Integration of Western management and Chinese philosophy in the current economic crisis

Citation

Li-Hua, R. (2009), "Integration of Western management and Chinese philosophy in the current economic crisis", Journal of Technology Management in China, Vol. 4 No. 2. https://doi.org/10.1108/jtmc.2009.30204baa.001

Integration of Western management and Chinese philosophy in the current economic crisis

Article Type: Editorial From: Journal of Technology Management in China, Volume 4, Issue 2

Sharing wisdom between West and East

By offering this title, I am still struggling on what key message that I should deliver. However, I would like to share a personal story with you before I discuss the economic crisis. I arrived at Newcastle from China 12 years ago. One day, I was guided by a librarian to visit one place, actually the place where Robert Morrison lived. He was a Scottish missionary and the first Christian Protestant missionary in China. He was born in 1782 in Morpeth, Northumberland. He moved to Newcastle when he was 17-year-old. He travelled to China as a young man, but he did one big thing that after 25 years of work he translated the whole Bible into Chinese language and baptized ten Chinese believers. He died in 1834 in Guangzhou and was buried there with a big monument. In addition, he concentrated on literature distribution among members of the merchant class (today MBA class) and laid the foundation for more educational and medical work that would significantly impact the culture and history of China. When he was asked shortly after his arrival in China if he expected to have any spiritual impact on the Chinese, he answered, “No sir, but I expect God will!” However, he built the cultural bridge between China and the West.

In the library of Judge Business School, Cambridge University, I was reading The Art of War, military strategy by Sun Tzu some 2,500 years ago. This book, which details a complete Chinese philosophy on how to defeat one’s rival. One of his major principles is to Win All Without Fighting. There is evidence that The Art of War first made its appearance in 1772 in the west, which was earlier than the time when Robert Morrison went China, so a French translation of The Art of War was available to Napoleon given both his interest in all things military and his culture’s interest in Chinese literature.

In addition, using Sun Tzu’s philosophy in business is nothing new. There is considerable evidence that Sun Tzu’s military strategy has been making significant contributions to the thinking of contemporary business leaders. Harvard Professor Michael Porter quoted from Sun Tzu when he lectured to the National Football League owners. The lessons of Sun Tzu are no doubt thousands of years old and it is the test of time that makes them valuable to the political leaders and business leaders today.

Very recently, Chinese Premier, Wen Jiabao revealed when he was interviewed by The Financial Times (2009) that while he travels he carries The Theory of Moral Sentiments by Adam Smith, an eighteenth century Scottish economist. He quoted the two “invisible hands”, which refers to the “Morality” and the “marketing force” from Smith’s other book The Wealth of Nations.

I believe that these are classical cases of knowledge sharing between East and West.

The two “big players”

Some studies on the current economic crisis show that in the last 30 years, the political and economic consensus in the West has been promoting the New Right and economic liberalism. The watchwords for this are privatization, liberalisation and deregulation. The policy of “laissez faire” was widely adopted and the slogan essentially was “public bad and private good”. The main principles of the New Right consensus were to minimize the state activities and maximize private sector activities, and deregulate the market at large, which led the growth of “irrational” sphere and the “rational” sphere become weaker to some extent. Banking giants, such as Fannie Mae and Freddie Mac, in Wall Street collapsed. The then US Treasury Secretary, Hank Paulson expressed that the intervention was needed as they were running a “flawed business model” that should never have been allowed. Consequently, following America, several countries in the West announced the economic recession resulting from the “credit crunch”.

While in China, in the last three decades, Mao’s instruction to “dig tunnels deep” has been replaced by Deng’s reassurance that “it does not matter if the Cat is black or white as long as it catches mice”. The pragmatic approach of no argument of being socialism or capitalism has been implemented. The market economy with Chinese characteristics has proved remarkably successful. The features of the economy are known as unwavering government commitment to economic development with integration between Western technology and Chinese soft capacity. The strong political motivation increases the credibility of the government and the confidence of international investors as well. However, to some extent, the Chinese economy is exported oriented economy as a consequence of the establishment of Sino-foreign joint ventures and wholly foreign owned firms. The decreasing of the purchasing/import power in the West has led to the closing down of hundreds of factories, sending 20 million “immigrants” to their land. For solution, Chinese government has decided to have an injection of RMB 4 trillion stimulus followed by additional target measures to support the automobile and steel industry. However, for the sustainability of the Chinese economy, China needs an appropriate and effective technology and innovation strategy which enhances its competitiveness.

The current crisis has hit everywhere in the world. To the ideal spectrum, the world needs co-ordinated efforts and a robust solution. However, it is disappointed that politicians seem to play a blame game. American politicians accused China of “manipulating” its RMB currency and having huge volume of saving as it reduced risk premiums around the world. China attacked back that “the main reason for this financial crisis is the imbalance of some economies” and “they have had double deficits and kept up high consumption based on massive borrowing.” Banks used excessive leverage to reap huge profit, and when such a bubble bursts, the whole world has been exposed to a big disaster. However, Hilary Clinton pointed out recently when she visited China that the Sino-American relationship is one of the most important ones in the twenty-first century. Two countries are in the same “economic boat” and should recognize the interconnection and will “rise and fall” together. For example, China is the world’s biggest holder of US treasuries. Many believe that it will be a real disaster if the two countries launch a trade war.

Western management vs Chinese philosophy – perspective of twenty-first century

We have noticed that from the credit crunch to the collapse of the banking giants in Wall Street in October, 2008, the economic downturn started from America struck the whole world. This has been un-precedened. No doubt that the Chinese economy has been seriously affected but controlled. Chinese market economy with Chinese characteristics draws considerably the world attention. Given China’s huge reserves, there is idea that China could recapitalize international financial institutions, notably the IMF. Could China save the world?

Before we answer this question, let us talk a little about management. In principle in management we are in the position to tackle the problems in the twenty-first century with method of twentieth century. Management is an activity with well established theories and practice in the history of the mankind. Many modern theories of management were developed in the nineteenth and twentieth Century, however, as mentioned previously, Sun Tzu’s, The Art of War also had a very important conceptual influence related to management. I have noticed that there are 900 Chinese students in Cambridge University today. Many more young people from China are encouraged to obtain a management degree from western countries. In the twenty-first century, I would argue that it is important that we have the integration of both Western management knowledge and Chinese management philosophy for three reasons:

First, in the 1950s the American management was prevailing across the world. However, “China phenomena” is changing the knowledge balance of the world. Chinese business executives are shifting the international business model. The Chinese management emerged in the 1980s, as the economic reform started in the late 1970s and Chinese business grow from national to international and to global market. Now the Chinese management is under scrutiny.

Second, it has been interesting to have a comparison between American management and Chinese management. It has been understood that the American style management is embedded in the process of self-actualisation. For example, it focuses on “management by objectives” and “driven by result”. However, the Chinese management concentrates on personal and governmental morality, correctness of the social relationship, justice and sincerity and the principle of “self-disciplinary first and then managing people” under the Confucius philosophy. Furthermore, Chinese philosophy is not a single homogeneous work but draws wisdom from many philosophers, some even contradictory. The classical period of Chinese philosophy extends from earliest time, through Confucius to the end of Qin Dynasty. It was that period of great originality and creativity in China, India and Greece. In ancient China, so numerous were the philosophers and their schools during the period from sixth to third century BC that the Chinese called them the “Hundred Schools”.

Third, I have a case study to illustrate my central argument. Xiaolangdi Dam Project was built across the Yellow River in 1990s in China. RMB 30 billion was invested on the basis of 50:50 between the World Bank and Chinese government. At the construction peak time, this involved 20,000 people who were from 51 countries. This provided an ideal platform for me to study knowledge transfer and observe intimate human interaction between different cultures. The project was completed on time with good quality and both the World Bank and the Chinese government were happy. This has become a demonstration project of successful collaboration between West and China and a good model of technology transfer and knowledge sharing between West and China. As a footnote, by the way, World Bank has a record of being criticized of bureaucracy and in-efficiency. However, Xiaolangdi Project changes the image of the World Bank.

There is no doubt that Chinese management will have an important position in the management field in the twenty-first century. However, this does not mean that Western management will be replaced by Chinese management. There is also little doubt that the twenty-first century is the century of those who are armed with Western management knowledge but in the meantime it may have to be modified by emerging Chinese management philosophy. The recent success of the Chinese economy is forcing a new look into strategies of managing of technological, human and financial resources in the twenty-first century. It is an era where people need to understand Chinese philosophy and Western management science and need to integrate Chinese management wisdom and Western management ideology.

Eastern and Western strategic thinking exist as two distinct and separate sources of information, seldom communicating with each other. Western strategists build upon the strengths of previous Western strategists; Eastern strategists similarly reinforce each other. Neither builds on the strength of the other. It seems like a pair of chopsticks but always in a parallel situation. However, in the current crisis, this “chopsticks” should have a “cross” manoeuvred with the wisdom between West and East.

Many authors wrote that the strategic lessons in The Art of War have become a general construct to solve a variety of problems. Here, I would like to convey my point that “let us win all without fighting” as Sun Tsu elaborated in The Art of War! No blame but use wisdom, which combines Western management strategy and Chinese management philosophy.

This Editorial paper was a Key Note Speech delivered at Cambridge University Asia Law and Business Annual Conference on 28 February 2009, Cambridge University.

Richard Li-Hua