ST

ST. MARTIN’S UNIVERSITY

SCHOOL OF BUSINESS

FINAL REPORT OF THE DEAN

May 8, 2006

William McDonald Wallace. Ph.D.

Dean

1999-2006

Introduction

As I near the end of my final term as Dean of St. Martin’s Business School, I feel it might be interesting to students, faculty, and others to recount my experiences since I came here in Jan. 1992. I had just retired as Chief Economist of Boeing Commercial Airplanes (and started teaching a week before I officially retired.) During my last decade at Boeing, the American economy went through its most traumatic period since the Great Depression. That trauma forced a major change in American management philosophy, reinforced by a collateral shift in worldview driven by new sciences such as quantum physics and chaos theory. Boeing was a major participant in that cultural paradigm shift. That shift had a profound effect on me on several levels. First, It much influenced by own worldview as well as what I taught, how I taught it, and later on, how I approached my job as dean.

Why did I choose St. Martin’s? Location played a big role since I had retired to a small tree farm on the Satsop River in Grays Harbor County. But purely from a commuting standpoint, Evergreen would have been 15 minutes closer. But the fact that St. Martin’s was a Benedictine School was important. I had come to admire the Benedictine slogan, ora et labora, in graduate school when I began to study the connection between religious values and economic performance.

St. Benedict was the first significant figure to bring into the sunlight of real dignity the sort of hard work any economy needs to operate efficiently. All the ancient civilizations demeaned work by keeping its social status at the bottom of a highly stratified social order. Benedictine values downplayed that, reduced autocracy and instead put emphasis on hospitality, tolerance, and open communication. All that also appealed to me. This Benedictine spiritual ethic seemed in harmony with the new paradigm of business management that stressed participation, open communication, teamwork, and camaraderie, all part of a participatory universe. I wanted to write a book on this paradigm shift and St. Martin’s Benedictine spirit seemed likely to provide an ideal climate to help me in that project. (The book, Postmodern Management, was published in May of 1998 by Greenwood Press.)

Early Curriculum Reform

When I arrived in early 1992, the division had only 56 business students within the five majors. Only two students declared economics as their major. I taught five classes that first semester, one an overload, all different. But I had

only about 30 students in all. Their tuition might pay for my direct costs, but I doubted they paid my fully allocated costs. That worried me.

At that time the college had just completed an accreditation review. Among other things the accreditors noted that all divisions needed to increase average class sizes to improve financial stability since St. Martin’s was tuition-driven. As it turned out attendance at a Boeing sponsored seminar for faculty members from Boeing’s recruitment area, proved the spur that motivated us to reform our own curriculum to solve the problem. Boeing had ignored St. Martin’s up to that time, so I had helped establish a connection. Our business faculty thus received an invitation to attend the next autumn seminar (co-hosted with Weyerhaeuser). They aimed to give faculty members feedback on their assessment of how well the college graduates they hired were doing. They also hoped to convince us to make some changes.

The feedback (mainly from Boeing) went something like this:

We at Boeing are generally pleased with the level of technical knowledge and skills your graduates bring to us. But we do have two major complaints. The first is really our fault. Along with most other American corporations after World War II, Boeing urged greater specialization for its new hires, because that was what we then wanted. But times have changed. Now we need broader-gauged students. Under the hammer of Japanese competition, especially on the quality front, we need people who see beyond their narrow specialties, who can work across specialties, and accept learning as a life-long job. We don’t want people to hide behind the old bureaucratic excuse, “That’s not my job”. We must take our share of blame for that. But we urge you to broaden the perspective of your students so that they will be better prepared for the major competitive changes in today’s economy that has recently shifted toward a new direction.

The second complaint, I think, is more on your account. In today’s market Boeing badly needs people who can work cooperatively together in self managed teams (that cut right across several disciplines.) We at Boeing have made a big shift in our management philosophy. In the sixties we stressed top down command and control. We quite frankly tried to over-control our employees. We de-motivated them in the process. We listened to Dr. W. Edwards Deming. Deming not only designed Japan’s postwar approach to quality, he became the global expert on how to achieve employee buy-in to continuous quality improvement. We now urge our managers to quit acting like control freaks. We want them to behave more like coaches who create the kind of environment that releases the creative instincts of their subordinates, and encourages self-motivated teamwork and cooperation. We are now giving performance evaluations based on that criterion. But you academics rarely teach teamwork. Your economic texts don’t even mention the word. You teach and grade students purely as individuals. You always have. But American students don’t need their individualism to be reinforced; our culture teaches it very well. The students we hire need to learn how to work cooperatively in teams to bring projects in on time, and to meet cost and quality targets. We spend lots of time in training on that issue and we urge you to help us out.

(The above is a compendium of four different talks by four of Boeing’s senior executives: Phil Condit, Allan Mullaly, Peter Morton, and Mike Little. All were vice presidents or senior directors who earlier went to Japan to learn how the Japanese achieved such good quality via cooperative teamwork. The result (under Phil Condit and Allan Mullaly) was the most successful new commercial jet in history up to then, the B-777.) Mullaly sent me a series of five PBS Videos (without Boeing edits) that filmed the progress of the 777 from first thoughts to certification and acceptance for delivery to the airlines. Mike Little gave me a book that connected the new scientific worldview with management philosophy, and I used it for a text in Organization theory until 1998. The book’s title was: Leadership and the New Science, by Margaret Wheatley, published in 1992).

I was already familiar with Boeing’s shift in philosophy since I participated in it. Yet this seminar (and others) gave me a new and broader perspective on the implications of that paradigm shift from the point of view of a business faculty. Dean Jerry Knutson urged the division to act on Boeing’s suggestions and I enthusiastically supported his idea. So did the majority and so we decided to drop from five to two majors, Business Administration and Accounting. That step enabled us to combine as many as three related courses into one. I combined International Finance, International Marketing, as well as Foreign Trade into a single course of International Economics and Business, cross-listed for both disciplines. We eliminated separate macro and micro courses. The course in contemporary problems became the evolution of economic thought to provide a broader perspective. To provide team experience many of us substituted self-managed team projects for individual term papers.

Cancelling the Major in Economics

By 1982 Boeing was so disgusted by the economic advice they got from their mainstream economists, they fired or reassigned all of them (except for me, the maverick). The whole corporate sector sacked about 75% of their economists betweem1980 and 1990 because they had misguided management so badly. Seattle banks are a good example. Those banks collectively employed about a hundred economists in the seventies. Those bank economists accepted the mainstream predictions that oil prices by 1990 would shoot up from about $34 to nearly $100 per bbl. Instead in 1986 oil prices collapsed to $7.00 briefly, and then stabilized at about $16.00 per bbl. Seafirst Bank acted on that mainstream price prediction and went bankrupt as a direct result. Believing the $100 price would happen, Seafirst made hundreds of loans to wildcatters. When the price of oil collapsed they could not repay their loans. Bank of America took over Seafirst and all Seattle banks fired all their economists soon after.

At my urging we thus cancelled the economics major (but kept the minor.) The lack of majors was just one reason. Even more important to me was the fact that the mainstream neoclassical canon was hopelessly out of touch on labor and indeed the new worldview. It was dysfunctional so why educate students to learn a dysfunctional discipline? The predictions based on that canon had proved either dead wrong or misleading for decades. As Chief Economist, I was acutely aware of, and embarrassed by, those failures. Why so many failures? Because embedded in that model was a “commodity theory of labor. That theory itself is ridiculous. People are social animals, not commodities as critics have always pointed out. To avoid embarrassment most professors who taught the neo-classical paradigm rarely mentioned the commodity theory or its companion piece, the “economic man”, (a social isolate interested only in money.) If either were mentioned at all most professors responded with Milton Friedman’s stock defense. Friedman argued that complaints against the commodity theory missed the point. The theory was used merely an “instrumental” assumption made to improve predictions of market behavior, and not to depict any broader reality.

The problem was that the now half-hidden economic assumption that people could be treated as if they were mere commodities subtly became embedded in personnel policies on organization and management. Some of these policies took the commodity theory to be real. Few people made that outright claim, but actions speak much louder than words and those actions invited a backlash. The first was Marxism. So was the later trade union movement. Japan’s sudden emergence as a competitive threat, meanwhile, came as a clear proof that in action, the commodity theory is highly dysfunctional, something I had suspected since graduate school.

Why not just get rid of this clearly defective theory? Because, in practice the commodity theory served the purposes of several groups. In academia, for example, the commodity theory allowed professors to teach economics as a branch of linear mathematics. One must use linear mathematics to make precise predictions when “other things are equal” and in so doing Professors could think of themselves as part of a science akin to physics. Such thinking began at the very outset of the new discipline in the 18^th century shortly after Newtonian physics had taken over. Newton’s ability to predict the orbit of the planets had conferred enormous prestige on physics. Economists wanted to share in that glory and at the same time rid economics of ethics. (Ethics was thought to have no place in a real science). The Newtonian worldview held that the universe was a deterministic machine (the clockwork universe as it was called). This model not only allowed economists to imagine they could make precise predictions, but just as important, allowed them to ignore the social needs of labor.

Japan was not blinded to those needs. Japan rejected the commodity theory as immoral and instead made the assumption that people were social animals. Thus workers had social needs that had to be addressed in the interests of competitive efficiency based on cooperative teamwork. Western economists dismissed all that as a unique aberration, a feudal legacy that Japan would shortly have to reject as it entered international competition. (In the West during its feudal age, economics was a branch of social ethics and that had been firmly disavowed by the Newtonian scientific approach.) Instead, Japan’s international competition between 1970 and 1985 took over one American market after another as Japan became the second most powerful economy in the world. Despite all that, neoclassical economists to this day dismiss Japan’s organic approach as a feudal legacy that will have to go. (You still will not find the term teamwork, team spirit, or esprit de corps in the index of any economics principals’ text expounding the neoclassical canon. For years I have challenged my economics students as follows: Find any of those words in a principal’s text, show it to me, and I will give you $10.00. I have yet had to pay.)

I wrote my doctoral dissertation at the University of Washington on how Japan’s religious values had helped launch Japan’s own industrial revolution with such success and so little trauma. Clearly, I concluded, the commodity theory is not a necessary assumption for a modern industrial economy. In January 1994 I delivered a paper in Hong Kong on how Japan escaped the Great Depression through its preference for an organic (family-like) approach to labor and how our commodity theory of labor created nearly all the unemployment that America had experienced. The conference director, who edited the Journal of the Western Economics Association, Contemporary Economic Policy, urged me to submit my paper to his Journal for peer review. I did and it was accepted and published as the lead article in the April 1995 issue: “The Great Depression Reconsidered, the Implications for Today”. I incorporated much of that article as a chapter in my 1998 book, Postmodern Management.

In light of the events discussed above, the business division voted to eliminate the economics major and combine the others into one: Business Administration. Skeptics within the division feared we would lose students as a result of our reforms. They left soon after, but despite their fears the number of students declaring for a business major soon began climbing. On average that growth has continued to this day. The number of business majors reached an all time high of 141 (plus 46 in accounting) in the autumn of 2005. This growth occurred in class size, not by adding more classes. As a result the Business School had to add only one new full time faculty member to accommodate a nearly three fold growth. We in the division were thankful to the administration of the college, led by Dr. Spangler, our president, and Dr. Langill, the VPAA, who, in the best Benedictine tradition, left it up to us to put our own reforms in place.

The Payoff

As a result, the division became a major cash cow for the university as a whole. Indeed, most of our increased revenue went elsewhere other than the division. Under the outstanding direction of Hal Wilson, the highly profitable returns from our MBA program substantially added to that cash flow despite fluctuations in enrollment in periods of military redeployment of personnel as happened during Desert Storm and Iraq.

Our reforms also paid off for many of our students. No St. Martin’s student had ever been hired into Boeing’s lucrative summer intern program up that time. When Boeing recruiters came by we urged our students to stress their broader majors and that they now participated in self-managed team projects in most business classes in their interviews. (Many of us had substituted self-managed team projects for term papers.)

Boeing immediately began hiring our students. In per capita terms Boeing hired more interns from St. Martin’s than anywhere else and also offered more of them permanent jobs. Unfortunately, Boeing had to cancel their intern program after the terrorist attack of September 11, 2001 because after that attack airline traffic dropped sharply. Many airlines cancelled firm orders for jets and Boeing and the aerospace sector went into sharp recession. (Fortunately it is now recovering.)

The China Program

I became Jerry’s place-holder dean after he took a long leave to teach English as a second language in China. When Jerry came back he resigned as dean in order to work on a doctorate and I finished out his term. (After getting his DBA, Jerry went on to another school.) At the next election the division elected me to a regular three year term to replace Jerry, reelected me in 2003, which was my third and final term.

In late1999 St. Martin’s Chinese representatives of Pudong business school in Shanghai approached St. Martin’s. They wanted us to join with them to create a two year business curriculum to be taught in English by St. Martin’s business professors. The plan was to qualify Pudong’s two year graduates to come to St. Martin’s to finish a four year degree in Business Administration. That degree would, in turn, much improve their student’s ability to get better jobs in China. Those unable to finish the four year degree would still qualify for employment with American or British firms in China. That has proven to be correct.

It took over two years to work out the details and at one point the deal nearly fell though over lack of focus. The VPAA, Dr. Johnson, had assumed control of the project early on. She did not want the China project to focus only on business and so the division backed off. Then Dr. Johnson left St. Martin’s for another position, and Dr. Spangler urged the division to take over the academic side. We were willing provided that we could focus first on what the client wanted, namely a Western style business program taught in English. We felt strongly that we should first focus on what the client wanted. Additional programs could follow should the business program prove successful. Josephine Yung, Director of the Pacific Rim Institute, and our President, Dr. Spangler, agreed. Given a free hand to design the curriculum, and thanks to Director Yung’s skills in relationships and negotiation, a deal was struck. In the autumn of 2002 four of the division’s faculty members, Mike Gideon, David Rasmussen, Riley Moore, and Paul Patterson individually went to Pudong in that order to teach the curriculum in English for intensive three week periods. They repeated the process in 2003-4 with great success despite much stress and disruption of their classes here in Lacey. Over 20 Chinese students soon qualified and came to St. Martin’s as full pay students. Their revenue helped make up some of the loss of revenue from the military bases that had occurred from the Iraq war.

We felt that our involvement in China was important for the Business School because we had as much to learn from China’s way of doing business as they did from us. Moreover, China was the fastest growing economy in the world and was rapidly assuming its place as a major global economic power, possibly set to become the world’s largest economy within a decade or two. Thus Riley Moore suggested that St. Martin’s sponsor a conference on China to alert local business firms about its emergent growth. Some people in the state government agreed with us and provided valuable assistance. So did others in the college, and especially Paul Patterson in the Business School. Governor Locke agreed to give the keynote address and the Chinese ambassador based in San Francisco also gave a major address. The conference, held in Worthington Center, was very well attended. As a follow on to that conference we sponsored a trip to China for local business and state leaders in the Spring of 2006.

The Business School has also made it possible for our own students to get college credit for summer tours of China and Japan, under the guidance of staff and faculty from the Business School. Riley Moore, Paul Patterson, and Sharon Sullivan have all served in that role. Meanwhile, as our program expanded, other faculty members have been able to go to Pudong, beginning with Dr. Rex Casillas, followed by Dr. Les Bailey, and Dr. Richard Langill.

Meanwhile, St. Martin’s has established a relationship with Wuhan University of Technology in Wuhan, China and several adjunct faculty have already gone to Wuhan to teach courses there.

Reflections on Management

In 2004 Dr. Spangler complimented me on the outcome of the China Conference. My response was that the only credit I could claim for it was that I got out of the way. (Lead, follow, or get out of the way is one of my mantras). Once I saw the enthusiasm of the participants, I played almost no role. In my experience, micromanaging people who know what they are doing often creates performance problems. In any event micromanagement seems contrary to the Benedictine spirit.

Management of any kind brings up the question of the relationship between “process” by which work is done and the results produced. I had always been puzzled by why some organizations seemed to insist on the rigid application of process, while others seemed relaxed about process and instead demanded results. Some times the same organization can shift from one focus to the other. One early and one recent experience serve to illustrate. I went into the army during the Korean War and my first duty assignment was on the division faculty teaching basic trainees in Ft. Lewis. In garrison, success depended on following army regulations precisely. But when I was deployed to Korea, that rigidity was suddenly much relaxed. Success depended on getting the job done.

A more recent experience better illustrates the point. A former student called me in Sept. 1998 and invited me to apply to join the board of the Grays Harbor Public Development Authority that was taking over the mothballed Satsop Nuclear Power plant. (One had to live in Grays Harbor County to be board eligible.) It seemed to fit in with my community service duties at St. Martin’s so I applied and was accepted. The idea was to scrap the power plant and create a business park with a high tech slant. The broader purpose was to attract new businesses that would provide family wage jobs for Grays Harbor residents. The Park was launched in November 1998 with great fan fare and Governor Locke presided over the opening. The anchor client, Safe Harbor Technologies was a dot.com start-up that had created a new web-based method of providing technical help to their client’s customers. It’s motto was “get big fast” for its CEO saw (correctly) that in the event of over-expansion, only the strong would survive the correction. That strategy, however, put our Board in a dilemma. To accommodate Safe Harbor we had to move fast in creating facilities because they were adding people who needed space and equipment at the rate of 25 a month as new clients keep signing up. To Safe Harbor providing that space or not was life or death. They needed it to show clients they could accommodate their needs. The Board voted to accommodate them, but the only way we could was by skipping some of the rules such as putting new construction out on bid and accepting the lowest cost bid. Instead we gave the contracts to the firms we trusted based on prior dealings. The result was that Safe Harbor did get big fast, and while most of their early clients were dot.coms, they also got several major and more stable clients such as Washington Mutual Bank and American Airlines. Safe Harbor thus survived the loss of most of their dot.com clients after the Crash in 2001. And the park’s Board did indeed accomplish the core part of our mission of attracting several hundred family wage jobs.

Our first audit by Brian Sontag and State Auditors office came shortly after. The audit found the Development Authority was far out of compliance with the state rules on such issues as bidding. The auditors did not care that we accomplished our mission. From their point of view it would have been far better had we failed to provide family wage jobs as long as we remained in compliance with the state regulations. Here was a clear cut case where regulatory compliance would have undercut mission achievement. That issue arises with varying intensities all the time and we learned the hard way that State Law does not address the issue.

That issue, among other insights encouraged me to begin research on a new book. It looks at the role of cultural evolution in relation to human behavior. All life, biological and cultural, evolves by a process called “punctuated equilibrium”. Disruptions of some kind trigger “punctuations of change” in an environment in stasis or “equilibrium”. Disruptions create new frontiers of risk and opportunity. They also change the fitness criteria for survival expressed as the behavior of individuals as such, as well as the collective behavior of cultures. The degree of change of course depends on the scope and severity of the disruption. For purposes of this report the bottom line is that people naturally tend to focus on results when they find themselves in a “frontier” kind of environment of change. The same people, however, become more process-focused in an environment that is in the equilibrium mode in terms of evolution. Tension between these two modes, punctuated frontiers on one hand, and stable equilibrium on the other, often create conflict between and within societies.

Ethics often provides a focal point of the clash when a frontier focus on results conflicts with the equilibrium focus on process, e.g. following the rules. In the fairly stable world of Eton, the elitist British school, the ethic is: “It isn’t whether you win or lose, but how you play the game.” In the more chaotic arena of American professional football, however, Vince Lombardi’s dictum spells out a different ethic. “Winning isn’t the main thing, it’s the only thing.” Each slogan works well enough in its own environment and neither works well in the other environment. Part of the problem is that this natural difference is simply not well understood theoretically by the social sciences in terms of psychological, social, ethical or political theory.

A Chaotic Future?

The Business School has made remarkable progress in the last 12 years. Yet our economy must cope on an almost perpetual frontier of change that entails both serious risks and great opportunities. One risk is that the Business School’s long standing advantage of a more convenient location has been eroded by the UWs expansion of its Tacoma campus into a four year school that offers a degree in business. South Sound Community College is also expanding in Hawks Prairie in business and accounting. When the number of high school graduates begins to decline in the next couple of years this combination of changes could create an acute crisis. We thus badly need new programs that can attract students regardless of location. We also badly need to solicit funding for new cutting edge programs that can meet that need. As a purely tuition driven university our ability to innovate successfully is sharply constrained.

More broadly, cultural changes driven by ever newer technology will continue, to force changes in the cultural “software” any society must create to regulate how people interact with society’s technological hardware. Consider a broad example. Capitalism and communism depended on the same industrial hardware such as railroads, steel mills, tractors, and trucks. Each system pursued similar goals such as economic growth and better living standards. In a seventy two year contest, capitalism proved that its software based on competitive markets proved more effective in achieving those economic goals compared to a mechanistic system of bureaucratic command and control. (Communism also was a system where an ideologically-driven process trumped economic results as my recent book, Techno-Cultural Evolution (Cycles of Creation and Conflict) points out. The main reason was that communism virtually excluded grass roots innovators and business entrepreneurs from participation. Yet these two factors always have accounted for most of capitalism’s technological progress. Communism thus cut itself off from the frontier stage of technological advancement. By 1980 they had come to depend more and more on their ability to copy our innovations and thus they were always behind and the gap was widening. (That realization led to the collapse of the Soviet Union, a sharp departure from communism in China, and a great reduction of socialist constraints on entrepreneurs in India.)

Yet, as the early part of this report suggested, in the seventies it became clear that the Japanese version of a market economy premised on a social theory of labor proved a far more effective software for an industrial market economy compared to one premised on the commodity theory of labor and its bureaucratic top down approach to management.

After the Cold War ended the world began sliding into a number of ever more intractable problems. They all have an impact on higher education in a way that requires policies that enable a quick and flexible response to a sudden crisis. We can always make five year plans. But unless those plans allow us to respond quickly to surprise shocks, then as they say, a good way to make God laugh is to show him your five year plan. This is another example of what is called for on a frontier of change vs. a focus on process that assumes a stable equilibrium.

After the USSR collapsed a short lived consensus emerged that major conflicts between ideologies had ended. They have changed, but they have also gotten worse. Capitalism, thanks largely to its embedded commodity theory of labor, continues to elicit resentment in much of the world because it so successfully promotes on-going technological change. Joseph Schumpeter noted that capitalism grew mainly from the work of innovators and entrepreneurs who acted as the main change agents. But he also noted that innovation was a process of creative destruction as the new kills off the old. As a frontier nation, America celebrates creation and the freedom innovators and entrepreneurs require, while nations focused on tradition and process decry the destruction. Such cultures focus more on obligation and duty rather than rights and freedom. While most religions prefer equilibrium to frontiers of change, Islam seems by far the most adamant about it. Samuel Huntington’s famous book, The Clash of Civilizations, depicts this conflict. In my recent book, I relate the clash to the on-going tension between punctuation and equilibrium. Both are vital parts of evolution but each has its own requirements for survival.

Meanwhile, the successful Asian approach to market capitalism is also emerging as an open contest between the social theory of labor and the commodity theory that academia continues to embed in neo-classical theory and that then becomes like a computer virus that spreads into practical management policy. Wall Street also loves the commodity theory because it enables those dealing in high finance to ignore the human implications of many of their financial actions such as financing unfriendly take-over bids, outsourcing abroad, mergers of incompatible corporate cultures, and the celebration of mass lay-offs to pump up the “bottom line”. It is not clear how the commodity theory can win this contest between software systems in the global arena. It lost badly to Japan twenty years ago.

Hovering over these political and economic contests is the sudden emergence of a growing consensus about global warming. Many previous skeptics (including me) have come to see the threat as real. Satellite photographs depicting the sudden shrinkage of the polar ice caps proved decisive in my case. We cannot do much about this crisis if global warming has passed the “tipping point” of a sudden climate shift.

If we have not passed the tipping point, then we clearly need to take account of ecology in all our classes, none more so than in economics. Academia needs to reform the neoclassical economic model because it ignores the environment and treats natural resources as a more or less unlimited cornucopia provided as a gift of nature. The model takes account of the direct costs of extracting the natural resources but little else. Actually, reforming the model to take a broader and more realistic view of the physical environment would be fairly simple by itself.

The more difficult problem is the social environment. The commodity theory of labor needs to be replaced with a more organic or socially realistic view of labor in its social environment. That is not a problem in principle but it clearly is in politics and on several levels. On the macroeconomic level the difficulty arises from a simple but compelling set of statistics. The human population has grown from about six million to over six billion since humans began farming 10,000 years ago. Two thirds of that growth has come since the end of World War II. The average per capita consumption has risen by over 100 fold since farming began and about half of that growth has come since 1950. Thus of the total 100,000 fold growth in human consumption, about 60% of it has come in just the last sixty years. Today, about 40% of the jobs in our economy directly or indirectly service economic growth. Stop the growth in consumption and under the commodity theory of labor, mass layoffs will promptly begin in the growth and growth-servicing sectors of the economy. That was the main trigger of the Great Depression. Several new industries had reached temporary maturity in demand and promptly had to cut production from replacement plus growth demand to replacement only, by as much 50% in the auto industry between 1929 and 1930. (See my paper, The Great Depression Reconsidered, Implications for today) Contemporary Economic Policy, (April 1995, lead article.)

No politician could afford to promote a growth-stopping policy to protect the environment at such high rates of unemployment. As unemployment shot up tax revenues would plummet and the social safety net would come under enormous stress. Thus the commodity theory as put into practice makes the economy highly vulnerable to global competition. In practice It is a highly destabilizing theory any time growth stops for any reason. Output and employment drop at once from replacement plus growth to replacement demand only. Organic employment policies, with their more flexible unit labor cost, as practiced in Japanese industry and by family farmers the world around, however, are far less vulnerable. Both Japanese industry and American farmers both proved that fact during the Great Depression. Income fell but employment remained stable. By slashing prices rather than employment Japan’s industry had little unemployment and in America, farm employment actually rose slightly between 1929 and 1933. (The September 1936 issue of FORTUNE devoted that whole issue to Japan and how it escaped the Great Depression. John Maynard Keynes published his General Theory (that put the neo in the neo-classical model) about the same time. Yet Keynes ignored Japan’s escape while explaining our Depression by trashing Say’s Law. The fact is that the Great Depression proved Say’s Law works in the economic sectors not subject to employment policies derived from the commodity theory of labor. Say’s law of markets states the supply creates its own demand, if and only if, unit labor costs and hence prices, can vary freely. Where labor costs were flexible employment did remain stable but income fell. Where unit labor costs were rigid, employment collapsed while prices remained high.

I would not discuss this issue at such length had not the commodity theory virus spread to the management policies of academia including St. Martin’s University. The virus expresses itself in two policies. The first is the policy of employment at will. The second is the practice of rigid rates of pay unrelated to revenue. The shortfall of revenue from the base programs over the past year illustrates the problem thus created. Given rigid pay rates that modest shortfall provoked a major budgetary crisis. Had 10% of everyone’s pay been “at risk” (free to rise or fall automatically with that limit), no crisis would have arisen. All faculty and staff would have had a strong personal incentive to improve retention rates. Instead, the crisis was addressed by yet other commodity theory-driven steps. “Cost cutting” policies were invoked that put student retention at risk. For example when regular faculty quit or retired the administration wanted to replace them with lower-paid adjuncts who are employed at will. The use of adjuncts has its place. However, their use for years on end to teach core courses is not one of them. That is just academia’s way (to use a Marxist term) of exploiting the academic labor force. The commodity theory is the real villain, not the managers who accept the theory because it is so wide-spread. Indeed, wide-spread use convinces many people the commodity theory and the adversarial relationship it fosters is “a law of nature”. It is not. It is a toxic outcome of policy.

(In my books and journal article cited above, I explain how Britain’s Enclosure Movement from 1400 to 1800 that uprooted thousands of tenant farmers and thus created the social conditions that first produced rural refugees who, lacking jobs, became an alienated underclass mired in crime. They wound up as Marx’s famous “industrial proletariat” and thus became the main source of labor for the early factories of the industrial revolution. As with the denizens of many of today’s urban ghettos, their 18^th century behavior revolted the middle classes. Thus bosses applied theory X (people must be coerced to work). By the same token middle class economists found it easy to dehumanize working class labor as “commodities” as they began to theorize about a market economy.)

In that social context, the emergence of the commodity theory, while hardly admirable, is at least understandable. But why continue with it 200 odd years after the social events that gave it life had vanished? And especially why does academia continue with it, despite its pronounced liberal bias? The main reason is two fold. First, the commodity theory is implicit not explicit for reasons cited earlier. It has thus crept into policy more as a toxic virus and not as a respected premise. Second, administrations in any organization dependent on its earned revenue, face the practical problem of matching expenses to that revenue. The commodity theory has long proved useful to justify counter-productive (penny wise but pound foolish) steps. Very broadly, however, the wage rate rigidity explicit in the commodity theory is the villain. It almost forces short term cost cuts that undercut future revenue and alienate regular faculty.

Unions usually institutionalize the adversarial relationship embedded in the commodity theory, but that is often the only way for employees to defend against the kind of tyranny the commodity theory implicitly encourages. That would be a pity. To avoid that outcome, organizations need apply organic management practices and a Theory Y ethic that people will do a good job if allowed to do so. In effect such a management approach puts Benedictine values into practice.

Teaching and Research; A Personal View

As between teaching and research I usually focus on research. Nearly every non-academic job I have held since graduate school, as a corporate economist, as an economic consultant and later as a management consultant, my job was focused on research. Usually I try to explain actual behavior within a broad theoretical framework. At times that requires the researcher to come up with a new theory. Thomas Kuhn pointed out in 1962 that, for the most part, scientific research aims to explain puzzling phenomena within an existing set of theories that he calls a paradigm. But as more unexplained puzzles mount up, a new theory is needed and when it is successful, the paradigm shifts to a new theory or set of theories. A pile of puzzles creates a dilemma for those who both teach and do research. I teach mainly in economics and organization theory and both deal in human behavior. In both disciplines the unexplained puzzles have indeed mounted up. The teaching canons in the established paradigms are, in my view, deeply flawed because they must explain away too much that does not fit the theory. My two books published since coming to St. Martin’s both attempted to explain the two sets of puzzles with new theory. Postmodern Management dealt with organization and my recent book, Techno-Cultural Evolution deals with economics in a broad context of cultural evolution. Out of my research for this book has come a plan for another. It aims to unify all the social sciences into a general theory of human behavior rooted in biology and within the evolutionary framework of punctuated equilibrium and other post-sixties sciences such as autopoiesis and chaos theory that make unification a possibility.

This kind of research has long attracted me but is very demanding if pursued seriously. I confess it has absorbed most of my creative energy such that my teaching suffered to some extent (not to mention my attention to administrative detail). I feel strongly that until St. Martin’s can afford to give sufficient release time for serious research, the university should remain focused on teaching.

Still in my case I felt strongly that the first priority of good teaching is a sound canon based on good theory. When such a canon is at hand then the creative focus should shift to the way the canon is taught. It is this part of teaching that St. Martin’s does so well. Hal Wilson, Don Stout, and Paul Patterson have all taught superbly well and almost every year they get nominated as outstanding teacher of the year. Heather Grob seems likely to follow in that same path. Don Stout has won the award of outstanding faculty member.

Combining teaching and research duties is perfectly sound provided the research is of the kind that extends the paradigm or explains puzzles within it. But if one begins serious research into an unstable canon defined by many unexplained anomalies, the picture changes or at least it did for me. While it may be just a personal idiosyncrasy, lectures help me firm up my conclusions. I enjoy seeing what objections my ideas may encounter. I am well aware that lectures have their limitations as a teaching method. It is however, a reasonably good way to pass on new information. Still, I suspect only about 20 to 30 percent of my students (the intellectually curious?) are much interested in learning new theory about old problems. For quite practical reasons most of our students are mainly interested in getting their degrees so that they can get a better job. Still, for better or worse, lecturing about my research helps me to bring my research to completion.

The best education comes from a sound canon taught in a way that inspires the student to learn. Great teaching of a flawed canon, however, can be worse than ignorance of that subject. Ordinary teaching of a good canon is much better and even if the student does not learn much, at least he or she won’t learn the wrong thing.

Appreciations

First, I want to thank the faculty and administrators of the division. I made it clear from the outset that administration was not my favorite activity and that I would accept the job of dean only with strong support. Linda Newman, Leslie Good, and for the last three years, Sharon Sullivan, all provided that support in spades. I also want to thank several faculty members for stepping in to help when my last book project began taking up so much of my time. Don Stout, Paul Patterson, and Hal Wilson all stepped up and helped me out of many an administrative bind. Riley Moore was a great help in all things connected with China and especially so on our trip to Beijing, Wuhan, and Shanghai in late May 2005.

Of course collectively I want to thank all my students for their guidance in writing both my books, even when they did not know they were providing it. While I much appreciated verbal and written comments, those who began dozing off also provided me with useful feedback. I of course apologize to my students since 2002 for being so caught up in my writing that I failed to devote as much time to their individual needs as I should have liked.

I want to give special thanks to Norma Shelan and Don Stout for encouraging me in my last book from its first thoughts. Both read dozens of first drafts of various sections and steered me away from some blind alleys. Norma read my entire manuscript and her wise comments often kept me out of trouble. Many thanks to you both.