The New Realities Of The Economy And Their Challenges To The Development Of The Management Theory And Practice

The New Realities of the Economy and their Challenges to the Development of the Management Theory and Practice Prof. Vassil Manov, D.Sc. Summary: On the basis of tracing back the evolution of the entrepreneurship – environment ‘dialogue’, this paper highlights the challenges of the new economic realities management theory and practice is facing at the end of the 20th C and the beginning of the 21st C. The growing mismatch between economic realities and economic theory within the period is analyzed. Society’s increasing intolerance to the negative effects arising out of the existent order is studied, and an important conclusion is arrived at about the end of the age of free entrepreneurship in its role of “the sacred cow”. Thus, the objective need for the development of a new view of business and the elaboration of a new paradigm, within which entrepreneurship and its order of management are to be considered, is substantiated. Key words: new realities; the relation economic theory – economic practice; the new paradigm of management; strategic planning; marketing; the end of the age of free entrepreneurship; the relationship “theory – practice – education” in the field of strategic planning and marketing. JEL: E60; M13; 011

Since the end of the 60ties of the 20th C, a change in the paradigm of the four- level management (world economy, national economy, regional and firm economy) has been acquiring shape worldwide. Rather this is a period of growing awareness of the need for a new outlook in the business sector and its management.1 The factor determining this need are the new realities established in the economy in the early 1960ies. Under such conditions an enlarging discrepancy between the dominant concept of the four-level economy and the respective applied management practices

1 on one hand, and the objective realities set in the economy, on the other, has been encountered over and over again. 1. What has the study of the past given us and what can it further give? When the focus is on the state of the theory, practice and education in the field of economic system management, to outline the directions in which efforts have to be made so as to effect the necessary changes in the latter are to be considered; so is the evolution, which has brought to life both strategic planning and strategic marketing, and their progress in the course of time. Without history there is no theory, and without theory there cannot be any reasonable practice and intentional and focused improvement and progress in education in any field, including that of strategic planning and marketing. In the age of a stable (relatively stable) environment of a given economy (global, national, regional, firm), a study of the past will provid the answer to how the economy is to be managed in the future. In modern times, and still more in the future, when a given economic system’s external environment is becoming increasingly unstable, and when the given economic system’s future cannot be considered a mere repetition of the past, studying the past will provide knowledge and insights as to how management has to be changed. Progress and improvement of the management system will be impossible, unless the objective trends of theory development in the field of management of the four-level economy are studied and the dialectical ‘theory – economic realities’ relationship is known. And this dialectics cannot be traced back outside its historical context, i.e. without the study of its evolution – not so much to find the tools and style of future management, but to arrive at how to make the tools and design the style the new realities require. Tracing back the evolution in management shows that management has been periodically or constantly compelled (“forced”) to adapt to the change in the economy, including the change required by management itself. A historical review

2 has proved that a high-quality management of a given economic system is the management that could “ride the waves of change”. A high-quality management is a management that is not only able to facilitate a given economic system’s adaptation to the change generated by others (imposed by its environment) and its taking advantage of this change, but also leads to a change generated within the system itself. To this effect, a strategy has to reorient the business so that it assumes an original character rather than remain imitational in nature. Hence evolution is to be studied so as to become aware of and fully grasp the correct course of development of the four-level economy. For the young generation, and not only for them, getting to know the objective trends and progress and the logic of economic progress, are of prime importance. The high-quality management of the economic systems will increasingly need such expertise, such highly-qualified experts as the above- mentioned, and such symbolic analysts. I do believe that on their part, young people need the challenging profession of the symbolic analyst. If the steps of the evolution in strategic planning and marketing have to be outlined, in the field of marketing they are as follows: the emergence of marketing, the transformation of the marketing’s initial image into a marketing-mix, the birth of the strategic marketing. Planning this evolution follows the surveying-rods: directive planning, indicative planning, strategic planning. 2. The discrepancy between the economic realities and the economic theory at the end of the 20th and the beginning of 21st C The picture set in economy confirmed that only change is eternal, that nothing remains constant and unchanged in time2. Even the innovations that have brought about a revolution in life, including a revolution in the economic development, have ultimately been forced to “abdicate from the stage of life” and have been substituted by new tools and a new idea of the world. And the idea of the

3 world, including that of the economic world, and the commonly shared values, provide a framework of economic performance on all four economic levels. A perfect illustration of this truth can be found in Keynes’s capital work “A General Theory of Employment, Interest and Money”. The word is about the discrepancy between the economic realities and economic theory (i.e. the idea of these realities) observed in the early 20th C. At that time the actual economic reality increasingly failed to comply with J.B. Say’s law of economic automatic self- regulation. Or, to put it in broader terms, Keynes presented his own interpretation of this lack of compliance and offered a new view of the economy as an alternative to classical theory postulates. It would be an unforgivable omission if I fail to quote Keynes on why he chose his capital work’s title, since in the very introduction, the reader is offered a thesis of fundamental and multi-aspectual significance: “I HAVE called this book the General Theory of Employment, Interest and Money, placing the emphasis on the prefix general. The object of such a title is to contrast the character of my arguments and conclusions with those of the classical theory of the subject, upon which I was brought up and which dominates the economic thought, both practical and theoretical, of the governing and academic classes of this generation, as it has for a hundred years past. I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium. Moreover, the characteristics of the special case assumed by the classical theory happen not to be those of the economic society which we actually live, with the result that its teaching is misleading and disastrous if we attempt to apply it to the facts of experience.”3. Already in the introduction Keynes points out the main reasons for the non- conformity of the classic theory’s postulates to the economic realities. The reason is the inadequacy of this theory to the economic society Keynes and his

4 contemporaries live in. Keynes provided an explicit warning about how dangerous and detrimental to real life any attempt to apply a theory, which proves irrelevant and fails to reflect adequately the anatomy and physiology of economy, can be. A complicated cause and effect relationship of a special kind exists between the economy’s anatomy and physiology. If an economic theory is adequate to the economy’s anatomy and physiology, if it adequately reflects the structure, logic and objective laws governing its development, then this theory will facilitate an increasing and effective economic growth. However, in the course of this economic growth, its contents are changed, or, in other words, the anatomy and physiology of the economy itself have changed. For this reason, every theory of the economy has and will have its historical time limits, within which it will provide an adequate study of its subject-matter. Economic science has to “adapt” itself to the regular changes in its object – the economy – including those resulting from economic achievements due to implementation of this very economic science. And the more economic science departs from its function to explain the world of the economy and assumes the function of a factor of economic growth, the more frequently will it have to “adapt” to the changes in economy, brought about by its actual application. And the shorter will the life cycle (the historical limits) of the respective theory be. The more useful and successful an economic theory for real economic life is, the shorter will it remain on the stage of life. This is not a paradox but an entirely natural conclusion. A very indicative example is Bismarck’s idea of composing the German navy at the Baltic Sea. The word is about the great efforts Bismarck made to realize this idea, and his great wonder and even fear of implementing his own idea. As Bismarck returned to the Baltic Sea ten years later to check the realization of his idea, he was horrified at the sight he faced.

5 Keynes had hardly even thought that his introduction, cited hereinabove, would remain valid for his own theory only 40-50 years after it was published. Keynes’s criticism of the classical economic idea (theory) and the approach to society in the light of this theory, in the name of whose principles he was brought up, encompass a number of key issues. It is worth dwelling on the issue of all issues, within the framework of which a criticism of classical theory’s major points is made. The word is about Keynes’s global evaluation of classical theory as an “Euclidean” economic theory under a non-Euclidean economic reality. “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required today in economics. We need to throw over the second postulate of the classical doctrine and to work out the behaviour of a system in which involuntary unemployment in the strict sense is possible”4. A historical perspective will reveal and prove the transitional nature of any economic theory, particularly that applied to real life. After all, the practical application of a specific theory begins to work against the theory itself because it creates new realities. And the realities in the early 20 th C grew increasingly divergent from their underlying scientific ideas and the applied management practices. To be more precise, management practices have proved over and over again that they are inadequate to realities they are targeted at. “Realities differ from the problems – Peter Drucker wrote – politicians, economists, scientists, and businessmen, trade union leaders still stress on, still write books on and deliver speeches about. And this is evidenced by the

6 discrepancy with reality, typical of a considerable part of contemporary political and economic science … One of the biggest obstacles to achieving results are slogans, promises, the problems of yesterday that still dominate public speeches, and still narrow our vision”5. Paraphrasing Keynes’s words, we can say that preaching the prevalent for the early 1960ties of the 20th C idea of the economy will not only lead to delusion, but will also will have disastrous effects if we try to apply it to real life. The discrepancy between realities and management practices begins more often and on a larger scale to “generate” undesirable effects for society. And the latter, being an expression of the discrepancy pointed out, appear at each level – the microeconomics of individuals and companies; macroeconomics within the national state; the economics of the transnational business; the world economy. What contributes to these negative effects on the micro-level is the mismatch between management practices and realities on the other three levels. And, of course, the latter largely ‘contributes’ to the negative effects present on the level of the world economy. In other words, not only the discrepancy between management practices and realities at a specific level plays a considerable role in causing the negative effects brought about on that level; but so does the mismatch occurring all the other three levels. The behavior of the microeconomic agents has a great “impact” on thinning out the ozone layer and the ozone hole’s critical widening. And, in its turn, this behavior is predetermined by the existing international order along with everything else. The awareness of this dialectical relationship and the interaction between the four levels is crucial for the efficient management of the economic systems on the four levels. The economic macro- and micro-world are globally interrelated and present a complete analogue of such interrelatedness between the macro- and micro-world in

7 all other aspects. Both aspects of the world of the economy (macro- and microeconomics) are inexhaustible. Besides, both the world of macroeconomics and the that of microeconomics were found to be analogously complex. These two worlds exist neither side by side nor one above the other; rather they exist through each other. The key to one of the channels for the development of strategic planning and marketing is realizing the dialectical relationship between macro- and microeconomics. What remains yet underdeveloped is the area of transforming the macroeconomic world into a microeconomic one and vice versa – transforming the economic micro-world into its macro-world. Within this framework of the dialectical interrelatedness discovered between the four-level economies, there also exists a relatively separate set of problems relating to the territory each level belongs to. 3. The objective necessity to replace the old international order by a new one At a global level the main problem relates to the replacement of the existing order by a new one. The old order has been exhausted and long ago started to “generate” effects dangerous for the present and the future – bringing about poverty; encouraging a growing gap between the rich and the poor; breaking standards of social behaviour; violating justice and rights to equal opportunities; failing to meet human needs; curbing and eliminating competition; interfering in policy on the part of business; polluting the environment; demonstrating indifference towards urgent social needs; weakening the international system; determining the domination of ideology over economics. The old order gave rise to a paradox of order (the accumulation of wealth is accompanied by a growth of poverty). The accumulation of wealth was achieved at the very high price of exhausting the primary natural resources to achieve one unit of this wealth. The old order caused a dehumanization of the economic development and progress.

8 For a long time society has put up with the negative effects the existing order has led to. But all these negative results reached a point beyond which they became not only unbearable but also dangerous for the existence of the world. They could blow it up very easily. The main fault of the old order is that it was and still is an order favoring the rich and detrimental to the poor. And this order favoring the rich was considered natural. However it is this order that violates equity in the world and thus leads to an enormous gap between the rich (industrial) and the poor (agricultural) countries. It is this order that determines the production of services and products for the rich and not for the needy. It is this order that leads to the ecological pathologies of the planet. This order creates unreasonable (wasteful) consumption. This order destroys countries’ political and economic independence. Life itself indicates that there is no future for the existing order because it cannot give the world any future. This is an order that saws off the bough on which the world is sitting. The world needs a new order, a transition from an order in favour of the rich towards an order in favour of ordinary people’s worthy life. The world needs a transition from an order based on economic benefits towards an order based on social welfare. A strategy for a new order, in the basis of which man has assumed the role of both producer and consumer of goods is necessary. A strategy based on justice, freedom, democracy (political, social and economic), solidarity, identity (cultural, educational, economic, etc.), preserved and perfected natural environment is necessary. The word is about a strategy viable enough to abolish poverty (material and spiritual) in the world, about a strategy strong enough to establish a harmonious environment, a strategy capable of protecting individuals from one other. It is completely possible that such a strategy be developed. Even Henry Ford fought for this strategy. “If the world decides – he wrote – to turn its attention,

9 interests and power towards drafting plans for the welfare and benefit of mankind, then these plans can easily be implemented”7. Today’s ideas and appeals for developing of a global Plan Marshall are nothing else but an attempt to make Ford’s dream come true and draft a plan for the welfare and benefit of mankind. The bell heralding a new world order has been ringing anxiously and urgently for half a century. The messages of the Club of Rome, of its founder Aurelio Pechey, of the first Nobel prize winner Jan Tinbergen (actually the first nominated were Jan Tinbergen and Ragnar Frisch) were the first peals of this bell. Every year the new order’s bell rings through the World Watch Institute reports. Those who care about the world and its survival not only anxiously ring the bell to wake up the world. They work hard to lay the foundations of the new order, so far referred to as the order of stable growth. More and more countries and communities in the world realize and accept the basis of the new order. This order is accepted more and more definitely by the European Union as well. Of course, this new order has not only its proponents. There are also its opponents and even ill-wishers. Life has clearly shown that there is a long, difficult and complex way to go to establish such an order once you have realized the necessity of it. It is not different from the long road from the conception of a new idea to its actual implementation in any other field. “Nothing is more difficult to hold back – Machiavelli said – nothing is riskier to manage or more uncertain to succeed than establishing a new order, since the innovator regards all those who had their good time under the former circumstances as enemies, and recognizes as cool defenders those who may be favored under the newly-set ones”. But no matter how big the difficulties in realizing a new idea in other fields of life are, the greatest difficulties are in the social and economic field of life. 4. An increasing social intolerance to the negative effects brought about by the old order

10 The unbearable and intolerable for the society consequences brought about by the old order naturally require changes in the dominant social outlook and ideology and inevitably lead to such. It is quite natural that society should voice certain doubts as to whether capitalism is the sole and ultimate philosophy of social progress. It is natural that there be doubts whether private property and the invisible hand reveal the only features of democratic society. It is also quite natural that the requirements set by the new realities as to involving groups outside business in business activities are grasped. Attention has increasingly been being focused on the old order’s weaknesses and deficiencies, and the grounds for the establishment of a new one are put forth. Unfortunately, economic policy in Bulgaria has become deeply trapped into an old order philosophy. Unfortunately, the issues relating to the transition from the old order to the new one are not yet incorporated within academic curricula. This is a very serious disadvantage because every well-trained expert in the field of strategic planning and marketing ought to obtain knowledge of this transition and the new order. These issues are given due attention in the next part of this paper. The dominant old order thesis that “businesses’ job is business” has been increasingly refuted by the new realities. These realities subject to revision Milton Friedman’s view that the requirements set to business that it should deal with anything different from profit-making, is an basically undermining social doctrine. The same realities have put to the test Adam Smith’s view that society is better serviced when the maximum profit-seeking is performed under the minimum possible restrictions on the part of society. It is the latter thesis that free entrepreneurship identifies itself with. It is this thesis that assigned business its role of “the sacred cow”, and this sanctity places business above society. The most illustrative example of making business “sacred” can be found in the motto of General Motors’s ex-president –

11 Wilson. “What is good for General Motors is good for the whole of America”. Another evidence of placing business interests above the interests of society is Henry Ford’s thesis that a customer can have a ‘Ford’ of any colour he wants, as long as he buys a black one. Of course, one could hardly find a reason why Wilson and Ford might even be suspected of ill intentions towards social interests. What they had in mind was that business has always been and will always remain a conscientious and highly responsible “servant” of buyers, i.e. of society. But just placing business interests above those of society entails the risk of degradation that is gaining speed with time and reaching dimensions beyond which business’s “arrogance” not only becomes unbearable and unacceptable, but also dangerous to society. So, up to the middle of the 20th C the ideology of business was accepted by society as the only possible and useful alternative. Until then business was generally viewed as an integral component of democracy, and free competition – as the only and optimal way to achieve accelerated economic growth. But even in the first decades of free enterprise’s emergence on the stage of life, it became more and more obvious that business’s unchecked behavior brought about serious and rampant social injustice. So, despite society’s proclaimed adherence to the principle of inviolability and sanctity of free entrepreneurship, it gradually began introducing a series of restrictions (a law of child employment; a regulation of minimal wage; a law regulating labour conditions and labour safety; antitrust laws, etc.). As a result of these restrictions, in the middle of the 20th C, the meaning of the initially perceived idea of free enterprise proved very difficult to interpret. In the middle of the 20th C faith in free entrepreneurship’s sanctity was deeply undermined. Faith in entrepreneurship’s leading role was gradually shaken and there was a tendency to cast doubt upon the latter. The significance of free entrepreneurship as an integral element of democracy was being thrown into doubt.

12 The unconditional adherence to economic growth was also open to doubt since this growth proved detrimental to society both in social and material terms. Of course, it was quite natural that entrepreneurship should react to these doubts raised by society and even more so to the restrictions society insistently demanded. Most often this reaction found its expression in two directions. The first direction of entrepreneurship’s reaction was launching an enlightening campaign to explain to society that any checks and control over entrepreneurship worked against economic efficiency and that such control could harm society itself. The next direction in which entrepreneurship responded to the tightening control were the programs for its social responsibilities. But entrepreneurship’s natural reaction did not make society terminate the tendency of maintaining control over free entrepreneurship and imposing the restrictions on it. The signals transmitted in real life at that time heralded the end of the age of admiring free entrepreneurship as a “sacred cow”. These signals were indicative of a significant shift in free entrepreneurship’s role under the new realities. Free entrepreneurship could hardly grasp its new role and, even more important, it could hardly have accepted it. Completely understandable is free entrepreneurship’s reaction of dissatisfaction with the tightening restrictions and control imposed by society. Entrepreneurship could not agree to this changed attitude since it had been the main engine of social progress for over 100 years. It could not understand why, being a result (product) of evolutionary progress, it had to be limited and checked. To defend its position, entrepreneurship pointed out that during its nearly one-hundred- year maintenance on the stage of life, it had created more wealth than the one created during the entire period preceding its appearance in the mid 19thC. Furthermore, entrepreneurship emphasized its feature of being an analogue of the

13 nucleus reactor, which keeps working regardless of the law of the conservation of energy, because it produces more energy than it consumes. It was explained to society that being specific type of reactor, free entrepreneurship produced goods and services, and generated the purchasing power necessary to purchase them; that it supported and expanded social infrastructure along with boosting profitability; that it created jobs not only within the business itself, but also within its supplier network and in the public sector; that free business generated wealth needed for its own growth. About the middle of the 20th C however, the likely degeneration due to the placing of entrepreneurship above society, was gradually acquiring the dimensions of a real danger. Thus, one of mankind’s most significant ‘inventions’ – free entrepreneurship, grounded on Adam Smith’s theory that the individual’s freedom to act in the name of his own economic interests, thanks to the “invisible hand”, provided maximal benefit for the entire society, began to prove its historical shortsightedness as a tool of progress. The new realities proved that the sanctity of private property and individual freedom are one of the most indispensable prerequisites necessary to achieve economic growth, and yet they are not sufficient to secure this growth; they presented core values extremely necessary yet insufficient to provide for economic progress. Indeed, free entrepreneurship created a huge and accumulating wealth within a short span of human history, but along with this wealth its uneven distribution continued to grow as well. Finally, this growth of wealth was accompanied, and still is, by destroying the ecological, social and political environment of business. Moreover, this growth is accompanied by both economic booms and economic declines. The realities of the second half of the 20th C more and more definitely prove that entrepreneurship left without social control tended to cut off “the helping hand”

14 by eliminating competition, setting up monopolies and thus destroying these ‘invisible forces’ it had relied on as it first appeared on the stage of life. Society endured the negative effects attending free entrepreneurship’s greatest achievements in the name of progress, as long as society remained largely focused on the problems of economic growth. When these consequences rose to the surface and became unbearable, society began restricting entrepreneurship. 5. The end of the age of free entrepreneurship in the role of “the sacred cow” One of the most significant outcomes of the evolution of free entrepreneurship is that a favourable and friendly social environment, providing for free entrepreneurship’s growth, was being gradually transformed from a well- intentioned into a hostile one. As Peter Drucker noted, free entrepreneurship fell prey to its own success. Under the new realities, free entrepreneurship’s environment (i.e. society) redirected its attention from the economic benefits free enterprise provided, to the disadvantages and adverse consequences arising from its operations and business activity. As a result, free entrepreneurship assumed a new role - from “the sacred cow” of social and economic progress it became an object singled out for criticism and subject to checks and controls. What else can be found in the field of the new realities in the second half of the 20thC? Despite increased restrictions and enhanced control over free entrepreneurship, business continued expanding and prospering, even though restrictions increased in number and intensified in power. As a result society held up the view that free entrepreneurship will continue to grow and make money regardless of the type of control society exercised. Stemming from of the changed ‘entrepreneurship – society’ relationship, a trend of revising entrepreneurship’s role under the new realities of the post- industrial period emerged. Gradually under the new conditions another tendency set in: to use entrepreneurship to larger and more complex goals by taking advantage

15 of its phenomenal capability to produce a wealth of goods. In other words, a tendency to transform entrepreneurship’s nature from an entirely economic institution into a social-economic one was established. Certain fundamental considerations dictated society’s new attitude to entrepreneurship. And the latter is not a result of a miscomprehension of the mechanisms of free entrepreneurship’s activities and merits. In other words, the company’s transformation from an economic institution into a social-economic one is due to fundamental reasons. The first reason was society’s unwillingness to put up with the negative side effects of entrepreneurship’s business activity. The second fundamental reason was that society matured and realized the incorrectness of the unconditional priority of economic growth. The third fundamental reason was that society realized the historical limitations of entrepreneurship ideology, in particular, and that of capitalism as a public ideology, in general. Society opened its eyes to and became aware of the truth that nothing lasted forever, that everything was conceived of, developed and taken away from the stage of life, that everything that presupposed progress and success in the past did not necessarily herald new times and ages. In this sense society had grown mature enough to realize the truth that the ideology of free business did not mean an end to economic growth, that modernization and radical changes in the mechanisms of management of economy and society are required. In connection with the future of free entrepreneurship, there are already four theoretically developed scenarios. Each entrepreneur (each specific company) has to know these scenarios when developing its strategic future. The first scenario is based on the hypothesis that the negative effects of excessive control over and restrictions imposed on entrepreneurship by society will rise to the surface, and that society will find it has seriously hit entrepreneurship. And this will make society “come to sense” and put an end to the tendency of comprehensive regulation on and

16 effective control over entrepreneurship. The second scenario rests on the hypothesis that if the current tendencies of growing control and restrictions to entrepreneurship are preserved, then the former are not likely to be reduced until it is too late, i.e. until “the camel’s spine” is broken. The third scenario rests on the hypothesis that most of the restrictions on entrepreneurship will not be withdrawn, while new elements of restrictions and control will be introduced. Thus the risk that entrepreneurship will become a destructive force will be hedged. So, according to the third scenario entrepreneurship will become a diligent servant of the market. The gradual changes to the regime under which entrepreneurship operates are reconsidered in the third scenario as being an integral part of an irreversible process of changes to the company’s status in post-industrial society – its transformation from an entirely economic institution into a social-economic one. According to the scenario, this new institution will allow for profit seeking to be supplemented by non-economic goals such as: maintaining a definite level of employment; satisfaction with the work performed; participation of everybody in decision making; maintaining the well-being of the local budgets. In other words, this last scenario forecasts the emergence of an ‘invisible hand’ of a new order. The fourth scenario is grounded on the analogy to the preceding radical changes to society – such as the collapse of the Roman empire, the Industrial revolution, US Civil war and revolution. Typical of the latter was that during of these cornerstone events, when the tools and institutions meeting the needs of a preceding period had disappeared, new tools and institutions “emerged like a Phoenix out of the ashes of the ruins attending the radical changes”. The first scenario is assessed as an optimistic one, while the fourth is viewed as an apocalyptic scenario for the future of entrepreneurship. However, common to all scenarios is that entrepreneurship will have a certain influence upon the final choice of “rules in business”. The rules will increasingly be

17 determined by the political processes, in the course of which representatives of various ideologies fight and negotiate, trade with each other or use other tools to effect impact and impose their own outlook and perspective as a basis of such rules. Entrepreneurship will be further pressed into studying various public groups’ demands and expectations relating to its business activity, the restrictions shared by different public groups and imposed on business, in one word – the battlefield of diverging forces outside entrepreneurship, in which field it has to operate in future. It is of great importance that entrepreneurship should be able to determine the probable rules of business that could be the likely outcome of the political process after it has exhausted its own possibilities to impose its own views as a basis of these rules. Of great importance is that the actual and likely impact the different restrictions will have on business be assessed; it is also important that the entrepreneurship’s position within these restrictions be determined. It is essential how entrepreneurship is protected against these restrictions: is any protection possible is at all, can it be effected through negotiations, and can the restrictions against which entrepreneurship has no protection be specified. It is also significant that entrepreneurship takes a view concerning the preferred business rules, and establishes its own set of preferred business rules. The success of entrepreneurship in implementing the preferred set of rules in legislation will be defined in the course of political negotiations with other social groups interested in or having the power to impose their own restrictions on business. For that reason, of central importance is that entrepreneurship be able to estimate the claims influential public groups and institutions are most likely to lodge in negotiations. It is important that each group’s relative potential power and aggressiveness in the course of the negotiations is evaluated. The restrictions the different groups are to demand also have to be estimated. And again there stands the question of estimating each public group’s power and aggressiveness.

18 There is a great possibility that there be a mismatch between the set of business rules preferred by entrepreneurship and the possible one conditioned by the power of influence and aggressiveness of the different social and economic groups and institutions with their own view on business. Under such circumstances entrepreneurship has to be able to negotiate skillfully, making use of the most efficient tools of influence so that its actual role largely overlaps with the one it would like to have. The directions of the ‘entrepreneurship – society’ dialogue given rise to under the new realities of the second half of 20th C expand in scope and range and prove that business activities cannot rest merely on a “monetary” basis, that in future entrepreneurship has to recognize certain social aspects of its business along with the commercial and political ones. In other words, there has been an ever pressing need that the entrepreneurship strategy of managing business be transformed into a commercial, social and political strategy. This transformation requires that a new vision on business activity, adequately meeting the requirements and business trends imposed by the new realities be developed. First of all an ideological reorientation is needed. Those in charge of managing business have to comprehend ideologies other than the free entrepreneurship doctrine. They are to honor and recognize the legitimacy of the other ideologies. Moreover, they are to be ready to move on from the traditional dogmatic faith in the free entrepreneurship theory as being the only right one, to an opener and wider position recognizing other ideologies’ legality. In the second place, entrepreneurship will need an expanded information system covering not only the commercial sphere but the social, political and ecological ones. The main deficiency of the economic analysis made within the framework of the old order is, for example, that it does not take account of the value of natural resources. Of course, this value can hardly be estimated. But it is also clear that

19 because of their unique and scarce character, natural resources have no price, and that it is very difficult to estimate the loss of animal breeds and plant varieties using nature as a source of resources. Therefore the economy appears poisonous and destructive on a gigantic scale and it is quite unfair that society should perceive all this and think of effective changes and reforms, not taking it into consideration. Under the older order there is a tendency of postponing difficult decisions. Moreover, quite often decisions for changes have been made without a preliminary study of the consequences of these changes. The lack of awareness of how serious the threat of the decisions for changes can be, results in “the miracle” becoming a fact. And the miracle with consequences threatening the planet’s existence long ago became a fact. The word is about the equivalent of finding a solution to the problem of malnutrition and poverty in the world. The World Watch Institute 2003 report confirmed that if the consumption of the average American was re-estimated in terms of primary natural resources, and the resultant value was multiplied by the number of people subject to poverty and malnutrition, the result would be a need for a planet three times the Earth’s size, properties and potential (see Note 1). In the third place, entrepreneurship has to master and competently use “the language” of the other social groups and institutions. It has to learn how to translate the entrepreneurship activity into their language. In the fourth place, entrepreneurship has to master the skill to comprehend political processes and shape an appropriate political behavior. It has to realize the huge difference between coordination, based on a uniform decision making philosophy, and the one effected within the framework of various public groups ideologies, where none of the parties has any decisive power and influence. Entrepreneurship has to acquire skills in drafting political decisions, in lobbying, setting up coalitions, conducting negotiations and using propaganda. In the next place, entrepreneurship has to create an infrastructure for performing its political activities, and be able to find its place

20 within policy, just as it found its place on the market at the dawn of the industrial age. Finally, entrepreneurship has to find the system of motivational tools to stimulate its timely and efficient reaction to the social problems and society’s expectations. So, under the new realities entrepreneurship is forced to approach public problems with similar caution, in the same methodical and well-considered manner in which purely economic matters are being approached. However weaker the power of entrepreneurship may become in its dialogue with society, it (entrepreneurship) must take an active part in this dialogue so as to participate in determining its own future public role. Otherwise, entrepreneurship may remain a passive observer of the changes in society, including its changing role in society. However, in any case it is preferred that entrepreneurship participates most actively in the processes which specify its role in society. Moreover, the idea of developing a scenario to facilitate the development of the business environment presents a necessary precondition for conducting traditional entrepreneurship activity targeted at making profits and realizing sales. But the point is that the decisions made as to what to produce, where and how to sell, what price to fix, how to finance and organize post-sale services – all this is subject to a comprehensive set of restrictions and bans imposed by society. It should be made explicit that entrepreneurship’s participation of solving in social problem considerably differs from the solutions arrived at within business. Yet, to realize the latter, the availability of many different perceptions of reality, various views and ideologies, manifested in the relationships established between entrepreneurship and the different groups of society and dialogue conducted between them, is to be acknowledged. Today business needs managers able to perform an intricate and unbiased analysis of the political situation and skillfully take advantage of the opportunities political power opens up (in a narrow sense within the framework of entrepreneurship and in a broader sense within the larger

21 social framework). In other words, entrepreneurship should assume the responsibility to be a constructive leader capable of specifying business’s place in the future society.

______1) “The last 50 years – Peter Drucker wrote – and especially the years after the Second world war were years of particular productivity in the field of economic science. Today considerable and profound knowledge on many particular matters is available. We know a lot about such matters as labour productivity while the term itself was practically unknown only 60 years ago… But we do not have a new review, nothing at least resembling the achievements of Gevens, Menger and Walrass have done 100 years ago or Keynes – 60 years ago. Such review in the form of a synthetic theory may not be possible at all, much as we need it…So, to obtain true economic theory we’ll need another integration principle to foresee and govern economic behaviuor on all four economic levels –macroeconomic of individuals and companies; macroeconomics within the national state, economics of transnational business, national economy. Until finding such integrating principle, the economic theory will provide only theoretical explanation of particular events and will give answers of particular questions. It would not be able to provide a theory of the economy as a whole.” Drucker, P., “The New Realities” 2) Georges Forastier’s evaluations are that at the end of the 20th C in the course of three years there occurred such changes in society as in 30 years at the beginning of the century, in 300 years until Newton, in 3 thousand years in the Stone Age.

22 3) Keynes, J. M., “General Theory of Employment, Interest and Money” 4) Keynes, J. M., “General Theory of Employment, Interest and Money” 5) Drucker, P. “The new realities” 6) Poor supply of the needs of customers and users (monopoly prices, accumulation of goods unprofitable for the buyer, false goods); competition working worse than advertising (very low – insignificant – maximization of income, concentration of oligopoly type, growth for the sake of growth, striving for “conservation” of the status quo, resistance to innovations); breaking standards of social behavior (agreement on prices, elimination of competition, bribes, political influence, dishonesty); harmful secondary social phenomena (inhuman labour conditions, unjust distribution of wealth, pollution of the environment, violation of economic balance, exhaustion of natural recourses); interference in national policy (transferring the interests of private business to policy, including those in country’s foreign policy, giving rise to contradictions instead of national unity, supremacy of military and industrial complex, including in military and foreign policy); inadequate response to primary public needs (expensive houses, public transport, health protection, urban decline); changes in the hierarchy of the value system in society (economic growth lost the status of the most important goal, reorientation from qualitative into quantitative characteristics of life level, lost of labour ethics, a suspicious and disapproving attitude towards enterprising, turning the attention to the social infrastructure for social security, saturation of stocks supply). 7) Ford, H. “My Life and my Successes”

23 Note 1 See Al Gore, “The land in Danger”, 1995, “The world made a significant step forward in its understanding about connecting the future economic growth with a reliable policy of stimulating the environment protection and wise control of natural resources… (p. 11). … The meeting about the Earth was the first important forum and it marked the beginning of a process I named “the new basic principle of organization” of the world after the end of the Cold war, namely the task of the world nature preservation and encouraging the economic growth meanwhile (p. 16) … Better incomes are of importance but the side effect of a co-existence of profitability and a larger benefit for the society is not of less importance… … The constructive demand for a better way to coordinate nature protection on world scale with the economic progress imperatives faced the delegates with a huge challenge worthy of selfless work (the word is about the delegates) (p.p. 20, 21) … If we do not understand that the influence of human being upon nature as a whole is becoming stronger and stronger, that in fact we are a natural power like the wind, the ebbs and flows, we cannot realize how seriously we threaten the Earth balance. Our prospect is strongly limited by another reason too. Very often we do not like to take a look at what comes ahead of us, to see how our actions today will effect our children and grandchildren. I am sure that many people have lost faith in the future because with any action of civilization we act as if the future is so unstable that it deserves to concentrate much on our problems and needs of today (p. 24) … … Most of the people think that in some way the ecological system of the Earth will manage to fight with all the waste we accumulated on it and to save us from ourselves. But Prof. Revel’s investigations showed that nature is not immunized against our attendance and actually we are able totally to change the composition of the Earth atmosphere (p.p. 28,29)… … I’ve already got a clearer picture of the most terrible

24 fact in our life – today the civilization is capable of self-destroying. …I thought about what I could do to change in a larger scale the course undertaken by our nation and civilization (p. 31) … … I saw that the world ecological balance depends not only on our ability to restore the balance between the civilization’s unappeased hunger to resources and the environment tender balance; it’s something more than our ability to restore the balance between ourselves as individuals and the civilization that we are striving to create and preserve. And finally – we must restore the balance inside us, the balance between our nature and our actions. Every one of us must take his personal responsibility for worsening of the world nature condition; every one of us must scrutinize his way of thinking and acting that actually have led us to such a serious crisis. As deeper I’m looking for the roots of the ecological crisis worldwide, the more I am convinced that it’s an act of an internal crisis which because of a lack of more accurate word I would describe as spiritual (p.p. 36, 37). …This change made me intransigent towards the status quo, towards the traditional thinking, towards passiveness and irresponsibility grounded in the idea that somehow we’ll manage to escape. This self-satisfaction appears as a soil for many problems but today when world nature perishes, it threatens us with a complete destruction. Nobody can dare to hope that the world will somehow solve its problems. All of us have to unite and decisively and totally change our civilization. I deeply believe that the true change is possible only if it begins inside the people who appeal to such a change (p. 39)… … The only way to realize our new role as co-architects of nature is to make ourselves a part of a complex system operating according to rules different from the simple rules of cause and effect we are used to. The problem is not in our influence on environment but how we interact with it. So, to find a solution we have to think carefully over all this as well as over the complex internal interrelations between the elements of civilization and those of the Earth ecological system (p.p. 59, 60) … … The greatest danger for the world

25 nature can perhaps be found not in the strategic threats themselves, but rather in the way we take them, because most of the people still do not believe how serious the crisis is (p. 63) … … Far too often we simply do not allow ourselves to notice the model because we are afraid of what we might find behind it. Indeed, sometimes it presumes basic changes in the way of living. And those who have invested in the status quo – economic, political, intellectual or emotional – very often object the new model in spite of all evidences (p. 68) … … The belief that the important things do not change and do not move is at the basis of the opposition against the revolutionary new ideas” (p. 69).