EXPORTING MENTAL MODELS: GLOBAL CAPITALISM IN THE 2 1ST CENTURY Patricia H. Werhane Abstract: The most serious ethical challenge facing multinational corporations in the next century is their exportation of the mental model of Western-style capitalism. This model promises that industrialized free enterprise in a free trade global economy, where businesses and entrepreneurs can pursue their interests competitively without undue regulations or labor restrictions, will produce growth and well-being, i.e., economic good, in every country or community where this phenomenon is allowed to operate. This paper points to some limitations to this model and illustrates how multinational corporations might meet this challenge. W hen one is asked to enumerate the most challenging ethical issues business will face in the next century, the list is long. Environmental sustainability, international trade, exploitation, corruption, unemployment, poverty, technology transfer, cultural diversity (and thus relativism) are a few obvious candidates. Underlying these and other issues is a more serious global phenomenon: the exportation of Western capitalism. There is a mental model of free enterprise, a model primarily created in the United States, that is being exported, albeit unconsciously, as industrialized nations expand commerce through the globalization of capitalism. This model is not one of greedy self-interested cowboy capitalists eagerly competing to take advantage of resources, low-priced employment, or offshore regulatory laxity. Rather I am referring to another model, one that has worked and worked well in most of North America and Western Europe for some time. This model contends that industrialized free enterprise in a free trade global economy, where businesses and entrepreneurs can pursue their interests competitively without undue regulations or labor restrictions, will produce growth and well-being, i.e,, economic good, in every country or community where this phenomenon allowed to operate. The results of global free enterprise, if adapting itself to an American style, "can be compared to the strongest hand in poker: the royal flush, of all five of the most valuable cards of the same suit,,," (Uchitelle 1999, p, 16), What is wrong with adapting a model for global capitalism out of the highly successful American model for free enterprise? What is wrong with economic growth and improved standards of living, particularly in developing countries? Isn't reduction of poverty a universally desirable outcome? The tempting answer is ©2000. Business Ethics Quarterly, Volume 10, Issue 1. ISSN 1052-150X, pp. 353-362 354 BUSINESS ETHICS QUARTERLY that there is nothing wrong with this model. In this paper I shall suggest that a more thoughtful reply requires some qualifications. To begin, let me explain the notion of mental models. Although the term is not always clearly defined, "mental model" connotes the idea that human beings have mental representations, cognitive frames, or mental pictures of their experiences, representations that model the stimuli or data with which they are interacting, and these are frameworks that set up parameters though which experience, or a certain set of experiences, is organized or filtered (Senge 1990, chapter 10; Gentner and Whitley 1997, pp. 210-11; Werhane 1991, 1998, 1999). Mental models are the mechanisms whereby humans are able to generate descriptions of system purpose and form, explanations of system functioning and observed system states, and predictions of future system states. (Rouse and Morris 1986, p. 351) Mental models might be hypothetical constructs of the experience in question or scientific theories; they might be schema that frame the experience, through which individuals process information, conduct experiments, and formulate theories; or mental models may simply refer to human knowledge about a particular set of events or a system. Mental models account for our ability to describe, explain, and predict, and may function as protocols to account for human expectations that are often formulated in accordance to these models (Gorman 1992, pp. 192-235). Mental models function as selective mechanisms and filters for dealing with experience. In focusing, framing, organizing, and ordering what we experience, mental models bracket and leave out data, and emotional and motivational foci taint or color experience. Nevertheless, because schema we employ are socially learned and altered through religion, socialization, culture, educational upbringing, and other experiences, they are shared ways of perceiving, organizing, and learning. Because of the variety and diversity of mental models, none is complete, and "there are multiple possible framings of any given situation" (Johnson 1993, p. 9). By that I mean that each of us can frame any situation, event, or phenomenon in more that one way, and that same phenomenon can also be socially constructed in a variety of ways. It will turn out that the way one frames a situation is critical to its outcome, because "[t]here are . . . different moral consequences depending on the way we frame the situation" (Johnson 1993). Why is the notion of mental models of concern for business, and in particular, for global business? Let me explain by using some illustrations. One of the presuppositions of Western free enterprise, a supposition that fueled and made possible the industrial revolution, is that feudalism, at least as it is exhibited through most forms of serfdom, is humiliating, it demeans laborers, and worse, it does not allow serfs, in particular, to create or experience any sense of what it would mean to be free, free to live and work where one pleases (or to be lazy), to own property, and choose how one lives. Adam Smith even argued that feudalism is inefficient as well (Smith 1776, Book HI). It is commonly, although not universally, argued that individual property ownership is a social good. In agriculturally based economies, in particular, owning one's own farm land is GLOBAL CAPITALISM IN THE 21 ST CENTURY 355 considered a necessary step toward freedom and self-reliance. The industrial revolution, coupled with free commerce, wage labor, and property ownership, changes the feudal mental model, and, it is commonly argued, improves the lives of serfs, farm workers, and tenant farmers, in particular. However, as Akiro Takahashi points out in a recent article in Business Ethics Quarterly, even 20"'-century feudal arrangements are complex social institutions. One cannot simply free the serfs or sharecroppers, engage in redistributive land reform, and hope that a new economic arrangement will work out. Takahashi's example is from a 1960s rice-growing community in Luzon in the Philippines, From as long as anyone can remember until land reforms in the 1970s the village had operated as afiefdom.There were a few landholders and the rest of the villagers were tenant farmers. In order to work the land, each year the tenant farmers paid rents equal to half the net production of their farms. But because the tenant farmers were always in debt to the landlords, they usually owed all the net production to the landlords. The tenant farmers in fact never paid their debts, but because of high interest rates, as much as 200 percent, their debt increased each year so that they really could never leave the property. Since in fact what was owed the landlord was the net produce, each sharecropper was allowed to hire workers to farm the land they rented. So tenant farmers hired workers from other landlords or from other communities to till and harvest. Each sharecropper, in turn, went to work for another landlord's sharecropper. In addition, it was common practice for the harvesters not to do a perfect job, leaving often as much as 20 to 25 percent of the rice unharvested. Gleaning was not allowed by tenant farmers or their families on the land they rented. But the wives of the farm workers and rest of the community "gleaned' the rest of the rice for themselves. In this way the poor were supported by the landlord and tenant farmers got some rice. The landlords pretended none of this occurred, still demanding the net product from each of its tenant farmers.' (Takahaski 1997, pp. 39-40). The value of private ownership (as linked to personal freedom) is a perfectly fine idea in principle. But abstracting that idea and universalizing it as a mental model for all reform has severe negative moral consequences, as the following example illustrates. Seven years ago, the prayers of 39 families were answered when the government [of Mexico] gave them this 1,000-acrecommunal farm in southern Mexico to raise livestock. Today the exhausted pastures are a moonscape of dust and rock. Cattle here don't graze quietly; they root like pigs as they yank rare blades of grass from the parched earth. . . . All arable land has been split into five-acre patches of corn per family. To stay alive, the men earn 21 cents an hour cutting sugar cane in nearby fields. Farms like this one, known as ejidos, have helped the government win political support in the countryside by answering peasant demands for "land and liberty" that date back to the revolution of 1910. Unfortunately, this continuing land-redistribution plan has done a better job of carving farmland into small, barren plots than it has of growing food or providing a decent living for farmers. 356 BUSINESS ETHICS QUARTERLY ...Farmers tend to split their parcels among their sons, and with two-thirds of farms already smaller than 12.5 acres, there isn't any room in the countryside for the next generations. (Frazier 1984, pp. 1, 18) Another example: the Neem tree is a wild scraggly tree that grows well throughout India. For thousands of years, in hundreds of villages throughout that country the Neem tree has had a special place in the community. The tree has special religious meaning in some Hindu sects. Its leaves are used as pesticides, spread on plants to protect them from insects. Various herbal medicines are made from Neem leaves and bark, its products are used as contraceptives and for skin ailments, and many Indians brush their teeth with small Neem branches. Because of its effectiveness as a pesticide, recently the W. R. Grace Company began studying the tree, and in 1992 they developed a pesticide, Neemix. Neemix works as effectively as Neem leaves and has a long shelf life, thus making it more desirable as a pesticide than the leaves. Following the guidelines of the Indian government regarding patenting, Grace patented Neemix, opened a plant in India, and manufactured the product. However, there have been mass protests against this patenting, both from Indians and from the Foundation on Economic Trends, a biotechnology watchdog organization. The argument is that Grace committed "biopiracy" because the Neem tree belongs to Indians, and products from the tree cannot be patented. Moreover, such patenting and manufacture of Neemix and other products drives up prices of Neem such that the indigenous poor, to whom the tree belongs, can no longer have access to the trees (Severence et al. 1999; Vijayalakshmi, Radha, and Shiva, 1995). A fourth illustration: SELF, the Solar Electric Light Fund, a United Statesbased NGO, for some time has been developing a project aimed at electrifying rural communities in China. SELF has promoted a small photovoltaic (PV) solar unit that produces about 20 to 60 watts of energy. SELF has a policy of not giving away its photovoltaic units. This is because, it argues, if people have to pay something, even a small amount, for this service, they will value it more. So SELF has set up complex long-term lending schemes so that some poor rural people in China can afford electricity and own their own units as well (Sonenshein etal. 1997a). SELF has been highly successful in some rural communities in China, so it decided to export that project to South Africa, concentrating on small Zulu villages. Working with village leaders in one community, SELF tried a pilot project, with the aim of providing electricity for 75 homes in a small village of Maphephethe. Six units were installed and were well received, and those receiving the units were delighted to have reliable power. However, one serious problem developed. Previous to the introduction of PV technology all the villagers lived modest but similar lives in a fairly egalitarian community. Now, those who have PV units are able to improve their social and economic status by operating manual sewing machines at night. The distribution of PV technology has upset a very GLOBAL CAPITALISM IN THE 21 ST CENTURY 357 delicate social balance by creating social stratification within this community (Sonenshein et al. 1997b). What do these examples tell us? They tell us something very simple, something we should have learned years ago from the Nestle infant formula cases. American (or in Nestle's case. Western European) mental models of property and free enterprise cannot be exported uniformly to every part of the world without sometimes producing untoward consequences. This is because, as Michael Walzer reminds us, the notion of what is good or a social good is a socially constructed idea that is contextually and culturally relative. Abstract ideas such as autonomy, equality, private property, ownership, and community create mental models that take on different meanings depending on the social and situational context. Differing notions of community, ownership, intellectual property, exchange, competition, equality, and fairness, what Walzer calls social goods, create cultural anomalies that cannot be overcome simply by globalizing private free enterprise and operating in the same way everywhere (see Walzer 1983, Chapter One). Land reform based on the notion of private ownership will not be successful in every community without making drastic social changes that alter communal relationships, family traditions, and ancient practices. This does not mean that land reform is wrongheaded; it suggests that is must be reconceived in each situation, so that what falls under the rubric of "reform" is contextually relevant such that change does not destroy the cultural fabric underlying what is to be changed. It is tempting to argue that what is needed in remote communities or in some developing countries is a rule of law, similar to Anglo-Saxon law, that respects rights and property ownership, enforces contracts, protects equal opportunity, etc., along with adequate mechanisms for enforcement. Indeed, it has been argued, I think with some merit, that one of the difficulties in Russia today is inadequate commercial laws or means to enforce them. But this argument, too, needs qualification. For example, intellectual property rights, already under siege with the electronic revolution, cannot merely be spelled out in every instance using a Western notion of ownership without infringing on some deeply rooted traditions and customs. An Anglo-Saxon model of patent protection, adapted in Indian law, may not be appropriate in many parts of rural India. Do these examples, and there are thousands of others, point to the conclusion that because of the relativity of custom and culture, we should either abandon the ideal of global economic well-being, or, alternately, simply continue to convert the world into versions of Dallas? Is the aim a television in every village? Or is John Gray correct when he declares in his recent book that "the global economy system [based on Western laissez-faire free enterprise] is immoral, inequitable, unworkable, and unstable" (Zakaria 1999, p. 16)? These two alternatives, as I have crudely stated them, present us with unnecessary dilemmas as if there were only two sorts of responses to problems of globalizing free enterprise. I want to suggest that there are other ways to deal with these issues. 358 BUSINESS ETHICS QUARTERLY The existence of widespread complex cultural, social, community, and even religious differences along with differing social goods does not imply that we can neither operate in those settings if they are alien to our own nor merely export Western versions of capitalism. To appeal again to Michael Walzer, despite the plurality and incommensurability of cross-cultural social goods, there is a thin thread of agreement, across cultures and religious difference, about the "bads," what cannot be tolerated or should not be permitted in any community. Walzer also calls these thin threads of agreement "moral minimums" (Walzer 1994). Human suffering, abject poverty, preventable disease, high mortality, and violence are abhorred wherever they occur. We are uncertain about the constitution of the "good life," but there is widespread agreement about deficient or despicable living conditions, indecencies, violations of human rights, mistreatment, and other harms. Given that perspective, almost everyone will agree that poverty, however contextually defined, disease, high infant morality, and violence are bads. Alleviating suffering of these sorts is surely a good. Improving economic conditions, in most cases, alleviates poverty and human suffering, if not violence. Then, is not economic value added in the form economic growth the proper solution to those evils? We must cautiously reach that conclusion. Economic growth is not a "bad," Indeed, in most cultures it is considered a social good. But the notion cannot be identified without qualification with a Western idea of free enterprise. The model of economic growth in each context has to be framed in terms of each particular culture and its social goods. Free enterprise and private ownership, as practiced in most industrialized nations, can be, in many contexts, viable options, but only if they are modified so as not to destroy the fabric of a particular set of social goods, or replace that fabric with a new "good" that destroys, without replacing, all the elements of that culture. For example, land reform and the redistribution of property, apparently worthwhile projects to free tenant farmers from feudal bonds, will be successful only if the new landholders have means to function as economically viable farmers and in ways that do not threaten age-old traditions. As the Philippines example demonstrates, the fragile distributive system in the feudal community cannot be dismantled merely for the sake of independence and private ownership without harming complex communal relationships that maintained this system for centuries. As purveyors of free enterprise, when moving into new communities and alien cultures corporate managers need to test their business mental models, especially if a particular system, service, or product has been successful in a number of markets. One needs to examine one's own mental models and try to fathom which models are operating in the community in which a company is planning to operate. In particular, it is important to find out what the operative social structures and community relationships are, what it is that this community values as its social goods, and try to imagine how those might be different given the introduction of a new kind of economic system. Because it is not jusl "the economy. GLOBAL CAPITALISM IN THE 21 ST CENTURY 359 stupid." What matters are social relationships; family, religious, and community traditions; and values—deeply held values about what is important and treasured—that is, those social goods a community cannot give up without sacrificing more than its lack of material well-being. If endemic poverty is an evil, we must create new ways to engage in free enterprise that takes into account, and even celebrates, cultural difference. All of this is rather vague, and, one might well contend, has more to do with public policy than the operations of transnational corporations. Yet as Richard Rorty and Cornell West (hardly hearty libertarians) argue, it is not the state, but the multinational corporation that is probably the most viable and creative social institution today. Many multinational corporations are more stable than the cultures of many developing countries, and according to Rorty, their leaders often have "a more perspicuous view of globalizing trends" (Rorty 1999, p. 3) than our political leaders. As a philosopher, 1 want to conclude, then, that given their economic power and stability, multinational corporations have moral responsibilities not to produce economic changes that result in negative cultural harm in any of the countries or cultures in which they operate. But that, too, is oversimplistic and didactic, and repeats the mistake of exporting mental models by universalizing a negative harm principle without contextualizing the meaning of harms and benefits. Interestingly, John Gray suggests that attempts at economic colonization of free enterprise will not produce world homogenization and the destruction of indigenous cultures as I have suggested. Rather, he argues, "[w]hen new technologies enter economies from which in the past they were shut out. . . they will interact with indigenous cultures to generate types of capitalism that have hitherto not existed anywhere" (Gray 1998, p. 58). Although Gray finds the expansion and fragmentation of Western-style free enterprise frightening, one might think of these changes as part of what Joseph Schumpeter thought of as the positive process of "creative destruction" (Schumpeter 1996, p. 83). In a new article in the Harvard Business Review, Stuart Hart and C. K. Prahalad make a different kind of argument for this same point. Hart and Prahalad contend that it happens to be in the long-term self-interest of global multinational companies to tread cautiously and with respect in alien cultural contexts. This is because, in brief, developing countries represent 80 percent of the population of the world and thus are an as yet untapped source of growth and development. If that growth is done carefully through working within indigenous constraints, the result could be the creation of exciting new products and services that enhance rather than destroy communities while at the same time benefiting the companies in question (Hart and Prahalad 1999). The challenge is to create new mental models for global business that achieve the aims Hart and Prahalad propose. There is at least one such attempt by a large transnational corporation to do exactly this. Unilever is a multibillion-dollar global company with over 300,000 employees operating in almost 100 countries. Its main products are foods, fish, chemicals, and household products. Because it 360 BUSINESS ETHICS QUARTERLY was founded in the Netherlands, a country one-third of which is reclaimed from the seas, Unilever has always been concerned with questions of environmental sustainability. In addition, the more recent expansion of its agricultural and fishing operations in remote communities has made Unilever increasingly aware of cultural difference. Beginning in 1993, Unilever began a process that resulted in a corporate-wide initiative that they call The Triple Bottom Line (Vis 1997). The rationale for this initiative is that if Unilever is going to continue to be successful in the next century, its success depends on its worldwide financial, ecological, and social assets. So Unilever changed the definition of "economic value added" to an expanded triple bottom line that measures economic, ecological, and community assets, liabilities, profits (or benefits), and losses. According to Unilever in its statement of corporate purpose and practice, each of these assets is of equal importance, and its aim is to be able to quantify the corporate contributions to each of these three areas. This may sound Pollyannaish, but Unilever's defense of this initiative could have been written by Milton Friedman. Each type of asset represents a source of value to the company and its shareholders. The sustained development of each of these sources of value ensures that the overall value accruing to shareholders is built up sustainably over the long term. This is in essence the significance of sustainable development to a company that aims at sustainable profit growth and long-term value creation for its shareholders, [customers], and employees. (Vis 1997, p. 3) As part of this Triple Bottom Line initiative, Unilever is currently engaged in a series of small enterprises in a few small villages in India to develop new products aimed at the rural poor. These are microdevelopment projects, because the products they are supporting require little capital, they are locally produced, and of only indigenous interest. Unilever's goal, however, is to make those villages and their inhabitants economically viable managers, entrepreneurs, and customers as those notions are defined and make sense within a particular village culture and in ways that are not environmentally threatening (Hart and Prahalad 1999 forthcoming). Whether this example will be a success story remains to be seen. There is to date no outcomes data, since the case events are still unfolding, and it will be some years before one can determine whether these projects are successes. Is this stretching the limits of what we should expect from global corporations? Not according to Unilever. It argues that human flourishing in diverse settings creates needs for a diversity of products and services, products and services that Unilever will be able to provide. At the same time human well-being creates long-term economic value added, both for Unilever and for the cultures and communities in which it operates.
