162 Part 2 The Cultural Environment of Global Markets management cooperate—in Germany labor is represented on corporate boards, and in Japan, management takes responsibility for the welfare of the labor force. Because the welfare of the workforce matters more to Japanese and German firms, their sales revenues are more stable over time. American-style layoffs are eschewed. The individualistic Ameri-can approach to labor–management relations is adversarial—each side takes care of itself. So we see damaging strikes and huge layoffs that result in more volatile performance for American firms. Studies have uncovered stability as one of global investors’ key criteria.90 Circa 2000, the American emphasis on competition looked like the best approach, and business practices around the world appeared to be converging on the American model. But it is important to recall that key word in Adam Smith’s justification for competition— “frequently.” It’s worth repeating here: “By pursuing his own interest he frequently pro-motes that of society. . . .” Smith wrote frequently, not always. A competitive, individualistic approach works well in the context of an economic boom. During the late 1990s, American firms dominated Japanese and European ones. The latter seemed stodgy, conservative, WORK WANTED: Chinese migrant workers advertise their skills while waiting for employers in the Sichuan city of Chengdu. The government expects the total number of migrants looking for jobs this year to reach at least 25 million. Maintaining steady growth is the country’s foremost priority and also its most challenging task. 90Vincentiu Covrig, Sie Tin Lau, and Lilian Ng, “Do Domestic and Foreign Fund Managers Have Similar Preferences for Stock Characteristics? A Cross-Country Analysis,” Journal of International Business Studies 37 (2006), pp. 407–29. After more than two decades of stagnation in Japan, the social contract of lifetime employment is softening. This change is reflected in more frequent corporate layoffs, frustrating job searches, and “tent villages” in public places such as Ueno Park in Tokyo. But even at their worst point in history, Japanese jobless are just a trickle compared with the torrent of pink slips and homeless folks when the American economy heads south.
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