Amanda Grayson

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Original document was submitted as an honors thesis requirement. Copyright is held by the author.

Document Type

Thesis

Abstract

The European Union is a combination of twenty-seven different and unique cultures under one common government. Can culture help explain the continued problems emanating from the European debt crisis?

In undergraduate management courses around the world, from Harvard University to Beijing International, eager young minds are taught the same fundamental management theories. Among others, one of the most popular would inevitably be Hofstede’s Cultural Dimensions.

Geert Hofstede, while working for the IBM research department, undertook a detailed survey and analysis of the various cultures of the world. He defined four dimensions of culture, now expanded to six, that can be utilized to describe the culture of a specific country, thereby creating a framework for international businesses to develop effective strategies. Hofstede once said in regards to cross-cultural business, “Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster.” His model was created as a method to solve this source of conflict.

Various business men and women have written about both the applications and the limitations of Hofstede’s dimensions. Most analysts entertain the idea of doing business across two or three cultures, and in general the consensus is the same: the more cultures that are at play, the more difficult the business becomes. So what would happen if there were even more cultures at play; twenty-seven for example? This is exactly what was created with the European Union.

Applying Hofstede’s Cultural Dimensions to the European Union would prove that this monetary alliance cannot succeed long-term without significant changes to the current management structure.

In order to accurately prove my thesis, I must analyze and answer three main questions. First, it is necessary to review the boundaries of Hofstede’s dimensions in order to apply them to my field of study. By understanding the exact definition as well as the constraints of his model, a more accurate judgment can be reached. Second, I shall create a profile of the major players in the debt crisis, in order to identify the core cultural attributes and business management style. By graphically displaying the differences based on Hofstede’s dimensions, I will be able to evaluate and compare the different markets. Third, I will attempt to define problems that led to the European Sovereign Debt Crisis. By defining the current issues in the European Union and the responses to these issues in government, I can explain the relevance of management theory to monetary union.

At the conclusion of these three focus points, I intend to support that European Monetary Union has left cultural gaps, and if left unattended can lead to the demise of the Union. It is impossible to unify a large quantity of diverse markets under a single legislation. Cultural differences should be celebrated and embraced rather than swept under the rug. Unless the European Commission decides to actively modify their current strategy to reflect these cultural barriers, the European Union cannot succeed in the long term. No, culture is not the sole cause of the current EU catastrophe. But accounting for cultural differences would have lessened the severity or perhaps even prevented the current economic crisis.

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