The times, in Europe, they are a-changin’

From The Hill

afd_germany_1The German elections are over, and for a brief moment, it looks like all is stable. But make no mistake, this is only the eye of the storm. Germany has already shifted away from the current leadership.

German Chancellor Angela Merkel stated that she has done nothing wrong. While that is true, there are many things she hasn’t done right. Society and its problematics around the world have moved on, circumventing traditional politics and politicians.

From a long-term analytical business perspective, politics requires a new direction. The parties in power may elegantly gloss over losing 10 percentage points in voter support. They talk about how the voters have made a mistake; how all it takes are better explanations and how all these inequities will be rectified shortly. How wrong they are!

Perceptions change. Research by Mintel reports that many consumers now judge soap bars to be a haven for bacteria. Similarly, voters now judge political insiders to be parasites to progress. Our work, which systematically tracks business behavior and expectations over the past 30 years, indicates new core values for voters.

Traditional dimensions of politics and individuals have four key dimensions, illustrated by the four legs of a stool. First is competition, which determines the approach to progress — one party achieves “the winner takes all,” others meekly fall in line for the droppings from the table.

Second is the establishment and management of risk, where steely nerves and occasional disasters determine lifestyle. Then comes profit, which accounts for success in tangible form. Finally, the fourth leg of the stool is property rights, which assure innovators of their return on investments. There now is a simultaneous splintering of all four legs, which inhibits successful conduct of direction.

A new stool with new legs has recently emerged, these changes are crucial in understanding society. First is truthfulness. Firms and voters detest fake news, insincere excuses and thoughtless comments. When the shadows of unreality obscure one’s outlook, exposed people extract a penalty.

Second is simplicity. Employees and citizens want to understand how relationships work and interact. Without that, it is hard to provide or accept truthfulness. Then there is participation, permitting insight beyond simple observation and offering an active role in shaping the conditions which confront one’s life.

The fourth leg is responsibility — going far beyond customary short memories and the traditional pleading of ignorance. The new drive says: “We are here and, if not, we are coming.”

Just as in America, European voters are beginning to be energized by the new legs of the stool and their new criteria. They expect new directions that negate tradition. Judging by shifts in Britain and Spain, stability in Germany may not be that assured.

It’s also not just the money or even economic growth that matter most. Known quantity may give way to even more quality and a rise of local criteria. “Merkelism” will be substituted for Mercantilism. German economic power may be repulsed by regions seeking to regain their cultural self-determination.

The U.S. emphasis on re-shoring, and the enhancing and encouraging of local production is likely a portent of the new Europe, which perhaps reduces Germany from the “King of Exports” to a mere prince. More export-supporting banks will permeate Europe, accompanied by increases in protectionism.

There are still many options for tariff and non-tariff barriers. Within, but particularly outside of the EU, one can expect growing restrictions in both capital and labor flows and a rise of sanctions. Vested interests will become more visible, and provide new decision frameworks.

All that requires a new team. Low-profile politicians will inexorably move onto the new pedestal. Andreas Pinkwart (FDP) and Karl-Theodor zu Guttenberg (CSU/CSIS) are two who get it. Bob Dylan may have written the song half a century ago, but now more than eve,r we get key guidance from, “The times, they are a-changing.” The change is with us already — the new stool will give us new rules of success and new directors.

Michael Czinkota (czinkotm@georgetown.edu) teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His key book is “International Marketing” 10th ed. (with Ilkka Ronkainen), CENGAGE.

Auto Kartels in Germany

Has the German emissions scandal affected US consumers?

In Germany, many consumers have been shocked by allegations of widespread emissions cheating. But in the United States, there is little awareness of events unfolding within Germany’s car industry. I explore these issues in my interview with Deutsche Welle.

Interview

 Click here for the Video Clip: http://p.dw.com/p/2hXVM?em

 

Universities must embrace cultural change

Universities are among the most successful institutions created. They do not however accept change lightly. But what role do universities need to play in the knowledge society of tomorrow to continue their success. This question grows more pressing for the western welfare states as their dominance in research and innovation is being challenged by globalization and the dynamics of the emerging economies.

The example of the US, which like no other nation, has been able to benefit from universities as drivers of growth, makes this abundantly clear. For a long time America has combined cutting-edge university research with strong science and engineering and entrepreneurial-oriented business schools. This has allowed the country to promote groundbreaking innovations.

Yet, in an era of major shifts in information flows and communication practices, there are increasing doubts about whether the concepts that allowed previous innovations remain sympathetic to the challenges and research priorities of the future.

The advance of biotechnology and social sciences absorbs almost half the research funds of US universities. Add the expansion of national security and military research, and universities have lost important drivers for the industrial use of new scientific insights. Instead, the ivory towers, which were once believed to have been abandoned, have re-emerged. Tackling the giant US budget deficit, will also require new structures and processes in research and teaching at universities.

In Europe, Germany may appear to be in better shape to innovate, with its broad mix of industrial and service-related leadership and its strong and flexible small and medium-sized businesses. However, this should not obscure obvious weaknesses. What has been achieved through a drive for excellence and high-tech initiatives, for which the government has provided competitive university funding and more autonomy in recent years, may be lost once more. Ideological campaigns declare either that universities are not and should not be subject to economic rules, or express fears about standardized expectations, which are said to lead to a commoditization of higher education.

Universities must deliver on accepted performance measures yet differentiate themselves sufficiently to attract scarce resources under competitive conditions.

Germany and the US face similar problems. So far the American and the German university system have learnt from each other in a time-delayed fashion. Now, due to mounting competitive and financial pressures, universities need to learn from each other simultaneously. University success is not about tearing down the ivory towers. Instead, it is about opening their windows as far as possible to other disciplines and to new markets.

While freedom of teaching and research must be defended, at the same time bridges for mutual transfers of knowledge and best practices have to be built.

We need Alexander von Humboldt’s ideas to be applied to the 21st century. The university of the future is only viable if best research and best teaching go hand in hand with best knowledge transfers. To achieve these goals, universities need reliable funding to generate innovative ideas through research. Interdisciplinary links, a close integration with the environment (both social and natural) as well as research relevance are also necessary.

All this calls for a major cultural change on both sides of the Atlantic. For new scientific knowledge to be used more rapidly in universities and businesses, the university approach to knowledge generation, transmission and application needs to be rethought. More risk capital, new business models and efficient intermediary organizations are needed in order to build a bridge over the valley of death, in which so many basic research contributions have perished before they could become innovations.

Such efforts would be worthwhile. It is not only about wealth and employment; it is also about the development opportunities of each individual and the defense of intellectual freedom.

Written by Michael Czinkota and Andreas Pinkwart and originally published in the Financial Times, August 2011.

Visiting Munich

I recently concluded a visit in Munich for research planning with my former student Valbona Zeneli, who is now leading professor of security studies at the Marshall Center in Garmisch. Congratulations on your success!

Here are a few papers we have written together:

Lunch with Dr. Theo Weigel

On the first of October, Professor Michael Czinkota hosted a private lunch with Dr. Theo Weigel at the McDonough School of Business, in collaboration with the Washington D.C. office of the Hanns-Seidel Foundation. Dr. Weigel served as the German Minister of Finance from 1989 to 1998, in the Cabinet of Chancellor Helmut Kohl. He was instrumental in the creation of the European monetary union, and the common currency. He was accompanied by a team of delegates that included his wife, Irene Epple-Weigel, the former alpine skier and Olympic medalist, and their son, Konstantin, a law student in Munich. Also part of the delegation was Richard Teltschik, the Director of the Hanns-Seidel Foundation in Washington. Georgetown University was represented also by Professors Thomas Cooke, Ricardo Ernst, Charles Skuba, David Walker, and Lee Pinkowitz. Also in attendance were three students – one from the McDonough School of Business, and two Masters candidates from the Walsh School of Foreign Service. Additional visitors came from the Hanns-Seidel Foundation and the German Embassy.

The lunch was inaugurated by Professor Czinkota, who gave a welcome address that included an introduction of Dr. Weigel’s many accomplishments. Following this, Dr. Weigel addressed the attendees of the lunch. He discussed his experiences with the creation and establishment of the Euro, relating both facts and anecdotes. One such story was of how the common currency came to be known as the “Euro,” rather than the other alternatives under consideration at the time, such as the Frank, Mark or ECU. He vehemently denied the common perception that the Euro was Germany’s reward of others for support of reunification, asserting that the two momentous events were planned and executed separately. Dr. Weigel talked about the fall of the Berlin Wall and the reunification of West and East Germany, at what was the eve of the 25th anniversary of the reunification. Yet it was not only German history that was discussed at the lunch, but also contemporary German politics and European current affairs. The issue of the refugee crisis in Europe was explored by Dr. Weigel as well as the other participants. Dr. Weigel believes that Germany can absorb the current volume of incoming refugees, approximately 800,000, for one year (possibly two). This will help the German economy, which is currently facing a demographic shortage of working-age and job-seeking citizens. Any absorption of refugees beyond this number, however, would end up harming the German economy.

For more than an hour, issues such as U.S.-Germany relations, collaborations and perceptions by the youth of the two countries, and Germany’s leadership role in the world were addressed in the question and answer session following Dr. Weigel’s speech.

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