politics and power in MNCs. Finally we
suggest some directions for future research.

Keywords
discourse and language perspectives on power, micro-politics, organizational politics, power in
multinational companies

Corresponding author:
Mike Geppert, Faculty of Economics and Business Administration, Chair of Strategic and International Management,
Friedrich Schiller University of Jena, Carl-Zeiss-Straße 3, 07743 Jena, Germany.
Email: mike.geppert@uni-jena.de

656152OSS0010.1177/0170840616656152Organization StudiesGeppert et al.
research-article2016

Introduction to the Special Issue

mailto:mike.geppert@uni-jena.de

http://crossmark.crossref.org/dialog/?doi=10.1177%2F0170840616656152&domain=pdf&date_stamp=2016-06-30

1210 Organization Studies 37(9)

Introduction

Multinational companies (MNCs) have been analysed as powerful economic and political players
in the global economy. However, they are also complex organizational entities with intricate and
multifaceted internal political processes. Some prominent scholars such as March (1962) and
Pfeffer (1992) have highlighted the importance of organizational politics. In spite of these seminal
works, the extant research on MNC internal politics has been surprisingly slim. With some notable
exceptions (Becker-Ritterspach & Dörrenbächer 2011; Böhm, Spicer & Fleming, 2008;
Dörrenbächer and Geppert, 2011; Forsgren, 2008; Mudambi & Navarra, 2004; Mudambi, Pedersen
& Andersson, 2014), the topic has not been a major focus of either the international business (IB)
or organizational studies (OS) literatures.

The mainstream IB literature has, in the main, retained a rather narrow approach that is theoreti-
cally rooted in the seminal work of the Carnegie School (March, 1962). This has lent it a rather
limited set of theoretical lenses including contingency, resource-based and agency perspectives
(Bouquet & Birkinshaw, 2008; Mudambi & Navarra, 2004). By contrast, in OS literature the analy-
sis of organizational politics (Burns, 1961; Mintzberg, 1983), power (Dahl, 1957; Etzioni, 1964)
and its implications for managers (Astley & Zajac 1990; Pfeffer & Salancik 1978; Spicer & Böhm,
2007) has developed from insights drawn from a wide range of disciplines with relatively little
integration, even within the field (Clegg, Courpasson & Phillips, 2006). However, despite the rich
variety of politics and power perspectives in current OS literature, these concepts are rarely applied
to the study of MNCs.

The foregoing discussion presents a powerful argument for a deliberate bridge-building effort
to cross-fertilize ideas developed in IB and OS in order to enhance our understanding of the nature
and role of politics and power in contemporary MNCs (Andersson & Holm, 2010). There is clearly
a wide range of opportunities for scholars from both camps for joining forces and bringing together
conceptual and empirical ideas in order to enrich our understanding of politics and power in MNCs.
In this research effort, we make an important contribution to enhancing our understanding by treat-
ing the MNC as a specific, multi-dimensional organizational form with rich and complex politics.
We bring together a range of theoretical lenses and present empirical findings that provide deep
insights into various facets of politics and power within MNCs. The different forms political
behaviour of key players are crucial building blocks of this analysis.

In this article we begin by discussing the conceptual underpinnings for the study of power and
politics in organizations. We then provide a brief historical overview of the theoretical foundations
of the study of politics and power in the MNC within the two fields of IB and OS. Next, we take a
closer look at historically grown differences in how organizational politics and power in MNCs
have been conceptualized and studied in OS, in comparison to IB research. Here we will draw on
the typology of Fleming and Spicer (2014), which is based on an extant literature review and dif-
ferentiates among four ‘dimensions’ or ‘faces of power’ in OS research, in order to reveal how
focusing on each of these might help us to both see and make sense of different aspects of political
behaviour and power relations in MNCs.

We apply the four faces framework to provide a detailed overview of the articles of our
Special Issue and demonstrate how each of the papers reflects on the faces.1 In so doing, we are
able to demonstrate how they help to conceptualize power relations in MNCs and interpret
political activities through empirical analysis. In our concluding section, we will briefly sum-
marize the contributions – in terms of unit of analysis, aspects of power and politics analysed,
theories and ideas that have been advanced – and highlight opportunities for integration and
cross-fertilization of ideas between researchers from IB and OS. Finally we suggest some direc-
tions for future research.

Geppert et al. 1211

Conceptual Underpinnings for Studying Power and Politics
in MNCs

Research on organizational power has been influenced largely by the seminal work of Lukes
(1974/2005), who developed a three-dimensional model for the study of power. The one-dimensional
view of power goes back to ‘pluralist’ studies on power by scholars such as Dahl (1957) who argue
that actors relate their ‘interests to what they actually want or prefer, to their policy preference as
manifested by their political participation’ (Lukes, 1974, p. 34). This is very much in line with
Weber’s causal view of power ‘to get others to do what you want them to do and if necessary against
their will’ (cited in Hardy & Clegg, 1996, p. 623). Ideas of political coalition building (March, 1962)
and of resource dependency theory (French & Raven, 1960; Pfeffer & Salancik, 1978) also fit in
here. Lukes then introduces a second, often non-visible, dimension of power which, as summarized
by Clegg et al. (2006, p. 210), ‘come(s) into play, especially, when choices are made concerning
what agenda items are ruled in or ruled out; when it is determined that, strategically, for whatever
reasons, some areas remain a zone of non-decision rather than decision’. The third dimension goes
back to ‘reformist’ studies of power (Bachrach & Baratz, 1963), stressing ‘that not all men’s wants
are given equal weight by the political system’ (Lukes, 1974, p. 34). In other words, not everybody
is able to politically participate in decision-making and decision-making often takes place in strict
boundaries where agendas have already been set or manipulated. The three-dimensional view, which
Lukes also calls the ‘radical view of power’, pays close attention to systemic aspects of power by
stressing ‘that men’s wants may themselves be a product of a system which works against their
interests, and in such cases, relates the latter to what they would want and prefer, were they able to
make the choice’ (p. 34).

The work of Lukes has inspired research, including by Clegg (1989), Clegg et al. (2006) and
more recently Fleming and Spicer (2014), that applies multi-dimensional approaches to study the
dynamics of politics and different facets of power relations in organizations. These applications
also involved some criticism of the original model and have led to significant adaptations. In par-
ticular, the universal claims that Lukes makes when outlining his ‘radical view’ have been seen as
problematic because of the implicit assumption that hegemonic power has become a normal form
of organizational control in contemporary capitalism. This view neglects the findings of compara-
tive institutionalism that there is not just one capitalist society, but rather many diverse forms of
capitalism (e.g. Whitley, 1999). Lukes’ approach also neglects the possibility of active forms of
social agency by paraphrasing the Marxist slogan that the rulers are in power and will stay in power
as long as they are able to manipulate the ‘real interests’ of the ruled. Further, Clegg et al. (2006)
criticize the inherent ‘paradox of emancipation’ within the radical view, i.e. ‘if people are system-
atically deluded about their interests they cannot emancipate themselves’ (Clegg et al., 2006, p. 213).

In a review about the study of power in management and organization studies, the authors dis-
tinguish four ‘faces’ of organizational power in their extensive review of the relevant literature
(Fleming & Spicer, 2014). Two faces – ‘coercion’ and ‘manipulation’– are positioned at the ‘epi-
sodic’ or surface level of power relations (see also Clegg et al., 2006). Coercion is related to the
one-dimensional view of power and defined as direct ‘mobilization of power’ by actors.
Manipulation is related to the two-dimensional view of power and defined as ‘attempts to ensure
action and discussion occurs within accepted boundaries’ (Fleming & Spicer, 2014, p. 241).
Coercion and manipulation have been the main focus of classic functionalist studies on power in
both IB and OS, e.g. studies on micro-politics in MNCs. The other two ‘faces’ of power are posi-
tioned at the systemic or deeper organizational levels, and go beyond organizational boundaries to
bring in societal-level influences. The third face, ‘domination’, is defined as ‘attempts to make
relations of power appear inevitable and natural’ (p. 241). The fourth face, ‘subjectification’, is

1212 Organization Studies 37(9)

defined as ‘attempts to shape sense of self, experience and emotions’ (p. 241) and placed at the
‘deeper’ or ‘systemic power level’ (see also Clegg et al., 2006, pp. 294–298). While domination is
directly related to the three-dimensional view of power, the ‘face’ of subjectification emerges from
Foucault’s seminal studies on disciplinary regimes (1977), and is accordingly seen as another sys-
temic force. Both faces are closely linked to studies on power in MNCs focused on the role of
discourses and language in shaping organizational structures and construction of subjective identi-
ties of key actors. The latter approach has only recently been adopted in the study of the MNC
(Balogun, Jarzabkowski & Vaara, 2011; Vaara & Tienari, 2008).

Further developments of the multi-dimensional model in the field of OS have concentrated on
the development of mid-range and more context-specific theories of organizational power. Based
on Foucault’s theory of power, Clegg et al. highlight

that rationalities are always situational. And because they are always contextually situational they are
always implicated with power. No context stands outside power. If that were the case, then power would
exist nowhere, outside of understanding, outside of possibility, outside of sense. Different power actors
operate in and through different rationalities, which have different rules for producing sense and, at the
more formal outer limits, for producing truth. (Clegg et al., 2006, p. 240)

This leads us back to our initial argument that MNCs in particular, which operate across national
divides, are highly complex and fragmented organizations. In short, MNCs are constituted by
diverse contextual rationalities (Morgan, 2001) that trigger different forms and dynamics of social
agency in the relevant political processes. However, the nature and forms of political behaviour
that will be observed in the study of MNCs are closely linked to the conceptualization of power that
scholars apply in their analysis.

There are currently two streams within IB and OS that try to capture social agency and the micro-
dynamic relations between politics and power structures. They both focus on the important question of
how political contests and struggles arise in MNCs and how they can then be linked to organizational
power. One stream concentrates on the dynamics of micro-political strategizing related to the different
and often contradictory interests and identities of key actors (Clark & Geppert, 2011; Geppert &
Dörrenbächer, 2011). A strong concern of this stream is the multiplex embeddedness, situatedness and
positioning of actors who structure their interests, identities and their power (Becker-Ritterspach,
2006; Becker-Ritterspach & Blazejewski, 2016; Becker-Ritterspach & Dörrenbächer, 2011;
Blazejewski, 2009; Geppert & Williams, 2006; Geppert, Williams & Wortmann, 2015).

The other stream emphasizes the discursive nature of organizational power struggles and the
role of political sensemaking (see also Geppert & Dörrenbächer, 2014 and 2016, for an overview).
Key studies from each of the two approaches historically focused on different dimensions of power
(Clegg et al. 2006; Fleming & Spicer, 2014). Micro-political studies in both OS and IB have
mainly concentrated on the role of ‘coercion’ and ‘manipulation’ in struggles within MNCs.
Discursive studies, most of which are in the OS field, predominantly studied political struggles
based on language and paid more attention to the role of ‘domination’ and ‘subjectification’ within
MNCs. However, studies focused on language often do not pay sufficient attention to the micro-
political and actor-centred aspects of the games played in and around MNCs.

IB and OS Approaches to the Study of Power and Politics
in MNCs

The foundation of IB research on power and politics lies largely in functionalist and rationalistic
organization theories (Buckley & Casson, 1976). Major works in IB about the role of politics in the

Geppert et al. 1213

business firm use the fundamental insights of Berle and Means (1932) who uncovered the diver-
gence between the interests of managers and shareholders in large American corporations beginning
in the late 19th century. However, most work on the role of politics in IB firms can be traced to the
work of March (1962) whose work laid the foundations of what has become known as the Carnegie
School approach. Some of these Marchian insights were incorporated into the detailed analysis of
managerialism in the behavioural theory of the firm (Cyert & March, 1963). The Carnegie School
approach recognized that organizations are marked by interest diversity, conflict and coalitions.

Starting in the 1980s, new and more far-reaching developments in IB significantly broadened
the analytical focus by applying ideas of contingency theory and agency theory. Contributions tak-
ing their starting point from contingency theory crucially emphasized the role of environmental
and structural embeddedness as a key source of conflict. While organizational politics and power
are not central to all of these contributions, a range of papers (Doz, Bartlett & Prahalad, 1981;
Ghoshal & Nohria, 1989; Nohria & Ghoshal, 1994) show that MNCs are made up of divergent
actors and interests and that politics, power and conflict are a key element of organizational life.
Focusing on the different organizational units of the MNC, root causes of politics and conflict are
seen in different organizational rationales that are functionally constituted by the respective units’
embeddedness in a specific task or market environment. In early literature this was suggested to
arise from the headquarters ambitions for global integration and subsidiaries’ orientation towards
local responsiveness (Mudambi, 2011).

IB scholars highlighted the negative consequences of organizational politics. Subsequent litera-
ture sought to devise appropriate organizational mechanisms to control or even avoid it. In this
view, a key function of managers, in particular those located at headquarters and at the helm of the
organization, is to maintain overall organizational rationality by keeping politics, conflict and the
pursuit of power in check.

Contributions rooted in agency theory build on Marchian insights. They emphasize that politics
and conflict within the firm stem from two interrelated sources: managers’ pursuit of self-interest
and interest divergence among the firm’s actors. In the seminal works on agency theory, the man-
agers are at odds with other stakeholders in the firm, most notably the shareholders (Fama, 1980).
Hence, the main objective of this substantial literature is to derive mechanisms that alleviate (or in
a perfect world, eliminate) the divergence of interests among the firm’s stakeholders (Himmelberg,
Hubbard & Palia, 1999; Mudambi & Nicosia, 1998). Mechanisms to align incentives of managers
and shareholders do not affect the fundamental political processes at work, but harness this energy
to generate positive rather than pernicious outcomes. This literature is closely related to main-
stream transaction cost economics (Williamson, 1975), wherein the concern is with efficiency and
performance. It views the exercise of political power as malignant, highlighted in a telling quote:
‘power explains results when the organization sacrifices efficiency to serve special interests’
(Williamson & Ouchi, 1983, pp. 29–30). This is in contrast to the view from organizational studies
that takes its inspiration from resource dependency theory (Pfeffer & Salancik, 1978). Rather than
seeing the existence and exercise of political power as inefficient, this view argues that ‘political
processes, rather than being mechanisms for unfair and unjust allocations and appointments, tend
toward the realistic resolution of conflicts among interests’ (Salancik & Pfeffer, 1977, p. 3).

In the 1990s, the rational, functional and managerial understanding of politics, power and con-
flict in contingency and agency theory was integrated with the resource dependence perspective in
IB research. Two streams of IB research stand out in this regard: research on business networks and
the work on subsidiary-level initiatives, both of which build to varying degrees on network theory
(Håkansson, 1982), resource dependence theory (Pfeffer & Salancik, 1978), resource/knowledge-
based views (Barney, 1991; Grant, 1996) and the intra-organizational power perspective (Hickson,
Hinings, Lee, Schneck & Pennings, 1971).

1214 Organization Studies 37(9)

Both streams mark a shift to a more generic politics perspective where power and conflict are
seen as a normal part of the functioning of organizations. In this view, MNCs are constituted by
struggles, interest divergence, conflict and coalitions. Political behaviour in MNCs manifests itself
in the form of ongoing competition and bargaining processes in which different organizational
subunits including the headquarters pursue different (rational) interests and leverage different
bases of power to gain influence. Reflective of network, resource dependence or resource/knowl-
edge-based and intra-organizational power theories, the sources of power are seen as functionally
derived, including: network centrality and position, functional positions and formal authority, as
well as the value of knowledge or resources held, resource exchange relationships and net depend-
encies between units and their internal and external network environments (Andersson, Forsgren
& Holm, 2007; Bouquet & Birkinshaw, 2008; Forsgren, Holm & Johanson, 2005; Mudambi &
Navarra, 2004).

In much of the IB literature, organizational politics in MNCs is largely confined to the organi-
zational level. Specifically, interest divergence, power, conflict and coalitions are theorized at
the level of organizational units with little concern for the sub-organizational or at the level of
individual actors. And even where individual actors such as subsidiary managers are considered
(Birkinshaw & Hood, 1998; Mudambi & Navarra, 2004) their interests and behavioural orienta-
tions are equated with the organizational units that host them. While we see the acceptance of the
MNC as an organizational context characterized by both competition and cooperation, the con-
cept is maintained at the subunit level, with subsidiaries or subsidiary managers rationally seek-
ing to enhance the subsidiary’s influence. This organizational-level focus means that the
micro-foundations of inter- and intra-unit politics in MNCs are not studied.

Starting in the 2000s, two streams of organizational theory that emphasize the micro-level poli-
tics and the systemic constitution of power in MNCs began to find their way into the field of IB.
These are the micro-politics (Almond & Ferner, 2006; Becker-Ritterspach, 2006; Dörrenbächer &
Geppert, 2006; Kristensen & Zeitlin, 2005) and the critical discourse perspectives (including the
context of language) (Balogun et al., 2011; Frenkel, 2008; Vaara & Tienari, 2002, 2008; Vaara,
Tienari, Piekkari & Santti, 2005).

Micro-political contributions have their main theoretical roots in actor-centred comparative
institutionalism. Micro-political perspectives see MNCs as first and foremost populated by indi-
vidual actors who behave politically in social interaction, i.e. they are driven by their own motives
and goals. Replacing organizational rationality with the intentionality and interest-driven behav-
iour of individual actors or groups of individual actors, these contributions emphasize that we can
only understand organizational behaviour in MNCs if we consider the political nature of agency at
the micro level (Becker-Ritterspach & Blazejewski, 2016). In line with a generic politics perspec-
tive, the organizational behaviour of MNCs is constituted by political objectives, interest diversity
and power mobilization. Actor interests and behavioural orientations are formed by their social
embeddedness (Becker-Ritterspach, 2006; Becker-Ritterspach & Dörrenbächer, 2011). Depending
on the contribution, this social embeddedness can comprise one or more levels of analysis (e.g.
national institutional embeddedness, organizational embeddedness and personal situations) and is
seen as more or less determining. While micro-political approaches often adopt episodic power
perspectives in that they consider how actors mobilize resources to further their interests in specific
organizational situations (e.g. plant closure), they also move into systemic power perspectives to
the extent that they see actor interests and actor power (ability to enter social relationships or the
mobilization of resources) as socially constituted by unquestioned organizational rules and societal
institutions (Morgan & Kristensen, 2006).

The last stream of research that we wish to discuss here comprises a range of contributions that
can be subsumed under the label of critical discourse or language perspectives. These perspectives

Geppert et al. 1215

are mainly rooted in critical theory, in particular the contributions of post-modernists and post-
structuralists (e.g. Foucault, 1973, 1980). Adopting the lens of these contributions, MNCs are seen
as constituted by discursive struggles and competing efforts of sensemaking. These struggles
unfold between different actor groups that battle over power and hegemony. A key extension
afforded by these contributions is that both identities and material situatedness can form the basis
of discursive struggles. For instance, identity, status, control over resources and personal pecuniary
benefits may all be threatened as a result of mergers and acquisitions or plant closures (Vaara &
Tienari, 2008). While discursive struggles may reproduce and reflect structures of domination,
they may also challenge them (Levy, 2008; Böhm et al., 2008).

The hegemony of a discourse, in turn, is related to its legitimacy that is maintained through
reference to broader societal conceptions, norms and ideologies. As the medium of discourses
language, communication, language skills, language policies and linguistic artefacts become a
focal point of analysis in these contributions (Geppert, 2003; Vaara et al., 2005; Vaara & Tienari,
2011). While critical discourse perspectives, which predominantly draw on critical discourse anal-
ysis (CDA), mark the arrival of discursive and systemic power perspectives to the field of IB, these
contributions are rather weak in considering the micro-level constitution of organizational politics
and power. In comparison to micro-political approaches, there is not much focus on individual
actors and how their specific organizational or societal embeddedness affects the political behav-
iour of actors at the micro level and thereby organizational-level outcomes (Becker-Ritterspach &
Blazejewski, 2016). Moreover, there is some criticism related to the influence and role of CDA in
contemporary OS. Based on alternative readings of Foucault’s seminal work on discourse and
power, it has been argued that the focus on discursive ‘hierarchies’ and ‘order’ in CDA studies
neglects the ‘transformative’ potential of critical OS scholars within the research process, when
they become actively engaged in the study of discursive practices and organizational power rela-
tions (see e.g. Curtis, 2014).

We can see from our brief discussion above that the field of IB has moved from analysing poli-
tics exclusively through the lens of efficiency toward a generic politics approach. More recent
theoretical developments as expressed in the micro-political and critical discursive perspectives
call for further refinement and empirical application. While IB has started incorporating some of
the cutting-edge insights from OS, more clearly needs to be done. Equally, OS can learn from the
rational foundations of IB. Research in OS is overly based on embeddedness, which under-repre-
sents the role and effect of individualism. Thus, both IB and OS could advance by incorporating
more sophisticated research from the nascent work on micro-foundations (Felin, Foss, Heimeriks
& Madsen, 2012).

Different Faces of Power in MNCs: Key Ideas and Findings in our
Special Issue

Recent research has emphasized that the structures of MNCs have become more complex and
fragmented. The new and increasingly multi-faceted structural features of these organizations ‘has
made MNCs more like political coalitions and less like (hierarchical) military formations’
(Mudambi & Navarra, 2004, p. 386). This suggests that we study MNCs as federations, where the
headquarters and the subsidiaries are involved in perpetual bargaining processes, or as ‘societies’
by emphasizing that there is not just one central power unit, but diverse power centres each with a
different set of influential actors (Morgan & Kristensen, 2009; Mudambi et al., 2014). However,
there is also new research revealing that power structures of MNCs remain largely hierarchical
(Andersson & Holm, 2010) and asymmetrical in favour of headquarters management (in this
Special Issue, Dörrenbächer & Gammelgaard, 2016).

1216 Organization Studies 37(9)

The contributions of our Special Issue shed some light on the enduring role of hierarchical
power relations in the MNC but also show that structural features as emphasized by contingency
and resource dependence perspectives are not sufficient to understand the underpinnings of organi-
zational politics and dynamic power relations. In order to gain deeper understanding, one must pay
close attention to the role of social agency, i.e. the impact of diverse institutional logics, interests,
identities and discourses. By emphasizing both the active and passive roles played by social agency,
we are able to see different facets of political processes within and around MNCs. Intra- and inter-
organizational forms of politics have the potential to both stabilize and/or de-stabilize established
power relations.

In the following section we will take a closer look, first, at the forms and dynamics of social
agency which come into play in micro-political and language games and, second, the faces of
power which each of our six papers will highlight. Our discussion draws on Fleming and Spicer’s
framework (2014), which was introduced and discussed in previous sections.

Two papers in our Special Issue deal mainly with one of the two faces of power, i.e. coercion.
These two papers, by Whitford and Zirpoli (2016) and Dörrenbächer and Gammelgaard (2016),
have the closest links with current debates in IB research. The first paper focuses on MNCs as
network firms with fragmented power structures that are conceptualized as ‘bundles of coalitions’.
The focus here is on political contests between key actors and coalitions which apply ‘discursive
resources’ in order to mobilize support across blurred organizational boundaries, i.e. across internal
and external production networks of the MNC. The face of power that these authors highlight in
their historical study of Fiat, the global car manufacturer, is coercion. The focus is on political
strategies of key actors and coalitions of actors and how these actors are able to use discursive
resources by purposefully framing and thus shaping the production network. The second paper, by
Dörrenbächer and Gammelgaard, concentrates on the episodic face of coercion, analysing a spe-
cific aspect of political ‘framing’, issue-selling. The paper focuses on a key topic in the IB litera-
ture: subsidiary initiative-taking. In comparison to Whitford and Zirpoli, the authors provide a
broader view in the analysis of the coercive face of power. Besides political strategizing, the empir-
ical cases analysed show the importance of considering tactical elements in micro-politics that
arise around subsidiary initiatives. And in contrast to Whitford and Zirpoli, who emphasize the
weakening of vertical/hierarchical power relations in their case study, these authors highlight the
on-going role of hierarchical power by stressing that subsidiary issue-selling activities can always
be stifled by the ‘power to’ (of the headquarters) which has the hierarchical power to reject subsidi-
ary initiatives. Both papers concentrate on episodes highlighting the coercive face of power.
Aspects of the manipulative face, however, such as non-decision-making or agenda-setting by
headquarters actors which would block successful framing or issue-selling, are not considered.

The remaining four papers in our Special Issue refer to all four faces of power but differ signifi-
cantly in how deeply they reflect on the two deeper and systemic faces of power. The third paper,
by Bjerregaard and Klitmoeller, focuses on the important topic of knowledge-sharing in MNCs and
takes a conflictual practice view, based on the work of Bourdieu. In their case study of an MNC
operating in Mexico they concentrate on the question of how actors’ social positioning inside and
outside the firm, combined with their career opportunities, shapes the character and dynamics of
intra-unit conflicts. The authors apply the concept of ‘habitus’ that relates to both episodic faces:
coercion and manipulation. They show how and why local managers and white-collar workers are
better equipped than blue-collar workers to develop long-term career strategies and position them-
selves, based on their socio-economic and cultural resources (capital) and thus are able to manipu-
late and dominate the existing subsidiary management control system. Additionally, the paper
points to aspects of subjectification related to gender, stressing that blue-collar female workers in
particular are silenced. These findings point to systemic dimensions of the habitus of these

Geppert et al. 1217

workers, i.e., the manifestation of subjugation because the actors are not aware of their political
behavioural rationales. It is also shown that blue-collar workers’ need to accumulate socio-economic
resources (capital) leaves little room for accumulating other resources (capitals) that would enhance
their strategic positioning. Conflicts between white-collar workers and local managers are linked
mainly to struggles about cultural capital (resources). Additionally, local managers manipulated
access to English language classes, limiting opportunities for identity construction, including the
career paths, of white-collar workers.

The other three papers, by Hong, Snell and Mak (2016), Whittle, Mueller, Gilchrist and Lenney
(2016) and Koveshnikov, Vaara and Ehrnrooth (2016), focus more explicitly on language issues
within MNCs, based on new conceptual developments in OS, i.e. discourse and narrative analysis.2
The first two papers study sensemaking and sensegiving processes between headquarters and sub-
sidiary key actors, but then present quite different results in terms of the outcome of these pro-
cesses. The paper by Hong et al. concentrates on the two episodic faces of power and also on levels
of domination by comparing stages and degrees of knowledge sharing (assimilation) between
Japanese expatriates and local Chinese managers. They show that the local institutional context
matters in terms of how contestative sensemaking can be overcome by cycles of sensemaking and
sensegiving, which encouraged local knowledge creation in one of their two cases. More contested
and less integrative sensemaking was observed in the other case study, which is explained to a
certain extent by the dominance of post-colonial attitudes of Japanese expatriates that hindered
consensual sensemaking and mutual learning between headquarters and subsidiary actors. The
paper by Whittle et al. very closely links episodes of coercion and manipulation with systemic
dominance of the MNC’s US headquarters, which stifled initiative-taking and created self-censoring
and strategic inaction of subsidiary key actors in Britain. An in-depth analysis of language games
shows how both the dominant power play of headquarters and the identity construction of subsidi-
ary actors (subjectification) led to self-censoring. The British subsidiary’s management developed
the feeling that certain issues could not be discussed. As a result, British managers felt that self-
interested protectionism and inaction were more appropriate than active initiative-taking and issue-
selling. This expands the findings of Dörrenbächer and Gammelgaard by showing that
subjectification may get in the way of issue-selling efforts. It was the actual experience of the sub-
sidiary managers that mattered most when dealing with the headquarters and just not the formal
hierarchical power position of the headquarters to reject or ignore subsidiary initiatives in the case
studied by Whittle et al. The last and sixth paper of our Special Issue sheds more light on the sys-
temic aspects of language issues that arise within MNCs, showing how stereotyping comes into
play. It stresses that forms of coercion and manipulation expressed in stereotyping and reactive talk
need to be related to the subjective identities of Finnish expatriates and Russian locals. The case
study by Koveshnikov et al. demonstrates how cultural stereotyping is used in language to defend
and enhance the self-image and self-esteem of each side, headquarters and subsidiary management.
In the view of the authors, the only way to get out of these manipulative and negative subject
identity-enhancing political processes is to create social spaces for self-reflective talk which allows
more integrative and less contestive forms of sensemaking, an issue which has also been raised by
Hong et al.

Concluding Comments and Directions for Future Research

We see our Special Issue as a bridge-building exercise between IB and OS approaches to studying
politics and power in MNCs. Research in both fields has studied not just specifically power and
politics in the MNC but MNCs in general from very different theoretical angles based on different
methodological approaches. The first serious bridge-building attempt was made more than 20

1218 Organization Studies 37(9)

years ago in 1993 by Ghoshal and Westney with the publication of the volume Organizational
Theory and the Multinational Corporation. However, this pioneering initiative had problems and
‘the hopes of Ghoshal and Westney…that there would be more interaction between the different
perspectives tended to wither’ during the 1990s (Collinson & Morgan, 2009, p. 14). They saw the
main reasons for this problem in: (a) the preference of IB scholars to remain faithful to established
paradigms, which made it difficult to move beyond the efficiency logics of transaction costs and
strategic fit and (b) OS scholars’ lack of interest in the study of the MNC as a unique organiza-
tional form (p. 14). Our Special Issue however confirms another observation that the authors
made, that there have been some significant changes in both fields in the last decade or so, leading
to greater ‘common ground’ in the study of MNCs between scholars of the formerly divided
camps (p. 18).

This is certainly also true for the study of politics and power in MNCs. The four papers by
Klitmoeller et al. (2016), Hong et al. (2016), Whittle et al. (2016) and Koveshnikov et al. (2016),
who reflect on multiple faces of power, apply new critical discursive approaches for the study of
games played in and around MNCs and contribute especially to current debates on conflictual
knowledge sharing, political sensemaking and stereotyping. However, even when the other two
papers by Whitford and Zirpoli (2016) and Dörrenbächer and Gammelgaard (2016) perhaps are
more closely related to classic IB research and thus largely reflect on the first face of power, both
papers also draw on new ideas in OS. The first authors apply Marchian ideas on political coalition-
building to internationally operating network firms, based on sociological frame analysis methods.
The latter authors introduce new conceptual ideas of politicking and issue-selling tactics to subsidi-
ary initiative taking in MNCs. In Table 1 we provide a general overview of the contents of our
Special Issue in terms of: the unit of analysis, the aspects of power and politics analysed, the theo-
ries advanced, and crossroads for bridge-building and cross-fertilization in future research.

In line with the goals of our Special Issue, we see two directions for further bridge-building and
cross-fertilization. On the one hand, we still see substantial scope for IB to learn from OS. First, we
suggest that IB research could gain from enriching classical rational and quantitative studies with
social-constructivist and discursive ideas and related research methods. In this sense it might be
quite useful for future research on subsidiary-initiative taking for instance to move beyond func-
tionalist resource dependency arguments, based on the assumption that the possession or control of
critical resources can straightforwardly be linked to subsidiary entrepreneurship and active agency
(see also Saka-Helmhout & Geppert, 2011). One way forward would be to focus on the wide range
of discursive struggles of all involved parties and actors inside and outside the MNC. From this
perspective, active as well as inactive behaviour of subsidiary management cannot be explained
only in reference to subsidiary access or lack of access to critical power resources. Instead, the
ways that they present or sell their initiatives must be seen as a central part of the various political
‘language games’ played in and around the MNC. The analysis of such games, which cannot be
sufficiently captured in reference to resource dependency logics, provides deeper insights about
both the silencing of powerful players and the gaining of ‘voice’ by weaker actors involved sub-
sidiary initiative-taking. Moving beyond this Special Issue, there is still substantial scope in IB to
consider not only different faces of power but also their interaction and interrelatedness. Considering
the different faces of power is not a mere esoteric or intellectual exercise by critical management
scholars in IB. Rather it serves to develop a better understanding of the strategic choices within and
around firms that operate internationally (Geppert, 2015).

OS research, on the other hand, could gain from IB insights on politics and power along four
lines. The first line involves recognizing: (a) the domains within which power is exercised; (b) the
role of hierarchical structure on power relationships. With regard to (a), from its very inception the
IB literature recognized and studied the structural aspects of the MNC (Gupta & Govindarajan,

Geppert et al. 1219

2000; Mudambi et al., 2014). Thus, it was recognized that subsidiaries with complementary activi-
ties (like an R&D unit and a sales unit) were naturally collaborative. In contrast, subsidiaries with
substitutive activities (like two sales units with overlapping territories) were naturally competitive.
Recognizing these generic collaborative and competitive forces can provide new insights to OS
research. With regard to (b), key objects of study for IB researchers are the headquarters–subsidi-
ary (hierarchical) and subsidiary–subsidiary (lateral) relationships. The nature of such internal
competition has received a great deal of attention within the IB literature, leading to key insights

Table 1. The contributions of this Special Issue.

Authors Unit of
analysis

Aspects of power
and politics analysed

Theories or concepts
advanced

Crossroads for bridge-
building and cross-
fertilization

Whitford &
Zirpoli

MNC as
network
firm

Role of discursive
resources and
relational embedding
in political coalition-
building in MNC
networks

Political contests
in MNCs based on
political coalition-
building efforts

Paper focuses on powerful
cognitive frames and
narratives; here are bridges
to and cross-fertilization
with discursive studies of
power and politics in MNCs

Dörrenbächer
&
Gammelgaard

Subsidiary
initiatives

Interplay of MNC
hierarchical,
subsidiary and
subsidiary-issue-
selling power

Politicking and issue
selling in subsidiary
initiative taking

Broadening of mainstream
IB debates on subsidiary
initiative-taking and
issue-selling tactics by
pointing to the special role
of asymmetrical power
relations and politics

Bjerregaard &
Klitmoeller

Knowledge
and practice
sharing in
MNCs

Micro-political
conflicts in MNC
practice sharing

Linking micro-politics
with a Bourdieuan
practice approach

Broadening of mainstream
IB debates on knowledge
transfer by stressing the
conflictual constitution
of the MNC and pointing
to interplay of pluralistic
contexts and agency

Hong, Snell &
Mak

Knowledge
sharing and
assimilation
in MNCs

Political sensemaking
in MNCs

Political aspects of
knowledge transfer
and assimilation

Paper points to ‘political
clout’ of locals which could
trigger new debates of
post-colonial studies
pointing to expat domination
of MNCs originating from
developed economies

Whittle,
Mueller,
Gilchrist &
Lenney

Discursive
enactment of
subsidiary–
headquarters
relations

Political sensemaking
in MNCs

Role and impact of
self-censoring and
inaction in discursive
construction of MNC
power relations

Findings of paper about
discursive construction of
inaction and self-censoring
could cross-fertilize with IB
on subsidiary innovation and
entrepreneurship

Koveshnikov,
Vaara &
Ehrnrooth

Discursive
enactment of
headquarters
and
subsidiary
relations

Identity work and
cultural stereotyping

Role and impact
of stereotype-
based identity
work in discursive
construction of MNC
power relations

Paper’s findings on
stereotyping could be
related to ideas of micro-
political and language game
playing in MNCs

1220 Organization Studies 37(9)

into the emergence of a diversity of subsidiary roles and levels of intraMNC influence (Cantwell
& Mudambi, 2005). These insights on the relationships between structure and power have the
potential to inform future OS research.

A second promising line for future IB research lies in the recognition that firms (and MNCs in
particular) are embedded within larger social systems, so that the manager–shareholder conflicts
analysed within classical agency theory may be too narrow (Gavetti, Levinthal & Ocasio, 2007). As
firm boundaries become increasingly porous and open systems predominate, the level of analysis at
which politics is operationalized moves beyond the firm to the broader ecosystem. These ecosystems
may be seen as global value chains (GVCs) run by orchestrating firms (Cano-Kollmann, Cantwell,
Hannigan, Mudambi & Song, 2016). When such firms are successful, they are able to disaggregate
activities and externalize them, yet maintain tight control over the entire GVC (Mudambi, 2008;
Mudambi & Puck, 2016). The processes through which they are able to exercise nearly absolute
power within their GVCs are essentially political. However, a systematic analysis of GVCs as open
systems through the lens of organizational politics has yet to be carried out. Numerous streams within
the OS literature, including sense-making and social identity, can be leveraged in this endeavour.

A third line of potential IB research involves re-introducing to OS recent refinements in the
micro-political perspective. In this regard a range of scholars including the work by Klitmoeller
et al. (2016) in this Special Issue points towards the development of more refined conceptualiza-
tions of how complex combinations of organizational and institutional embeddedness of actors,
their positioning and interactions (Becker-Ritterspach, 2006; Hotho, Becker-Ritterspach & Saka-
Helmhout, 2012) define the micro-foundations of organizational behaviour and organizational out-
comes in MNCs. Hence, while having their roots in the micro-political perspectives of OS, a range
of IB contributions has advanced the micro-political perspective within the context of MNCs.
These advancements and refinements, in particular with regard to our understanding of how actors’
situatedness and their strategizing are connected, may be worthwhile imports to OS.

The fourth and related line of future research opportunities involves seeing MNCs as interesting
empirical testing grounds for OS with regard to advancing systemic perspectives of power. With
their multi-contextual embeddedness (Meyer, Mudambi & Narula, 2011), MNCs can demonstrate
what happens when different patterns and effects of domination and subjugation, which often
remain unquestioned and unchallenged when in a single societal setting, meet each other and inter-
act with one another. It raises the question of whether and to what extent such cross-contextual
encounters make the oftentimes unquestioned patterns of domination and subjugation visible, sub-
jecting them to discourses which potentially challenge and change systemic conditions.

Funding

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit
sectors.

Notes

1. Altogether we received 39 submissions from OS and IB scholars. We desk rejected about 50% of the
submitted papers. The remaining papers were sent out for peer review. We finally decided to include six
papers in our Special Issue. These fit quite well with the overall goals outlined in the original Call for
Papers. Moreover, they all focus on building bridges between OS and IB researchers who are interested
in shedding some new light on political activities within and round internationally operating firms and
the social constitution of power relations in the MNC.

2. However, the so-called ‘discursive turn’, which OS has experienced in the last years, has hardly arrived
in IB research yet.

Geppert et al. 1221

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Author biographies

Mike Geppert is Professor of Strategic and International Management at Friedrich Schiller University,
Jena, and Visiting Professor at the Turku School of Economics. His current research focus is on socio-
political issues and sensemaking within multinational companies, and on cross-national comparisons of
management, organization and employment. His work is published in journals including the British
Journal of Management, European Journal of Industrial Relations, Human Relations, International
Journal of Human Resource Management, International Journal of Management Reviews, Journal of
International Management, Journal of Management Studies and Organization Studies, reflecting his mul-
tidisciplinary research interests. Mike is also one of the guest editors of the upcoming Special Issue on
‘Politicization and political contests in contemporary multinational corporations’ in Human Relations,
co-editor of the new volume ‘Multinational corporations and organization theory: Post millennium per-
spectives’ of the Research in the Sociology of Organization series and co-editor of the new book Politics,
power and conflict in multinational corporations: Foundations, applications and new directions with
Cambridge University Press.

Florian Becker-Ritterspach is Professor of Economic and Organizational Sociology at the University of
Applied Sciences Berlin (HTW). Next to knowledge transfer, and learning, his research focuses on issues of
power, politics and conflict in multinationals. His main theoretical interest centres on combining international
management approaches with organizational theory. He has published his work in, amongst others, Journal
of International Management, Management International Review, Organization Studies and the British
Journal of Management. Florian is organizer and convenor of the Standing Working Group 11 ‘Multinational
Corporations: Social Agency and Institutional Change’ at the European Group for Organizational Studies
(EGOS). He is also a co-editor of the forthcoming volume Politics, power and conflict in multinational cor-
porations: Foundations, applications and new directions with Cambridge University Press.

Geppert et al. 1225

Ram Mudambi is the Frank M. Speakman Professor of Strategy at the Fox School of Business, Temple
University, USA. He holds a Master’s degree from the London School of Economics and a PhD from Cornell
University. He is a Fellow of the Academy of International Business and an Honorary Professor at the
University of Leeds. He has been a Visiting Professor at Bocconi University, Copenhagen Business School
and the University of Sydney. He has served as an Associate Editor of the Global Strategy Journal (2010–
2013) and an Area Editor at the Journal of International Business Studies (2013–2016). He has been a special
issue editor for numerous journals including the Journal of Economic Geography and the Journal of
Management Studies and serves on the editorial boards of numerous journals. He has published over 80 peer-
reviewed articles, including in the Journal of Political Economy, the Journal of Economic Geography and the
Strategic Management Journal.

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De-industrialization: a case study of Dundee,
1951–2001, and its broad implications

Jim Tomlinson, Jim Phillips & Valerie Wright

To cite this article: Jim Tomlinson, Jim Phillips & Valerie Wright (2022) De-industrialization: a
case study of Dundee, 1951–2001, and its broad implications, Business History, 64:1, 28-54, DOI:
10.1080/00076791.2019.1676235

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De-industrialization: a case study of Dundee, 1951–2001,
and its broad implications

Jim Tomlinson, Jim Phillips and Valerie Wright

university of Glasgow, subject of economic and social History, Glasgow, uK

ABSTRACT
Using a case study of one Scottish city, Dundee, this article addresses
some of the tensions involved in the use of the concept of ‘de-industri-
alization’. Widely used to try to understand economic and social
change in the post-war years, this term is complex and controversial.
This article unravels some of this complexity, arguing that the term is
potentially very helpful, but needs careful definition, nuanced applica-
tion and recognition of its limits. The focus here is on the impact of
changing industrial structures on the labour market. After analysing
the processes of firm births and deaths, the study looks at the decline
of the ‘old staple’ industry, jute manufacturing in Dundee. The next sec-
tions assess the role of multinational enterprises in re-shaping the
employment structure of the city, before looking at the contraction of
some of the city’s other industries. Attention then turns to the impact
of all these changes on the economic welfare of the city. The final section
draws conclusions about our general understanding of de-industrial-
ization from the Dundee case.

De-industrialization is a term increasingly deployed in attempts to understand economic
and social change in the advanced economies in the post-war years. A variety of approaches
to this phenomenon are evident in the literature, ranging from political economy to cultural
history (Bluestone & Harrison, 1982; Cowie & Heathcott, 2003; Gibbs, 2018; High, Mackinnon,
& Perchard, 2017; Phillips, 2013). This article uses a broadly defined political economy
approach to the de-industrialization of one city, Dundee, to address some of the complexities
and tensions involved in the use of the term, and to challenge some of the interpretations
commonly put upon it. It starts from the basis that the term is indeed very helpful, but needs
careful definition, nuanced application and recognition of its limits if it is to be employed to
best enhance our understanding ( Tomlinson, 2019; see also Tomlinson, 2016). In particular,
its productive use requires close attention not only to changes in industrial sectors, but also
those at the level of the individual firm.

Concern with de-industrialization in public discourse materialized in Britain in the 1970s.
At that time it was mainly perceived as linked to macroeconomic issues, especially the bal-
ance of payments and national economic growth (Bacon & Eltis, 1976; Blackaby, 1978; Sherif,
1979; Singh, 1977). This debate drew on two distinct strands of older economics literature,
which either saw manufacturing as the key to high overall growth rates, or worried about

KEYWORDS
De-industrialization;
employment; Dundee;
Scotland; jute; Timex;
decline; industrial closures;
capital flight; multinational
corporations

Business History
2022, VoL. 64, no. 1, 28–54
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the long-run productivity consequences of the rise of services (Baumol, 1967; Kaldor, 1966).
The debates of the 1970s and subsequent decades that focussed on these macroeconomic
matters were by no means all based on the belief that de-industrialization was a problem,
with both journalists and academics arguing (from differing perspectives) that its dangers
were, at a minimum, being exaggerated (Brittan, 1980; Crafts, 1993; Rowthorn & Wells, 1987).

But while this macroeconomic concern has periodically re-surfaced in public debate,
since the 1980s most of the de-industrialization literature has focussed on the labour market
impact, and very much emphasized the negative effects of the process on industrial workers
and the communities in which they lived (as in Broadberry, 2014).1 The emergence of such
a literature in the 1980s, notably in North America and Britain, was in the context of the
industrial contractions experienced in those countries at that time, and the major increases
in unemployment that followed. In turn, a feature of this literature was the linking of those
contractions to ‘declinist’ tropes, which saw them, not as some passing cyclical or contingent
event, but evidence of a deep-seated pathology of the national economy (Foster & Woolfson,
1986; Levie, Gregory, & Lorentzen, 1984; Martin & Rowthorn, 1986; Rose, Vogler, Marshall, &
Newby, 1984).2

The ‘declinist’ approach to twentieth-century economic and industrial change is deeply
embedded in Scotland, and the history of the country as an ‘Industrial Nation’. That history
is, in the words of Morton and Griffiths, ‘a largely familiar one of a prolonged retreat from
the heights of heavy industrial success and the problems encountered by an economy in
which, for much of the period, average income lagged behind those for Britain as a whole…’
(Morton & Griffiths, 2013). The declinist narrative generally centres on a story of historic
‘over-commitment’ to the old staples (coal, iron and steel, shipbuilding, textiles), the attempts
to ‘modernize’ this structure towards lighter, consumer-oriented, sectors after 1945, but with
an emphasis on the limited and transient nature of the success of such endeavours. Knox
and McKinlay’s characterisation is typical: ‘Scotland, where a narrowly integrated industrial
structure based on shipbuilding, engineering, coal, and iron and steel inhibited the emer-
gence of new industries for most of the twentieth century’ (Knox & McKinlay, 2008, p. 49).3

Transience is usually seen as the result of an over reliance on inward investment by mul-
tinational companies. So the economic history literature of the late twentieth-century tended
to see the structural change that occurred as failing to correct the long run problems of the
Scottish economy, though the culprits for this continuing ‘decline’ varied according to ideo-
logical taste (Campbell, 1980, pp. 151–184; 1985; Foster, 2001, pp. 467–78; Lythe & Butt, 1975,
pp. 201–227; Payne, 1985).4

Unsurprisingly, given the hugely damaging effects of industrial contraction on many parts
of Scotland from the 1970s onwards, the story of de-industrialization of that country has
become both part of a declinist national narrative, and focussed attention on the immediate
economic and social harms inflicted by that process (Perchard, 2013). This approach has
gone along with a tendency for accounts of de-industrialization in Scotland (and, indeed,
elsewhere) to focus on industrial closures (Dickson & Judge, 1987; Lorentzen, et al., 1984;
Staudohar & Brown, 1987; Woolfson & Foster, 1988).5 Again, while the concern with closure
is fully explicable given the political charge of such events, this focus misleads as to the
underlying processes at work in de-industrialization. As noted by Dickson and Judge in the
introduction to their book on closures in the 1980s: ‘Admittedly, the experience of closure
is not new, and has been a recurrent feature of capitalist development…What is new is that
whereas in the past old plants closed to be replaced by new factories, production methods

BUSInESS HISTory 29

and new jobs, in the 1980s closure and job loss are no longer counteracted by plant openings
and job gains’.6

The focus on closure within accounts of de-industrialization has tended to be accompa-
nied by a concern with resistance to such closures (Clarke 2017; Findlay, 1987; Foster &
Woolfson, 1986; Gilmour, 2007; Woolfson & Foster, 1988). Of course, such episodes of resis-
tance are important to our understanding of the recent political and social history of Scotland,
particularly where these involved workers articulating a sense of ownership of factories in
moral economy terms (Gibbs & Phillips, 2018). On the other hand, in studying the longer-run
process of de-industrialization we need to be clear that, just as closures are not the main
mechanism of decline in industrial employment, organized resistance to such closure is
highly atypical of the response to job loss (High, 2013).

Focussing upon the dynamics of sectoral and firm-level changes, this article contributes
to understanding of de-industrialization by emphasizing that it was a complex and long-
running process rather than a chronologically-compressed sequence of inherently conten-
tious events. The analysis proceeds as follows. Section one discusses the ‘demographics’ of
de-industrialization, and some of the data problems which arise from seeking to understand
this process. Section two looks at the decline of ‘juteopolis’, while section three analyses the
role of multinational enterprises and their significance for the structural changes of the
period. Section four looks briefly at some other industries in Dundee. Section five summarizes
the consequences of de-industrialization for Dundee. The final section draws general con-
clusions about our understanding of de-industrialization from the Dundee case.

De-industrialization is defined here as a trend reduction in the share of industrial in total
employment, and such a trend is the effect of a number of components. First, of course, such
a trend is compatible with some industrial sectors expanding, as the designation ‘industrial’
covers a set of heterogenous components, which may have quite different trajectories. In
most literature ‘industrial’ covers mining, manufacturing, and construction. In the case of
Dundee, the first of these is not relevant, and construction has experienced sharp cycles but
no long-term trend in the numbers employed.7 So in Dundee manufacturing has always
quantitatively been the great bulk of ‘industry’, and where changes have been concentrated,
as Table 1 makes clear. (There are problems with variation in the precise definition of sectors
at these different dates, but these are not sufficient to undermine the broad evidence of
change). This overall trajectory of that change, it can be noted, is broadly similar between
Scotland as a whole and Dundee (Tomlinson, 2018, p. 13).8 (In this study ‘Dundee’ is taken
to mean the local authority area, which was subject to a significant boundary change in
1996 when approximately 15,000 people were allocated to neighbouring areas. But the
losses were overwhelmingly from residential suburbs, so the impact on figures for employ-
ment was limited. Between 1975 and 1996 Dundee was part of Tayside region, but data
continued to be produced for the Dundee city local authority area).

But if de-industrialization is deemed important because of its impact on the labour
market, and especially in bringing the collapse of manual work for those with relatively
poor formal educational qualifications, it follows that some occupations outside strictly-
defined ‘industry’ need to be included in our discussion. There are no easy dividing lines

30 J. ToMLInSon ET AL.

here, but certainly jobs in transport (railways, docks and road transport) would seem obvious
cases for treating as ‘industrial’.

Changes in the labour market are not just driven by sectoral change. Lots of change in
the composition of work is driven by changing occupational patterns within industries, and
there is good evidence that in the long-run such changes have been very significant. A
pioneering Ministry of Labour study for the period 1951–1961, looking at the UK as a whole,
argued that ‘whilst different rates of employment growth among industries have had an
influence on the occupational pattern of the economy, a stronger influence was the funda-
mental change in the occupational structure of individual industries’ (Ministry of Labour,
1967, p. 15). This study was an early recognition of the growth of administrative, clerical, and
technical employment in all sectors of industry, and, conversely, the decline of manual work.
For Scotland, sociologists have made a similar argument for the importance of within-in-
dustry occupational change, focussing upon the years 1981–2001 (Paterson, Bechhofer, &
McCrone, 2004, pp. 50–52, pp. 82–87).

This article focuses on sectoral change and the associated analytic framework of de-in-
dustrialization, but it important to acknowledge that this framework is imperfect for cap-
turing the shifts we are concerned with, and other aspects of occupational change need to
be part of the discussion. This point is returned to in the concluding section.

In line with the terminology adopted by the ONS, the decline in industrial employment
can be thought of in demographic terms—as a population whose size is the consequence
of both births and deaths.9 ‘Births’ encompasses both new firms opening and expansion
of existing plants; ‘deaths’ covers both closures and contractions. The balance of these
elements may shift over time, though as a general point it is important to note that even
in periods of marked overall contraction lots of new jobs will be being created. Table 2
below shows the data for Dundee in the 1980s. This makes clear that closures, while very
important, were only one component of the loss of manufacturing employment. We lack
comparable data for other periods, but it is possible that the contribution of closures to
the overall pattern was especially high in the 1980s, given the huge impact of the economic
contraction at the beginning of that decade, so Table 2 may overstate their significance
in other periods.

So in trying to understand de-industrialization, we need to understand, on one side both
shrinkage and closure, and on the other, the entry of new firms and their expansion. This
was clearly recognized in John MacInnes’s pioneering study of Glasgow, where he noted

Table 1. industrial distribution of employed population in Dundee, 1951, 1971, 2001.
1951 (aged over 15) 1971 (aged over 15) 2001 (aged 16–74)

Manufacturing 51.6* 42.0 15.2
Construction 5.8** 7.8 6.7
utilities 1.3*** 1.4 0.9
transport, storage and communication 7.4**** 5.2 6.1
All ‘industry’ 66.1 56.4 28.9

*Minimum List Headings 20-199;
**MLH200-202;
*** MLH 210-212;
****MLH 220-239.
Sources: 1951: calculated from Census 1951. scotland vol. V. occupations and industries table 13

‘Dundee city’ ; 1971 calculated from Census 1971. scotland economic Activity (10 per cent sample),
table 3 ‘Dundee city’; 2001: Census 2001. scotland. Key statistics for settlements and Localities in
scotland, table Ks11a.

BUSInESS HISTory 31

that the city’s ‘major problem is its low rate of job creation: less than half that of the New
Towns and one which has declined in the course of the 1970s and 1980s’ (MacInnes, 1995,
p. 81).10 In principle, job creation covers expansion of existing firms, the movement in of
firms from elsewhere, and the creation of new firms. Sections II and III below look at the first
two of these elements, but it is important to note how much emphasis both academic
analysis and policy have put on facilitating the birth of firms.

While specialists in industrial relations and industrial sociology have focussed on job loss,
the substantial literature on ‘births’ has come mainly from economists (For Scotland, Hood,
1984). Policy encouragement of small firm creation has been important across the UK since
the 1970s, despite a degree of ideological contention that has been attached to these firms
(Tomlinson, 1980). Such encouragement was a central focus of the Scottish Development
Agency, established in 1976, and an important part of its activities in Dundee, not least by
building factories, or sub-dividing existing ones, for renting to small business (Hood, 1991;
McCrone & Randall, 1985; Robertson, 1981). A key problem for analysis and policy is that
small firms have generally been important net creators of jobs, but also suffered a high failure
rate, so that increasing births by policy encouragement will also to lead to higher death rates
(Henderson, 1980).

The partial evidence we have for Dundee provides some support for the importance
of small firms in generating manufacturing employment. Table 3 shows the net change
in employment by size band for the 1980s. On the other hand, there is evidence (from a
somewhat earlier period) that small firm (below 25 employees) birth rates were well
below the Scottish average in Tayside (with an associated lower death rate), and, impor-
tantly, that this could not be accounted for by the industrial composition of local industry;
there seem to have been specific locational factors present in the area (Beesley &
Hamilton, 1986).

But new firms do not of course have to be small. An important feature of Scottish and
Dundee industrial history was the entry of multinationals as major job creators from the
1940s, but, as discussed further below, major problems arose in the 1970s which involved
not only the contraction and closure of existing MNEs, but the failure of new MNEs to come
to Scotland (Hood & young, 1982, pp. 33–4; Woolfson & Foster, 1989, p. 52, pp. 54–6).11

Table 2. Changes in manufacturing employment in
Dundee 1981–1990.
openings +2504 Closures 5883
expansions +4560 Contractions

–3479
Gross job gains +7064 Gross job losses

–9362
Net change

–2298
Of which:
companies with
0–10 employees

+2396

11–25 +265
26–50 −71
51–100 +32
101–200 +357
201–500 −981
501+ −4296

Source: Glancey, 1995, pp. 39, 41.

32 J. ToMLInSon ET AL.

The jute industry dominated Dundee from the middle of the nineteenth until well into the
twentieth century, though the industry reached its peak employment before 1914, and
shrank, unevenly, thereafter before its final demise in 1998. The story of this decline may
seem a straightforward one, of an industry squeezed and eventually eliminated by low wage
competition. Up until 1939 such a narrative would be largely appropriate. Drawing on raw
jute from Bengal, and selling its products all over the world, ‘Juteopolis’ was a striking example
of the process of ‘imperial globalization’ which characterised much of the British economy
in the decades before 1914 (Tomlinson, 2014). The industry was subject to increasingly
serious competition from India’s jute manufacturers from the 1880 s, but was hit especially
hard in the 1930s, and by the end of that decade the industry had shrunk to a fraction of its
pre-1914 size.

Protection organised under the Jute Control from 1939 helped to stabilise the industry,
with employment peaking in 1954, and thereafter falling only slowly until the late 1960s
contrary to the expectations of much more rapid shrinking at the time of the Working Party
Report on the industry in 1948, which emphasized the likely effects of Indian competition
(Board of Trade, 1948). Protectionism, and the local ‘Gentleman’s Agreements’ which under-
pinned its operation, were the focus of great deal of attention at the time, and by subse-
quent analysts (Howe, 1982; Morelli, Tomlinson, & Wright, 2012). But the broader forces
shaping the industry’s destiny were the global decline in the traditional uses of jute as bags
and sacking for transport, in the face of bulk carrying and containerization, and insofar as
bags and sacks were still used, the increasing substitution of paper and later polypropylene
for jute (McDowall, Draper, & McGuinness, 1976; McDowall & Draper, 1978).

The protection afforded the industry, by increasing the price of jute products, may have
hastened the rise of competitive products, but it does not seem to have inhibited significant
investment in the industry, considerable technical progress, and the search for new uses for
jute. Investment was substantial, and accompanied by increased firm level concentration in
the industry (Howe, 1982, pp. 137–141, pp. 153–155). A Research Association was set up,
and this helped encourage technical changes which helped lead to a healthy productivity
performance (Carter & Williams, 1957, pp. 220-229). There was also a major shift towards
exploiting new uses for jute—first as a backing for linoleum (where demand multiplied up
until 1955), then as carpet-backing. By the early 1970s about 80 per cent of total output was
going to carpet-makers (Howe, 1982, p. 160; Jackson, 1979, p. 166).12 These new uses made

Table 3. employment in jute in Dundee,
1948–1999 (to nearest thousand).

Women Men total

1948 12,000 8000 20,000
1954 12,000 9000 21,000
1959 9000 8000 17,000
1964 9000 9000 18,000
1969 7000 9000 16,000
1974 3000 6000 9000
1979 2000 5000 7000
1982 1000 3000 4000
1991 300 1000 1300
1999 0 0 0

Source: tomlinson, Morelli and Wright the
Decline of Jute. p.21.

BUSInESS HISTory 33

the industry much less affected by Indian competition in the old staple products. Whatever
the effects of protection at an earlier stage, by the late 1970s it was not the crucial issue for
the industry’s fortunes, which depended much more upon technical change (McDowall &
Draper, 1978; Tomlinson, Morelli, & Wright, 2011, pp. 155–156).13

The key technical change was the introduction of the synthetic fibre polypropylene, used
not only for sacking but also for carpet-backing. The two biggest jute firms, Low and Bonar
and Jute Industries Limited, had been quick to spot the potential of this new material and
entered into a joint venture for its production. But the production of polypropylene involved
quite different patterns than those characteristic of jute. First of all, it was a much less labour
intensive product. Second, there were few if any locational advantages in making polypro-
pylene-based products in Dundee, whereas for jute Dundee was a classic ‘industrial district’,
leading to high levels of efficiency and profitability (Broadberry, 1997, pp. 259–260). Thus,
while polypropylene proved important to the corporate survival of one of the ‘big two’ jute
firms, relatively little of the material was made or used in manufacturing in Dundee (Morelli,
2013; Tomlinson et al., 2011, p. 110).14

The story of jute is not a story of ‘decline’ as pathology. As Howe argues, the decline of
Dundee jute derived primarily from technical change in transport (bulk carrying, contain-
erization) and the invention of polypropylene. ‘To the question, could jute in the long term
have competed more effectively against these new methods, the answer must be no’ (Howe,
1982, p. 159). In the absence of any pathological narrative we have no need to search for
those who can be ‘blamed’ for the industry’s demise; in particular, the most common declinist
tropes of blaming either under-investment by employers, inefficiency on the part of man-
agers, or intransigence on the part of workers or trade unions for the shrinking of an industry,
are wholly irrelevant.15

Nor, after 1945, was the decline of jute mainly a problem of ‘globalization’, here using that
word in the limited sense of low wage competition. The scope of such competition shrank
as the product mix in Dundee diversified away from the traditional areas where Indian and
Pakistani goods now dominated world markets (Tomlinson et al., 2011, p. 94). This point
should not be exaggerated: South Asian producers were themselves seeking to diversify as
global markets for bagging and sacking contracted, but the limits of international compe-
tition are shown by how slowly import penetration rose in Britain even as protection of the
home market eroded after 1963 (Table 4). As Howe summarizes the position: ‘most com-
mentators would thus agree that Control moved from a position in the 1950s where it was
indispensable to the survival of the Dundee industry to one in the later 1960s where tech-
nological change had made it irrelevant’ (Howe, 1982, p. 164). Thus the political focus on
protectionism in Dundee was by this time to a large extent misplaced (Carstairs & Cole, 1960).

Table 4. import penetration in the uK jute market, 1952–1976.

yarn imports
(‘000 tonnes)

yarn imports as a percentage
of home

consumption

Cloth imports
(‘000 tonnes)

Cloth imports as a
percentage of home

consumption

1952 0.3 2.6 56.8 53.7
1957 1.7 1.0 49.7 43.8
1962 3.8 2.6 51.9 43.1
1967 1.5 1.9 50.3 47.3
1972 2.8 2.6 27.7 56.3
1976 1.3 2.7 23.1 66.3

Source: Howe, Dundee textile industry, pp. 60–61.

34 J. ToMLInSon ET AL.

Post-war employment in jute, returning to Table 4, did not decline sharply until the late 1960s.
This bears emphasis. The industry was still a major source of jobs with 18,000 in 1964 and 16,000
in 1969. Closures in the 1950s had a limited negative impact on employment. Some were linked
to the changing structure of the industry. Table 6 shows an incomplete listing of such jute
plant-closures. Most followed acquisition by other companies, rather than the exit of a stand-
alone entity. The number of independent entities fell by 23 per cent from 1945 to 1967, while
the industry’s largest five firms increased their market share from 50 per cent in 1958 to 73 per
cent by 1975 (Howe, 1982, p. 164; Symeondis, 2002, Table B1). While not a perfect measure of
changing structure, the membership of the employers group, the Association of Jute Spinners
and Manufacturers, declined from its post-war peak of 40 in 1958 to 14 by 1977 (Howe, 1982, p. 39).

The listing of closures in Table 6 gives some sense of the pattern of contraction, but mis-
leads if taken to suggest that closure was the main mechanism for job loss. More important
were the falling numbers in plants that remained open. One example is Camperdown works,
historically the largest of all jute factories in the city, with a workforce of over 14,000, but
which by the time of its closure in 1981 employed only 340 workers.16 Sidlaw Industries,
which owned the site, had reduced the number of its textile workers in the city from 3,280
in 1977 to 650 in 1981, after the Camperdown closure.17

The other component of the demographics of the industry was the absence of new entries
into the industry. Only one new plant was built after the war, Taybank Mill in 1948—which
was also the last to close, in 1998, making 80 workers redundant (Table 5).18

Table 5. Largest manufacturing employers in Dundee in 1966 (all companies with over 500
employees).
name of company Product and status Male employment Female employment total

Jute industries Jute. Locally-owned. 2553 1513 4066
nCr electronics. American Mne 3235 813 4048
timex Watches. American Mne 1008 2165 3173
DCthomson Publishing and printing.

Locally-owned.
1595 672 2267

Keiller Jam and marmalade.
Locally-owned.

345 873 1218

Morphy richards Domestic appliances: english
based.

869 204 1073

Bonar Long electrical transformers.
Locally-owned.

883 181 1064

J. scott Jute: locally-owned 534 530 1064
Burndept Batteries. english-based. (661)* (372*) 1033
Caledon shipbuilding. Locally-owned. 929 34 963
unijute Jute: locally-owned 485 408 893
Veeder-root Computer mechanisms.

American Mne.
558 231 789

Valentines Printing and publishing:
locally-owned

321 409 730

Baxters Linen and jute. Locally-owned. 352 370 722
Caird Jute: locally-owned 361 352 713
sCWs Jute: locally-owned 243 386 629
thomson and shepherd Jute carpets. Locally-owned. 386 223 609
Mallom Jute. Locally-owned 299 268 567
yorkshire imperial

Metals
Brass Finishers. english based. 302 205 507

totals 15,919 10,209 26,128

Source: tnA: Pro Bt177/2686 Miss McGhee (office for scotland) to Miss Hodkinson, ‘information for brief on Dundee’,
29 november 1966. ‘Manufacturing’ and ‘employees’ are not defined by the source.

*no breakdown by gender is given in the original document for this company, so these numbers have been
estimated as if Burndept’s composition reflected the average of all other companies in the table.

BUSInESS HISTory 35

The post-1945 decline of jute evoked much heart-searching, but no significant resistance
on the part of workers. Apart from a wage dispute in 1961, industrial relations in the industry
were largely characterised by co-operation and agreement (Craig, Rubery, Tarling, &
Wilkinson, 1980). We can only speculate on why there was this absence of resistance.

One important element was that, for the period until the 1980s, there was compensating
employment growth in the city. This was particularly associated with the location and expan-
sion of multinational enterprise (MNE) manufacturing through UK regional assistance. The
closure of Longtown Works in Milton of Craigie in 1958 illustrates this very point. Timex, the
US-owned mechanical watch-maker, extended its engineering workshops only yards just
across the road from the Longtown Works in 1957, increasing production and employment
at a cost to the Treasury of £25,000.19 We can draw a parallel here with the ‘moral economy’
established in the coal-mining industry, where loss of jobs in that industry was initially, from
the 1950s to the 1970s, compensated either by coal jobs elsewhere or other local industrial
employment (Phillips, 2013). In Dundee, of course, the context was different. We are analysing
an industry in a very restricted geographical area, where there was a long-term recognition
that the industry was in secular decline, and that alternative jobs needed to be found. We
can see this recognition clearly at work as far back as the city council’s 1931 publication, with
the evocative title ‘Do It in Dundee’. 20 Even earlier it is evident in the City’s pressure to build
a road bridge over the Tay, which dates back to just after the First World War, and was always
linked to ideas about diversifying the local economy (Phillips, 2011, pp. 247, 251).

This concern was translated into effective action with the Distribution of Industry Act of
1945, the basis of the regional policies that were used to attract industry to the city for the
next three decades. These industries typically offered better pay and better conditions to
Dundee workers than were available in jute, and many workers (especially women) voted
with their feet and fled the low pay, noise and dirt of jute production (Wright, 2011,
pp. 146–147). By 1951 the jute employers were pressing the Board of Trade to reduce the
inducements to new industry as they suffered labour shortages; indeed, complaints of such
shortages continued well into the period when the industry was shedding significant num-
bers of workers (Campbell & Lyddon, 1970, p. 108).

So for many Dundonians, down to the 1970s, the decline of jute was compensated for,
(and for many, more than compensated for), by the availability of better paid and more
congenial work. Skilled men who left the industry to work in Timex in the late 1960s doubled
their earnings. 21 While the loss of jobs in jute was not welcomed, and was no doubt painful
for many of the individuals involved (especially older workers who found it more difficult to
get jobs in other sectors), it was not regarded as a disaster. It is instructive to compare the
sense of decline in the 1930s, when the loss of jobs in jute was catastrophic not only because
of their scale, but also because there was so little growth of alternatives. It was only in the
late 1970s, and especially the 1980s, with the simultaneous contraction of jute and most
other industrial sectors, that a sense of a major local unemployment returned. And, as dis-
cussed below, it was in that period that two of the main examples of worker resistance to
job losses in specific companies took place.

The context of the decline of jute was one in which there was a long-established narrative
in the city that the industry was one which would always struggle against Indian competition
(Tomlinson, 2014). This did not lead entirely to fatalism in the industry, as has been suggested
in noting the search for new markets and products by the jute firms, but it helps to explain
the degree of co-operation offered by the worker and union to the employers. The main

36 J. ToMLInSon ET AL.

union, the Dundee and District Union of Jute and Flax Workers, worked with the employers
on such issues as recruitment and protection, having been converted in the 1930s on the
second of these from its previous free trade stance (Ewan, Innes, Reynolds, & Pipes, 2006,
pp.115–116).22

Despite amalgamations in the industry, jute remained a locally-controlled sector, so that
the hostility that could be mobilised against remote owners was not relevant. This contrasts
with the one case of a declining ‘old staple’ where job loss was resisted-in the shipbuilding
firm of Caledon (see Section IV below).23 The Caledon workforce was also entirely male,
whereas the jute industry was traditionally very much a ‘women’s industry’. However, in the
post-war years, as Table 3 shows, there had been a marked switch in this regard, so that by
the late 1960s the majority of the jute workforce were male. This shows the success of indus-
trial diversification of Dundee, which is examined in further detail below, with the widening
range of opportunities for women, alongside the increase in skill levels in jute production.
In any event, it would be a great simplification to suggest only male-dominated workforces
resisted employment shrinkage and closures. For example, it was an overwhelmingly female
work force that resisted closure at Lee Jeans in 1981 (an event that happened to co-incide
with the sit-in at the Caledon yard), as it was the women workers who resisted the closure
of Plessey in Bathgate (Clarke, 2017; Findlay, 1987).

III

One of the key drivers of employment changes in post-war Dundee was the arrival of
American manufacturing multinationals, part of a general pattern in Scotland. The firms
were encouraged by regional subsidies, the promise of relatively low-wage labour accus-
tomed to industrial employment, and, initially, by trade protection (Hood & young, 1982).
This development had started almost as soon as the war ended, with around 40,000 jobs
created country-wide by 1950 (CMD, 1950, p. 42–52).

Table 6 shows the composition of Dundee manufacturing amongst the largest firms close
to the peak of employment in the sector in the mid-1960s.24 At this time it is clear that the
MNEs (Timex, NCR, Veeder-Root) were making a substantial but not overwhelming contri-
bution to sustain employment in the city. Jute, to reiterate, remained an important force in
the city until the early 1970s. Total manufacturing employment (1965) was 44,820, with the
three American MNEs providing 7,910 jobs, approximately 18 per cent.25 The firms listed in
Table 7 employed 55 per cent of the manufacturing workforce—emphasizing their impor-
tance, but also the continuing role of small and medium-sized employers, (there were a small
number of large companies with relatively small-scale activities in Dundee e.g. Ferrranti)
(Jackson, 1979, p. 162).26

Amongst the MNEs in Dundee, one of the earliest arrivals was Timex, and its presence,
through to its final departure in 1993, has come to be seen as emblematic of the problematic
role of such enterprises in Scotland in general and Dundee in particular (Knox and McKinlay,
2011; young, 1984, pp. 117–127).

From the employment levels recorded in Table 6, Timex expanded rapidly in the late
1960s and 1970s, to reach a peak at over 6,000 workers in 1974, declining to complete
closure by 1993. The decline after 1974 eventually led to a major dispute in 1983, with an
occupation focused on the predominantly male Milton plant. After six weeks the occupation

BUSInESS HISTory 37

ended with union agreement to 425 job losses, but there were no compulsory redundancies
as there were sufficient applicants for voluntary departure (Knox and McKinlay, 2011, pp.
283–285). Over the next ten years employment dwindled until final closure.

In the considerable debate about the role of US MNEs in the Scottish economy, one strong
criticism often made was that they were branch plants (Knox and McKinlay, 2011). Branch
plants have been seen as of limited benefit because of their perceived lack of linkages with
the local economy, their provision of only low-skilled assembly work, but also as embodying
only a fragile presence in the local economy because of the ease with which they can be
closed down without damage to the overall structure of the parent company (Dimitratos,
Liouka, Ross, & young, 2009; Firn, 1975).

Timex was a pioneering producer of the mass-produced mechanical watch, for which it
built a large scale assembly plant in Dundee. Many of the jobs provided were low-skilled,
and the company’s operations were based on a highly-gendered structure in which these
jobs were overwhelmingly undertaken by women, who supervised almost entirely by men.
But it also employed a significant number of men on tool-making and related activities, and
these activities fed into the company’s global activities (Knox and McKinlay, 2011, p. 277).
Ex-skilled workers recall repairing machinery that was sent from the USA to Dundee for this
purpose, and returned for use in the firm’s US factories.27 So even in its earlier days, the
alleged shortcomings of branch plants only applied in part in the case of Timex.

Table 6. Closures of jute companies within Dundee city boundaries,
1954–1998 (incomplete).
1954 Craigie Works, robertson st.
1957 Belmont Works, Hawkhill
1958 Longtown Works Milton of Craigie road; south Dudhope Mill;

Ward Mills, Willison st.
1959 north British Linoleum Company, Clepington rd.
1960 Victoria Works, ure st; Balgay works, Lower Pleasance;

Maxwelltown Works, Alexander st.
1964 Larchfield Works, Brook st.
1966 Claverhouse Bleachfield
1968 Cowgate Calender
1969 Heathfield Works, Hawkhill,; Caledonian Works, Anderson’s Lane,

Lochee
1970 south Anchor; Dundee Linoleum Company, south road; Walton

Works, Brook st; King’s Cross Works, Loons rd; Wellington
Works, Hilltown

1971 MidWynd Works, Hilltown; Dundee Linen Works, Constitution st;
1973 Kingsmead Carpets; Kinnaird Works, ogilvie’s rd.
1974 Caldrum east spinning mill; eagle Mills Victoria st; Dudhope

Works, Douglas st.
1975 Angus Works, Fairbairn st.
1976 seafield Works, taylor’s Lane; Bowbridge polypropylene weaving

factory; Manhattan Bag sewing factory, Dundonald st.
1977 Garden Works, Benvie rd.; Caldrum West; Jamaica Works, Jamaica

st.; east Port Works.
1978 upper Dens Works, Princes st.; Lower Dens Work, Princes st.
1980 Dundee Bleachworks, Midmill; Dura Mill, Dura st.; Bower Factory,

Douglas st.; Filtrona textile Products, Gourdie ind. estate;
Bowbridge polypropylene plant

1981 Camperdown Works, Lochee;
1996 Manhattan Works
1998 taybank Works

Sources: evening telegraph 21 August 1981, 18 october 1994, 1 september 1998;
Herald 5 February 1996; Dundee university Archives Ms/24/1/7/1/1 Low and
Bonar Company Announcements, 1 september 1977.

38 J. ToMLInSon ET AL.

The decline and then departure of Timex was closely linked to the decline of the mechan-
ical watch, and the company’s decision to focus instead on the assembly of components for
consumer electronics. The rundown of the company was part of a global strategy of the
company, but it should be noted that this was not a case of switching production of a low-
skill product to the Global South. The residual watch-making activity was moved to France,
but most of the jobs previously done by women working for Timex in Dundee disappeared
entirely as the market for mechanical watches collapsed. The later phase of departure also
sent work previously done in Dundee to other parts of Europe (young, 1984). So the demise
of Timex was not a simple ‘globalization’ story, if that term is taken to suggest the relocation
of jobs to low wage areas.

The other big American MNE in Dundee was NCR. It began making cash registers and
accounting machines in the city in 1946. After rapid growth in the late 1960s, employment
peaked at 6,500 workers in the city at nine locations, in 1970. It grew rapidly on the basis if
decimalization in Britain (1971), but was seemingly completely unprepared for the take-off
of electronics in the business machine sector (Hood & young, 1982, pp. 100–117) In response
to this technological change, the company undertook radical re-organization of its whole
business. Employment was cut across the board, including at the company HQ in Dayton,
Ohio, where employment fell from 14,500 to 870 between 1971 and 1977. In Europe pro-
duction was concentrated in Dundee and Augsburg. From 1971 there was a continuous
decline in numbers employed, although manufacturing only ceased in 2009 and the com-
pany retains a small non-manufacturing facility in the city (BBC, 2009; Hood & young, 1982,
pp. 106–111). The evolutionary nature of employment changes at the firm was emphasized
by Hood and young, who saw it as exemplifying the slow ‘retreat’ of MNEs in Scotland.
Corporate restructuring and concentration of production at alternative sites, typically else-
where in Western Europe, meant that job losses accrued in significant numbers often years
or even decades prior to eventual closure and departure. At NCR a sudden reversal of fortunes
in 1971 evoked protest marches and brief stoppages late in that year, but no further forceful
opposition. After significant redundancies in the early 1970s, the company revived later that
decade as it completed the switch to a fully electronics-oriented facility. But in the crisis of
the early 1980s, and following a five-week strike over wages, further redundancies brought
employment to less than a thousand (Hood & young, 1982, 106–113).28

NCR in Dundee evolved away from branch assembly activity in its cash register production
phase, and by the 1960s was less focussed on such activity than Timex. By the end of that
decade it was an almost self-sufficient entity, meeting all of its need from raw materials
through assembly to testing. The nature of its activities is suggested by the gender compo-
sition of its workforce (Table 6) whose maleness reflected the absence of an assembly oper-
ation on the scale of Timex. At that time little R and D was done in Dundee, but that changed
with the move to electronic devices (Hood & young, 1982, p. 104).

Like Timex, the decline of NCR was the consequence of technological changes which led
to major corporate re-structuring. These involved a transition to less labour-intensive activ-
ities, but also the shift of work out of Dundee. Such a shift was undoubtedly facilitated by
the companies’ MNE status, though in neither case was there a wholesale shift of activity to
a ‘low-wage’ area outside Europe.

A general survey of MNE activity in Tayside in the early 1990s suggested that MNEs brought
capital and new technologies to the area, but supplied many of their inputs from imports,
and suggested that, partly as result, no new local suppliers came into being to cater for the

BUSInESS HISTory 39

MNEs’ needs (Liu, 1994). But by then MNE employment had shrunk to a fraction of its previous
size.29 As we have seen, MNEs in Dundee made a significant impact on employment in the
city, providing many well-paid jobs to both men and women. This impact was not short-lived,
being strong from the 1940s to the 1970s. But ultimately it was transient, and in the 1970s
and 1980s their decline was a significant part of the de-industrialization of the city.

Forceful resistance to de-industrialization is an important part of the political history of
post-war Dundee. Resistance was especially pronounced at Timex in 1983 and 1993, but in
each instance workers were opposing changes to production or the system of pay and reward
rather than corporate flight. It is true that in 1983 the firm decided to end watch-making
and close the Milton of Craigie plant, concentrating its new emphasis on contract electronics
assembly production at another site in the city, at Camperdown. This was the scene of a
major dispute in 1993, triggered when the firm sought to impose a programme of temporary
lay-offs, a one-year wage freeze and reduced fringe benefits (Martin & Dowling, 1995).
Closure followed seven months later, and only after the dispute had evolved painfully from
a strike to a lockout, involving the dismissal – on dubious legal grounds – of the plant’s
remaining 340 workers (Hetherington, 1993). These acts of resistance were important, but
partly because they were in fact highly atypical of the response to job losses. To reiterate,
most such losses were part of a gradual process of attrition, so closures typically came long
after the plant had passed its maximum level of employment. This explains why the number
of people engaged in resistance to closures is always so small: they are a ‘residual’ workforce
making a ‘last stand’. This is true for Timex in 1993, as we have seen, but also, for example,
outwith Dundee, for Plessey, which employed 2,400 workers in 1973, but only 330 at the
time of the 1982 occupation (Findlay, 1987, p. 75). Also typical of a wider feature of resistance
to closure was that it was most evident where a remote (often foreign) owner could be
identified as the decision-maker behind the closure, which gave clear agency to the decision
and an ideological charge to that resistance. Finally, we must note that resistance to closure
was bunched in the years of the early 1980s, both in Dundee and elsewhere in Scotland and
the UK. In Dundee the battles at Caledon (returned to in the next section) and the first one
at Timex were shadowed by the recession of the early 1980s, the most serious since the
1930s, and the trebling of registered unemployment.30 Unsurprisingly, the prospect of job
loss within a labour market seeming to offer poor possibilities of alternative employment,
created a stronger disposition to resist. To put the point another way: in the early 1980s
an extraordinarily sharp contraction of industrial jobs was superimposed on a much
longer trend.

The story of de-industrialization in Dundee is not just about jute and MNEs. Significant job
losses were also suffered in three ‘old’ industries, shipbuilding, the docks, and railways.

Shipbuilding had been an important Dundee industry from the early nineteenth century,
but pressure from larger yards elsewhere meant that by 1920 it had been concentrated into
one company, Caledon’s. The company enjoyed a boom during the Second World War and
into the 1950s, but the gross tonnage launched peaked in the late 1940s, and had halved
by the early 1960s. By 1971 employment was down to just over 1,000 (Jackson, 1979,
pp. 150–153).31 Contraction continued, and in 1981 British Shipbuilders, who had acquired

40 J. ToMLInSon ET AL.

the yard on the nationalization of the industry in 1976, announced its closure. Closure was
opposed by a sit-in of 140 workers, with the chair of the shop stewards asserting: ‘I am only
interested in the yard. I had the opportunity to serve my time in this yard and I want other
youngsters to get the opportunity to do the same.’32

The occupation was unsuccessful and the yard closed, though many of the workers found
jobs at the neighbouring Kestrel Marine that grew out of the boat-builders Smith and Hutton
(closed 1975), and by 1983 was employing 1,000 workers in ship repair and oil rig fabrica-
tion.33 The willingness of the Caledon workers to resist closure was partly the result of a belief
that British Shipbuilders were dishonest in their claims about the yard’s financial position
and productivity performance, as well as the prevalence of restrictive practices, in the yard.34
So, ironically perhaps, nationalization in this case seems to have reinforced the sense of a
remote, uncaring management.

Employment in Britain’s docks has plummeted in the wake of containerization, especially
evident from 1965 onwards.35 But in Dundee, as elsewhere, the contraction began much
earlier. The National Dock Labour Board statistics do not give separate data for Dundee docks,
but include them in ‘East Scotland’, where employment fell from 2,535 in 1947, 2,082 in 1950,
to 1,793 in 1960, 1,375 in 1965, 1,207 in 1970, and only 699 in 1975. This scale of decline is
indicative of what happened in Dundee, where the Census records 374 dockers in 1951, 120
by 1971.36

The contraction of the UK railway network and accompanying decline of the labour force
is often linked to the Beeching Report of the 1960s, but in fact it is noticeable from soon
after railway nationalization in 1948. In the 1950s the rise of cheap road transport was expos-
ing both freight and passenger services to sharp competition, and British Railways were
responding with significant cuts, including in Dundee (Marshall, 1996, pp. 147–157). In the
1960s the process accelerated. In that decade across the UK railways came second only to
coalmining for the scale of job losses, with 128,000 going between 1964 and 1969.37 In
Dundee contraction was epitomised by the closure of Dundee East station in 1959, followed
by Dundee West in 1965. Probably even more important in employment terms was the
closure of Tay Bridge engine shed (linked to the transition from steam to diesel traction) in
May 1967, where over 350 people had previously been employed (Marshall, 1996, p. 151).
In the census of 1951 1063 people were recorded as ‘railway transport workers’ of all grades,
while by 1971 the figure was 460.38

De-industrialization changes the labour market in two distinguishable ways. Insofar as it
takes place through job losses (as opposed to the absence of fully compensating new indus-
trial job creation), it brings the immediate threat of unemployment. If these job losses are
concentrated in periods of macroeconomic contraction, then this problem will be much
more serious. Irrespective of how it occurs, de-industrialization by definition brings a trend
change in the types of jobs available. The central concern of those who see de-industrial-
ization as key to change in the labour market, is that even if one sets aside the impact of
unemployment, de-industrialization will bring about a polarization of the labour market.
The service-dominated economy generates lots of ‘lovely’ jobs for the educated, but also
lots of ‘lousy’ jobs for those with limited educational qualifications (Goos & Manning, 2007).

BUSInESS HISTory 41

We can christen these problems respectively the ‘transitional’ and the ‘steady state’ problems
resulting from de-industrialization.

Christening the first aspect ‘transitional’ is intended to make an important analytical dis-
tinction, but should not be taken to suggest that the problem is either minor or rapidly
resolved. Those who are thrown on the labour market with perhaps high, but redundant,
job-specific skills but limited education, will generally find it very difficult to make the shift
to the ‘lousy’, let alone the ‘lovely’ jobs in the service economy. So the impact of job losses
may be prolonged, and not necessarily limited to the generation immediately affected by
job loss, if that loss results in family deprivation with its potentail to pass disadvantage down
through the generations.

So in looking at what has happened in post-war Dundee we can usefully deploy this
distinction, whilst recognising that in practice the nature and impact of change in the labour
market cannot be easily categorised.

Recorded unemployment in Dundee was below the Scottish average in the 1950s and
1960s (Campbell and Laydon, 1970, p. 99).39 While net emigration increased, the total pop-
ulation of the city rose between 1951 and 1961 and was then stable until 1971. These
employment and population trends suggest the city was participating substantially in the
post-war ‘golden age’ of the British economy. In 1969 an article about the city in the Financial
Times was headed ‘Dundee-from depression to dynamism in 25 years’.40 As already noted,
the labour market underpinnings of this prosperity came from the slowing of jute’s decline
by protection and innovation in the industry, coupled to the growth of new manufacturing
industries, including the influx of multinationals. But in the 1970s unemployment rose
significantly, then shot up again from 1979. 41(A study in the late 1970s of the effects of job
losses at NCR and Sidlaw Industries respectively showed how this unemployment impacted
on different parts of the labour market. Amongst the NCR workers, 36 per cent went straight
to another job, and only 27 per cent were unemployed for more than three months. For
Sidlaw’s jute workers the figures were 14 per cent and 56 per cent respectively. NCR workers
were typically typically much more skilled: Scottish Economic Planning Department,
‘Redundancies in Dundee’ (Dundee, 1979, p. 16) By September 1979 the official rate had
reached 9 per cent before peaking at 18 per cent in 1991 (Ross & Hardy, 1979, p. 3).42 But
increasingly this official figure underestimated the real rate of joblessness. More compre-
hensive calculations give estimates of 20.6 per cent for January 1997. This calculation also
suggests that a significant proportion of this ‘hidden unemployment’ was female, with a
women’s unemployment rate of 15.5 per cent. This may perhaps be a hidden legacy of the
high employment rates of women in the city, dating back to jute and the post-war American
multinationals, with a residue of older women who lost jobs and never regained employ-
ment (Beatty, Fothergill, Gore, & Herrington, 1997).

The early 1990s do seem to represent a nadir in Dundee’s post-1945 economic fortunes.
The Carstairs Index of poverty shows Dundee City to have had some of the most deprived
postcodes in Scotland in 1991. A few years later, an analysis of social security claimants found
35 per cent of households in Dundee were in receipt of social security benefits, compared
with a national average of 33%, and with Glasgow at 52 per cent, using the unitary authorities
as the unit of analysis (Bramley, Lancaster, & Gordon, 2000; McLoone, 1994, pp. 64–55).

For the purposes of the argument here we can think of ‘a new ‘steady state’ emerging as
the pace of de-industrialization slowed at the end of the 1990s. ‘Steady state’ exaggerates,
as employment in industry continued to decline in the early twenty-first century. But as a

42 J. ToMLInSon ET AL.

trend a falling share of employment in industry must eventually come to an end, when it
reaches zero. In practice the trend will end well before that level is reached, as it is impossible
to conceive of a structure of costs that makes it worthwhile to import every single industrial
output. In other words, there is a minimum below which industrial employment cannot
plausibly fall, and it is possible that the contemporary UK and Scotland are getting close to
that minimum, though this is an inherently speculative proposition.

Table 1 shows the general shift from industrial to non-industrial employment over the
whole period 1951–2001. ‘Services’ are an extremely heterogenous category, and the expan-
sion of such employment has been accompanied by enormous changes in its composition.
This expansion has been accompanied by major changes in official definitions, so Table 7
only gives a rough guide to those shifts.

Employed with caution, Table 7 is useful in identifying some of the major changes in the
service sector employment (Dundee, 2004, p. 20).43 The most striking changes are the rise
of ‘real estate, renting and business activities’, linked, amongst other factors, to the spread
of private home ownership and the splitting-off of many business services (accounting,
marketing, etc.) from previous ‘in-firm’ provision. The second feature to be emphasized is
the rise of health and education to key employment sectors, sectors overwhelmingly in the
public sector.

As Table 7 makes clear, Dundee, like many post-industrial parts of Britain, became highly
dependent on public sector employment in the last decades of the twentieth century, reliant
on a kind of ‘regional Keynesianism’ not sufficiently stressed in most accounts of contempo-
rary Britain.44 This growth of public employment can in turn be seen as a key component of
the ‘de-globalization’ of the city, making its economic fortunes much more reliant on political
decisions in London and Edinburgh, and much less (at least directly) on the vagaries of the
international economy (Tomlinson, 2009).

The expansion of the public sector favoured the employment of women, who were much
more strongly represented in that sector than in ‘new’ industries such as digital media of life
sciences. Thus it has allowed Dundee to continue to be a relatively good place for female
employment opportunities, following the demise of jute and the multinational electronics
firms which previously provided a large number of such jobs. Public sector employment is

Table 7. Changing composition of services in
Dundee, 1951–2001 (proportion of employed
population).
sector (1951/2001 definitions) 1951 2001

Distributive trades/wholesale and
retail trade and repairs

14.0 16.4

insurance banking and finance/
financial intermediaries

1.6 2.7

other professional and business
services/real estate, renting and
business activities

0.4 9.6

Public sector employment
Public administration and defence/

public administration, defence
and social security

4.0 5.7

Medical and dental services/health
and social work

3.6 15.3

education 2.8 8.8

Sources: as table 1.

BUSInESS HISTory 43

also now relatively well-paid compared with the private sector, though as much of this
reflects the contracting out to the private sector of low-paid jobs previously done ‘in-house’
by public sector employers, it adds to the trend towards polarization of the labour market.

Evidence of the longer-term impact of de-industrialization, is given in Tables 8 and 9.
Along with overall population decline went a shift in the age structure, partly a result of
out-migration of young people. But in addition, the employment rate amongst those of
working age fell significantly.

Evidence of the growing ‘precarity’ of employment is suggested by the levels of self-
employment and part-time work. On the first of these, national studies show that it is in part
the consequence of the absence of employment opportunities, rather than indicative of a
surge in entrepreneurialism.45 Part-time work, much more prevalent amongst women, is
sometimes the worker’s preference, but also a sign of the ‘lousy job’.

As noted earlier, changes in sectoral composition were by no means the whole story of
changes in the labour market in Dundee. Changes in occupation also need to be addressed,
though here the changing categorisations mean that there are no directly comparable sta-
tistics. Taking Tables 10 and 11 together brings out the key point about the decline of manual
occupations and the growth of a wide diversity of white-collar work, usually requiring formal
educational qualifications at varying levels. The link between manual occupations and the
absence of formal educational qualifications is brought out by the contrast between the
1951 Census, which found that 90 per cent of men and of 91 per cent of women had left
school at the earliest opportunity (14/15 or earlier)—usually with no formal qualifications
(though such qualifications may have been acquired at a later stage in the life cycle). By
contrast, in 2001 34 per cent of the population had no educational qualifications, 24.5 had

Table 8. Working population changes in Dundee 1971–2001,
per cent (post-1996 boundaries.

Percentage change
in Dundee

Percentage change
in scotland

total population −21.31 −3.07
Population of working age −17.91 1.93
Persons in employment −27.84 1.75
ratio those in employment :

those of working age
−8.54 −0.12

Source: census data, collated by turok, 2007, p. 22.

Table 9. economic activity in Dundee, 2001 (share of population aged
16–74)*.
economic status Activity Men Women

Economically active Part-time employee 3.6 16.8
Full-time employee 44.4 28.1
self-employed 6.8 1.9
unemployed 7.4 3.2
Fulltime student 4.2 5.2

Economically inactive retired 12.2 17.9
student 8.4 7.3
Looking after home/family 1.0 7.8
Permanently sick/disabled 8.5 7.4
other 3.6 4.4

*total population in this age group: male 54,959, female, 59,689.
Source: Census 2001. scotland. Key statistics for settlements and Localities in scotland,

tables Ks09b and c.

44 J. ToMLInSon ET AL.

group 1 (SVQ1-2), 16.6 group 2 (SVQ 3), 7.3 group 3 (SVQ4-5) and 18 group 4 (degree or
professional qualification).46

In sum, what we are tabulating here is the radical shrinking of the manual working class
in the city. In the place of all those manual jobs there have proliferated a variety of mainly
non-manual service sector jobs, a large proportion of which require significant levels of
educational qualification-the ‘lovely jobs’. But at the same time there has been the loss of
opportunities for the substantial minority with little or nothing in the way of such qualifica-
tions-they are the people who have to do the ‘lousy jobs’. To reiterate, these changes in
occupational structure are by no means all the result of sectoral shifts. Within industry, includ-
ing manufacturing, more jobs were becoming technical and/or supervisory, usually requiring
formal qualifications for those who took them up (McCrone, 2017, pp. 205–208).

What are the implications of the Dundee case for our broader understanding of de-
industrialization? First, most generally, that this term’s use is always and inevitably embedded
in broader narratives about economic development: it is not a ‘free-standing’ concept. Most
discussion of de-industrialization still shows evidence of its origins in the 1970s, and espe-
cially 1980s, when declinist assumptions about the American, British and Scottish economies
were ubiquitous. This has meant that every industrial closure in those countries has tended
to be interpreted within a story of national pathology, rather than as part of the normal flux
of economic activity in a capitalist economy, or as part of a trend common to all such
economies.

Table 11. occupations in Dundee 2001.

occupational Group
Percentage of those aged

16–74 in employment

Managers and senior officials 9.7
Professional occupations 10.5
Associate professional and technical 14.4
Administrative and secretarial 12.3
skilled trades 10.7
Personal service 7.0
sales and customer service 10.4
Process, plant and machine operatives 10.5
elementary occupations 14.6

Source: Census 2001. scotland. Key statistics for settlements and
Localities in scotland, table Ks12a.

Table 10. occupational class in Dundee, 1951.

occupational Class*
Men (occupied or retired

over 15) percentage

Women (occupied or retired

over 15) percentage

i 2.9 0.5
ii 10.8 11.0
iii 53.1 57.1
iV 16.4 20.7
V 16.8 10.6

*social classes i and ii are salaried workers, iii, iV and V are wage workers, broadly
divided into skilled, semi-skilled and unskilled respectively.

Source: Census 1951. scotland vol. V. occupations and industries table 10.

BUSInESS HISTory 45

Second, because of this chronological origin, it has been common in both the British and
Scottish cases to exaggerate the significance of the Thatcher period in the process of de-
industrialization, which began well before 1979, and continued long after. That this fore-short-
ened chronology does not fit the shrinking of the coal industry has been emphasized by
recent research, but the point has much wider scope (see Table 1) (Gibbs, 2018; Phillips,
2013). This is not to dispute the pain caused by the incompetence of Thatcher’s economic
policies, but to suggest that excessive focus on the period tends to both misunderstandings
of the causes of de-industrialization, and unhelpful approaches to its politics.

On causes, focusing too much on the experience of the 1980s will tend to conflate the
short-term effects of the sharp contraction at the beginning of that decade, and the con-
tinuation of long-term trends which had been proceeding since the 1950s (Massey &
Meegan, 1982, p. 14).47 If we focus on trends we can see that, as the decline in industrial
employment was evident across all the Western industrial countries, the causes must also
be sought substantially in forces operative at an international and not just a British or
Scottish level (Feinstein, 1999, p. 39). Changes in consumption patterns, differing relative
sectoral productivity performance and changing patterns of international trade and capital
movement are then seen as broader contexts within which the British and Scottish cases
worked out.

On the politics, the policies of the Thatcher period are best seen as very important not
for initiating de-industrialization (though they greatly accelerated the process), but, crucially,
as changing how that process was responded to: as undermining the previous, if frayed,
moral economy (Bolton & Laaser, 2013).48 These market fundamentalist policies broke with
the moral economy of the previous decades, when to varying degrees it was deemed the
duty of the state to offset, mitigate or compensate for the unavoidable disruptions that
de-industrialization brings.49

Another problematic legacy of the origins of the de-industrialization debate in the 1980s
is the question of links between globalization and de-industrialization. Of course globaliza-
tion is multi-faceted, and if we associate it with the influx of multinationals into Dundee after
1945 it clearly brought substantial benefits of new technologies and enhanced wages and
conditions for many workers. But in the 1980s globalization was a term commonly linked
de-industrialization by notions of capital flight. Much of the North American literature
focussed on both ‘flight’ within countries (‘from the Rust Belt to the Sunbelt’) and between-in-
ternational or ‘global’ movements. The literature on Scotland and Britain focused more on
the latter, as within country flight of capital was a less significant feature; while varying in
degree, all parts of these countries were experiencing de-industrialization. Within the UK,
industrial decline in London was enormous, as emphasized by the Greater London Council
in the 1980s (GLC, 1985, pp. 2–8). Within Scotland it was also happening everywhere. The
traditional emphasis has been on West Central Scotland, and this article has obviously
emphasized its serious impact in Dundee. But it also took place in the Highlands and in the
Borders. 50 Perhaps most surprisingly, it was a powerful trend in Edinburgh, a city historically
with a large industrial sector, but where more manufacturing jobs were lost in 1968–1976
than in Dundee (both absolutely and proportionately) (Ashcroft, 1983, p. 177; Madgin and
Rodger 2013).51

The Dundee case should caution us in putting too much attention on capital flight as a
cause of de-industrialization. It we first take the case of jute, its problems never arose from
this cause; as shown above its shrinking arose first from goods market competition, and the

46 J. ToMLInSon ET AL.

later from technical change. Never was there a process of closing down jute mills and relo-
cating their production elsewhere.52

Jute was broadly typical of the whole textile industry, certainly including cotton, the
largest component of that sector. Its decline had begun around the First World War, it was
driven initially by low-wage competition from the ‘Third World’, with problems exacerbated
by technical change after 1945, especially the invention of synthetic fibres. Despite significant
technological innovation and product diversification, employment loss was large and per-
sistent across the post-war years.

Textiles were hugely important, especially for employment, and the employment of
women, but they were not typical of the ‘old staples’ in key respects. The decline of coal was
overwhelmingly driven by technical change coupled, in later years, with public policy on
electricity generation, not by market competition; imports of coal were trivial until the 1990s,
and even then only displaced a small proportion of the jobs that had been lost in the industry
(Kerai, 2012).53 Shipbuilding was, of course, hit by market competition, but in its most rapid
period of decline in the late 1950s and 1960s this competition did not come from the ‘Third
world’, but from other advanced industrial countries, Norway, Sweden and Japan (Johnman
& Murphy, 2002). It is a similar story in iron and steel, where technical change and competition
from other advanced countries were the main drivers of employment decline (only in the
twenty-first century was competition from China and India significant) (Payne, 1995; Rhodes,
2016, p. 6, 9).54

What capital flight did occur in Dundee should caution us against a too simplistic view
that this flight could be characterised as consisting of footloose, unembedded plants which
fled to low-wage locations in the Global South. As noted above, in the Dundee case, both
of the biggest multinationals eventually established activities which went well beyond
branch plant assembly, with significant skilled employment, including in Research and
Development. They did eventually cease manufacturing in the city (though they were hardly
‘transients’-both provided industrial employment for almost fifty years), but insofar as the
jobs lost went elsewhere, it was to other European locations, rather than developing coun-
tries. There was also relatively little of the direct transfer of employment as with the ‘rust-belt
to sunbelt’ phenomenon within Britain. In Dundee, the only identified cases are Morphy
Richards and Burndept (listed in Table 6) where, as part of corporate re-organizations, pro-
duction was shifted south of the border in the 1970s (Jackson, 1979, p. 156, 162; Riddell,
1979, pp. 476–482).

We can use the Dundee case to helpfully complicate the stories of both the ‘old staples’
and the ‘new industries’ in their contribution to de-industrialization. But this ‘old/new’ dichot-
omy itself has serious limits. As the jute example brings home, the old staples were not
characterised by an unchanging commitment to inherently outdated activities. In their help-
ful typology of industries suffering employment decline, Massey and Meegan suggested a
three part characterization: ‘rationalization’, which is simple reduction in total capacity; ‘inten-
sification’, where labour productivity is driven up without major investment or re-organiza-
tion; and ‘investment and technical change’, which is self-explanatory (Massey & Meegan,
1982, p. 18). They rightly put jute in the third of these boxes, given, as noted above, that it
was subject to major re-organization and reform, and, most strikingly, by the 1970s barely
deserved the designation ‘jute industry’, so far had it shifted to the use of polyproplylene. It
had become a ‘new industry’.

BUSInESS HISTory 47

So the ‘old/new’ distinction needs to be treated with some care. Many important industries
never fitted into that dichotomy. Food, Drink and Tobacco, for example, is not normally seen
as either of these, yet was and remained a major employer in the city. Publishing and printing
is similar, with the particularly prominent example of DC Thomson. Probably the city’s most
long-standing, stable source of private sector jobs, Thomson’s is a company which has thrived
on producing a resolutely old-fashioned set of newspapers and magazines, but spread its
investments widely, including into a range of new media.

Finally, we return to the long arc of history within which we can place de-industrialization.
If we see that process as akin to the historical transition from agricultural to industrial pre-
dominance, we can note that the historiography of that earlier transition has often run
aground because disputants about its impact talked past each other ( A key early debate is:
Hobsbawn & Hartwell, 1963; Griffin, 2018). Those who emphasized its negative effects on
popular welfare focused on the undoubted pains of the transition, and the long lag before
the mass of the population saw much benefit in their material living standards. The ‘optimists’
focused attention on the long-run effects, when most of the transition had taken place, and
so might be thought of as talking about something approaching a ‘steady state’ industrial
society. In the context of de-industrialization, the point is not whether we take an overall
‘optimistic’ or ‘pessimistic’ view, but that we recognise the utility of distinguishing the issues
raised by an inherently painful transition as distinct from those raised by a new ‘steady state’
of the ‘service economy’.

Notes

1. It might be argued that the very term ‘de-industrialization’ emphasizes the negative effects, as
opposed to alternatives such as ‘the rise of services’.

2. Bluestone’s ‘Foreword’ to Cowie and Heathcott , Beyond The Ruins makes this context for his
1982 book especially clear, when he argues that since the 1980s US industrial output and pro-
ductivity (but not employment) has rebounded into growth (x-xiii), and therefore what has
happened in the 1990s and the early 2000s ‘cannot be termed “deindustrialization”, but for the
workers affected it feels the same’. (xiii). Note that the 1980s was the peak period for declinism
in the USA, in the face of Japanese competition. For Britain, Martin and Rowthorn, The
Geography; Foster and Woolfson, The Politics; Levie, Gregory and Lorentzen, Fighting Closures;
Rose et al, ‘Restructuring’.

3. On the ‘new industries’ theme, see Randall, ‘New towns’.
4. Campbell, Scotland Since 1707, chapter XVI ‘since 1945’ diagnoses a problem of resistance to

change, and shortage of indigenous enterprise—uses a trope of entrepreneurial failure, a sta-
ple of early historiographical declinism.

5. For the debate in North America: Staudohar and Brown, Deindustrialisation.
6. Dickson and Judge, ‘Introduction’, vii.
7. According to the 1951 Census there were seven men and one woman coalminer living in

Dundee, presumably commuting to the Fife coalfield.
8. Scottish data in Tomlinson, Key trends’, 13.
9. ‘Business demography,UK’.
10. Unlike Glasgow, Dundee was not the object of a planned reduction of the city’s population,

and there is no evidence that the city was suffering serious competition for job creation with
any of the new towns. Dundee was also chracterised by relative geographical isolation, thus
less affected by expanding travel to work areas.

11. On the failure of the Ford motor company to establish a prospective plant in Dundee, Woolfson
and Foster, ‘Corporate Reconstruction’, 52, 54-6. Unsurprsingly, when this issue came to the

48 J. ToMLInSon ET AL.

Thatcher cabinet it was discussed as an episode of union intransigence: TNA:PRO CAB128/89/12
Cabinet Conclusions 24 March 1988.

12. This innovation encouraged the production of carpet-making in the city, so that in 1959 there
were three carpet producers in the city employing 1,000 workers (One of them a subsidiary of
Jute Industries).

13. For these authors’ debate with jute industry leaders.
14. Sidlaw Industries quickly sold off its Polypropylene interests and diversified into a very wide

range of activities, most of them outwith Dundee.
15. For the role of unions, see below.
16. Courier 9 January 1981.
17. Courier 10 January 1981.
18. Courier 1 September 1998.
19. TNA, BT 177/928B, Treasury Financed Building Project on Trading Estates or Site, 13 December

1957.
20. Dundee City Council, ‘Do It in Dundee’ (Dundee, 1931).
21. Tom Smith and Dave Howie, Interviewed by Val Wright and Jim Phillips, Dundee, 3 July 2018.
22. See the biography of Margaret Fenwick, who was Assistant General Secretary of the DDUJFW

from 1960 and General Secretary from 1971 in Ewan, The Biographical Dictionary of Scottish
Women, pp.115-116 and debate on the issue at the time of the 1963 bye-election in the city,
Times 12 November 1963. The TUC also got involved in pressure for continuation of protec-
tion-see MRC MSS292/629/3.

23. Caledon was a very old Dundee company that amalgamated with Robb’s of Leith in 1968.
24. The most detailed account of Dundee industry at firm level is for the early 1960s: see

Jackson,’Leading industries’.
25. Total employment figure from TNA: PRO BT177/2686 Miss McGhee (Office for Scotland) to Miss

Hodkinson, ‘Information for brief on Dundee’, 29 November 1966.
26. Ferranti came to Dundee in 1954, initially with 40 workers, and employed 230 in 1963, and 630

in 1984: Courier 27 March 1984.
27. Smith and Howie, Interviewed by Wright and Phillips.
28. The Times, 7 May 1983, 9 May 1983, 9 July 1983, 4 September 1984.
29. In 2001 the one remaining large multinational manufacturing company was the French tyre

company Michelin, where high weight/value ratios in transporting tyres keep production in
Dundee, close to European markets). Michelin was established in 1972 with 400 workers, with
subsequent fluctuations around 800-1000. The company closed its Aberdeen factory (opened
1973) in 1986, and plants in Burnley and Stoke in 2001, leaving Dundee the only one of
Michelin’s British plants making car tyres. Its closure was announced in November 2018.

30. The crisis of the 1970s was one of inflation and fiscal deficits, with only mild impact on output
and employment.

31. Census 1971 Scotland Economic Activity (10% sample), Table 3.
32. Scotsman, 19 October 1981; for arguments about Caledon see also Gordon Wilson MP in

Hansard (Commons) vol. 10 cols. 23-5, 19 October 1981.
33. Courier 21 June 1983.
34. Scotsman, 19 October 1981.
35. Wilson, Dockers, 308-9.
36. National Dock Labour Board, Reports and Accounts, various; Census 1951, vol. iv, Table 6 and

Census 1971 Scotland Economic Activity, Table 3.
37. Hansard (House of Commons), vol. 801, col. 432, 6 May 1970.
38. Census 1951, vol. iv, Table 6 and Census 1971 Scotland Economic Activity, Table 3.
39. The lowest point according to the official (claimant) count was 2.0 per cent in 1966: Campbell

and Laydon, Tayside, 99.
40. Financial Times 17 October 1969.
41. A study in the late 1970s of the effects of job losses at NCR and Sidlaw Industries respectively

showed how this unemployment impacted on different parts of the labour market. Amongst
the NCR workers, 36 per cent went straight to another job, and only 27 per cent were unem-

BUSInESS HISTory 49

ployed for more than three months. For Sidlaw’s jute workers the figures were 14 per cent and
56 per cent respectively. NCR workers were typically typically much more skilled: Scottish
Economic Planning Department, ‘Redundancies in Dundee’ (Dundee, 1979), 16.

42. Department of Employment Gazette, various issues.
43. As always, broad similarity of aggregates does not mean no compositional change. For exam-

ple, retailing has shifted from a multiplicity of small, locally-owned, shops to the dominance of
the major supermarkets, so that by 2001 Tesco was the biggest private sector employer in
Dundee: Dundee City Council, About Dundee 2004 (Dundee, 2004), p. 20.

44. ‘Regional Keynesianism’ is to be distinguished from the main thrust of regional policy which
was characterised by a variety of means of seeking to encourage private investment into a re-
gion.

45. Scottish Executive, Scottish Economic Statistics 2002 (Edinburgh, 2002), p.137.
46. Census 1951. Scotland vol. V. Occupations and Industries Table 17; Census 2001. Scotland. Key

Statistics for Settlements and Localities in Scotland, Table KS13.
47. A contraction which reduced jobs in the service sector by around 250,000 in the UK.
48. For a general social science discussions of the concept of ‘moral economy.
49. Compare the much more carefully managed decline of deep-mined coal in Germany.
50. Perchard, ‘A little local difficulty?
51. 19, 901 (35.9 per cent), compared with 11,572 (27.1 percent).
52. There was some financing of Calcutta jute by Dundee capitalists before the First World War, but

in the post-1945 period it was owned by Indians. Also, some jute machinery from Dundee mill
closures was moved to Calcutta mills.

53. Imports exceeded domestic production for the first time in 2001, rising to 25 million tons in
2015, roughly equivalent to12,500 miner’s jobs at UK levels of productivity.

54. Iron and Steel lost 90 per cent of its workforce between 1971 and 2001, the great bulk of the
fall coming in the 1980s (50 per cent of the fall in 1979-1981). Over the same period, output fell
by much less, approximately 40 per cent; Payne, ‘The end of steel-making’. Payne details the
erosion of employment at most plants well before their closure (78).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Funding

Grant sponsored by “Leverhulme Trust “ and “Employment, Politics and Culture in Scotland”,
RPG-2016-283, with Jim Phillips as Principal Investigator, Valerie Wright as Research Associate,
and Jim Tomlinson as Co-Investigator.

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De-industrialization: a case study of Dundee, 1951–2001, and its broad implications

ABSTRACT

III

Notes

Disclosure statement

Funding

References

The New Story of Business:
Towards a More Responsible

Capitalism

R. EDWARD FREEMAN

ABSTRACT

Business is undergoing a conceptual revolution. Since the
Global Financial Crisis there are many new ideas and pro-
posals to make capitalism more responsible. The purpose
of this paper is to identify key flaws in the “old story” of
capitalism. Six principles are explained that taken
together form the basis for a new story of business, one of
responsible capitalism.

INTRODUCTION

The last 40 years have seen great changes in our understand-
ing of business. In our lifetime, we have seen a remarkable
pace of globalization. We have seen revolutionary informa-

tion technology. We have seen nothing less than a fundamental
shift in the story of business. In this talk I will try to explicate what
I believe is a conceptual revolution in business, and in particular, I

R. Edward Freeman is University Professor and Olsson Professor of Business Administration,
the Darden School, University of Virginia, Charlottesville, VA. E-mail: freemane@darden.vir-
ginia.edu; redwardfreeman.com.

Editor’s Note: A public lecture by R. Edward Freeman, Verizon Visiting Professor of Business
Ethics, Bentley University.

VC 2017 W. Michael Hoffman Center for Business Ethics at Bentley University. Published by
Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington
Road, Oxford OX4 2DQ, UK.

Business and Society Review 122:3 449–465

bs_bs_banner

will try to explain this “new story of business” in terms of a few fun-
damental principles or ideas.

While the roots of this revolution are easily traceable back to the
1980s or even earlier, they are most clearly seen in the responses
to the Global Financial Crisis (GFC) of 2008. Since that time, we
have seen an explosion of ideas of how to make businesses more
responsible for the consequences of their actions.

For instance, many companies have taken a renewed interest in
corporate social responsibility and sustainability. In addition, we
have seen a renewed emphasis on the idea of Conscious Capitalism
as John Mackey and Raj Sisodia have argued that companies that
follow the tenets of conscious capitalism will outperform those that
do not. Michael Porter and a colleague have suggested that compa-
nies focus on “shared value” where economic value and social value
are seen as going hand in hand. Nestle has been the show pony for
this idea. Just Capital is an NGO that is committed to rating com-
panies on widely accepted standards of justice. Bill Gates has sug-
gested Creative Capitalism, whereby companies forego profits for
the sake of public welfare. Senator Mark Warner of Virginia has
suggested that it is time for new metrics, especially around the wel-
fare of workers and has hailed a move to Capitalism 2.0.

Meanwhile, the idea of social entrepreneurship has taken off
with many millennials beginning to start businesses that address
social problems. NGOs such as the Acumen Fund, Kiva, Kickstar-
ter, and countless others have been started to provide capital for
small and very small businesses and entrepreneurs who are socie-
tal change agents. Even on Wall Street, we see an increase in the
movement toward what is variously called, “patient capital,”
“impact investing,” “responsible investing,” and other terms.

Business pundits have gotten into the act, decrying a lack of
ethics that they claim brought about the GFC. Robert Reich has
argued that ethics and profits have to go together. Agency Theorist
pioneer Michael Jensen has suggested that integrity is an important
element in a successful business. The Aspen Program in Business
and Society has led various conversations about new business mod-
els, new governance models, and a variety of other related ideas.

At two recent meetings at the White House in 2016 sponsored by
the Obama Administration’s Department of Labor, 75 people from
these organizations and movements gathered to discuss common-
alities and whether or not there needed to be one brand that

450 BUSINESS AND SOCIETY REVIEW

identifies this new story of business that is emerging. While such a
brand may someday emerge, or perhaps it already has, for my pur-
poses I want to focus on the underlying ideas and principles that
are inspiring all of this activity. Whichever brand or brands that
ultimately become the rallying cry on which this conceptual revolu-
tion will be based. The brand will have to be based on a sense of
purpose and ethics that is as central to the new narrative as profit
is to the old one. It will have to address how companies can simul-
taneously create value for all of its key stakeholders. The brand will
have to take sustainability and the physical limits of business very
seriously. And, it will have to recognize that people are complex
and that they can and do collaborate with others to create value. I
will set these ideas out more carefully in a later section. For now,
let’s turn to the dominant narrative or the “old story of business,”
and see why it is no longer applicable for the twenty-first century.

THE DOMINANT NARRATIVE

While all of these conversations and new business models are going
on, we still see many executives and academics who are strongly
committed to the idea that the main goal of any business is to make
as much money as possible for its shareholders. This view was artic-
ulated best by Milton Friedman in a 1970 New York Times article in
which he stated that the only responsibility of the executives is to
make as much money as possible for shareholders. While Friedman’s
view is more nuanced and is often misinterpreted, the shareholder
primacy idea has a real grip on both executives and academics. This
dominant narrative of what we might call the old story of business is
deeply rooted in business cultures around the world. Oftentimes, it is
appealed to as a way of justifying almost any action that seems to
harm groups other than shareholders. Consequently, especially since
the GFC, there’s a real struggle going on around the issue of the
ethics of capitalism. Let’s be a little more precise here. We can talk
about this old story of business in terms of five claims.

The first is that business is primarily about making money and
profits for shareholders. Business on this view is the physics of
money, and the language of money and profits is seen by many to be
the main metaphor in talking about business. Often these theorists
talk as if money is the only thing that matters, and the vocabulary of

451R. EDWARD FREEMAN

finance and accounting are the only vocabularies that tell us how to
build a great business. More precisely, business is seen as a collec-
tion of economic transactions that can be fully understood using
economic models and concepts. Modern economics has built some
really powerful models, from general equilibrium to modern econo-
metrics, and indeed they are useful for understanding how markets
work. The problem is that they are not the only way to understand
business, and they can be misleading as the GFC taught us.

The second claim is that the only constituency that matters is
shareholders. Friedman’s claim is that the only social responsibility
of an executive is to make as much money as possible for sharehold-
ers. Even though Friedman was careful to also say that such a claim
was subject to ethical rules and law—this part of the claim often
gets left out. So, executives and pundits sometimes argue that what-
ever is not illegal is permissible in the name of shareholder value.

The third claim is often implicit. It is that we live in a world of
fairly limitless physical resources, or that market forces will always
determine which resources are economically feasible to use. We
need markets for natural resources such as air, water, and carbon
emissions, not regulation.

The fourth claim, that we see played out in the popular press all
the time, is about what motivates business people. In keeping with
the idea that business is about the physics of money there is a wide-
spread idea that given the opportunity business people will cut cor-
ners, lie, and cheat. People, on this view, are completely self-
interested. They will work for others, only if they are incentivized to
do so with either a threat of punishment or a promise of rewards.

The fifth claim summarizes the first four and says that business
and capitalism work because people and companies are self-
interested, competitive, and greedy. The greatest good emerges as if
by an invisible hand. Usually homage is paid to a brief passage in
Adam Smith about the butcher and baker.

WHAT’S WRONG WITH THE OLD STORY?

Profits Are not the Purpose of Business

While there has been much criticism of this so-called neo-classical
view of the firm, for our purposes I want to focus on three main

452 BUSINESS AND SOCIETY REVIEW

flaws that make it easier to see why the old story is no longer
appropriate. The first flaw is the idea that business is the physics
of money and that profits are and should be the purpose of any
business.

While there are many businesses that have come to see making
money for their “owners” as the main purpose of their business,
most of these businesses didn’t start out this way. Most entrepre-
neurs start their companies because, in John Mackey’s words,
“they are on fire about their business idea.” No matter whether it
was Steve Jobs and Bill Gates on fire about the desktop computing
revolution and starting Apple and Microsoft, Mackey himself, on
fire about bringing healthy food to people through what became
Whole Foods Market, or my son, Ben, on fire about bringing the
great rhythm and blues sound of Motown and Stax into the
twenty-first century with Red Goat Records, none of these entre-
preneurs started the business with the purpose of making as
much money as they could.

Now, of course, money and profits are important. They must
exist for a business to live. Demonizing profits, as many pundits
have done, is just a shortsighted, ideological mistake. Likewise, to
claim that the purpose of a business is to make profits for owners
is a similar and often ideological mistake.

I need to make red blood cells to live. However, it does not follow,
without a lot of argument that I simple cannot imagine, that the
purpose of my life is to make red blood cells. Even if I have fallen
on unhealthy times, and I have to actually concentrate on making
red blood cells, for instance by paying a lot of attention to the iron
in my diet, it still does not follow that the purpose of life is to make
red blood cells (or to breathe, or to drink water, etc.).

Likewise, sometimes businesses fall on hard times. A competi-
tor disrupts the industry, or mistakes have been made, or the
world simply changed. In all of these cases, a business might
have to focus fairly clearly on generating profits to stay alive, but
it would be a mistake to claim that profits were the purpose of the
business.

Former CEO of GE, Jack Welch, business guru, Simon Sinek,
and many others have claimed that it is best to see profits as an
outcome. And, I will add it is an outcome of purpose and how value
gets created for stakeholders. More on that idea later.

453R. EDWARD FREEMAN

Business Ethics Is Not a Contradiction

When I tell people that I teach business ethics you know what hap-
pens. Either they have to manage not to laugh, or they say
“business ethics” I thought that was a contradiction. The idea that
business and ethics do not go together has long been a part of the
dominant story of business. After all, if business is just about
money, shareholders, and profits, there’s not much room for ethics
to be a central part of it. The way I like to put it is that of the
phrase “business ethics,” we only really misunderstand two of the
words.

First, let’s talk about business. The old story of business says to
us that business is about competing, making money, and doing
whatever you can get away with. The idea that business people are
not trustworthy is in many cultures around the world. A recent
study found that only 19% of people around the world actually
trust business executives of large companies. Now, every business
person that’s here today knows that business is not just about
making money. But even if that’s all you want to do, how are you
going to do it? You would better have some products and services
that customers want to buy. You need suppliers who are commit-
ted to making you better by improving your business with their
products and services. You need employees who are not there just
for the paycheck but are there to make your business better—
employees who are engaged in their jobs. You need them not to be
unengaged or actively engaged, as many studies have found is the
case in a lot of businesses. And, you need to be a good citizen in
the community. If you are not a good citizen in the community,
communities will pass restrictive laws or ordinances to prevent
your business from operating well there. If you do these things, if
you have great products and services for customers, if your suppli-
ers want to make you better, if you have employees who are
engaged, and if you are a community builder, then if you put those
things together the right way, profits will emerge. Again, this is the
idea that profits are an outcome. So business, far from being just
about the money, is about creating value for stakeholders.

Now, let’s talk about ethics. Many people think that ethics is
about things you talk about only on Sunday. It’s about angels and
organ music or very serious things talked about in hushed tones.
While religion is important in ethics, I want to urge you to think

454 BUSINESS AND SOCIETY REVIEW

about it more broadly. Ethics is really the most practical thing
around. Ethics is about how I live my life and how living my life
affects how you live your life. Ethics is always personal; it’s about
what I want and how I’m going to live. And, it’s always interpersonal.
It’s about how we are going to live together. Many people have the
idea that ethics is about rules chipped into stone, rules that never
change and rules that are fairly inflexible. But sometimes these
“rules” can conflict and sometimes they need to change or be inter-
preted in different ways as we invent new technologies or discover
other previously hidden features of a situation. Ethics is, in my view,
a conversation about how we are going to live together. It is a conver-
sation that substitutes reason, dialogue, and talking together for vio-
lence. It’s easy to see in many places in the world where the
conversation has broken down. Violence is not a good answer. Now,
many people would argue that ethics is personal. I get to decide what
my ethics are. I have to look myself in the mirror. I have to live with
myself. And that’s true, you do have to live with yourself. But all of
us have to live with you too. And that gives us some right to join in
the dialogue and conversation about how we are all going to live and
thrive together. From the time when we lived in caves, we have
always had conversation about what behavior is appropriate and
what behavior is inappropriate in a community. We have had con-
versations about what are some good ideas—some good rules of
thumb—to keep the order in society and to allow all of us to flourish.
This is ethics at its best. Over time, we have grown quite good at ethi-
cal reasoning. But at the same time, we have many challenges to our
ethics in society today primarily because of technological change
and the emergence of new societies to do things differently and new
cases of a kind that we just have not thought of before.

For instance, I learned ethics at my grandmother’s knee in the
1950s in Georgia, but we did not have any conversations about
intellectual-property that could be digitally reproduced for no cost.
We did not have any conversation about end-of-life technology that
could prolong life at a great cost. We did not have any conversa-
tions about abortion or things like file-sharing and Napster or
what’s appropriate on Facebook and Twitter. Those things simply
did not exist. Now, one thing you can say is know your ethics and
your values and you will not have to have much of a conversation.
The problem with this is that it is very hard to do in today’s world.
Human beings are very good at fooling themselves and saying one

455R. EDWARD FREEMAN

thing and doing something else. We need each other in this conver-
sation about how we are going to live together.

What does all this have to do with business? If you ask people
around the world to write down their three most important values
that they would like to teach their children, or their three most
important ethical principles, they all pretty much actually write the
same thing. There is some version of respect, honesty and integrity,
caring and love, and responsibility. Of course, what it means to
show respect in Jakarta is very different than what it means in
Charlottesville, so there is always a cultural context. But, it is diffi-
cult to imagine doing business without these values. Try to think
what it would be like to do business always with people you did not
respect, or on whose honesty you could not rely on, or who did not
care about others. It would be impossible.

Adam Smith knew how important ethics was to business.
Indeed, in The Theory of Moral Sentiments and in The Wealth of
Nations, Smith makes it clear that without a sense of justice, mar-
kets just will not work very well at all. Thinking that business
ethics is a contradiction is a deep flaw in the dominant narrative of
business.

People Are Complicated

There is ample scientific evidence that human beings are not the
rational economic beings that much of our economic and business
theory assumes. We are not always driven by extrinsic if-then
rewards. We want to be engaged in doing something that has
meaning and purpose. Some like Daniel Pink, have argued that we
understand human motivation in terms of three ideas: Mastery,
the sheer joy we take out of getting better at something; Autonomy,
the freedom to live our own lives to try new things; and Purpose,
the idea that we stand for something greater than just ourselves
and our self-interest. By thinking about mastery, autonomy, and
purpose we get a much more realistic view of what motivates peo-
ple in business. The old story’s insistence on human beings being
motivated primarily by money is really not appropriate in the
twenty-first century if it ever was appropriate. Certainly, the new
generation that we call Millennials want to do something that has
meaning, that has purpose, that is not just making money.

456 BUSINESS AND SOCIETY REVIEW

Psychologist, Harry Levinson, used to hang out at the Harvard
Business School. He was kind of a crusty old guy and would often ask
executives what was the main way people are motivated inside corpora-
tions. Most executives would say to him rewards and punishments or
carrots and sticks. Levinson would draw on the board a carrot at one
end and a stick at the other. In the middle, he would put a question
mark. He would ask what animal do you imagine between the carrot
and the stick? Most people would say a jackass. So, Levinson coined the
idea that he called the great jackass fallacy. It goes like this: maybe. . .

just maybe, human beings are slightly more complex than jackasses.
Maybe they have social, spiritual, sexual, political, ethical lives as well
as economic lives. But it’s even a little more difficult than that. If you
treat people like jackasses, they begin to act like jackasses. They nose
around for the carrots and they try to avoid getting the stick. Think of all
of the productivity that gets left on the table, and, indeed, think of all of
the human misery that results from treating people like jackasses.
Human beings are more complex than the dominant story would have
us believe. We will say more about this as we move to thinking about the
principles that underlie this new story of business.

There are at least three flaws in the current story of business.
First, the purpose of a business is not only to make money. Sec-
ond, business and ethics need to go hand in hand. And, third,
human beings are complicated. The time has passed for these
flaws. The new story of business that is being built by thousands of
entrepreneurs and executives around the world eschews these
flaws and takes a different approach. Let’s turn to understanding
the ideas that are behind the new narrative.

THE IDEAS BEHIND THE NEW STORY

I have identified at least six new ideas that undergird the new story
of business that is emerging. They are: (1) The unit of analysis is
stakeholder relationships; (2) stakeholders are interdependent; (3)
tradeoffs are managerial failures of creative imagination; (4) pur-
pose, values, and ethics must be embedded in organizations; (5)
business exists in the physical world; and (6) people are compli-
cated. Let’s look at each in turn and see how they are connected
with each other and this new story.

457R. EDWARD FREEMAN

The Unit of Analysis Is Stakeholder Relationships

One of the cornerstone ideas behind the new story of business
that is emerging is the importance of looking beyond shareholders
to a broader group of stakeholders. As we saw earlier, creating
value for stakeholders is something that every successful busi-
ness has actually done. As we become more aware of this fact, we
can build into our business models more nuanced ways to create
value.

The key difference is that in a relationship there is a presump-
tion that the relationship will continue over time, other things
being equal. Businesses need relationships with their stakeholders
so that each has some attachment to the other. You want custom-
ers to have some degree of loyalty. You want employees to give you
the benefit of the doubt, and you want shareholders who will stick
by you when things are tough. Seeing these relationships through
the lens of “discrete transactions unrelated to each other” does not
build loyalty. In fact, it encourages exit when things get tough.
Building loyalty with stakeholders mitigates the risks of difficult
times.

Company X had built a relationship with a stakeholder group
that often criticized the company. The stakeholder was targeting
X with a campaign and called to tell them. The executive at Com-
pany X asked for help in solving the problem that the campaign
was about, and the company and stakeholder were able to intro-
duce an innovative program that went a long way toward solving
the problem. All of this happened because there was a relational
mind set.

Of course, relationships are two-way streets. Companies have to
stand by their suppliers and their employees when times are tough
for them. And, they have to share in the rewards of success, in a
broad manner, not just in terms of rewarding senior management.
Whole Foods Market uses gain-sharing to reward the employees
who work to bring things in under budget. They also give most of
the stock options to non-top management employees.

Stakeholders Are Interdependent

It has often been said that the key insight of stakeholder theory is
that there are groups that are important other than shareholders.

458 BUSINESS AND SOCIETY REVIEW

And, while this is one insight that the theory has brought to man-
agement thinkers, another is more important. It is that stake-
holder interests have a certain interdependence. And, when
management can capture this interdependence and push it for-
ward, great results are likely to occur. Wal-Mart was for many
years a poster child for this interdependence. By negotiating
tough deals with suppliers, Wal-Mart could offer customers every-
day low prices, and even though the margins were thin for suppli-
ers, there was a great deal of volume that could lead to
profitability. Employees were better off since there were more cus-
tomers coming to take advantage of the everyday low prices, and
the stock price saw a steady increase. Unfortunately, Wal-Mart
paid little attention to communities as stakeholders, focusing on
citizens as customers. Many outside groups began to be formed
and Wal-Mart was blamed for many social ills. Today, Wal-Mart is
working hard to repair its relationships with communities and to
integrate ideas that make communities better off into the rest of
its business model. The progress that has been made with sus-
tainability is but one of several examples where Wal-Mart has
taken a leadership role.

Even the companies who do CSR and who have adopted Michael
Porter’s view of shared value have begun to see stakeholders as
interdependent. For a long time, CSR was seen as something of a
public relations move, unconnected to the main business model.
More recently, we have begun to see how CSR can be connected to
the basics of what a company knows how to do. Nestle has pio-
neered this idea with shared value, as it has sought to introduce
the creation of social value all the way down its economic value
chain.

Trade-offs Are Managerial Failures of Creative Imagination

Economists love trade-offs. In fact, one of the hallmarks of modern
economics is that one can always calculate trade-offs. I have
become increasingly skeptical of trade-off thinking. In fact, I believe
that the drive to collaborate and avoid trade-off thinking is far
more powerful. When we see the task of the executive as getting
stakeholder interests all going in the same direction over time,
trade-offs will disappear. Of course, sometimes they have to be

459R. EDWARD FREEMAN

made, because we cannot imagine an alternative, but when we
make a trade-off we need to immediately begin the process of mak-
ing the trade-off better for both sides.

I have often told the story of a large chemical company who
decided to commit to being more sustainable and cleaner. The
CEO announced a large and lofty sustainability goal and proceeds
around to the divisions and plant sites to let them know that he
was very serious about this. There were interim goals and plans in
a very businesslike approach. In one facility, as he told the story to
a symposium at Dartmouth in the 1990s, the engineers came up
to him and said, “Sorry but we can’t meet these interim goals. This
process is too dirty, this equipment is too old, and we can’t meet
the first target.” The CEO said that they were serious about this
program and so they would have to close the plant. What I under-
stood from that was that he was willing to make a trade-off, envi-
ronment or community on the one hand versus employees on the
other. The CEO’s trade-off was that the environment was a serious
issue and it was going to be the winner. So, he told the engineers
to prepare to close the plant. A few weeks later the engineers came
back and said that a miracle had occurred. They figured out how
to do it. When the CEO asked what it would cost, the engineers
actually were embarrassed to say that the new method would save
money.

When trade-off thinking becomes unacceptable we kick into gear
the only infinite resource we really have, which is our creative
imagination. The use of the creative imagination is radically
underutilized in most companies today. Trade-offs are easy. In the
new story of business with the stakeholder mindset, trade-offs
become managerial failures. As more and more companies are
thinking about the new story of business, they are discovering
ways to satisfy multiple stakeholders. Simultaneously, this is one
of the key ideas in the new story.

What this means is that conflict, often avoided in many compa-
nies, is precisely the place where value creation can take place.
When there’s conflict among stakeholders, where there’s conflict
among core values, where there is conflict among competitors or
products this is exactly the place where we can reimagine that con-
flict and create more value. We have to come to see conflict as a
good thing. Recall the story above about company X who had con-
flict with the stakeholder group but kept up the relationship

460 BUSINESS AND SOCIETY REVIEW

because that stakeholder group could help them figure out how to
solve a problem. A lot of value was created.

Purpose, Values, and Ethics Must Be Embedded in the
Organization

One of the great things about business as an institution is that
many different purposes are possible. Novo Nordisk wants to rid
the world of diabetes. Whole Foods Market wants to help people be
healthier with better choices for food. Tastings, a small restaurant
in my hometown, wants to bring the joy of good French country
cooking to its customers. The founders of Relish MBA want to
make it easier for companies and MBA students to find a good
match. The only limit to the purpose of a business is our imagina-
tion. Of course, purposes do not have to be all good. We have
plenty of examples from human history about organizations that
were of high purpose, but whose purpose was morally evil. A sense
of values and ethics has to go alongside purpose. There are many
organizations in the pantheon of new story organizations who are
addressing precisely this issue. Just Capital is rating organizations
based on a notion of “Justice.” However, it shakes out, we can no
longer make the mistake that the pursuit of profits is the sole pur-
pose of business. Real purpose inspires both employees and other
stakeholders who come to share that purpose. And, this new story
of business is an inspirational story.

Businesses Exist in the Physical World

While many who write about sustainability and the environment
sound a caution about the physical limits of the world, I want to
suggest that this is only part of the story. We do need to come to
see business as embodied in the world, and hence, there are con-
straints imposed by the physical world. However, we also need to
see business as capable of transforming those constraints into new
opportunities. We have seen this time and again as companies
such as 3M figure out how to turn waste streams into products
and services. Obviously, we need to tackle climate change, but see-
ing it as giving us limits to growth is forgetting the creative imagi-
nation that has solved so many of our problems in the past.
Adopting some kind of green values, and integrating respect for the

461R. EDWARD FREEMAN

environment into our purpose and values, can be a powerful elixir
for creativity.

People Are Complicated

I do not want to repeat the arguments I gave earlier about the flaws
in the old story. Rather, I want to suggest that there is a much
more inspirational view of human beings that is emerging. People
are using business models and ideas to attack age old problems of
poverty, education, disease, and more participation in society.
Often these problems are attacked by these “new story companies”
in conjunction with NGOs, governments, and other private organi-
zations. We have seen a wave of “social entrepreneurs” and “impact
investing” where the explicit idea is to use business to make society
better and to solve social problems. I believe that we are fast craft-
ing a new idea about what it is to be human. Let me illustrate.

What is this smartphone, really? The way I see it, it’s some bits
of sand and metal, some vocabularies that we have invented to
solve problems, and the fact that we can work together collabora-
tively to achieve things that no one of us can achieve alone. In
short, I see the world not as a world of scarcity, but as one of abun-
dance. We have an almost infinite capacity to invent ways to solve
our problems, whether we take on poverty, space travel, climate
change, or understanding the rules of cricket. But, we are not in it
alone. We invent mutually beneficial vocabularies with others to
solve our problems. And, this is true whether we are scientists or
politicians. We are surely more than narrow economic creatures,
and in fact, capitalism works just because of this complex human
dimension.

TOWARDS A MORE RESPONSIBLE CAPITALISM

If we are to move our system to a more responsible capitalism, we
need a few more ideas that will transcend these particular ones
aimed at creating and sustaining a successful business. First of
all, we need some broadly defined principles of responsibility
throughout our society. Responsibility is an idea that comes with
the more libertarian idea of freedom that underpins market sys-
tems. We need to see people and companies as responsible for the

462 BUSINESS AND SOCIETY REVIEW

effects of their actions on others. That is the moral cornerstone of
the stakeholder idea. Unless we are willing to take responsibility
and to be willing to justify our actions to our fellow humans, our
society will not continue to flourish.

The second idea is that we need to continue to see business as a
voluntary enterprise. No one is forced to do business with anyone
else. This idea of choice as applied to multiple stakeholders is cen-
tral in creating a system of business that works for everyone. Com-
petition should celebrate the choice that customers have.
Restricting that choice artificially through institutions like crony
capitalism should have strong sanctions.

Finally, we need a new idea of the role of government. While we
have clear theories about how government plays its role as both
regulator and redistributor, there is another role that is often over-
looked. Government can be a facilitator of value creation. It does
this via infrastructure and other programs such as enforcing civil
rights, and ensuring that crony capitalism does not take hold. We
have only begun to explore this idea of government as facilitator of
value creation, so stay tuned.

WHAT CAN YOU AND YOUR COMPANY DO?

Let me wrap up by taking these ideas down to an extremely practi-
cal level. There are at least five ways to begin to practice this more
responsible capitalism in your businesses.

First, you can rediscover your purpose and the values that go
with it. No less a company than Unilever has begun this process,
and while it takes time, the payoffs are large. Employees become
inspired, and the innovative ideas begin to flow. How do you redis-
cover your purpose? Well, the first thing to do is to have a look at
history. What are the founders’ stories that are told in the com-
pany? Why do people actually show up for work? What really helps
them when they are at their best? It takes a concerted effort if a
company has lost its way, but it is an exciting process to rediscover
the purpose of an organization. Values go along with purpose and
are often seen as the “How” we are going to realize the purpose.

Second, you can perform a systems/process check on the pur-
pose and values. Purpose and values live in the systems and pro-
cesses of an organization. Talk is cheap. The first places to look are

463R. EDWARD FREEMAN

the HR and expense reimbursement systems. Think about an orga-
nization that trumpeted its respect for employees but required
them to get a receipt for a $2 toll on the Mass Pike, a task that is
mostly dangerous if not impossible. Or consider an organization
who is very proud of its stand on values, yet waits 60 days to reim-
burse employees, and pays suppliers in even later terms.

Third, you can begin live conversations about the purpose and
values. Small groups of employees can help to clarify what values
are actually in force at the company, and there are known techni-
ques for creating a conversation about these values, such as which
ones are we really serious about, and which ones are we just giving
lip service to. Some companies have begun to encourage meetings
where employees bring “values vignettes,” or sticky problems, to
groups of peers to try and get insights. Based on Johnson and
Johnson’s original “challenge meetings” discussions of these
vignettes helps to clarify what the true meaning and intention of
often quite general values statements are.

Fourth, you can be a community builder. There are many ways
to help build the communities in which you operate. Giving
employees time off to volunteer, hiring some of the least well-off
members of a community and giving them training, and donating
to charities, are all viable strategies. However, figuring out what
you know how to do, can be used to build community, brings the
power of the business model to bear on tough problems. We are
beginning to see more and more companies working with stake-
holder groups in the nonbusiness sector to jointly tackle societal
issues. Such multi-sector collaborations are one of the best ways
to build community.

Finally, you can communicate how your organization makes the
world a better place. We need business organizations to inspire us.
We need business to become an institution of hope. We need busi-
ness executive to try and remake their organizations to be places
we want our children to live in. Asking anything else is to set the
bar too low.

ACKNOWLEDGMENTS

The ideas in this paper have been partially developed in a number of
places, especially Freeman, Martin, and Parmar (2007); Freeman,

464 BUSINESS AND SOCIETY REVIEW

Parmar, and Martin (2016); Freeman and Ginena (2015); and, Free-
man (2017, forthcoming).

I am grateful to editors and co-authors for their permission to more
carefully develop these ideas here for a public audience. This paper
will be a part of a forthcoming book, tentatively titled The New Story
of Business: Responsible Capitalism, co-authored with Bidhan Par-
mar and Kirsten Martin, in 2018.

REFERENCES

Freeman, R. E. 2017. “Five challenges to stakeholder theory: A report on
research in progress,” in D. Wasieleski and J. Weber, eds., Stakeholder
Management, Business and Society 360 Series. Emerald Publishing
(forthcoming).

Freeman, R. E., and Ginena, K. 2015. “Rethinking the purpose of the cor-
poration: Challenges from stakeholder theory,” Notizie di Politeia
31(117): 9–18.

Freeman, R. E., Harrison, J., Wicks, A., Parmar, B., and de Colle, S.
2010. Stakeholder Theory: The State of the Art. Cambridge: Cambridge
University Press.

Freeman, R. E., Martin, K., and Parmar, B. 2006. “Ethics and capitalism,”
in M. Epstein and K. Hanson, eds., The Accountable Corporation, Vol 2:
Business Ethics. Westport, CT: Praeger, pp. 193–208.

Freeman, R. E., Martin, K., and Parmar, B. 2007. “Stakeholder capital-
ism,” Journal of Business Ethics 74: 303–314.

Freeman, R. E., Parmar, B., and Martin, K. 2016. “Responsible capital-
ism: Business for the 21st century,” in D. Barton, D. Horvath, and M.
Kipping, eds., Re-Imagining Capitalism. Oxford: Oxford University Press,
pp. 135–144.

Friedman, M. 1970. “The social responsibility of business is to increase
its profits,” New York Times Magazine 13: 32–33.

465R. EDWARD FREEMAN

VICTIMS OF CIRCUMSTANCES?
A DEFENSE OF VIRTUE ETHICS IN BUSINESS

Robert C. Solomon

Abstract: Should the responsibilities of business managers be under-
stood independently of the social circumstances and “market forces”
that surround them, or (in accord with empiricism and the social sci-
ences) are agents and their choices shaped by their circumstances,
free only insofar as they act in accordance with antecedently estab-
lished dispositions, their “character”? Virtue ethics, of which I consider
myself a proponent, shares with empiricism this emphasis on char-
acter as well as an affinity with the social sciences. But recent
criticisms of both empiricist and virtue ethical accounts of character
deny even this apparent compromise between agency and environ-
ment. Here is an account of character that emphasizes dynamic
interaction both in the formation and in the interplay between per-
sonal agency and responsibility on the one hand and social pressures
and the environment on the other.

Business ethics is a child of ethics, and business ethics, like its parents, is
vulnerable to the same threats and challenges visited on its elders. For many

years, one such threat (or rather, a family of threats) has challenged moral phi-
losophy, and it is time it was brought out in the open in business ethics as well.
It is a threat that is sometimes identified by way of the philosophical term, “deter-
minism,” and though its status in the philosophy of science and theory of
knowledge is by no means settled, it has nevertheless wreaked havoc on ethics.
If there is determinism, so the argument goes, there can be no agency, properly
speaking, and thus no moral responsibility. But determinism admits of at least
two interpretations in ethics. The first is determination by “external” circum-
stances, including pressure or coercion by other people. The second is
determination within the person, in particular, by his or her character. In the
former case, but arguably not in the latter, there is thought to be a problem
ascribing moral responsibility.’

The argument can be readily extended to business ethics. Versions of the
argument have been put forward with regard to corporations, for instance, in the
now perennial arguments whether corporations can be or cannot be held respon-
sible.^ One familiar line of argument holds that only individuals, not corporations,
can be held responsible for their actions. But then corporate executives like to

44 BUSINESS ETHICS QUARTERLY

excuse their actions by reference to “market forces'” that render them helpless,
mere victims of economic circumstances, and everyone who works in the corpo-
ration similarly excuses their bad behavior by reference to those who set their
agenda and policies. They are mere “victims of circumstances.” They thus betray
their utter lack of leadership. Moreover, it doesn’t take a whole lot of research
to show that people in corporations tend to behave in conformity with the people
and expectations that surround them, even when what they are told to do violates
their “personal morality.” What (outside of the corporation) might count as “char-
acter” tends to be more of an obstacle than a boon to corporate success for many
people. What seems to coutit as “character” in the corporation is a disposition to
please others, obey superiors, follow others, and avoid personal responsibility.

In general philosophy, Kant tried desperately to separate determinism and
moral responsibility, defending determinism in the domain of science and “Na-
ture” but preserving agency and responsibility in the domain of ethics. “I have
found it necessary to limit knowledge to make room for faith,” as he put in one
of his most concise but rather misleading bon mots. Other philosophers were
not so bold. They were willing to accept determinism (even if conjoined with
skeptical doubts) and somehow fit agency and responsibility into its domain.
David Hume and John Stuart Mill, the two most illustrious empiricist promoters
of this strategy, suggested that an act is free (and an agent responsible) if it
“flows from the person’s character,”^ where “character” stood for a reasonably
stable set of established character traits that were both morally significant and
served as the antecedent causal conditions demanded by determinism. Adam
Smith, Hume’s best friend and the father of not only modern economics but of
business ethics too, agreed with this thesis. It was a good solution. It saved the
notions of agency and responsibility, it was very much in line with our ordinary
intuitions about people’s behavior, and it did not try to challenge the scientific
establishment. So, too, a major movement in business ethics, of which I con-
sider myself a card-carrying member, is “virtue ethics,” which takes the concept
of character (and with it the related notions of virtue and integrity) to be central
to the idea of being a good person in business. Among the many virtues of virtue
ethics in business, one might think, is that, as in Hume and Mill, it would seem
to keep at bay the threat of situational (“external”) determinism.

Such a solution seems particularly appropriate for business ethics because
the concept of character fills the void between institutional behaviorism (“orga-
nizational behavior”) and an overblown emphasis on free will and personal
autonomy that remains oblivious to context, the reality of office work, and the
force of peer and corporate pressures. It provides a locus for responsibility with-
out sacrificing the findings of “management science.” But 1 bave mixed feelings
about the empiricist solution. On the one hand, it seems to me too weak. It does
not account (or try to account) for actions “out of character,” heroic or saintly or
vicious and shockingly greedy behavior, which could not have been predicted
of (or even by) the subject. And it does not (as Aristotle does) rigorously hold a
person responsible for the formation of his or her character. Aristotle makes it

A DEFENSE OF VIRTUE ETHICS IN BUSINESS 45

quite clear that a wicked person is responsible for his or her character not be-
cause he or she could now alter it but because he or she could have and should
have acted differently early on and established very different habits and states
of character. The corporate bully, the greedy entrepreneur, and the office snitch
all would seem to be responsible for not only what they do but who they are,
according to Aristotle’s tough criterion.

On the other hand, however, the empiricist solution overstates the case for
character. (This is what some psychologists, and Gilbert Harman, refer to as the
“attribution error.”) The empiricists make it sound as if character is something
both settled and “robust” (the target of much of the recent psychological litera-
ture). Character consists of such traits as honesty and trustworthiness that are
more or less resistant to social or interpersonal pressures. But character is never
fully formed and settled. It is always vulnerable to circumstances and trauma.
People change, and they are malleable. They respond in interesting and some-
times immediate ways to their environment, their peers and pressures from above.
Put into an unusual, pressured, or troubled environment, many people will act
“out of character,” sometimes in heroic but more often in disappointing and
sometimes shocking ways. In the corporate setting, in particular, people joke
about “leaving their integrity at the office door” and act with sometimes shock-
ing obedience to orders and policies that they personally find unethical and even
downright revolting.

These worries can be taken care of with an adequate retooling of the notion
of character and its place in ethics, and this is what I will try to do here. But my
real worry is that in the effort to correct the excesses of the empiricist emphasis
on character, the baby is being thrown out with the bath toys. In recent work by
Gilbert Harman and John Doris, in particular, the very notion of character is
being thrown into question.** Indeed, Harman suggests that “there may be no
such thing.” Doris entitles his book, tellingly. Lack of Character. Both Harman
and Doris argue at considerable length that a great deal of what we take as
“character” is in fact (and demonstrably) due to specific social settings that rein-
force virtuous conduct. To mention two often-used examples, clergy act like
clergy not because of character but because they surround themselves with other
clergy who expect them to act like clergy. So, too, criminals act like criminals
not because of character but because they hang out with other criminals who
expect them to act like criminals. Harman argues vehemently against what he
calls the illusion of “a robust sense of character.” Doris argues, at book length, a
very detailed and remarkably nuanced account of virtue and responsibility with-
out character. The conclusion of both authors is that virtue ethics, construed in
terms of character, is at best a mistake, and at worst a vicious political maneuver.

It is worth saying a word about this “vicious political maneuver” that is the
political target of Harman’s and Doris’s arguments. I share in their concern, and
I, too, would want to argue against those who, on the basis of an absurd notion
of character, expect people to “pick themselves up by their own bootstraps,”
blaming the poor, for instance, for their own impoverishment and thus ignoring

46 BUSINESS ETHICS QUARTERLY

social and political (not to mention medical and racial) disadvantages that are
certainly not their fault. I, too, reject such a notion of character, but I am not
willing to dispense with the very notions of character and the virtues in order to
do this.

So, too, in business ethics, there is a good reason to be suspicious of a notion
of character that is supposed to stand up to overwhelming pressures without
peer or institutional support. I would take Harman’s and Doris’s arguments as a
good reason to insist on sound ethical policies and rigorous ethical enforcement
in corporations and in the business community more generally, thus maximizing
the likelihood that people will conform to the right kinds of corporate expecta-
tions. Nevertheless, something extremely important can get lost in the face of
that otherwise quite reasonable and desirable demand. It is the idea that a per-
son can, and should, resist those pressures, even at considerable cost to oneself,
depending on the severity of the situation and circumstances. That is the very
basis on which virtue ethics has proven to be so appealing to people in business.
It is the hope that they can, and sometimes will, resist or even rise up against
pressures and policies that they find to be unethical.

So whatever my worries, I find myself a staunch defender of character and
the indispensability of talk about character in both ethics and business ethics.^
To quote my friend and colleague Ed Hartman, “the difference between Peter
Hempel [one of the most wonderful human beings we ever met] and Richard
Nixon is not just a matter of environment.” In both everyday life and in busi-
ness, there are people we trust, and there are people we do not, often on the
basis of a substantial history of disappointments and betrayal. And we trust or
distrust those people in much the same circumstances and under much the same
conditions. To be sure, character is vulnerable to environment but it is also a
bulwark against environment. Character supplies that familiar and sometimes
uncomfortable or even uncanny resistance to untoward pressures that violate
our “principles” or morally disgust us or are damaging to our “integrity.” It is
character and not God or the Superego that produces that nagging inner voice
called “conscience.” (It has been suggested that conscience produces character
rather than the other way around, but apart from religious predilections there
seems to be little sound philosophical argument or empirical research to defend
this.) One person refuses to obey a directive to short-change his customers while
another refuses to cheat on her expense account despite the fact that everyone
around her is doing so. It is character that makes the difference, though not, to
be sure, all the difference.

Some of my concern with this issue is personal. Like most conscientious
people, I worry about my integrity and character, what sorts of temptations and
threats I could and would withstand. I feel ashamed (or worse) when I give into
those temptations and humiliated when I succumb to (at least some of) those
threats. I am occasionally even proud about those temptations and threats I have
withstood. Philosophically (“existentially”), I worry about how we view our-
selves when the balance of accounts is shifted over to causal and statistical

A DEFENSE OF VIRTUE ETHICS IN BUSINESS 47

explanations of behavior instead of a continuing emphasis on character, agency,
and responsibility. Will that give almost everyone an excuse for almost every-
thing?^ And professionally, I have made something of a reputation for myself as
a “virtue ethicist” in business ethics, in the twisted tradition of Aristotle and
Nietzsche, and virtue ethics requires a solid notion of character. But not a fixed
and permanent notion of character. To be sure, many writers about the virtues,
perhaps betraying their own insecurity, tend to describe good character and in-
tegrity in terms of rock and stone metaphors, suggesting that the truly virtuous
person is capable of standing up against anything. (A handful of mostly legend-
ary examples provide the paradigm.) But I for one never said that virtue ethics
requires a strong sense of autonomy, the ability to cut oneself off from all influ-
ences and pressures from other people and institutions and ignore one’s personal
“inclinations” and make a decision on the basis of one’s “practical reason” alone.
On the contrary, I have argued that one’s inclinations (one’s emotions, in par-
ticular) form the essential core ofthe virtues, and I have argued that so do Aristotle
and (more obviously) Nietzsche. And one’s emotions are largely reactive, re-
sponsive to other people and the social situations in which one finds oneself.
Virtue ethics need not, and should not, deny any of this.

The “New Empiricism ” Virtue Ethics and Empirical Science

Behind the attack on character and virtue lies another commendable motive.
John Doris puts it well. Virtue ethics, he says, can be traced back to the momen-
tous writings of Aristotle, 2500 years ago. Unfortunately, however, the social
psychology on which virtue ethics rests is also 2500 years old. Even the work of
Hume, Mill, and Adam Smith is pressing on 250 years, ancient times in the
scope of modern psychology. As both Doris and Harman properly point out,
there has been a great deal of research in the social sciences, much of it within
the last 50 years, that ought to be taken into account. And this, they think, seri-
ously undermines the claims of virtue ethics and its emphasis on character.

As so often in these discussions, there is an easy, but wholly misleading,
analogy with physics. Paul Griffiths, for instance, compares our present “folk
psychology” to Aristotle’s obviously erroneous category of “superlunary ob-
jects,” an arbitrary grouping wholly determined by ancient ignorance of
astronomy.^ So, too, Harman juxtaposes our ordinary intuitions about morality
with the findings from scientific research, arguing (by analogy) that just as we
are wrong in our intuitions about classical mechanics so, too, we can be wrong
in our moral intuitions. But I think there are very real questions about the extent
to which modern empirical studies of human behavior have in any sense re-
placed rather than merely supplemented or possibly deepened our age-old “folk
psychology” in anything like the way that modern astronomy and physics have
introduced revolutions in the way we see the world. I do not doubt that many of
our moral intuitions are erroneous or archaic, left over from earlier phases of
human culture and no longer practical (what Nietzsche once called “the shadows

48 BUSINESS ETHICS QUARTERLY

of God”). Nor do I doubt that many of our moral judgments are based on hypoc-
risy, self-deception, and wishful thinking. But our moral intuitions are not like
our intuitions in physics. There is no “matter of fact” independent of our intui-
tions and attitudes. (Against the moral realists of his day, Nietzsche insisted that
“there are no moral facts,” and contemporary authors such as Simon Blackburn
have argued for a “quasi-realism” in which our personal intuitions and attitudes
are ineliminable from moral concerns.^) The social sciences, our ordinary intui-
tions, and moral philosophy are all of a piece. There is no easy separation of
“facts” about personal character and evaluations of moral merit.^ Character traits
and virtues—honesty, trustworthiness, and a sense of fairness—are normative.
They are not mere behavioral tendencies. All psychology, if it is psychology at
all, is one or another version of “folk psychology” (“the only game in town,”
according to Jerry Fodor).

Harman and Doris attack virtue ethics in general and the concept of character
in particular on the grounds that they do not survive experimental findings in
the past few decades. Exhibit number one for both of them is the infamous Stanley
Milgram experiments in which people with supposedly good character performed
the most despicable acts when encouraged to do so by an authority (the experi-
menter). But though empirical research in social psychology can on occasion
shock us, surprise us, annoy us, and sometimes burst our illusions, it all gets
weighed and accounted for, whether well or badly, in terms of our ordinary folk
psychology observations and the ordinary concepts of belief, desire, emotion,
character, and interpersonal influences, interactions, and institutions. There are
no Copernican revolutions and no Michelson-Morley experiments. The Milgram
and other experiments such as those by Darley and Batson that play a central
role in Doris’s and Harman’s arguments get rationalized and explained in all
sorts of ways, but none of them in violation of the basic forms of psychological
explanation that Aristotle would have found perfectly familiar.’° Of course, there
remains a debate about the relative influence of “external’ (environmental) and
“inner” factors (character), but the debate, which ever way it goes, remains within
the framework of folk psychology and our ordinary psychological concepts.

We might be disturbed, for example, that so many subjects followed the in-
structions of an authority figure to the point of (what they thought was) the
torturing of another human being, but the various explanations in terms of “obe-
dience to authority” or the unusual circumstances of the experiment (how often
are most of us told to punish anyone?) do nothing to challenge our ordinary
moral intuitions. It just reminds us of something we’d rather not remember, that
ordinary people sometimes act very badly in group and institutional situations.
This should come as no surprise to those of us who do corporate and organiza-
tional ethics.

I would not want to rest my argument on a general and contentious claim
about the social sciences, however. On the contrary, what is disturbing to me is
Harman’s and Doris’s juxtaposition of virtue ethics against the social sciences.
One of the virtues of virtue ethics, I have always thought, is its utter compatibility

A DEFENSE OF VIRTUE ETHICS IN BUSINESS 49

with the social sciences. It rests on (one or another) theory of human nature, and it
is unashamedly a theory about how people are, not how they ideally ought to be.
Kantian ethics is explicitly not so. Its main thrust lies in the domain of autonomy
and it matters only marginally what people in fact want to do or normally do. In
virtue ethics, by contrast, what people want to do and normally do makes a great
deal of difference. And learning what people want to do and normally do is
always relevant, even if only as a warning that our practices and institutions are
offering up the wrong kind of role models and encouraging the wrong kinds of
desires, ideas, and behavior. (Utilitarianism is also rigorously empirical and
shares this virtue with virtue ethics, but it tends to emphasize the consequences
of behavior and thus ignore the intentions and motives—and thus the charac-
ter—of the agent.)

I have long been an advocate of cooperation between moral philosophy and
the social sciences in business ethics. I think that the more we know about how
people actually behave in corporations, the richer and more informed our moral
judgments and, more important, our decisions will be. In particular, it is very
instructive to learn how people will behave in extraordinary circumstances, those
in which our ordinary moral intuitions do not give us a clue. All of us have
asked, say, with regard to the Nazi disease in Germany in the Thirties, how we
would have behaved; or how we would behave, think, and feel if we worked for a
tobacco company. But even in an ordinary corporation (which is not the same as a
university in which there is at least the illusion of individual autonomy and “aca-
demic freedom”), the question of “obedience to authority” comes front and center.

Thus an experiment like the Milgram experiment is shocking precisely be-
cause it does not seem to presuppose any extraordinary context. Milgram’s
experiment, which would certainly be prohibited today, has to do with subjects
inflicting potentially lethal shocks to victim-learners (in fact the experimenter’s
accomplices). Even when the victim-learners pleaded for them to stop, the ma-
jority of subjects continued to apply the shocks when ordered to do so by the
authorities (the experimenters). One could easily imagine this “experiment” being
confirmed in any corporation.•’ But I find the use of such research to undermine
the notion of character not at all convincing.’^ Harman, for example, argues that

Empirical studies designed to test whether people behave differently in ways
that might reflect their having different character traits have failed to find
relevant differences. It is true that studies of this sort are very difficult to
carry out and there have been few such studies. Nevertheless, the existing
studies have had negative results. Since it is possible to explain our ordi-
nary belief in character traits as deriving from certain illusions, we must
conclude that there is no empirical basis for the existence of character traits. ̂ ^

But in addition to leaping from “very few studies” that are “difficult to carry
out” to the conclusion that there is “no empirical basis for the existence of char-
acter traits,” the whole weight of the argument comes to depend on iho. possibility
of explaining our ordinary belief in character traits as “deriving from certain
illusions.” But what would such an explanation consist of? What illusions are

50 BUSINESS ETHICS QUARTERLY

we talking about? And what is our “ordinary belief in characier”? I will argue
that it does not require the “robust” notion attacked by Harman.

Doris is much more cautious and painstaking in his conclusions. He admits
that empirical psychological studies are deeply flawed and limited especially in
the fact that the studies he employs describe only particular behavior in particu-
lar (artificial) situations and not long-term patterns of behavior—which is what
character is all about. He admits that “meaningful generalization outside of the
laboratory” is “questionable.”^”^ He even says, borrowing from Churchill on de-
mocracy, “I’ll readily admit it: experimental psychology is perhaps the worst
available method for understanding human life. Except, I hasten to add, for all
of the other methods” (including the use of moral “intuitions” of armchair moral
philosophy).’5 His main objection to those who champion virtue ethics, how-
ever, is that “they presuppose the existence of character structures that actual
people do not very often possess” (12, 42, 68). But unless such structures are
supposed to be indefensibly wooden and the “not very often” means “very rarely”
this is a fairly weak claim that is perfectly compatible with what virtue ethicists
require in terms of character.

What Is a Virtue and Whence Character?

Harman does a nice job of delimiting the ordinary notions of virtue and char-
acter, namely those that are most relevant to business ethics. He distinguishes
character from various psychological disorders (schizophrenia, mania, depres-
sion). More dubiously, he distinguishes character from “innate aspects of
temperament such as shyness or being a happy or sad person.”^^ Kant, oddly
enough, quite correctly insists that being happy (though an “inclination”) can
be a virtue, as it makes us more inclined to do our duty. But Harman is not just
attacking the virtues. He is after character traits in general. Shyness, for ex-
ample, is a non-moral example of a character trait. Harman considers this a
prime example of “false attribution.” But I think Jean-Paul Sartre has his eye on
something very important when he refers to the citing of such a character trait
as “bad faith,” namely, where we point to a causal syndrome where we should
be talking about decisions and the cultivation (in a very strong sense) of charac-
ter.’^ There is a certain element of such Sartrianism (an insistence on existential
choices rather than robust character) in Harman’s argument (with which I quite
agree), but this is a very different set of reasons for questioning or qualifying
the concepts of character and the virtues.•*

Harman then considers such Aristotelian traits as courage, cowardice, hon-
esty, dishonesty, benevolence, malevolence, friendliness, and unfriendliness.
(Although it is not clear, contra Hume, that benevolence and malevolence are
virtue and vice, respectively. Doing and not merely wishing, beneficence and
maleficence, are the virtues in question.) Aristotle describes “the ordinary con-
ception of such character traits” as relatively long-term dispositions to act in
certain ways. (We might note again that Aristotle was describing the ordinary

A DEFENSE OF VIRTUE ETHICS IN BUSINESS 51

conception of his Mediterranean peers twenty-three hundred years ago.) Doris
calls this long-term disposition to act in certain ways “globalism,” which in-
volves (a) consistency of character traits, (b) stability of character traits, and (c)
the integration of various such traits, what in Aristotle is usually called “the
unity of the virtues.” It is what he ultimately claims to be “empirically inad-
equate.”^^ Character traits involve activity, not just “possession,” habits and
operative desires and not just skills. Skills and knowledge may well be involved
but are not sufficient for the attribution of the virtue (or vice). Furthermore,
character traits must be broad based rather than narrow dispositions. (A par-
ticular fear does not signify cowardice.)

But the attribution of virtue (or vice) and the ascription of character traits are
particularly tricky notions in Harman’s and especially in Doris’s discussions. To
deny that a particular fear or phobia entails cowardice is not yet to leap to the
“global” hypothesis that a virtue or character trait must be all-pervasive in one’s
personality. Doris discusses “local traits” (honesty in particular) and observes
that people are sometimes honest in one sort of situation but not in another
(108). This, of course, is no surprise. (Alfred Carr, among others, have often
noted the inappropriateness of the virtues in at least some business settings.2°)
But in the defense of the virtues one need not insist on global virtues (or vices)
any more than one should insist that each and every bit of behavior is the reflec-
tion of a virtue (or lack thereof). Doris’s dramatic postmodern conclusion, “The
Fragmentation of Character,” the idea that there is no single “core of character”
that alone explains our social behavior, is on the one hand (like most postmodern
rhetoric) enormously overblown. On the other hand, it is just a bland descrip-
tion of what we all recognize, when we are not being blindly moralistic or overly
philosophical, that the virtues are contextual and only rarely “global” in nature.

In the ordinary conceptions of character traits and virtues, Harman and Doris
tell us, people differ in their possession of such traits and virtues. People are
different, and these differences explain their differences in behavior. Harman:
“We ordinarily suppose that a person’s character traits help to explain at least
some of the things the person does” (italics mine). But, he says, “the fact that
two people regularly behave in different ways does not establish that they have
different character traits. The difference may be due to their different situations
rather than differences in their characters” (italics mine). But notice that there is
no inconsistency whatever between insisting that a person’s character traits help
to explain their behavior and insisting that a difference in behavior may be due
to the different situations in which two people find themselves. So, too, Doris’s
objection to globalism is that people (in experimental situations) fail to display
the consistency and stability that explanations in terms of character require.
But, again, the short-term experiments that he cites do not undermine our more
ordinary long-term judgments about personal propensities and dispositions. At
best, they force us to face some hard truths about ourselves and consider other
propensities and dispositions that may not be virtuous at all.

52 BUSINESS ETHICS QUARTERLY

In our “ordinary conception” two people (one honest, one dishonest) in the
same situation (discovering a lost wallet in the street, encountering a person in
apparent desperate need, being ordered by an experimenter to “keep on punish-
ing”) will very probably act differently. But any philosopher worthy of his or
her debating trophies will quickly point out that no two situations are suffi-
ciently similar to make that case. It is only a very thin description of “the
situation” (the experimental set-up) that makes it seem so. Subjects come from
different backgrounds and different social classes. They are different genders.
They may as a consequence have very different senses of the situation. I would
not join Joel Feinberg in claiming that those students who do not stop for a
stranger in need (in Darley and Batson’s much-discussed “Good Samaritan”
experiment) have a “character flaw,” but neither would I conclude (with Doris)
that their behavior is largely “situational.”^i The student’s way of seeing and
being in the situation may be very different, and this, of course, is just what
Aristotle says about character. It is, first of all, a kind of perception, based on
good up-bringing. Thus I think Harman is being a bit disingenuous when he
argues that “they must be disposed to act differently in the same circumstances
(as they perceive those circumstances).” The question of character begins with
how they perceive those circumstances.

In his subsequent discussion, Harman follows Nisbett and Ross (1991) in
arguing that “people often choose the situations to which they are exposed.”^2
“Thus clerics and criminals rarely face an identical or equivalent set of situ-
ational challenges. Rather they place themselves, or are placed by others, in
situations that differ precisely in a way that induce clergy to look, feel, and act
consistently like clergy and that induce criminals to look, feel, and act consis-
tently like criminals” (Nisbett and Ross, 19). Furthermore, in the presence of
their peers, people “sometimes feel obliged even committed to act consistently”
(ibid, italics in original). True enough (and Jean-Paul Sartre could not have put
it better). Corporate managers and employees feel obliged and committed to act
in conformity with corporate pressures and policies even when they are ques-
tionable or unethical, and they learn to rationalize accordingly. The question is,
does any of this imply that we should give up or give in on character? Or should
we say that character is both cultivated and maintained through the dynamic
interaction of individuals and groups in their environment and they in turn de-
velop those virtues (and vices) that in turn motivate them to remain in the
situations in which their virtues are supported, reinforced, and not threatened?

In Milgram’s famous “shocking people” experiment in the early 1960s (just
as America was getting more deeply involved in the morass of Vietnam), the
experimental data were indeed shocking, even to Milgram and his colleagues
who expected no such result. In the social context of the times, questions about
obedience to authority (left over from the Nuremberg trails not so many years
before) had a special poignancy, especially in the face of the soon to be chal-
lenged American “innocence” of the time. It was very upsetting to find that
good, solid, ordinary middle-class people could be ordered (but not coerced) to

A DEFENSE OF VIRTUE ETHICS IN BUSINESS 53

act so brutally (whether or not they had severe misgivings about their behavior
at the time—a matter of no small importance here). The facts of the experiment
are beyond dispute. But what the experiment means remains highly controver-
sial, and it does not deserve the central place in the attack on character that it is
now receiving. Doris claims that “Milgram’s experiments show how apparently
non-coercive situational factors may induce destructive behavior despite the
apparent presence of contrary evaluative and dispositional structures.” Accord-
ingly, he “gives us reason to question the robustness of dispositions implicated
in compassion-relevant moral behavior.”^^

Well, no. The disposition (virtue) that is most prominent and robust in this
very contrived and unusual situation, the one that virtually all of the subjects
had been brought up with and practiced everyday since childhood, was doing
what they were told by those in authority. Compassion, by contrast, is a virtue
more often praised than practiced, except on specially designated occasions (giv-
ing to the neediest at Christmas time) or stretching the term to include such
common courtesies as restraining one’s criticism of an unprepared student or
letting the other car go first at a four-way intersection. (I would argue that such
examples betray a lack of understanding of what compassion is.) Most often,
people display compassion by “feeling sorry for” those much worse off than
they, a very small expenditure of effort even when it is sincere. It seems to me
that what the Milgram experiment shows—and what subsequent events in Viet-
nam made all too painfully obvious—was that despite our high moral opinions
of ourselves and our conformist chorus singing about what independent indi-
viduals we all are, Americans, like Germans before them, are capable of beastly
behavior in circumstances where their practiced virtues are forced to confront
an unusual situation in which unpracticed efforts are required. In the Milgram
experiment as in Vietnam, American subjects and soldiers were compelled by
their own practiced dispositions to follow orders even in the face of consequences
that were intolerable. Obedience may not always be a virtue. But that is not
what is being challenged by Harman and Doris. They are denying (contrary to
the empirical evidence) that people have robust dispositions. I would say, no.
They are just looking at the wrong disposition.

In discussions of Vietnam, those who were not there (especially politicians)
like to talk about the virtue of courage as the defining trait of the American
forces. What they ignore, of course, is the very nature of the war. In several
important memoirs by soldiers who served there. Bill Broyles and Tim O’Brien,
it becomes clear that courage was just about the last thing on most of the sol-
diers’ minds.24 They were terrified of losing legs and arms. They were moved by
camaraderie and a sense of mutual obligation. (The virtue-name “loyalty” misses
the mark.) The only discussion of courage in O’Brien’s book has to do with a
single heroic figure, a Captain Johansen whom he likens to Hector in Homer’s
Iliad. But this one character is exemplary in precisely the fact that he alone
talked about and exemplified true courage. But the absence of courage (which is
not to imply anything like cowardice on the part of the American troops) had a

54 BUSINESS ETHICS QUARTERLY

great deal to do with the nature of this particular war. It lacked any sense of
purpose or progress. It lacked any sense of meaning for most of the men. And
so, in that moral vacuum, all that was left for most soldiers was the worry about
their own physical integrity and their keen sense of responsibility for each other.
The atrocities at My Lai and Thanh Phong followed as a matter of course. There
was no context in which either character or courage could be exercised.

Which brings us back to the misgivings and feelings of discomfort experi-
enced by some (not all) of the subjects and the “grunts” in Vietnam. Feelings of
compassion (and other moral sentiments) may not be definitive in motivating
behavior, especially if one has not faced anything like the awful situation in
which the subjects and soldiers found themselves. But it does not follow that
there is nothing more for virtue ethics to say about such cases. Experiments
such as Milgram’s are no longer allowed on college campuses, and for good
reason. The feelings provoked in the subjects were too painful, and often with
lasting damage.25 And this is nothing, of course, compared to the post-traumatic
experiences of many of those who served in Vietnam. The robustness of com-
passion must be measured not simply in terms of whether the subjects refused to
continue with the experiment or not (most did) or whether the soldiers contin-
ued to do as they were ordered but by how powerful and upsetting the feelings
they experienced both during and after the experiment. It is worth noting that
there were a few sadists who actually enjoyed cruelty. There were others that
were brutalized by the experiment and many who were brutalized by the war.
That, it seems to me, should not be discounted. Bosses today are once again being
forced to lay off thousands of their managers and employees. (“Market forces” is
the inescapable explanation.) But there is all the difference in the world between
those monsters like the infamous Al “Chainsaw” Dunlap who took such evident
pride in cross the board cuts and virtual saints such as Aaron Feuerstein who felt
so badly about having to lay off workers (after a fire gutted his factory) that he
kept them on the payroll until the company got back on its

The Milgram Experiment Revisited: A Model of Corporate Life?

Is corporate life nothing but the vectors of peer pressures, leaving very little
or even no room for the personal virtues? Does social psychology show that this
is not the case only for corporate grinds but for all of us? Empirically-minded
philosophers love to find a single experiment, or perhaps two, that make this
case for them, that is, which provide the basis for speculative excursions that go
far beyond the (usually rather timid) findings of the social psychologists them-
selves. Harman’s appeal to the two famous experiments by Milgram and by Darley
and Batson are illustrative. Doris takes in a much wider swath of the social
science literature, but even he is forced to admit, throughout his admirable book,
that there are profound reasons for not generalizing from particular experiments
to a good deal of “real life.”

A DEFENSE OF VIRTUE ETHICS IN BUSINESS 55

Regarding the Milgram experiment, Harman (following Ross and Nisbett)
rejects as implausible any explanation in terms of a “character defect” and sug-
gests instead the “step-wise character ofthe shift from relatively unobjectionable
behavior to complicity in a pointless, cruel, and dangerous ordeal.” I think that
this is indeed part of the explanation. Milgram’s subjects needed to have their
callousness cultivated even as they dutifully obeyed the authorities (like the
proverbial frog in slowly boiling water). The subjects could not have been ex-
pected to simply shock strangers on command. But where Harman adds that we
are tempted to make the “fundamental attribution error” of blaming the subject’s
destructive obedience on a personal defect, I would say instead that what the
Milgram experiment shows is how foolish and tragic the otherwise important
virtues of conformity and obedience can be. There is no “personal defect” on
display here precisely because what the experiment shows is the consistency
and stability of that virtue. And the fact that it is (like all virtues) not always a
virtue is no argument against its status as part of the core of the explanation of
the subjects’ behavior. The rest of the explanation involves not just the incre-
mental but also the disorienting nature of the situation.

But one third of the subjects in the Milgram experiment did quit. And those
who did not were indeed confused. Is there no room for character in a complete
explanation? Or do the differences between the subjects and their behavior and
feelings demand such an explanation? Where are all of those studies on indi-
vidual differences that would explain the differences (without necessarily taking
anything away from the importance of the situation and the importance of the
authority of the experimenters)? What about that voluminous literature not in
social psychology but in the (artificially competing) field of personality theory,
from Freud, Gordon Allport, David McClelland, and more recently, Costa and
McRae? At the University of Minnesota, just a few blizzards away from Doris’s
previous base in Ann Arbor, the continuity and stability of character has become
something of a minor industry.^^ If we want to play off moral philosophy and
virtue ethics against the social sciences, let’s make sure that all of the social
sciences are represented and not just social psychology, which tends to define
itself (artificially again, in competition with personality theory) as the study of
the social dimensions of human behavior.

The other often-used case for “lack of character” is the case of the “good
Samaritan,” designed by Darley and Batson. Seminary students, on their way to
give an assigned lecture (on “the good Samaritan”) were forced to confront a
person (an accomplice of the experimenter) on their way. Few of them stopped
to help. It is no doubt true that the difference between subjects and their willing-
ness to help the (supposed) victim can be partially explained on the basis of
such transient variables as the fact that they were “in a hurry.” And it is probably
true as well (and not at all surprising to those of us who are not pushing “faith-
based initiatives” these days) that people who were (or claimed to be) religious
or who were about to talk on a religious topic of direct relevance to the experi-
ence did not act so differently as they would have supposed. But does it follow

56 BUSINESS ETHICS QUARTERLY

that character played no role? I would say that all sorts of character traits, from
one’s ability to think about time and priorities to one’s feelings of anxiety and
competence when faced with a (seemingly) suffering human being all come into
play. Plus, of course, the sense of responsibility and obligation to arrive at an
appointment on time, which once again slips into the background of the inter-
pretation ofthe experiment and so blinds us to the obvious.

As in the Milgram experiment, how much is the most plausible explanation
ofthe case precisely one that the experimenters simply assume but ignore, namely
the character trait or virtue of promptness, the desire to arrive at the designated
place on time? It is not lack of character. It is a conflict of character traits, one
practiced and well-cultivated, the other more often spoken of than put in prac-
tice. Theology students have no special claims on compassion. They just tend to
talk about it a lot. And as students they have had little opportunity to test and
practice their compassion in ways that are not routine.

In his discussion, Harman argues that people often choose the situations to
which they are exposed. But on what basis do they make such choices? Surely
part of the explanation is their wanting to act as they believe they ought to, with
the knowledge that they are prone to temptation and peer pressure. A more obvi-
ous aspect of their choice is their judgment that they would feel more comfortable
in one situation rather than another and that their comfort depends, in part, on
their virtues. Thus clerics and criminals place themselves, or are placed by oth-
ers, in situations that differ precisely because they induce clergy to look, feel,
and act consistently like clergy and induce criminals to look, feel, and act con-
sistently like criminals. None of this eliminates situational factors as an
explanation of behavior. On the contrary, it furthers them and explains why people
“feel obliged and even committed to act consistently.” None of this implies that
we should give up or give in on character but rather tells us that circumstances
and character cannot be pried apart and should not be used competitively as
alternative explanations of virtuous or vicious behavior.

Harman notes that employers tnistakenly think that they can gain useful infor-
mation from interviewing potential employees. But such interviews, Harman
argues, only add “noise” to the decision process. This may explain, by the way,
Princeton’s peculiar (and so far as I know unique) policy of hiring new profes-
sors without interviews, on the basis of the written work alone. But I doubt that
it has much justification in social science. First of all, it is a falsification of the
interviewing process to think that what it provides is more information. Rather
it provides an opportunity for employers (or their chosen representatives in “Hu-
man Resources”) to “get the feel” of a candidate, see how much “in sync” they
are, in order to anticipate how they will “get along.” This explains why most
interviewers describe themselves as typically having made a decision for all
intensive purposes within the first minute or so, which would make little sense
if the purpose of the interview was to gather “more information.” Second, of
course, there are people who have the skill (not necessarily a virtue) to inter-
view well and others who do not. This can indeed be misleading, and it is all the

A DEFENSE OF VIRTUE ETHICS IN BUSINESS 57

worse if the candidate is also skillful at deception, hiding his or her crasser
motives and intentions in order to “make a good impression.” But none of this
undermines the importance or intelligibility of the interviewing process. It just
means that interviewers should be on their toes and learn to ferret out insincer-
ity and deception, skills on which most of them already pride themselves.

What is not debatable, it seems to me, is that people present themselves dif-
ferently, whether or not their presentations accurately represent their virtues
and vices (which longer exposure is sure to reveal). I have long argued that the
subject of explanation is not just the behavior of an agent but the behavior of an
agent-in-situation (or some such odd locution). In business ethics, in particular,
the behavior in question is the behavior of an ”individual-within-the-organiza-
tion,” which is not for a moment to deny that this context may not be the only
one of relevance in moral evaluation. Context is essential but it isn’t everything.
Virtues and vices are important for our explanations of human behavior, but
they make sense only in the context of particular situations and cultural sur-
roundings. There is no such thing as courage or generosity in abstraction, but it
does not follow that there is no such thing as courage or generosity.

Conclusion: In Defense of Business Virtue Ethics

Virtue ethics has a long pedigree, going back to Plato and Aristotle, Confucius
in China, and many other cultures as well as encompassing much of Medieval
and modern ethics—including, especially, the ethics of Hume, Adam Smith, and
the other “Moral Sentiment Theorists.” But we would do well to remind our-
selves just why virtue and character have become such large concerns in the
world today—in business ethics and in politics in particular. The impetus comes
from such disparate sources as the Nuremberg trials and American atrocities in
Vietnam, teenage drug use and peer pressure, and the frequently heard rational-
ization in business and politics that “everyone is doing it.” The renewed emphasis
on character is an attempt to build a personal bulwark (call it “integrity”) against
such pressures and rationalizations and (though half-heartedly) to cultivate vir-
tues other than those virtues of unquestioning obedience that proved to be so
dominant in the Milgram experiments and in Vietnam atrocities such as My Lai.

Nevertheless, I share with Harman and Doris a concern that virtue ethics and
talk about character is being overused and abused. Too often preachers of the
virtues praise (in effect) their own sterling personalities without bothering to
note how little there has been in their lives to challenge their high opinion of
themselves. Too often, people are blamed for behaving in ways in which, given
the situation and their personal backgrounds, it is hard to see how they could
have acted or chosen to act otherwise. In contemporary politics, in particular,
the renewed emphasis on character is prone to bullying and even cruelty, for
example, as way of condemning the victims of poverty and racial oppression for
their behavior and insisting that such people “boot-strap” their way to respect-
ability. Thus I could not be more in agreement with Harman when he throws

58 BUSINESS ETHICS QUARTERLY

suspicion on the American conservative William Bennett. But Nietzsche beats
him to it, a full century before The Book of Virtues:

Then again tbere are those who consider it a virtue to say, “virtue is neces-
sary”; but at bottom they believe only that the police are necessary.̂ ^

I think that Harman’s and Doris’s ultimate aim is to take moral philosophy
away from such vicious moralism and give it back to the good old empirical
social engineer. Indeed, B. F. Skinner is never far from these new empiricist
accounts, although neither Harman nor Doris would accept the absurdities of
strict behaviorism. But once we have downplayed character and with it respon-
sibility and put all of the emphasis back onto the environment, the “situation,”
all that is left is to design circumstances conducive to desirable behavior. To be
sure, such design is important and essential and almost totally ignored by too
many virtue ethicists today. If we are to combat intolerance, encourage mutual
forgiveness, and facilitate human flourishing in contexts plagued by ethnic ha-
tred, for instance, there is no denying the need for mediating institutions that
will create the circumstances in which the virtues can be cultivated. Closer to
home, the cultivation of the virtues in much-touted moral education also re-
quires the serious redesign of our educational institutions. And much of the
crime and commercial dishonesty in the United States and in the world today is
due, no doubt, to the absence of such designs and character-building contexts.
(The market, said the late great “Buddhist” economist E. F. Schumaker, “is the
institutionalization of non-responsibility.”^^) We need less moralizing and more
beneficent social engineering.

I could not agree more with these aims. But the existentialist twist to which
Harman alludes (that we choose our circumstances) and the postmodern turn
encouraged by Doris (that we acknowledge that for the most part our circum-
stances make us) convince me not that we should eliminate talk of the virtues
and character but fully acknowledge both the role of the social sciences {all of
the social sciences) and stop preaching the virtues without due emphasis upon
both personal responsibility and the force of circumstances. Like Doris, we should
appreciate more such “out of character” heroic and saintly behavior (he mentions
Oscar Schindler in particular) and the exigencies of context and circumstances.
But we should insist, first and foremost, that people—at any rate, people like us—
are responsible for what they do, and what they make of themselves.

Notes

• See, for example, Robert Young, “The Implications of Determinism,” in Peter Singer, A
Companion to Ethics (London: Blackwell, 1991). I am not considering here the post-Freudian
complications of determination hy way of compulsion or personality disorder.

2 E.g., Kenneth Goodpaster and John B. Matthews, Jr., “Can a Corporation have a Con-
science?” Harvard Business Review, Jan.-Feb. 1982; John Ladd, “Morality and the Ideal of
Rationality in Formal Organizations,” The Monist, Oct. 1970; Peter A. French, Collective

A DEFENSE OF VIRTUE ETHICS IN BUSINESS 59

and Corporate Responsibility (New York: Columbia University Press, 1984). French, Peter A.,
“Responsibility and the Moral Role of Corporate Entities,” in R. Edward Freeman, ed.. Busi-
ness as a Humanity (Ruffln Lectures II) (New York: Oxford, 1994); Peter A. French, “The
Corporation as a Moral Person,” American Philosophical Quarterly 16: 3 (1979). Manuel G.
Velasquez, Business Ethics (Engelwood Cliffs, N.J.: Prentice-Hall, 1982 and further editions).

3 David Hume, An Enquiry Concerning Human Understanding, 2nd ed. L. A. Sleby-
Biggee, ed. (Clarendon: Oxford University Press, 1902). John Stuart Mill, A System of Logic
8th ed. (New York: Harper & Row, 1874). Adam Smith, Theory of the Moral Sentiments
(London: George Bell, 1880).

* Gilbert Harman, “Moral Philosophy Meets Social Psychology: Virtue Ethics and the
Fundamental Attribution Error,” Proceedings of the Aristotelian Society 99 (1998-99): 315-
331. Revised version in Harman, G., Explaining Value and Other Essays in Moral Philosophy
(Oxford: Clarendon Press, 2000), 165-178. See also, “The Nonexistence of Character Traits,”
Proceedings of the Aristotelian Society 100 (1999-2000): 223-226. John Doris, Lack of
Character: Personality and Moral Behavior (New York: Cambridge University Press, 2002).

5 Two philosophical defenses of character are Joel Kupperman, “The Indispensability of
Character,” in Philosophy, April 2001, 76(2): 239-250, and Maria Merritt, “Virtue Ethics
and Situationist Personality Psychology,” in Ethical Theory and Moral Practice 3 (2000):
365-383.

* The fight against the pervasiveness of excuses is something I learned early on from
Jean-Paul Sartre and pursue in some detail in my series. No Excuses: Existetialism and the
Meaning of Life (The Teaching Company, 2000).

•’ Paul Griffiths, What Emotions Really Are (Chicago, 1997).

8 Simon Blackburn, Essays in Quasi-Realism (New York: Oxford University Press, 1995).

‘ Alasdair Maclntyre, After Virtue (Notre Dame, 1984).

‘” I would plea for something of an exception in the case of the fascinating flow of
neuropsychiatric research of the last thirty or so years, which does indeed go beyond folk
psychology, not only in its particular findings but in the very vocabulary and structure of its
explanations. Nevertheless, what is so dazzling in much of this research is precisely that way
in which neurological anomalies violate our ordinary “folk psychology” explanations. I will
limit my references to two. The first is a wonderful series of studies published by Oliver
Sachs over the years, including The Man Who Mistook His Wife for a Hat and Other Clinical
Tales (Touchstone, 1998). The second is the recent research of Antonio Damasio, esp. in
Descartes’s Error (Putnam, 1994).

” Stanley Milgram, “Behavioral Study of Obedience,” Journal of Abnormal and Social
Psychology, vol. 67, 1963; Obedience to Authority (New York: HarperCollins, 1983).

•̂ I have argued with both Harman and Doris that they have made selective use of social
science research. In particular, they have restricted their appeals and references almost en-
tirely to social psychology and have been correspondingly neglectful of counter-arguments
in personality theory. The difference in perspective—and consequently the tension—between
these two branches of empirical psychology are extremely significant to the argument at
hand. See, e.g., Todd F. Heatherton (ed.), Joel Lee Weinberger, (ed.). Can Personality Change?
[edited book] (Washington, D.C: American Psychological Association, 1994), xiv, 368. A.
Caspi, and B. W. Roberts (1999), “Personality Continuity and Change Across the Life Course”
in L. A. Pervin and O. P. John (eds.). Handbook of Personality: Theory and Research, 2nd
ed., (New York: Guilford), 300-326. Thomas J. Bouchard, Jr., “The Genetics of Personal-
ity,” [chapter], Kenneth Blum (ed.); Ernest P. Noble, (ed.) et a!.. Handbook of Psychiatric
Genetics (Boca Raton, Fla.: CRC Press, Inc. 1997), 273-296.

‘^Gilbert Harman, “Moral Philosophy Meets Social Psychology” (web version), 1.

60 BUSINESS ETHICS QUARTERLY

‘* P. 67, p. 24 (all page numbers are to the unpublished manuscript, courtesy of John
Doris.)

15 Doris, 15-6.

‘* But see a similar distinction defended by Ed Hartman. “The Role of Character in Busi-
ness Ethics,” in J. Dienhart, D. Moberg, and R. Duska, The Next Phase of Business Ethics:
Integrating Psychology and Ethics (Amsterdam: JAI/EIsevier, 2001), 341-354.

“Jean-Paul Sartre, Being and Nothingness, trans. H. Barnes (New York: Philosophical
Library, 1956), see for instance 104f.

18 An essay that uses the Milgram experiment to talk about “excuses” is A. Strudler and
D. Warren, “Authority, Heuristics, and the Structure of Excuses,” in J. Dienhart, D. Moberg,
and R. Duska, The Next Phase of Business Ethics, 355-375. My own view is that “everybody’s
doing it” is NO excuse, or at best a mitigating one. See my No Excuses: Existentialism and
the Meaning of Life. See also the now classic essay by Ron Green, “Everybody’s Doing It,” in
Business Ethics Quarterly 1(1): 75-94.

“Doris, 41-2.

20 Alfred Carr, “Is Business Bluffing Ethical?” Harvard Business Review (Jan.-Feb. 1968).

21 J. M. Darley and C. D. Batson, “From Jerusalem to Jericho: A Study of Situational and
Disposition Variables in Helping Behavior,” Journal of Personality and Social Psychology
27, 1973.

” Nisbett and Ross, Human Inference: Strategies and Shortcomings of Social Judgment
(Prentice-Hall, 1980).

” Doris, 69.

24 William Broyles, Jr., Brothers in Arms (New York: Knopf, 1986) and Tim O’Brien, / / /
Die in a Combat Zone Box Me Up and Ship Me Home (New York: Delacorte, 1973). Both
books are discussed by Thomas Palaima in “Courage and Prowess Afoot in Homer and in
Vietnam” in Classical and Modern Literature, 20/3/(2000).

2* See Milgram, Obedience to Authority.

26 See my discussion in A Better Way to think about Business (Oxford, 1999), 10.

27 For a good summary of the debate and the differences between the two approaches, see
D. T. Kenrick, and D. C. Funder, 1988. “Profiting from Controversy: Lessons from the Person-
Situation Debate,” American Psychologist (43); 23-34, and David C. Funder, “Personality,”
Annual Review of Psychology, 2001, vol. 52: 197-221

28 Thus Spoke Zarathustra, Part II, “On the Virtuous,” trans., Kaufmann (New York: Vi-
king, 1954), 207

29 E. F. Schumaker, Small is Beautiful (Harper and Row, 1973).

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Broyles, William, Jr. 1986. Brothers in Arms. New York: Knopf.
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A DEFENSE OF VIRTUE ETHICS IN BUSINESS 61

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The Clash of Civilizations?
Author(s): Samuel P. Huntington
Source: Foreign Affairs, Vol. 72, No. 3 (Summer, 1993), pp. 22-49
Published by: Council on Foreign Relations
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The Clash of Civilizations?

Samuel P. Huntington

THE NEXT PATTERN OF CONFLICT

World politics is entering a new phase, and intellectuals have

not hesitated to proliferate visions of what it will be?the end of his

tory, the return of traditional rivalries between nation states, and the

decline of the nation state from the conflicting pulls of tribalism and

globalism, among others. Each of these visions catches aspects of the

emerging reality. Yet they all miss a crucial, indeed a central, aspect
of what global politics is likely to be in the coming years.

It is my hypothesis that the fundamental source of conflict in this

new world will not be primarily ideological or primarily economic.

The great divisions among humankind and the dominating source of

conflict will be cultural. Nation states will remain the most powerful
actors in world affairs, but the principal conflicts of global politics will

occur between nations and groups of different civilizations. The clash

of civilizations will dominate global politics. The fault lines between

civilizations will be the battle lines of the future.

Conflict between civilizations will be the latest phase in the evo

lution of conflict in the modern world. For a century and a half after

the emergence of the modern international system with the Peace of

Westphalia, the conflicts of the Western world were largely among

Samuel P. Huntington is the Eaton Professor of the Science of

Government and Director of the John M. Olin Institute for Strategic
Studies at Harvard University. This article is the product of the Olin

Institute’s project on “The Changing Security Environment and

American National Interests.”

[22]

The Clash of Civilizations?

princes?emperors, absolute monarchs and constitutional monarchs

attempting to expand their bureaucracies, their armies, their mer

cantilist economic strength and, most important, the territory they
ruled. In the process they created nation states, and beginning with

the French Revolution the principal lines of conflict were between

nations rather than princes. In 1793, as R. R. Palmer put it, “The wars

of kings were over; the wars of peoples had begun.” This nineteenth

century pattern lasted until the end of World War I. Then, as a result

of the Russian Revolution and the reaction against it, the conflict of

nations yielded to the conflict of ideologies, first among communism,
fascism-Nazism and liberal democracy, and then between commu

nism and liberal democracy. During the Cold War, this latter conflict

became embodied in the struggle between the two superpowers, nei

ther of which was a nation state in the classical European sense and

each of which defined its identity in terms of its ideology.
These conflicts between princes, nation states and ideologies were

primarily conflicts within Western civilization, “Western civil wars,”
as William Lind has labeled them. This was as true of the Cold War
as it was of the world wars and the earlier wars of the seventeenth,

eighteenth and nineteenth centuries. With the end of the Cold War,
international politics moves out of its Western phase, and its center

piece becomes the interaction between the West and non-

Western

civilizations and among non-Western civilizations. In the politics of

civilizations, the peoples and governments of non-Western civiliza

tions no longer remain the objects of history as targets of Western

colonialism but join the West as movers and shapers of history.

THE NATURE OF CIVILIZATIONS

During the cold war the world was divided into the First,
Second and Third Worlds. Those divisions are no longer relevant. It

is far more meaningful now to group countries not in terms of their

political or economic systems or in terms of their level of economic

development but rather in terms of their culture and civilization.

What do we mean when we talk of a civilization? A civilization is
a cultural entity. Villages, regions, ethnic groups, nationalities, reli

FOREIGN AFFAIRS – Summer 1993 [23]

Samuel P. Huntington

gious groups, all have distinct cultures at different levels of cultural

heterogeneity. The culture of a village in southern Italy may be dif

ferent from that of a village in northern Italy, but both will share in a

common Italian culture that distinguishes them from German vil

lages. European communities, in turn, will share cultural features that

distinguish them from Arab or Chinese communities. Arabs,
Chinese and Westerners, however, are not part of any broader cul

tural entity. They constitute civilizations. A civilization is thus the

highest cultural grouping of people and the broadest level of cultural

identity people have short ofthat which distinguishes humans from
other species. It is defined both by common objective elements, such

as language, history, religion, customs, institutions, and by the sub

jective self-identification of people. People have levels of identity: a

resident of Rome may define himself with varying degrees of inten

sity as a Roman, an Italian, a Catholic, a Christian, a European, a

Westerner. The civilization to which he belongs is the broadest level

of identification with which he intensely identifies. People can and
do redefine their identities and, as a result, the composition and

boundaries of civilizations change.
Civilizations may involve a large number of people, as with China

(“a civilization pretending to be a state,” as Lucian Pye put it), or a

very small number of people, such as the Anglophone Caribbean. A

civilization may include several nation states, as is the case with

Western, Latin American and Arab civilizations, or only one, as is the

case with Japanese civilization. Civilizations obviously blend and

overlap, and may include subcivilizations. Western civilization has

two major variants, European and North American, and Islam has its

Arab, Turkic and Malay subdivisions. Civilizations are nonetheless

meaningful entities, and while the lines between them are seldom

sharp, they are real. Civilizations are dynamic; they rise and fall; they
divide and merge. And, as any student of history knows, civilizations

disappear and are buried in the sands of time.

Westerners tend to think of nation states as the principal actors in

global affairs. They have been that, however, for only a few centuries.

The broader reaches of human history have been the history of civi

[^4] FOREIGN AFFAIRS Volume^No^

The Clash of Civilizations?

lizations. In A Study of History, Arnold Toynbee identified 21 major
civilizations; only six of them exist in the contemporary world.

WHY CIVILIZATIONS WILL CLASH

Civilization identity will be increasingly important in the

future, and the world will be shaped in large measure by the interac

tions among seven or eight major civilizations. These include

Western, Confucian, Japanese, Islamic, Hindu, Slavic-Orthodox,
Latin American and possibly African civilization. The most impor
tant conflicts of the future will occur along the cultural fault lines sep

arating these civilizations from one another.

Why will this be the case?

First, differences among civilizations are not only real; they are

basic. Civilizations are differentiated from each other by history, Ian

guage, culture, tradition and, most important,

religion. The people of different civilizations
have different views on the relations between

God and man, the individual and the group, the

citizen and the state, parents and children, hus

band and wife, as well as differing views of the

relative importance of rights and responsibili
ties, liberty and authority, equality and hierar

chy. These differences are the product of centuries. They will not

soon disappear. They are far more fundamental than differences

among political ideologies and political regimes. Differences do not

necessarily mean conflict, and conflict does not necessarily mean vio

lence. Over the centuries, however, differences among civilizations

have generated the most prolonged and the most violent conflicts.

Second, the world is becoming a smaller place. The interactions

between peoples of different civilizations are increasing; these

increasing interactions intensify civilization consciousness and
awareness of differences between civilizations and commonalities

within civilizations. North African immigration to France generates

hostility among Frenchmen and at the same time increased receptiv

ity to immigration by “good” European Catholic Poles. Americans

FOREIGN AFFAIRS – Summer 1993 [25]

The conflicts of the

future will occur along
the cultural fault lines

separating civilizations.

Samuel P. Huntington

react far more negatively to Japanese investment than to larger invest
ments from Canada and European countries. Similarly, as Donald

Horowitz has pointed out, “An Ibo may be … an Owerri Ibo or an

Onitsha Ibo in what was the Eastern region of Nigeria. In Lagos, he

is simply an Ibo. In London, he is a Nigerian. In New York, he is an

African.” The interactions among peoples of different civilizations

enhance the civilization-consciousness of people that, in turn, invig
orates differences and animosities stretching or thought to stretch

back deep into history.
Third, the processes of economic modernization and social change

throughout the world are separating people from longstanding local

identities. They also weaken the nation state as a source of identity.
In much of the world religion has moved in to fill this gap, often in
the form of movements that are labeled “fundamentalist.” Such

movements are found in Western Christianity, Judaism, Buddhism

and Hinduism, as well as in Islam. In most countries and most reli

gions the people active in fundamentalist movements are young, col

lege-educated, middle-class technicians, professionals and business

persons. The “unsecularization of the world,” George Weigel has

remarked, “is one of the dominant social facts of life in the late twen

tieth century.” The revival of religion, “la revanche de Dieu,” as Gilles

Kepel labeled it, provides a basis for identity and commitment that

transcends national boundaries and unites civ

ilizations.

Fourth, the growth of civilization-consciousness is enhanced by
the dual role of the West. On the one hand, the West is at a peak of

power. At the same time, however, and perhaps as a result, a return

to the roots phenomenon is occurring among non-Western civiliza

tions. Increasingly one hears references to trends toward a turning
inward and “Asianization” in Japan, the end of the Nehru legacy and

the “Hinduization” of India, the failure of Western ideas of socialism

and nationalism and hence “re-Islamization” of the Middle East, and

now a debate over Westernization versus Russianization in Boris

Yeltsin s country. A West at the peak of its power confronts non

Wests that increasingly have the desire, the will and the resources to

shape the world in non-Western ways.
In the past, the elites of non-Western societies were usually the

[26] FOREIGN AFFAIRS- Volumey2No.3

The Clash of Civilizations?

people who were most involved with the West, had been educated at

Oxford, the Sorbonne or Sandhurst, and had absorbed Western atti

tudes and values. At the same time, the populace in non-Western

countries often remained deeply imbued with the indigenous culture.

Now, however, these relationships are being reversed. A de

Westernization and indigenization of elites is occurring in many non

Western countries at the same time that Western, usually American,

cultures, styles and habits become more popular among the mass of

the people.
Fifth, cultural characteristics and differences are less mutable and

hence less easily compromised and resolved than political and eco

nomic ones. In the former Soviet Union, communists can become

democrats, the rich can become poor and the poor rich, but Russians

cannot become Estonians and Az?ris cannot become Armenians. In

class and ideological conflicts, the key question was “Which side are

you on?” and people could and did choose sides and change sides. In

conflicts between civilizations, the question is “What are you?” That

is a given that cannot be changed. And as we know, from Bosnia to

the Caucasus to the Sudan, the wrong answer to that question can

mean a bullet in the head. Even more than ethnicity, religion dis

criminates sharply and exclusively among people. A person can be

half-French and half-Arab and simultaneously even a citizen of two

countries. It is more difficult to be half-Catholic and half-Muslim.

Finally, economic regionalism is increasing. The proportions of

total trade that were intraregional rose between 1980 and 1989 from

51 percent to 59 percent in Europe, 33 percent to 37 percent in East

Asia, and 32 percent to 36 percent in North America. The importance
of regional economic blocs is likely to continue to increase in the

future. On the one hand, successful economic regionalism will rein

force civilization-consciousness. On the other hand, economic

regionalism may succeed only when it is rooted in a common civi

lization. The European Community rests on the shared foundation

of European culture and Western Christianity. The success of the

North American Free Trade Area depends on the convergence now

underway of Mexican, Canadian and American cultures. Japan, in

contrast, faces difficulties in creating a comparable economic entity

FOREIGN AFFAIRS Summer 1993 [27]

Samuel P Huntington

in East Asia because Japan is a society and civilization unique to itself.
However strong the trade and investment links Japan may develop
with other East Asian countries, its cultural differences with those

countries inhibit and perhaps preclude its promoting regional eco

nomic integration like that in Europe and North America.

Common culture, in contrast, is clearly facilitating the rapid

expansion of the economic relations between the People s Republic of

China and Hong Kong, Taiwan, Singapore and the overseas Chinese

communities in other Asian countries. With the Cold War over, cul

tural commonalities increasingly overcome ideological differences,
and mainland China and Taiwan move closer together. If cultural

commonality is a prerequisite for economic integration, the principal
East Asian economic bloc of the future is likely to be centered on

China. This bloc is, in fact, already coming into existence. As Murray
Weidenbaum has observed,

Despite the current Japanese dominance of the region, the Chinese-based

economy of Asia is rapidly emerging
as a new epicenter for industry, com

merce and finance. This strategic area contains substantial amounts of tech

nology and manufacturing capability (Taiwan), outstanding entrepreneurial,

marketing and services acumen
(Hong Kong),

a fine communications net

work (Singapore), a tremendous pool of financial capital (all three), and very

large endowments of land, resources and labor (mainland China)…. From

Guangzhou to Singapore, from Kuala Lumpur to Manila, this influential net

work?often based on extensions of the traditional clans?has been described

as the backbone of the East Asian economy.1

Culture and religion also form the basis of the Economic

Cooperation Organization, which brings together ten non-Arab

Muslim countries: Iran, Pakistan, Turkey, Azerbaijan, Kazakhstan,

Kyrgyzstan, Turkmenistan, Tadjikistan, Uzbekistan and Afghan
istan. One impetus to the revival and expansion of this organization,
founded originally in the 1960s by Turkey, Pakistan and Iran, is the
realization by the leaders of several of these countries that they had

no chance of admission to the European Community. Similarly,

Caricom, the Central American Common Market and Mercosur rest

1Murray Weidenbaum, Greater China: The Next Economic Superpower?, St. Louis:

Washington University Center for the Study of American Business, Contemporary
Issues, Series 57, February 1993, pp. 2-3.

[28] FOREIGN AFFAIRS Volume72N0.3

The Clash of Civilizations?

on common cultural foundations. Efforts to build a broader

Caribbean-Central American economic entity bridging the Anglo
Latin divide, however, have to date failed.

As people define their identity in ethnic and religious terms, they
are likely to see an “us” versus “them” relation existing between them

selves and people of different ethnicity or religion. The end of ideo

logically defined states in Eastern Europe and the former Soviet

Union permits traditional ethnic identities and animosities to come

to the fore. Differences in culture and religion create differences over

policy issues, ranging from human rights to immigration to trade and
commerce to the environment. Geographical propinquity gives rise

to conflicting territorial claims from Bosnia to Mindanao. Most

important, the efforts of the West to promote its values of democra

cy and liberalism as universal values, to maintain its military pre
dominance and to advance its economic interests engender

countering responses from other civilizations. Decreasingly able to

mobilize support and form coalitions on the basis of ideology, gov
ernments and groups will increasingly attempt to mobilize support by

appealing to common religion and civilization identity.
The clash of civilizations thus occurs at two levels. At the micro

level, adjacent groups along the fault lines between civilizations

struggle, often violently, over the control of territory and each other.

At the macro-level, states from different civilizations compete for rel

ative military and economic power, struggle over the control of inter

national institutions and third parties, and competitively promote
their particular political and religious values.

THE FAULT LINES BETWEEN CIVILIZATIONS

The fault lines between civilizations are
replacing the political

and ideological boundaries of the Cold War as the flash points for cri
sis and bloodshed. The Cold War began when the Iron Curtain
divided Europe politically and ideologically. The Cold War ended

with the end of the Iron Curtain. As the ideological division of

Europe has disappeared, the cultural division of Europe between

Western Christianity, on the one hand, and Orthodox Christianity

FOREIGN AFFAIRS Summer 1993 [29]

Western

Christianity
circa icoo

Orthodox

Christianity
and Islam

MILES c^SP^
Source: W. Wallace, THE TRANSFORMATION OF

WESTERN EirROPE. London: Pinter, 1990.
Map by lb Ohlsson for FOREIGN AFFAIRS.

Samuel P. Huntington

and Islam, on the other, has reemerged.
The most significant dividing line in

Europe, as William Wallace has suggested,
may well be the eastern boundary of

Western Christianity in the year 1500. This

line runs along what are now the boundaries

between Finland and Russia and between

the Baltic states and Russia, cuts through
Belarus and Ukraine separating the more

Catholic western Ukraine from Orthodox

eastern Ukraine, swings westward separat

ing Transylvania from the rest of Romania,
and then goes through Yugoslavia almost

exactly along the line now separating
Croatia and Slovenia from the rest of

Yugoslavia. In the Balkans this line, of

course, coincides with the historic bound

ary between the Hapsburg and Ottoman

empires. The peoples to the north and west

of this line are Protestant or Catholic; they
shared the common experiences of Euro

pean history?feudalism, the Renaissance,
the Reformation, the Enlightenment, the

French Revolution, the Industrial Revo

lution; they are generally economically bet

ter off than the peoples to the east; and they
may now look forward to increasing

involvement in a common
European

econ

omy and to the consolidation of democrat

ic political systems. The peoples to the east

and south of this line are Orthodox or

Muslim; they historically belonged to the
Ottoman or Tsarist empires and were only

lightly touched by the shaping events in the

rest of Europe; they are generally less

advanced economically; they seem much

[30] FOREIGN AFFAIRS Volume 72 N0.3

The Clash of Civilizations?

less likely to develop stable democratic political systems. The Velvet

Curtain of culture has replaced the Iron Curtain of ideology as the

most significant dividing line in Europe. As the events in Yugoslavia
show, it is not only a line of difference; it is also at times a line of

bloody conflict.

Conflict along the fault line between Western and Islamic civi

lizations has been going on for 1,300 years. After the founding of

Islam, the Arab and Moorish surge west and north only ended at

Tours in 732. From the eleventh to the thirteenth century the

Crusaders attempted with temporary success to bring Christianity
and Christian rule to the Holy Land. From the fourteenth to the sev

enteenth century, the Ottoman Turks reversed the balance, extended

their sway over the Middle East and the Balkans, captured

Constantinople, and twice laid siege to Vienna. In the nineteenth and

early twentieth centuries as Ottoman power declined Britain, France,
and Italy established Western control over most of North Africa and

the Middle East.
After World War II, the West, in turn, began to retreat; the colo

nial empires disappeared; first Arab nationalism and then Islamic

fundamentalism manifested themselves; the West became heavily

dependent on the Persian Gulf countries for its energy; the oil-rich

Muslim countries became money-rich and, when they wished to,

weapons-rich. Several wars occurred between Arabs and Israel (cre
ated by the West). France fought a bloody and ruthless war in Algeria
for most of the 1950s; British and French forces invaded Egypt in

1956; American forces went into Lebanon in 1958; subsequently
American forces returned to Lebanon, attacked Libya, and engaged

in various military encounters with Iran; Arab and Islamic terrorists,

supported by at least three Middle Eastern governments, employed
the weapon of the weak and bombed Western planes and installations

and seized Western hostages. This warfare between Arabs and the

West culminated in 1990, when the United States sent a massive army
to the Persian Gulf to defend some Arab countries against aggression

by another. In its aftermath nato planning is increasingly directed to

potential threats and instability along its “southern tier.”

This centuries-old military interaction between the West and

FOREIGN AFFAIRS Summer 1993 [31]

Samuel P. Huntington

Islam is unlikely to decline. It could become more virulent. The Gulf

War left some Arabs feeling proud that Saddam Hussein had

attacked Israel and stood up to the West. It also left many feeling
humiliated and resentful of the West’s military presence in the

Persian Gulf, the West’s overwhelming military dominance, and

their apparent inability to shape their own destiny. Many Arab coun

tries, in addition to the oil exporters, are reaching levels of economic

and social development where autocratic forms of government
become inappropriate and efforts to introduce democracy become

stronger. Some openings in Arab political systems have already
occurred. The principal beneficiaries of these openings have been

Islamist movements. In the Arab world, in short, Western democra

cy strengthens anti-Western political forces. This may be a passing

phenomenon, but it surely complicates relations between Islamic

countries and the West.

Those relations are also complicated by demography. The spec
tacular population growth in Arab countries, particularly in North

Africa, has led to increased migration to Western Europe. The move

ment within Western Europe toward minimizing internal bound

aries has sharpened political sensitivities with respect to this

development. In Italy, France and Germany, racism is increasingly
open, and political reactions and violence against Arab and Turkish

migrants have become more intense and more widespread since 1990.
On both sides the interaction between Islam and the West is seen

as a clash of civilizations. The West s “next confrontation,” observes

M. J. Akbar, an Indian Muslim author, “is definitely going to come

from the Muslim world. It is in the sweep of the Islamic nations from

the Maghreb to Pakistan that the struggle for a new world order will

begin.” Bernard Lewis comes to a similar conclusion:
We are facing a mood and a movement far transcending the level of issues and

policies and the governments that pursue them. This is no less than a clash of

civilizations?the perhaps irrational but surely historic reaction of an ancient

rival against
our Judeo-Christian heritage, our secular present, and the world

wide expansion of both.2

2Bernard Lewis, “The Roots of Muslim Rage,” The Atlantic Monthly, vol. 266,

September 1990, p. 60; Time, June 15,1992, pp. 24-28.

[32] FOREIGN AFFAIRS Volumey2No.3

The Clash of Civilizations?

Historically, the other great antagonistic interaction of Arab

Islamic civilization has been with the pagan, animist, and now

increasingly Christian black peoples to the south. In the past, this

antagonism was epitomized in the image of Arab slave dealers and

black slaves. It has been reflected in the on-going civil war in the

Sudan between Arabs and blacks, the fighting in Chad between

Libyan-supported insurgents and the government, the tensions

between Orthodox Christians and Muslims in the Horn of Africa,
and the political conflicts, recurring riots and communal violence

between Muslims and Christians in Nigeria. The modernization of

Africa and the spread of Christianity are likely to enhance the prob

ability of violence along this fault line. Symptomatic of the inten

sification of this conflict was the Pope John Paul IPs speech in
Khartoum in February 1993 attacking the actions of the Sudans

Islamist government against the Christian minority there.

On the northern border of Islam, conflict has increasingly erupt
ed between Orthodox and Muslim peoples, including the carnage of

Bosnia and Sarajevo, the simmering violence between Serb and

Albanian, the tenuous relations between Bulgarians and their

Turkish minority, the violence between Ossetians and Ingush, the

unremitting slaughter of each other by Armenians and Az?ris, the

tense relations between Russians and Muslims in Central Asia, and

the deployment of Russian troops to protect Russian interests in the

Caucasus and Central Asia. Religion reinforces the revival of ethnic

identities and restimulates Russian fears about the security of their

southern borders. This concern is well captured by Archie Roosevelt:
Much of Russian history concerns the struggle between the Slavs and the

Turkic peoples on their borders, which dates back to the foundation of the
Russian state more than a thousand years ago. In the Slavs* millennium-long
confrontation with their eastern neighbors lies the key to an understanding
not only of Russian history, but Russian character. To understand Russian

realities today one has to have a concept of the great Turkic ethnic group that

has preoccupied Russians through the centuries.3

The conflict of civilizations is deeply rooted elsewhere in Asia.

The historic clash between Muslim and Hindu in the subcontinent

3Archie Roosevelt, For Lust of Knowing, Boston: Little, Brown, 1988, pp. 332-333.

FOREIGN AFFAIRS – Summer 1993 [33]

Samuel P. Huntington

manifests itself now not only in the rivalry between Pakistan and

India but also in intensifying religious strife within India between

increasingly militant Hindu groups and Indias substantial Muslim

minority. The destruction of the Ayodhya mosque in December 1992

brought to the fore the issue of whether India will remain a secular

democratic state or become a Hindu one. In East Asia, China has

_ outstanding territorial disputes with most of its

neighbors. It has pursued a ruthless policy
toward the Buddhist people of Tibet, and it is

pursuing an increasingly ruthless policy toward

its Turkic-Muslim minority. With the Cold
War over, the underlying differences between

China and th? United States have reasserted

themselves in areas such as human rights, trade

and weapons proliferation. These differences

are unlikely to moderate. A “new cold war,” Deng Xaioping report

edly asserted in 1991, is under way between China and America.

The same phrase has been applied to the increasingly difficult rela

tions between Japan and the United States. Here cultural difference

exacerbates economic conflict. People on each side allege racism on

the other, but at least on the American side the antipathies are not

racial but cultural. The basic values, attitudes, behavioral patterns of

the two societies could hardly be more different. The economic issues

between the United States and Europe are no less serious than those

between the United States and Japan, but they do not have the same

political salience and emotional intensity because the differences

between American culture and European culture are so much less

than those between American civilization and Japanese civilization.

The interactions between civilizations vary greatly in the extent to

which they are likely to be characterized by violence. Economic com

petition clearly predominates between the American and European
subcivilizations of the West and between both of them and Japan. On

the Eurasian continent, however, the proliferation of ethnic conflict,

epitomized at the extreme in “ethnic cleansing,” has not been totally
random. It has been most frequent and most violent between groups

belonging to different civilizations. In Eurasia the great historic fault

[34] FOREIGN AFFAIRS Volumey2No.3

The crescent-shaped

Islamic bloc, from the

bulge of Africa to

central Asia, has

bloody borders.

The Clash of Civilizations?

lines between civilizations are once more aflame. This is particularly
true along the boundaries of the crescent-shaped Islamic bloc of

nations from the bulge of Africa to central Asia. Violence also occurs

between Muslims, on the one hand, and Orthodox Serbs in the

Balkans, Jews in Israel, Hindus in India, Buddhists in Burma and

Catholics in the Philippines. Islam has bloody borders.

civilization rallying: the kin-country syndrome

Groups or states belonging to one civilization that become in

volved in war with people from a different civilization naturally try to

rally support from other members of their own civilization. As the

post-Cold War world evolves, civilization commonality, what H. D.

S. Greenway has termed the “kin-country” syndrome, is replacing

political ideology and traditional balance of power considerations as

the principal basis for cooperation and coalitions. It can be seen grad

ually emerging in the post-Cold War conflicts in the Persian Gulf,
the Caucasus and Bosnia. None of these was a full-scale war between

civilizations, but each involved some elements of civilizational rally

ing, which seemed to become more important as the conflict contin

ued and which may provide a foretaste of the future.

First, in the Gulf War one Arab state invaded another and then

fought a coalition of Arab, Western and other states. While only a

few Muslim governments overtly supported Saddam Hussein, many
Arab elites privately cheered him on, and he was highly popular
among large sections of the Arab publics. Islamic fundamentalist

movements universally supported Iraq rather than the Western
backed governments of Kuwait and Saudi Arabia. Forswearing Arab

nationalism, Saddam Hussein explicitly invoked an Islamic appeal.
He and his supporters attempted to define the war as a war between

civilizations. “It is not the world against Iraq,” as Safar Al-Hawali,
dean of Islamic Studies at the Umm Al-Qura University in Mecca,

put it in a widely circulated tape. “It is the West against Islam.”

Ignoring the rivalry between Iran and Iraq, the chief Iranian religious
leader, Ayatollah Ali Khamenei, called for a holy war against the

West: “The struggle against American aggression, greed, plans and

FOREIGN AFFAIRS – Summer 1993 [35]

Samuel P. Huntington

policies will be counted as a jihad, and anybody who is killed on that

path is a martyr.” “This is a war,” King Hussein of Jordan argued,

“against all Arabs and all Muslims and not against Iraq alone.”

The rallying of substantial sections of Arab elites and publics
behind Saddam Hussein caused those Arab governments in the anti

Iraq coalition to moderate their activities and temper their public
statements. Arab governments opposed or distanced themselves from

subsequent Western efforts to apply pressure on Iraq, including
enforcement of a no-fly zone in the summer of 1992 and the bomb

ing of Iraq in January 1993. The Western-Soviet-Turkish-Arab anti

Iraq coalition of 1990 had by 1993 become a coalition of almost only
the West and Kuwait against Iraq.

Muslims contrasted Western actions against Iraq with the West’s

failure to protect Bosnians against Serbs and to impose sanctions on

Israel for violating U.N. resolutions. The West, they alleged, was

using a double standard. A world of clashing civilizations, however,
is inevitably a world of double standards: people apply one standard

to their kin-countries and a different standard to others.

Second, the kin-country syndrome also appeared in conflicts in

the former Soviet Union. Armenian military successes in 1992 and

1993 stimulated Turkey to become increasingly supportive of its reli

gious, ethnic and linguistic brethren in Azerbaijan. “We have a

Turkish nation feeling the same sentiments as the Azerbaijanis,” said
one Turkish official in 1992. “We are under pressure. Our newspapers
are full of the photos of atrocities and are asking us if we are still seri

ous about pursuing our neutral policy. Maybe we should show

Armenia that there’s a big Turkey in the region.” President Turgut
Ozal agreed, remarking that Turkey should at least “scare the

Armenians a little bit.” Turkey, Ozal threatened again in 1993, would

“show its fangs.” Turkish Air Force jets flew reconnaissance flights

along the Armenian border; Turkey suspended food shipments and

air flights to Armenia; and Turkey and Iran announced they would

not accept dismemberment of Azerbaijan. In the last years of its exis

tence, the Soviet government supported Azerbaijan because its gov
ernment was dominated by former communists. With the end of the

Soviet Union, however, political considerations gave way to religious

[36] FOREIGN AFFAIRS Volume7<2No.3

The Clash of Civilizations?

ones. Russian troops fought on the side of the Armenians, and

Azerbaijan accused the “Russian government of turning 180 degrees”
toward support for Christian Armenia.

Third, with respect to the fighting in the former Yugoslavia,
Western publics manifested sympathy and support for the Bosnian

Muslims and the horrors they suffered at the hands of the Serbs.

Relatively little concern was expressed, however, over Croatian

attacks on Muslims and participation in the dismemberment of

Bosnia-Herzegovina. In the early stages of the Yugoslav breakup,

Germany, in an unusual display of diplomatic initiative and muscle,
induced the other n members of the European Community to follow

its lead in recognizing Slovenia and Croatia. As a result of the pope s

determination to provide strong backing to the two Catholic coun

tries, the Vatican extended recognition even before the Community
did. The United States followed the European lead. Thus the lead

ing actors in Western civilization rallied behind their coreligionists.

Subsequently Croatia was reported to be receiving substantial quan
tities of arms from Central European and other Western countries.

Boris Yeltsin s government, on the other hand, attempted to pursue a

middle course that would be sympathetic to the Orthodox Serbs but
not alienate Russia from the West. Russian conservative and nation

alist groups, however, including many legislators, attacked the gov
ernment for not being more forthcoming in its support for the Serbs.

By early 1993 several hundred Russians apparently were serving with

the Serbian forces, and reports circulated of Russian arms being sup

plied to Serbia.
Islamic governments and groups, on the other hand, castigated the

West for not coming to the defense of the Bosnians. Iranian leaders

urged Muslims from all countries to provide help to Bosnia; in viola

tion of the U.N. arms embargo, Iran supplied weapons and men for

the Bosnians; Iranian-supported Lebanese groups sent guerrillas to

train and organize the Bosnian forces. In 1993 up to 4,000 Muslims

from over two dozen Islamic countries were reported to be fighting
in Bosnia. The governments of Saudi Arabia and other countries felt

under increasing pressure from fundamentalist groups in their own

societies to provide more vigorous support for the Bosnians. By the

FOREIGN AFFAIRS – Summer 1993 [37]

Samuel P Huntington

end of 1992, Saudi Arabia had reportedly supplied substantial fund

ing for weapons and supplies for the Bosnians, which significantly
increased their military capabilities vis-?-vis the Serbs.

In the 1930s the Spanish Civil War provoked intervention from
countries that politically were fascist, communist and democratic. In

the 1990s the Yugoslav conflict is provoking intervention from coun

tries that are Muslim, Orthodox and Western Christian. The paral
lel has not gone unnoticed. “The war in Bosnia-Herzegovina has

become the emotional equivalent of the fight against fascism in the

Spanish Civil War,” one Saudi editor observed. “Those who died

there are regarded as martyrs who tried to save their fellow Muslims.”

Conflicts and violence will also occur between states and groups
within the same civilization. Such conflicts, however, are likely to be

less intense and less likely to expand than conflicts between civiliza
tions. Common membership in a civilization reduces the probability
of violence in situations where it might otherwise occur. In 1991 and

1992 many people were alarmed by the possibility of violent conflict

between Russia and Ukraine over territory, particularly Crimea, the

Black Sea fleet, nuclear weapons and economic issues. If civilization

is what counts, however, the likelihood of violence between

Ukrainians and Russians should be low. They are two Slavic, pri
marily Orthodox peoples who have had close relationships with each
other for centuries. As of early 1993, despite all the reasons for

conflict, the leaders of the two countries were effectively negotiating
and defusing the issues between the two countries. While there has

been serious fighting between Muslims and Christians elsewhere in

the former Soviet Union and much tension and some fighting
between Western and Orthodox Christians in the Baltic states, there

has been virtually no violence between Russians and Ukrainians.

Civilization rallying to date has been limited, but it has been grow
ing, and it clearly has the potential to spread much further. As the

conflicts in the Persian Gulf, the Caucasus and Bosnia continued, the

positions of nations and the cleavages between them increasingly
were along civilizational lines. Populist politicians, religious leaders

and the media have found it a potent means of arousing mass support
and of pressuring hesitant governments. In the coming years, the

[38] FOREIGN AFFAIRS- Volumey2No.3

The Clash of Civilizations?

local conflicts most likely to escalate into major wars will be those, as

in Bosnia and the Caucasus, along the fault lines between civiliza

tions. The next world war, if there is one, will be a war between civ

ilizations.

THE WEST VERSUS THE REST

The west is now at an extraordinary peak of power in relation

to other civilizations. Its superpower opponent has disappeared from

the map. Military conflict among Western states is unthinkable, and

Western military power is unrivaled. Apart from Japan, the West

faces no economic challenge. It dominates international political and

security institutions and with Japan international economic institu

tions. Global political and security issues are effectively settled by a

directorate of the United States, Britain and France, world econom

ic issues by a directorate of the United States, Germany and Japan,
all of which maintain extraordinarily close relations with each other

to the exclusion of lesser and largely non-Western countries.

Decisions made at the U.N. Security Council or in the International

Monetary Fund that reflect the interests of the West are presented to

the world as reflecting the desires of the world community. The very

phrase “the world community” has become the euphemistic collec

tive noun (replacing “the Free World”) to give global legitimacy to
actions reflecting the interests of the United States and other Western

powers.4 Through the imf and other international economic institu

tions, the West promotes its economic interests and imposes on other

nations the economic policies it thinks appropriate. In any poll of

non-Western peoples, the imf undoubtedly would win the support
of finance ministers and a few others, but get an overwhelmingly
unfavorable rating from just about everyone else, who would agree

4Almost invariably Western leaders claim they are acting on behalf of “the world com

munity.” One minor lapse occurred during the run-up to the Gulf War. In an interview
on “Good Morning America,” Dec. 21,1990, British Prime Minister John Major referred
to the actions “the West” was taking against Saddam Hussein. He quickly corrected him
self and subsequendy referred to “the world community.” He was, however, right when
he erred.

FOREIGN AFFAIRS – Summer 1993 [39]

Samuel P. Huntington

with Georgy Arbatovs characterization of imf officials as “neo

Bolsheviks who love expropriating other people s money, imposing
undemocratic and alien rules of economic and political conduct and

stifling economic freedom.”

Western domination of the U.N. Security Council and its deci

sions, tempered only by occasional abstention by China, produced
U.N. legitimation of the West s use of force to drive Iraq out of

Kuwait and its elimination of Iraq s sophisticated weapons and capac

The very phrase “world

community” has

become a euphemism to

give legitimacy to the

actions of the West.

ity to produce such weapons. It also produced
the quite unprecedented action by the United

States, Britain and France in getting the

Security Council to demand that Libya hand
over the Pan Am 103 bombing suspects and

then to impose sanctions when Libya refused.

After defeating the largest Arab army, the
West did not hesitate to throw its weight

around in the Arab world. The West in effect

is using international institutions, military power and economic

resources to run the world in ways that will maintain Western pre

dominance, protect Western interests and promote Western political
and economic values.

That at least is the way in which non-Westerners see the new

world, and there is a significant element of truth in their view.

Differences in power and struggles for military, economic and insti

tutional power are thus one source of conflict between the West and

other civilizations. Differences in culture, that is basic values and

beliefs, are a second source of conflict. V. S. Naipaul has argued that

Western civilization is the “universal civilization” that “fits all men.”

At a superficial level much of Western culture has indeed permeated
the rest of the world. At a more basic level, however, Western con

cepts differ fundamentally from those prevalent in other civilizations.

Western ideas of individualism, liberalism, constitutionalism, human

rights, equality, liberty, the rule of law, democracy, free markets, the

separation of church and state, often have little resonance in Islamic,

Confucian, Japanese, Hindu, Buddhist or Orthodox cultures.

Western efforts to propagate such ideas produce instead a reaction

[40] FOREIGN AFFAIRS Volumej2No.3

The Clash of Civilizations?

against “human rights imperialism” and a reaffirmation of indigenous

values, as can be seen in the support for religious fundamentalism by
the younger generation in non-Western cultures. The very notion

that there could be a “universal civilization” is a Western idea, direct

ly at odds with the particularism of most Asian societies and their

emphasis on what distinguishes one people from another. Indeed, the

author of a review of ioo comparative studies of values in different

societies concluded that “the values that are most important in the

West are least important worldwide.”5 In the political realm, of

course, these differences are most manifest in the efforts of the

United States and other Western powers to induce other peoples to

adopt Western ideas concerning democracy and human rights.
Modern democratic government originated in the West. When it has

developed in non-Western societies it has usually been the product of

Western colonialism or imposition.
The central axis of world politics in the future is likely to be, in

Kishore Mahbubani s phrase, the conflict between “the West and the

Rest” and the responses of non-Western civilizations to Western

power and values.6 Those responses generally take one or a combina

tion of three forms. At one extreme, non-Western states can, like

Burma and North Korea, attempt to pursue a course of isolation, to

insulate their societies from penetration or “corruption” by the West,

and, in effect, to opt out of participation in the Western-dominated

global community. The costs of this course, however, are high, and

few states have pursued it exclusively. A second alternative, the equiv
alent of “band-wagoning” in international relations theory, is to

attempt to join the West and accept its values and institutions. The

third alternative is to attempt to “balance” the West by developing
economic and military power and cooperating with other non

Western societies against the West, while preserving indigenous val

ues and institutions; in short, to modernize but not to Westernize.

5Hany C. Triandis, The New York Times, Dec. 25,1990, p. 41, and “Cross-Cultural

Studies of Individualism and Collectivism,” Nebraska Symposium on Motivation, vol.

37> ?989, PP- 41-133
6Kishore Mahbubani, “The West and the Rest,” The National Interest, Summer 1992,

PP- 3-*3

FOREIGN AFFAIRS – Summer 1993 [41]

Samuel P. Huntington

THE TORN COUNTRIES

In the future, as people differentiate themselves by civilization,
countries with large numbers of peoples of different civilizations,
such as the Soviet Union and Yugoslavia, are candidates for dismem

berment. Some other countries have a fair degree of cultural homo

geneity but are divided over whether their society belongs to one

civilization or another. These are torn countries. Their leaders typi

cally wish to pursue a bandwagoning strategy and to make their coun

tries members of the West, but the history, culture and traditions of

their countries are non-Western. The most obvious and prototypical
torn country is Turkey. The late twentieth-century leaders of Turkey
have followed in the Attat?rk tradition and defined Turkey as a mod

ern, secular, Western nation state. They allied Turkey with the West

in nato and in the Gulf War; they applied for membership in the

European Community. At the same time, however, elements in

Turkish society have supported an Islamic revival and have argued
that Turkey is basically a Middle Eastern Muslim society. In addi

tion, while the elite of Turkey has defined Turkey as a Western soci

ety, the elite of the West refuses to accept Turkey as such. Turkey will

not become a member of the European Community, and the real rea

son, as President Ozal said, “is that we are Muslim and they are

Christian and they dont say that.” Having rejected Mecca, and then

being rejected by Brussels, where does Turkey look? Tashkent may be

the answer. The end of the Soviet Union gives Turkey the opportu

nity to become the leader of a revived Turkic civilization involving
seven countries from the borders of Greece to those of China.

Encouraged by the West, Turkey is making strenuous efforts to carve

out this new identity for itself.

During the past decade Mexico has assumed a position somewhat

similar to that of Turkey. Just as Turkey abandoned its historic oppo
sition to Europe and attempted to join Europe, Mexico has stopped

defining itself by its opposition to the United States and is instead

attempting to imitate the United States and to join it in the North
American Free Trade Area. Mexican leaders are engaged in the great

task of redefining Mexican identity and have introduced fiindamen

[42] FOREIGN AFFAIRS Volume72N0.3

The Clash of Civilizations?

tal economic reforms that eventually will lead to fundamental politi
cal change. In 1991 a top adviser to President Carlos Salinas de

Gortari described at length to me all the changes the Salinas govern
ment was making. When he finished, I remarked: “That’s most

impressive. It seems to me that basically you want to change Mexico

from a Latin American country into a North American country.” He

looked at me with surprise and exclaimed: “Exactly! That’s precisely
what we are trying to do, but of course we could never say so pub

licly.” As his remark indicates, in Mexico as in Turkey, significant ele

ments in society resist the redefinition of their country’s identity. In

Turkey, European-oriented leaders have to make gestures to Islam

(Ozal s pilgrimage to Mecca); so also Mexico’s North American-ori

ented leaders have to make gestures to those who hold Mexico to be

a Latin American country (Salinas’ Ibero-American Guadalajara
summit).

Historically Turkey has been the most profoundly

torn country.

For the United States, Mexico is the most immediate torn country.

Globally the most important torn country is Russia. The question of

whether Russia is part of the West or the leader of a distinct Slavic

Orthodox civilization has been a recurring one in Russian history.
That issue was obscured by the communist victory in Russia, which

imported a Western ideology, adapted it to Russian conditions and

then challenged the West in the name of that ideology. The domi
nance of communism shut off the historic debate over

Westernization versus Russification. With communism discredited

Russians once again face that question.
President Yeltsin is adopting Western principles and goals and

seeking to make Russia a “normal” country and a part of the West.

Yet both the Russian elite and the Russian public are divided on this
issue. Among the more moderate dissenters, Sergei Stankevich

argues that Russia should reject the “Atlanticist” course, which would

lead it “to become European, to become a part of the world economy
in rapid and organized fashion, to become the eighth member of the

Seven, and to put particular emphasis on Germany and the United

States as the two dominant members of the Atlantic alliance.” While

also rejecting an exclusively Eurasian policy, Stankevich nonetheless

FOREIGN AFFAIRS – Summer 1993 [43]

Samuel P Huntington

argues that Russia should give priority to the protection of Russians

in other countries, emphasize its Turkic and Muslim connections,
and promote “an appreciable redistribution of our resources, our

options, our ties, and our interests in favor of Asia, of the eastern

direction.” People of this persuasion criticize Yeltsin for subordinat

ing Russia’s interests to those of the West, for reducing Russian mil

itary strength, for failing to support traditional friends such as Serbia,
and for pushing economic and political reform in ways injurious to

the Russian people. Indicative of this trend is the new popularity of

the ideas of Petr Savitsky, who in the 1920s argued that Russia was a

unique Eurasian civilization.7 More extreme dissidents voice much

more blatantly nationalist, anti-Western and anti-Semitic views, and

urge Russia to redevelop its military strength and to establish closer

ties with China and Muslim countries. The people of Russia are as

divided as the elite. An opinion survey in European Russia in the

spring of 1992 revealed that 40 percent of the public had positive atti

tudes toward the West and 36 percent had negative attitudes. As it

has been for much of its history, Russia in the early 1990s is truly a

torn country.

To redefine its civilization identity, a torn country must meet three

requirements. First, its political and economic elite has to be gener

ally supportive of and enthusiastic about this move. Second, its pub
lic has to be willing to acquiesce in the redefinition. Third, the

dominant groups in the recipient civilization have to be willing to

embrace the convert. All three requirements in large part exist with

respect to Mexico. The first two in large part exist with respect to

Turkey. It is not clear that any of them exist with respect to Russia’s

joining the West. The conflict between liberal democracy and

Marxism-Leninism was between ideologies which, despite their

major differences, ostensibly shared ultimate goals of freedom, equal

ity and prosperity. A traditional, authoritarian, nationalist Russia

could have quite different goals. A Western democrat could carry on

an intellectual debate with a Soviet Marxist. It would be virtually

7Sergei Stankevich, “Russia in Search of Itself,” The National Interest, Summer 1992,

pp. 47-51; Daniel Schneider, “A Russian Movement Rejects Western Tilt,” Christian
Science Monitor, Feb. 5,1993, pp. 5-7.

[44] FOREIGN AFFAIRS –
Volume72N0.3

The Clash of Civilizations?

impossible for him to do that with a Russian traditionalist. If, as the

Russians stop behaving like Marxists, they reject liberal democracy
and begin behaving like Russians but not like Westerners, the rela

tions between Russia and the West could again become distant and

conflictual.8

THE CONFUCIAN-ISLAMIC CONNECTION

The obstacles to non-Western countries joining the West vary

considerably. They are least for Latin American and East European
countries. They are greater for the Orthodox countries of the former

Soviet Union. They are still greater for Muslim, Confucian, Hindu

and Buddhist societies. Japan has established a unique position for

itself as an associate member of the West: it is in the West in some

respects but clearly not of the West in important dimensions. Those

countries that for reason of culture and power do not wish to, or can

not, join the West compete with the West by developing their own

economic, military and political power. They do this by promoting
their internal development and by cooperating with other non

Western countries. The most prominent form of this cooperation is

the Confucian-Islamic connection that has emerged to challenge
Western interests,

values and power.

Almost without exception, Western countries are reducing their

military power; under Yeltsin’s leadership so also is Russia. China,
North Korea and several Middle Eastern states, however, are

significantly expanding their military capabilities. They are doing
this by the import of arms from Western and non-Western sources

and by the development of indigenous arms industries. One result is

the emergence of what Charles Krauthammer has called “Weapon

8Owen Harries has pointed out that Australia is trying (unwisely in his view) to
become a torn country in reverse. Although it has been a full member not only of the

West but also of the ABC A military and intelligence core of the West, its current lead
ers are in effect proposing that it defect from the West, redefine itself as an Asian coun

try and cultivate close ties with its neighbors. Australia’s future, they argue, is with the

dynamic economies of East Asia. But, as I have suggested, close economic cooperation

normally requires
a common cultural base. In addition, none of the three conditions nec

essary for a torn country to join another civilization is likely to exist in Australia’s case.

FOREIGN AFFAIRS Summer 1993 [45]

Samuel P. Huntington

States,” and the Weapon States are not Western states. Another

result is the redefinition of arms control, which is a Western concept
and a Western goal. During the Cold War the primary purpose of

arms control was to establish a stable military balance between the

United States and its allies and the Soviet Union and its allies. In the

post-Cold War world the primary objective of arms control is to pre
vent the development by non-Western societies of military capabili
ties that could threaten Western interests. The West attempts to do

this through international agreements, economic pressure and con

trols on the transfer of arms and weapons technologies.
The conflict between the West and the Confucian-Islamic states

focuses largely, although not exclusively, on nuclear, chemical and

biological weapons, ballistic missiles and other sophisticated means

for delivering them, and the guidance, intelligence and other elec

tronic capabilities for achieving that goal. The West promotes non

proliferation as a universal norm and nonproliferation treaties and

inspections as means of realizing that norm. It

also threatens a variety of sanctions against
those who promote the spread of sophisticated

weapons and proposes some benefits for those

who do not. The attention of the West focus

es, naturally, on nations that are actually or

potentially hostile to the West.

The non-Western nations, on the other

hand, assert their right to acquire and to deploy
whatever weapons they think necessary for their security. They also

have absorbed, to the full, the truth of the response of the Indian

defense minister when asked what lesson he learned from the Gulf

War: “Don’t fight the United States unless you have nuclear

weapons.” Nuclear weapons, chemical weapons and missiles are

viewed, probably erroneously, as the potential equalizer of superior
Western conventional power. China, of course, already has nuclear

weapons; Pakistan and India have the capability to deploy them.

North Korea, Iran, Iraq, Libya and Algeria appear to be attempting
to acquire them. A top Iranian official has declared that all Muslim

states should acquire nuclear weapons, and in 1988 the president of

[46] FOREIGN AFFAIRS Volume72No.3

A Confucian-Islamic

connection has

emerged to challenge
Western interests,

values and power.

The Clash of Civilizations?

Iran reportedly issued a directive calling for development of “offen

sive and defensive chemical, biological and radiological weapons.”

Centrally important to the development of counter-West military

capabilities is the sustained expansion of Chinas military power and

its means to create military power. Buoyed by spectacular economic

development, China is rapidly increasing its military spending and

vigorously moving forward with the modernization of its armed

forces. It is purchasing weapons from the former Soviet states; it is

developing long-range missiles; in 1992 it tested a one-megaton
nuclear device. It is developing power-projection capabilities, acquir

ing aerial refueling technology, and trying to purchase an aircraft car

rier. Its military buildup and assertion of sovereignty over the South

China Sea are provoking a multilateral regional arms race in East

Asia. China is also a major exporter of arms and weapons technolo

gy. It has exported materials to Libya and Iraq that could be used to

manufacture nuclear weapons and nerve gas. It has helped Algeria
build a reactor suitable for nuclear weapons research and production.
China has sold to Iran nuclear technology that American officials

believe could only be used to create weapons and apparently has

shipped components of 300-mile-range missiles to Pakistan. North

Korea has had a nuclear weapons program under way for some while

and has sold advanced missiles and missile technology to Syria and

Iran. The flow of weapons and weapons technology is generally from

East Asia to the Middle East. There is, however, some movement in

the reverse direction; China has received Stinger missiles from

Pakistan.

A Confucian-Islamic military connection has thus come into

being, designed to promote acquisition by its members of the

weapons and weapons technologies needed to counter the military
power of the West. It may or may not last. At present, however, it is,
as Dave McCurdy has said, “a renegades’ mutual support pact, run by
the proliferators and their backers.” A new form of arms competition
is thus occurring between Islamic-Confucian states and the West. In

an old-fashioned arms race, each side developed its own arms to bal
ance or to achieve superiority against the other side. In this new form

of arms competition, one side is developing its arms and the other

FOREIGN AFFAIRS – Summer 1993 [47]

Samuel P Huntington

side is attempting not to balance but to limit and prevent that arms

build-up while at the same time reducing its own military capabili
ties.

IMPLICATIONS FOR THE WEST

This article does not argue that civilization identities will

replace all other identities, that nation states will disappear, that each

civilization will become a single coherent political entity, that groups
within a civilization will not conflict with and even fight each other.

This paper does set forth the hypotheses that differences between civ

ilizations are real and important; civilization-consciousness is

increasing; conflict between civilizations will supplant ideological
and other forms of conflict as the dominant global form of conflict;
international relations, historically a game played out within Western

civilization, will increasingly be de-Westernized and become a game
in which non-Western civilizations are actors and not simply objects;
successful political, security and economic international institutions

are more likely to develop within civilizations than across civiliza

tions; conflicts between groups in different civilizations will be more

frequent, more sustained and more violent than conflicts between

groups in the same civilization; violent conflicts between groups in

different civilizations are the most likely and most dangerous source

of escalation that could lead to global wars; the paramount axis of

world politics will be the relations between “the West and the Rest”;
the elites in some torn non-Western countries will try to make their

countries part of the West, but in most cases face major obstacles to

accomplishing this; a central focus of conflict for the immediate

future will be between the West and several Islamic-Confucian states.

This is not to advocate the desirability of conflicts between civi

lizations. It is to set forth descriptive hypotheses as to what the future

maybe like. If these are plausible hypotheses, however, it is necessary
to consider their implications for Western policy. These implications
should be divided between short-term advantage and long-term
accommodation. In the short term it is clearly in the interest of the

West to promote greater cooperation and unity within its own civi

us] FOREIGN AFFAIRS- Volume72No.3

The Clash of Civilizations?

lization, particularly between its European and North American

components; to incorporate into the West societies in Eastern

Europe and Latin America whose cultures are close to those of the

West; to promote and maintain cooperative relations with Russia and

Japan; to prevent escalation of local inter-civilization conflicts into

major inter-civilization wars; to limit the expansion of the military

strength of Confucian and Islamic states; to moderate the reduction

of Western military capabilities and maintain military superiority in

East and Southwest Asia; to exploit differences and conflicts among
Confucian and Islamic states; to support in other civilizations groups

sympathetic to Western values and interests; to strengthen interna

tional institutions that reflect and legitimate Western interests and

values and to promote the involvement of non-Western states in

those institutions.

In the longer term other measures would be called for. Western

civilization is both Western and modern. Non-Western civilizations

have attempted to become modern without becoming Western. To

date only Japan has fully succeeded in this quest. Non-Western civi

lizations will continue to attempt to acquire the wealth, technology,
skills, machines and weapons that are part of being modern. They

will also attempt to reconcile this modernity with their traditional

culture and values. Their economic and military strength relative to

the West will increase. Hence the West will increasingly have to

accommodate these non-Western modern civilizations whose power

approaches that of the West but whose values and interests differ

significantly from those of the West. This will require the West to
maintain the economic and military power necessary to protect its

interests in relation to these civilizations. It will also, however, require
the West to develop a more profound understanding of the basic reli

gious and philosophical assumptions underlying other civilizations

and the ways in which people in those civilizations see their interests.
It will require an effort to identify elements of commonality between

Western and other civilizations. For the relevant future, there will be
no universal civilization, but instead a world of different civilizations,
each of which will have to learn to coexist with the others. ?

FOREIGN AFFAIRS Summer 1993 [49]

Article Contents

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p. 29

p. 30

p. 31

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Issue Table of Contents

Foreign Affairs, Vol. 72, No. 3 (Summer, 1993), pp. I-X, 1-152, 1-14, 153-222

Front Matter

Editor’s Note: A New Look for Foreign Affairs [p. IX-IX]

Comments

A Common Discontent: Revisiting Britain and Germany [pp. 2-6]

Lessons of Chernobyl: The Cultural Causes of the Meltdown [pp. 7-11]

The Post-Cold War Press: A New World Needs a New Journalism [pp. 12-16]

Reining in the U.N.: Mistaking the Instrument for the Actor [pp. 17-20]

Essays

The Clash of Civilizations? [pp. 22-49]

Debate

The Case for a Ukrainian Nuclear Deterrent [pp. 50-66]

The Case against a Ukrainian Nuclear Deterrent [pp. 67-80]

A Profile of Slobodan Milošević [pp. 81-96]

Invitation to War [pp. 97-109]

A Brief History of Ethnic Cleansing [pp. 110-121]

The Case for War Crimes Trials in Yugoslavia [pp. 122-135]

The Next Great Arms Race [pp. 136-152]

The Plutonium Genie [pp. 153-165]

Superpower without a Sword [pp. 166-180]

Reviews

Review Essay

Review: Clinton’s Emerging Trade Policy: Act One, Scene One [pp. 182-189]

Review: The Stain of Vietnam: Robert McNamara, Redemption Denied [pp. 190-193]

Recent Books on International Relations

Political and Legal

Review: untitled [p. 194-194]

Review: untitled [pp. 194-195]

Review: untitled [p. 195-195]

Review: untitled [p. 196-196]

Military, Scientific and Technological

Review: untitled [p. 196-196]

Review: untitled [pp. 196-197]

Review: untitled [p. 197-197]

Review: untitled [pp. 197-198]

Review: untitled [p. 198-198]

The United States

Review: untitled [p. 199-199]

Review: untitled [p. 200-200]

Review: untitled [p. 201-201]

Review: untitled [pp. 201-202]

Western Europe

Review: untitled [p. 202-202]

Review: untitled [pp. 202-203]

Review: untitled [p. 203-203]

Western Hemisphere

Review: untitled [p. 204-204]

Review: untitled [pp. 204-205]

Review: untitled [p. 205-205]

Eastern Europe and Former Soviet Republics

Review: untitled [p. 205-205]

Review: untitled [p. 206-206]

Review: untitled [pp. 206-207]

Review: untitled [p. 207-207]

Review: untitled [pp. 207-208]

Middle East

Review: untitled [p. 208-208]

Review: untitled [p. 209-209]

Review: untitled [p. 210-210]

Review: untitled [p. 211-211]

Review: untitled [p. 212-212]

Review: untitled [pp. 212-213]

Asia and the Pacific

Review: untitled [p. 213-213]

Review: untitled [pp. 213-214]

Review: untitled [p. 214-214]

Review: untitled [pp. 214-215]

Review: untitled [p. 215-215]

Africa

Review: untitled [p. 215-215]

Review: untitled [p. 216-216]

Letters to the Editor

Fundamentalism’s Modern Origins [pp. 217-218]

Self-Fulfilling Prophecy [p. 218-218]

Democracy in Cuba [pp. 219-220]

Beyond the Balkans [pp. 220-221]

The Russian Work Force [pp. 221-222]

Back Matter

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