The initiative against mass immigration: Is it really just about immigration policy and economic success models?

A lot is at stake with the upcoming initiative against mass immigration. With the termination of the agreement on the free movement of persons with the EU (one of four fundamental freedoms), all the bilateral agreements between Switzerland and the EU might begin to totter. Economic circles are fighting the initiative at the forefront by stressing the importance of the free movement of persons in order to meet the demand for qualified labor. In this view, a change of course could only happen at the expense of the economic success model Switzerland.

Economic circles tend to argue similarly with all initiatives that could have negative effects on them. In their perspective, this is understandable in principle.

Dismantling of a Swiss Holy Cow

In my last blog article, I took a look at the deterioration of the brand “Swiss” and noted that this was in part due to the negative publicity that Switzerland has been getting abroad concerning its banking secrecy and opportunistic taxation schemes. While Swiss banking secrecy may now soon be something for the history books, it is still interesting to note that the Swiss banks and taxation regimes originally had their roots in virtues, and not vices. Whereas most of Europe featured unstable governments and legal frameworks, engaged in endless wars and built their “social contract” on the premise of mistrusting its citizens, Switzerland provided stability in both governance and law, was largely peaceful and had a basic “social contract” that espoused trust before mistrust (this being in part a consequence of its direct democratic tradition and a source of the extensive privacy rights as pertaining to financial matters). This resulted in the flourishing of the Swiss banking sector as it attracted wave after wave of foreign depositors, fleeing instability, insecurity, and states more interested in the gleaning of the wealth of its citizens than in the provision of needed services. While Switzerland – again, beginning with a virtue - for centuries already practiced a strongly decentralized (federalized) “good governance” regime which paired up freedom with accountability by allowing every commune and canton to freely levy their own taxes and invest these resources as best they saw fit, thus also creating a healthy competition to keep a sound budget and make wise investments, much of Europe experienced just the opposite: top-down directives with little to no citizen participation and consequently freedom and accountability.

With time, however, bit by tiny bit, these virtues became corrupted. Banking secrecy became no longer so much a reflection of privacy and trust between citizens and their state, but rather was a convenient pretense for the easy garnering of money from abroad. On the haughty altar of “discretion”, Swiss bankers would willingly bunker the millions and billions of dictators, tyrants or simply the clever evaders of taxation in their home countries. Much the same happened with the taxation regimes in Switzerland. Cantons and communes realized that much money could be made by adroitly positioning themselves in a zero-sum race to the bottom and attracting wealthy individuals – for whom special taxation schemes would be negotiated – and global companies in search for a more profitable tax haven from which to conduct their business. This led to the proliferation of countless “mail-box” companies which had little or no real connection to Switzerland.

Since the recent financial crisis and its accompanying scandals, however, the EU and the USA have increasingly started to put pressure on Switzerland (as also on other similar finance and tax havens, although often conveniently omitting some of their own) to change its “bad habits”. While a minority of Swiss citizens has always openly criticized its banking and taxation practices, and probably a healthy majority in private moments admitted to the status quo being ethically questionable, the matter was nevertheless nothing less than a “holy cow” amongst the Swiss economic and political establishment. So strongly was this self-righteousness engrained, that when a professor at the renowned Swiss Business School of St. Gallen was openly critical of this situation in an interview with a German magazine a couple of years ago, some voices (granted isolated, but nevertheless remarkable for a country with a rightfully proud democratic tradition with guaranteed free-speech) branded him as a national traitor and demanded his immediate demission!

It is a well known and studied phenomenon that countries that are blessed with ample natural resources such as oil, are often cursed with having their economies develop asymmetrically with an over-dependence on just these natural resources. As with abundant natural resources, the incentives that the Swiss legal system and historic precedents provided also resulted in relatively “easy money” to be made in the finance sector. Some of the nefarious side-effects of this in turn resulted in what may well be deemed an internal resource and brain-drain, as investors invested in the areas of greatest returns for the least risk (and for a long time, the Swiss private banking sector was a very low-risk investment, as success was not so much based on any unique, rapidly changing know-how but a legal framework which virtually ensured its competitive advantage) and many of the brightest labor market entrants turned their back to work in other sectors such as for example the risky high-tech area or lower-margin machine industry, in favor of the far more stable and lucrative financial industry.

While Switzerland still has a highly sophisticated, diversified and competitive economy, always jousting for the top spot in global assessments, there is a real risk and an increasingly high price that Switzerland has to pay for its extensive financial center. Apart from public bailouts (such as the UBS in 2008) and the internal resource and brain drain, the very fact that salaries paid in the financial sector are so high drives up concomitant costs such real-estate, making it increasingly difficult for, say, high-tech companies to get started in the country. Starting an export oriented business from scratch in Switzerland is simply prohibitively expensive, especially if the returns, as in many high-tech sectors, take years to materialize. Add to that the finance sector’s negative impact on the overall reputation on Switzerland, and you can well comprehend that the Swiss financial industry is increasingly unpopular also in Switzerland.

The tragedy of this entire matter is however that the age old Swiss social contract of trust between the state and its citizens may now have to be sacrificed in view of the financial center and taxation policies of decades past. The United States, long also a bastion of individual freedom and with a delicate awareness of privacy rights, has already sacrificed much of this on the altar of national security. The question thus remains one of just how much freedom are we willing to sacrifice for security, and how much privacy for fairness.

Manuel Dawson

Are Customer relations friendships?

Customers in a shop or guests in a restaurant usually very much appreciate it when the employees are friendly, understanding or even empathic. It contributes to the fulfillment of their desires and needs with full satisfaction. Therefore, customer focus rightly is an important requirement in customer relations – the customer as a human being should always be in the center.

However, the human relationship between the customer and the company is being abused more and more as a sales gimmick. At Starbucks, you’re the barista’s best friend; you belong to the IKEA family or the salesperson at the high end Ralph Lauren store trusts you with her very own preferences.

The staff in shops or restaurants is instructed to create a feeling of closeness through simulating a strong friendship. Customers get the feeling that you really like them. But in reality it is only about encouraging them to buy more. It’s not about the individual and understanding and considering his or her personality and needs, but about hard selling and sale success. So customer focus ultimately only serves the purely financial success of a company and doesn’t add to the perceived quality of life of a particular customer.

 However, in a humanistic perspective, human beings are considered as ends, not as means. Each human being is a unique person with specific interests and values. Already in the 1970s, Erich Fromm called for recognizing the “oneness” of people in a capitalist society, instead of considering them only in anonymous customer group categories in terms of “sameness”. Pretend friendships exploit our human peculiarities.

The employees of companies with such sales strategies are exposed to an emotional dilemma. They are asked and usually also trained to put their human abilities in the service of financial ratios. As a customer you also face a dilemma: How should you interpret the kindness of the salesperson? If it is authentic, you don’t want to reject it, but if it’s only manipulative, you can’t and don’t want to trust their advice.

 However, recent empirical 1) evidence confirms that the trustful treatment of people and their recognition is crucial to the perceived quality of life. I hope that in 2014 you will have the opportunity in your professional life to contribute to the quality of human life. 

 

1)      Anderson, C., Kraus, M. W., Galinsky, A. D., & Keltner, D. (2012). The Local-Ladder Effect: Social Status and Subjective Well-Being. Psychological Science, 23, 764-771.

On the Pope’s criticism of today’s economic thinking

Last week the Pope published his text “Evangelii Gaudium”, in which he is giving different inputs for reorienting the Catholic Church. Although I am not Catholic, I was interested in his statements about the challenges of today’s world and especially in his criticism of our current economy.

In quite a positive way, he recognizes the improvement the economic system brought to “people’s welfare in areas such as healthcare, education and communication”. Yet he blames this economy of “exclusion and inequality”. He thus asks critically, “how can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?” And he continues: “Today everything comes under the law of competition and the survival of the fittest, where the powerful feed upon the powerless.”

I was especially amazed by his criticism of issues that have also been discussed by the stakeholder theory for the past few years. One example is his critique of the free market. 

However, he makes no specific suggestions as to how extreme competitiveness could be limited. In contrast, the stakeholder theory proposes, for example, to focus more on the potential of cooperation among stakeholders, based on the resource based view of strategy, instead of pure competition: Through the cooperative pooling of resources, innovative solutions to issues, products and processes can be found, according to the stakeholder theory, which a single stakeholder who considers others only as competitors could not find. It would have been interesting to learn whether the Pope could in addition to this instrumental perspective on cooperation also offer a normative view, in his case based on the Catholic faith.

The same could be said about his criticism of the concept of human beings that prevails in economy. Certainly, many economists would agree with the Pope’s analysis that “the denial of the primacy of the human person” predominating classic economic theory is questionable or wrong. A growing number of publications are increasingly critical of the basic concepts of economic theory, in particular of the hypothesis of human self-interest. In this sense, the Pope states, “the socioeconomic system is unjust at its root.”

This criticism also calls for the question of which normative concept could form an adequate basis for a more realistic image of human nature. The Pope refers only summarily to the need for ethics: “Ethics – a non-ideological ethics – could make it possible to bring about balance and more human social order.” One can assume that he refers to Catholic social ethics. One can add here that there are also ethical approaches not tied to a specific denomination or religion, which are therefore also acceptable to non-Catholics.

Our reflections on stakeholder theory refer to a humanistic approach based on Kant. This approach considers human beings always as ends, not means, also in economic interactions. In this view, the different values, norms, interests and capabilities have to always be considered and taken into account in economic and business activities. Such a general humanistic approach not only addresses believers of a particular denomination, but its non-denominational claim makes it a fundamental norm also for economic activity.

Edwin Rühli

A viral spot reconsidered: What does language tell us about a business’ acceptance?

A viral spot (that has however not yet taken off) advocating sustainable investment as being the investment strategy of the present and future caught my attention yesterday. The video clip, initiated by an investment management group headquartered not far away from our institute in Zurich, both thrilled and puzzled me at the same time.

The clip busts several myths regarding sustainable investments in order to propagate the initiator’s investment strategy. The underlying proposition suggests that you can earn more money when your investment manager assesses the stocks’ potential of your portfolio in the most complete manner available. The approach applied by the initiator enlarges the financial analysis of firm’s performance by adding an analysis of the social and ecological performances of the firm. Apart from its rather instrumentalist application, the concept behind it—called the triple bottom line—excites me. It demands of firms to take into account their responsibilities to all stakeholders (e.g. employees or customers), not only stockholders. The result suggested in the clip may seem paradoxical: The less a firm tries to solely meet the demands of its stockholders, the merrier is the stock’s potential in the future.

However, the puzzling aspect of the clip unfolded just as I tried to connect it with my (current) research interest: the diffusion of business practices. The question arises as to how widespread the above business is. As I am eager to learn more about rhetoric theories that highlight the potency of language in shaping organizational life and behaviour, the language used in the clip awakened my interest.

From a rhetorical perspective, the way a particular practice is accompanied by language tells you a lot about its state of acceptance. The relationship between the rhetoric used by people and their social practice is theorized about in many complicated ways. A catchy—and thus highly persuading, as rhetorical theorists would say—framework was, however, introduced by the management scholar Sandy Green. As evidence of a practice’s acceptance, he proposes the lack of a need to justify it, for example in legitimating it by rationalizing the matter of subject. And what is the video clip actually doing? It’s not a typical commercial trying to persuade the audience that the initiator is better at doing its business than its counterparts. In the core, however, this clip is purely a justification of the initiator’s business practice at all. Even though it repeatedly refers to the triple bottom line as being common sense, this clip can be taken as a testimony of the rather weak penetration of this business practice even without knowing much about this business (as I definitely do not).

My puzzling to me is, therefore, the weak state of diffusion of business practice that corresponds to my very own idea of how business ought to work. However, the theory of rhetoric gives us a master plan about institutional change. Among the factors impacting whether a business practice is adopted or not, the most powerful ones are not those seeming the most efficient or the most effective, but rather the ones that make sense to the people. From a rhetorical viewpoint, you just have to talk about it long enough until a critical mass of people is persuaded. 

Christian Stutz

Critical thinking

I recently taught a class in scientific research. One of the exercises included giving constructive feedback, pointing out that talking about strengths instead of just weaknesses can help people improve as well as negative points can help to make progress. Even though I had heard and spoken these rules a dozen times, it hit me, that I was really bad in seeing the good elements, especially in research. I am not generally a negative person, so I thought about where this was coming from. I then realized that in my entire studies in psychology I hardly ever learned to see the positive aspects. The goal was to learn to think critically. The usual task was to read a paper and then list all the shortcomings. The fact that someone was actually able to publish this writing, giving it a high quality stamp and that it probably was important for the progression of knowledge in that area somehow got lost in all the criticism. Further the point was to find a little gap that could be filled with new research, based on the shortcomings of others. My perception was that it was about finding mistakes and not doing them ourselves. Whenever I tried writing something myself, I got stuck immediately, because I couldn’t finish a thought before the alarm bells of inner criticism went off.

In business strategy class I can remember learning to deconstruct a market situation and look at shortcomings or gaps and then use this gap as a competitive advantage. Deconstructing some topic into its parts with analytical thinking is very important and of course it has to be thought in schools and universities. But creative thinking, “constructing thinking” was not trained. If we want to solve long lasting societal, environmental and business problems, it is not enough to deconstruct the situation and look at gaps. Analytical thinking can help us find the problems, but creative thinking can help us solve them. So we need creative thinking for innovative solutions. We need to see the positive aspects of what has been done, honor those and build on them. This does not only address education, it also addresses business. If we can train and attain this creative and positive mindset, we can also start to see more win-win situations in daily business life.

Watch Ken Robinson talk on a facet of this topic: (http://www.ted.com/talks/ken_robinson_says_schools_kill_creativity.html)

Vanessa McSorley

Video Games and Society: A Short Reflection

By generating more than $800 million in the first day of sales, the recently released video game Grand Theft Auto V (GTA V) is highly successful commercially. This comes as no surprise as the game series’ predecessors also generated high revenues and GTA V was extensively marketed through media campaigns.

 

People playing GTA V have to fulfill different missions in the fictional City of Los Santos. Thereby, these missions are most often only accomplishable through violent actions like stealing cars, shooting police officers or getting information by torturing other people. The overwhelming graphics and the huge open and interactive world of Los Santos add to the video game’s realistic environment.

Since a couple of years, I fulfill my duty as a military psychologist assisting military personnel (mainly recruits) in need of psychological counseling. In this context, it occurs to me that video games play an increasing part in the life of twenty-year old males and are co-occurring with social or psychological problems. During conversations, the recruits frequently tell me of spending three or more hours a day on video gaming. A small proportion also shows addictive behavior and the corresponding withdrawal symptoms related to excessive video gaming.  At the same time, most of these recruits report reduced participation in real world social activities (e.g., being members of a clubs, political participation). Taking into account the very selective population my observations are based on, and the risk of over-interpretation, I would like to reflect shortly on the consequences of video gaming for society.

Starting with the consequences for real world contact due to an extensive consumption of video games, people may have reduced social experiences. Research related to social psychology consistently showed that social contact is a powerful mechanism to reduce stereotypes, prejudice and discrimination among different individuals, groups and organizations in society. Therefore, diminished social contact and a societal tendency for individualism and self-realization may are related to video games confronting people with increasingly realistic open world scenarios. Additionally, there still exists an unsolved debate about the causes and effects of violent contents in video games.

However, there are also positive aspects of video games. People who experience difficulties in real world interactions can be offered a less stressful and demanding online alternative. Many video games are designed exactly to address these integrative aspects of online interactions, as the game’s challenges can only be solved cooperatively. Further, realistic video games combined with integrative online features are the result of an interconnected and globalized society. Hence, video gaming may develop skills and capabilities required for being successful in such an environment.

I am surprised by how silent research in various disciplines is when it comes to the analysis of societal consequences related to video gaming. In this context, a public discourse among the various stakeholders (e.g., families, clubs, organizations, game developers, employers, researchers) and their responsibilities related to video games is needed.

Fortress or kindhearted Europe?

The Italian Island Lampedusa is again in the news around the world. Once again it is because of human tragedies that took place before its coast: several hundreds of African refugees died during the attempt to cross the Mediterranean Sea in vessels. As reported in the press, between 1992 and 2012 17’000 humans already died in such attempts.

In Europe in all sorts of media there are brisk discussions, comments and reports about the topic. Two basic view points and recommendations for the future dominate in discussions: one says that to prevent such tragedies in the future Europe needs to provide the refugees more support for their plans. An example is that potential refugees should have the possibility to make a request for asylum directly in Western embassies in African states. Proponents of this view moreover think that development aid is an important part to solve the issue. They denounce also exogenous reasons for poverty like the narrowly self-interested and exploitative activities of Western (natural resources) corporations in Africa. The second fraction wants to prevent such tragedies, but by taking measures that are aimed to stop influxes of refugees over the Mediterranean Sea. This shall be achieved, for example through strengthening boarder controls on the sea massively and through establishing refugee camps already in Northern Africa. Proponents of this view primarily condemn endogenous reasons for poverty like highly corrupt and kleptocratic elites in the African states.

Overall, proponents of both views present certain constructive suggestions for solving the issue. But one main problem is that it seems like the proponents of both sides do not listen to each other. If they would do so they probably would come to the conclusion that a combination of their suggestions would be the way to come to an effective solution. The suggestions are generally not mutually exclusive (e.g. stronger boarder controls and the possibility to make a request for asylum in embassies directly). In the existing consequent separation of the view-points we possibly also can recognize that one part of Europeans act consistent to one view while the other part does so with the other. The result of quasi two parallel policies are not only uncoordinated, often there are diametrically opposed actions (e.g. Western aid trying to provide access to clean water vs. a Western corporation nearby looting resources and thereby discharging polluted water in the river).

Coordinated and coherent actions among proponents of both views and thus of different stakeholders of the issue would arguably be expedient. It would also prevent from overturning in non-expedient actions from one fraction which the other is likely to see as too extreme. Without more coordination the status quo will be kept.

A second problem is that the root causes of the issue are not really discussed. But European stakeholders should focus more on these root causes. There are, for example potentials to connect activities of corporations looting natural resources and development aid organizations. Although it is at a first glance not easy to connect such different stakeholders it is a necessity: cooperation on root causes would tame both of them and thus lead to less non-reflected or only one-side-reflected activities. In this way real opportunities could be created in Africa.

In sum, cooperation between stakeholders concerning root causes is essential. In a presentation from early 2010 at the University of Zurich an invited Historian of the University of Oxford mentioned that the European activities in North Africa were not considering the full context there. Important realities were ignored and hence a forward-looking engagement was not possible. A year later the Arab spring took place. This brought hope in the beginning, but lastly not positive perspectives for the future of young people. Instead it brought new problems and new refugees.

 

Claude Meier