On Hernando De Soto, a mechanical economist,
and Douglas McGregor, a humanist at work

Nipawin - January 1, 2001 - by: Mario deSantis

differential thinking

Yesterday I read the book "Douglas McGregor Revisited(1)' and this early morning I read the
article "Why the invisible hand has failed the Third World(2)." What a contrast of imagination
is included in these two writings and what kind of differential thinking is expressed by the two
people in question: Douglas McGregor, a management scientist, and Hernando De Soto, a
Peruvian economist.



Theory X
Theory Y

Douglas McGregor formulated the well known Theory X and Theory Y related to the
management and motivation of workers/employees in the work place(3). McGregor presented
these theories to open a public dialogue on understanding the basic assumptions of our human
nature so that people's work could be designed to be closer to our human nature and aspiration.
In a nutshell, Theory X assumes that people are inherently 'lazy' and must have external
prodding to do anything, that is waving the dollar sign in front of their noses; instead,
Theory Y assumes that people are inherently cooperative, imaginative and creative. There is
no doubt where McGregor stood about these two theories, and when asked repetitiously the
question of how you would motivate people he would respond "You don't, Man is by nature
motivated." Therefore, the challenge lies not in motivating people but in building an
environment in which motivated people are willing to make a maximum contribution
[Heil/Bennis/Stephens page 87], for themselves, for their organizations and for their




Hernando De Soto(5) has written the book "The Mystery of Capital: Why Capitalism
Triumphs in the West and Fails Everywhere Else". In this book, De Soto sees the world as
made up of poor and rich countries. De Soto observes that after the fall of Communism with
the disintegration of the Soviet Union, capitalism has not provided new wealth to the former
communist countries and to the third world. He believes that capitalism has not been
successful in these countries because of the lack of well defined property rights.




I am very puzzled by this economist's observation, however I am getting used to the
widespread BS coming out of the mouths of our outstanding leaders, be politicians,
academicians, businessmen or some other experts of human nature and affairs.




Now that we don't have communism anymore, what do we have? Capitalism? And what is
Capitalism? If capitalism is free enterprise I ask myself where is it(6)? If capitalism is the
free market envisioned by Adam Smith(7), I ask myself where is it(8)? My contention is that
there is no point of exporting Capitalism to the third world as there was no point of exporting
Democracy to Vietnam in the 60s and 70s. Under this overall political and economic
misunderstanding, to blame the failure of Capitalism in the third world countries to the lack
of well defined property right(9) is not only absurd, but void of any social intelligence. I am
just wondering, instead, if the failure of Capitalism in the former communist and third world
countries could be due to the lack of Human Rights in these countries.
  Quote by Donella Meadows "challenging a paradigm is not a part-time job. It is not sufficient to make your point once and then blame the world for not getting it. The world has a vested interest in, a commitment to, not getting it. The point has to be made patiently and repeatedly, day after day after day" ftp://sysdyn.mit.edu/ftp/sdep/Roadmaps/RM1/D-4143-1.pdf The Global Citizen, http://www.tidepool.org/gc/
  List of relevant social articles http://www.ftlcomm.com/ensign


Douglas McGregor, Revisited: Managing the Human Side of the Enterprise, by Gary Heil, Warren Bennis, Deborah C. Stephens, John Wiley & Sons, Inc. 2000. ISBN 0-471-31462-5. Gary Heil and Deborah C. Stephens are coufounders of the Center for Innovative Leadership http://www.cfil.com/ And Warren Bennis is Distinguished Professor of Business Administration at the University of Southern California http://behavior.net/column/bennis/bio.html




Why the invisible hand has failed the Third World, Lorne Gunter, December 30, 2000, The Edmonton Journal




Business Open Learning Archive. Douglas McGregor - Theory X and Y




Living Systems: Principles of Organization and Building Sustainable Human Communities, by Mario deSantis, September 12, 1998




Hernando De Soto. Interviewed by Dario Fernandez-Morera




The assembly line economics is obsolete, by Mario deSantis, December 26, 2000




Biography of Adam Smith (1723-1790), Adam Smith wrote "The Wealth of Nations." He is most often recognized for the expression "the invisible hand," which he used to demonstrate how self-interest guides the most efficient use of resources in a nation's economy, with public welfare coming as a by-product. However, Smith's belief in the invisible hand was questioned when at the time of his death on July 17, 1790, it was discovered that Smith had devoted a considerable part of his income to numerous secret acts of charity. Yet, our conventional economists identify Adam Smith as the true believer of "The Invisible Hand," that is capitalism, whatever capitalism is for our conventional economists.




THE BETRAYAL OF ADAM SMITH, David C. Korten (When Corporations Rule the World)




Securing Property Rights: The Foundation of Markets. An interview with Hernando de Soto, by the Center for International Private Enterprise