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Collectivism and Socialism

Collectivism views the needs and goals of society at large as more impor- tant than individual desires.5 The reason there is no one rigid form of collectivism is be- cause societal goals and the decision of how to keep people focused on them differ greatly among national cultures. The Greek philosopher Plato (427–347 BC) believed that indi- vidual rights should be sacrificed and property should be commonly owned. While on the surface one may assume that this would lead to a classless society, Plato believed that classes should still exist and that the best suited should rule over the people. Many forms of collectivism do not adhere to that idea.

Collectivism emerged in Germany and Italy as “national socialism,” or fascism. Fascism is an authoritarian political ideology (generally tied to a mass movement) that considers individual and other societal interests inferior to the needs of the state and seeks to forge a type of national unity, usually based on ethnic, religious, cultural, or racial attributes. Various scholars attribute different characteristics to fascism, but the following elements are usually seen as its integral parts: nationalism, authoritarianism, militarism, corporatism, collectivism, totalitarianism, anticommunism, and opposition to economic and political liberalism. We will explore individualism and collectivism again in Chapter 4 in the context of national cultural characteristics.

Socialism directly refers to a society in which there is government owner- ship of institutions but profit is not the ultimate goal. In addition to historically com- munist states such as China, North Korea, and Cuba, socialism has been practiced to varying degrees in recent years in a more moderate form—“democratic socialism”—by Great Britain’s Labour Party, Germany’s Social Democrats, as well as in France, Spain, and Greece.6

Modern socialism draws on the philosophies of Karl Marx (1818–1883), Friedrich Engels (1820–1895), and Vladimir Ilyich Lenin (1870–1924). Marx believed that govern- ments should own businesses because in a capitalistic society only a few would benefit, and it would probably be at the expense of others in the form of not paying wages due to laborers. He advocated a classless society where everything was essentially communal. Socialism is a broad political movement and forms of it are unstable. In modern times it branched off into two extremes: communism and social democracy.

Communism is an extreme form of socialism which was realized through violent revolution and was committed to the idea of a worldwide communist state. During the 1970s, most of the world’s population lived in communist states. The communist party

encompassed the former Soviet Union, China, and nations in Eastern Europe, Southeast Asia, Africa, and Latin America. Cuba, Nicaragua, Cambodia, Laos, and Vietnam headed a notorious list. Today much of the communist collective has disintegrated. China still exhibits communism in the form of limiting individual political freedom. China has begun to move away from communism in the economic and business realms because it has discovered the failure of communism as an economic system due to the tendency of common goals to stunt economic progress and individual creativity.

Some transition countries, such as Russia, are postcommunist, but still retain aspects of an authoritarian government. Russia presents one of the most extreme exam- ples of how the political environment affects international management. Poorly managed approaches to the economic and political transition resulted in neglect, corruption, and confusing changes in economic policy.7 Devoid of funds and experiencing regular gas pipeline leaks, toxic drinking water, pitted roads, and electricity shutoffs, Russia did not present attractive investment opportunities as it moved away from communism. Yet more companies are taking the risk of investing in Russia because of increasing ease of entry, the new attempt at dividing and privatizing the Unified Energy System, and the move- ment by the Kremlin to begin government funding for the good of society including education, housing, and health care.8 Actions by the Russian government over the past few years, however, continue to call into question the transparency and reliability of the Russian government. BP, Shell, and Ikea have each encountered de facto expropriation, corruption, and state-directed industrialization.

One of the biggest problems in Russia and in other transition economies is cor- ruption, which we will discuss in greater depth in Chapter 3. The 2009 Corruption Perception Index from Transparency International ranked Russia 146th out of 180 coun- tries, falling behind Libya, Pakistan, and Honduras.9 Brazil, China, and India, part of the BRIC emerging markets block, consistently score higher than Russia. In the 2010 Heritage Foundation’s Index of Economic Freedom, Russia’s overall rating in the mea- surement of economic openness, regulatory efficiency, the rule of law, and competitive- ness decreased to 50.3 this year, ranking it only 0.3 points away from being a repressive economic business environment.10 As more MNCs invest in Russia, these unethical prac- tices will face increasing scrutiny if political forces can be contained. To date, some multinationals feel that the risk is too great, especially with corruption continuing to spread throughout the country. Despite the Kremlin’s support of citizens, Russia is in danger of becoming a unified corrupt system. Still most view Russia as they do China: Both are markets that are too large and potentially too lucrative to ignore.

Social democracy refers to a socialist movement that achieved its goals through nonviolent revolution. This system was pervasive in such Western nations as Australia, France, Germany, Great Britain, Norway, Spain, and Sweden, as well as in India and Brazil. While social democracy was a great influence on these nations at one time or another, in practice it was not as viable as anticipated. Businesses that were nationalized were quite inefficient due to the guarantee of funding and the monopolistic structure. Citizens suffered a hike in both taxes and prices, which was contrary to the public inter- est and the good of the people. The 1970s and 1980s witnessed a response to this unfair structure with the success of Britain’s Conservative Party and Germany’s Christian Dem- ocratic Party, both of which adopted free-market ideals. Margaret Thatcher, as mentioned previously, was a great leader in this movement toward privatization. Although many businesses have been privatized, Britain still has a central government that adheres to the ideal of social democracy. With Britain facing severe budget shortfalls, Prime Minister David Cameron, elected in 2010, has proposed a comprehensive restructuring of public services which could further alter the country’s longstanding commitment to a broad social support program.11

It is important to note here the difference between the nationalization of businesses and nationalism. The nationalization of businesses is the transference of ownership of a business from individuals or groups of individuals to the government. This may be done

for several reasons: The ideologies of the country encourage the government to extract more money from the firm, the government believes the firm is hiding money, the gov- ernment has a large investment in the company, or the government wants to secure wages and employment status because jobs would otherwise be lost. Nationalism, on the other hand, is an ideal in and of itself whereby an individual is completely loyal to his or her nation. People who are a part of this mindset gather under a common flag for such reasons as language or culture. The confusing thing for the international businessperson is that it can be associated with both individualism and collectivism. Nationalism exists in the United States, where there is a national anthem and all citizens gather under a common flag, even though individualism is practiced in the midst of a myriad of cultures and extensive diversity. Nationalism also exists in China, exemplified in the movement against Japan in the mid-1930s and the communist victory in 1949 when communist leader Mao Tse-tung gathered communists and peasants to fight for a common goal. This ultimately led to the People’s Republic of China. In the case of modern China national- ism presupposes collectivism.

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