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The Global Financial and Economical Crisis is a Crisis of Management
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The Global Financial and Economical Crisis is a Crisis of Management


Vitali Guitberg, Ph.D.


“America has been failed by its government and the nation now faces catastrophic consequences unless that government changes its ways, Wharton management professor Lawrence G. Hrebiniak concludes in his new book, The Mismanagement of America, Inc.” (August 2008)



A suddenly arisen Global Crisis is a regrettable, but expected result of continually far-reaching management crises on all levels of government administration and management of technological processes in workplaces, and in private life.

Through resent decades, both public and private life became so complicated that any reasonable decisions in the management field are as reliable as chiromancy. Unfortunately, this is an objective reality, and it is does not matter who is the leader and parlamentry decision makers of a country.


This is proven by the fact that no national leader or recognized economist is able to provide any coherent explanation for the origin of this crisis, and show the optimal way to overcome it. A number of reasons are blamed in mass media for this crisis, such as wasteful consumption, the tendency of populations to live above their income, bank credit frauds and so on. Of course, they are not actual reasons, but are consequences of social and financial mismanagement on a government and personal level.


When any new item comes to reality, for instance a product comes to the market, it will lead to some consequences (social and economic), which usually cannot be accurately predictable at a stages of item’s design, because it is practically impossible to consider all the necessary factors for such prognosis. In many government projects the same thing is happening, their results demonstrate it rather well. Accumulation of new designs with many unaccounted social and economical factors is similar to a ripening abscess, which eventually bursts. This actually occurs to economy in those or other countries.


Effectiveness of government designed and managed economy has still not been proved, taking the countries with such economies: Cuba, North Korea, Zimbabwe, etc as an example.  

Voluntaristic rulership by a “grand leader”, who makes only “genius” decisions, benefits only the leader. In democratic countries their leaders are selected by the people, but ultimately the leaders make decisions on the basis of subjective opinions, that are without an accurate prognosis the consequences are also voluntaristic. Very often we can see that the political and socio-economical projects did not succeed at the goals or even have miscarried.

There is a huge risk that the regulation of the economy by the government in democratic countries could lead to the same situation currently present in nondemocratic countries.


When meddling in people's business with the goal to lead a country to prosperity, it is necessary for the leader to be sure in achieving a positive result. Unfortunately, it is clear that leaders do not possess a method for accurate prognosis and for getting the optimal result even when he makes his decision together with a group of advisors.

American Congress Debates regarding the Budget of 2009 demonstrate the opposing opinions of the two main parties. Republicans argue that the budget is doomed to failure and disaster, while Democrats welcome it as an eminent achievement. Who could be a reliable arbiter between these parties? Who can propose a more reliable and optimal Budget? 


Who declare that “our world is only as good or bad as our decisions” obviously have trust in correct decisions that have to be implemented in real life, but decisions cannot be classified as only good or bad. On one hand it could be good, but on the other hand it could be not so good (as used to say Tevye the Milkman from the “Fiddler on the Roof” musical). With any decision regarding a project the result of its implementation should be less “bad” and more “good”. This is possible only when all necessary factors are taken into account by the designer of the project. But this is not enough. It is necessary that the designer has a method for doing it correctly and will be able to utilize this method. 


At the present stage of development in human society, it has become much easier to make global decisions, because they are always voluntaristic regardless of how many people participate in the decision making. On the other hand, the implementation of any global decision will require many executive decisions, which could reverse the plan (project) originally conceived.


Decision making for a medical doctor is more complicate, because he has an obligation to find the optimal medical treatment for the patient, but more frequently doctor is not able to do it, especially in complicated or/and emergency case.


It is unsurprising then that Hippocrates demanded to: “not do harm”! He did not believe that the doctor could always do more. It was in that time when physicians were able to retain knowledge necessary for taking into account important factors for more or less accurate diagnosis and design close to optimal cure. While today it is no longer possible for individual physician. Neville W Goodman (consultant anesthetist, Southmead Hospital, Bristol) in his review of book “Doctors' Errors and Mistakes of Medicine: Must Health Care Deteriorate?” By Moshe Wolman, Ruth Manor (2004) wrote: “Medicine is an uncertain activity, in which there is no substitute for learning and training on sick patients; it is inevitable that doctors will make mistakes, and some mistakes will kill people.” The problem of obtaining of knowledge concerns not only medicine.            


It is too risky to depend on ones extremely limited personal knowledge, which becomes even smaller next to the avalanche of unsystematic scientific knowledge, distributed through a large number of sources.


From the methodological point of view, our consciousness uses an algorithm that is common among all living beings in Nature. Our consciousness is “programmed” in such a way that it addresses the current situation by analyzing it, assessing it, determining tasks and actions necessary to reach previously set goals. The problem is that the determination of all actions is based on taking into account only those immediate factors, which were found in the field of view, or suddenly came to mind, and this often makes the prognosis of the desired results inaccurate. Allocation of priorities is in essence a process of planning actions, then follows their design, and how these actions should lead to the designated goals, in a most optimal way.  


These processes of a) analyzing the situation while taking into account all important factors, b) selecting the most appropriate means or ways to reach goal, c) predicting the effects of  the selected actions and d) the final decision - are the essence of any designing and designing of administrative actions. The quality of any result depends on the availability of necessary knowledge and on the method of its use.

World–famous British futurologist James Martin, who founded the extraordinary 21st Century School at the University of Oxford, which now has 15 Institutes, expressed his opinion in an interview with the magazine “Itogi”, “Century of changes” (#26, June 24, 2008) that without the establishment of a universal Knowledge Base and System, which will use artificial intelligence for optimal decision making, humanity will return to the Stone Age. He affirms that in the nearest 20-30 years world economy will depend more on unity in global network artificial intelligence modules, than on the cost of petroleum. I do not know if the time predicted by him is right, but as an author of such unified Knowledge Base that included knowledge of different applied field, which practically could be as “global Knowledge Base”, I completely support his opinion regarding their necessity.

Conventional Information systems of Ministries and their databases even in developed countries were mostly created 10-15 years ago even upgrading remain heavy-handed, and until today have been used as tools for the development of social programs and political decisions. They have practically become obsolete since then particularly in methodological use. This is completely true regarding the existing decision support systems as well. “Software errors cost the U.S. economy $60 billion annually in rework, lost productivity and actual damages” according to a newly released study commissioned by the Department of Commerce's National Institute of Standards and Technology (NIST)

From the autonomy and compartmentalization of Ministers and their departments Information systems, very serious problems in administration arise. As it has been shown by many years of public experience, the lack of inter-operability in communication could take a tragic turn, especially in emergency situations, which require immediate and optimal decision making. John Ozimek, Associate Director, Mi liberty, (London, UK, March 2009) in his article “Ministers spending billions on unlawful databases” cited the following data: A report on the Database State (pdf) claims that 40 out of 46 key government databases are not fit for purpose, and 11 of those are "almost certainly illegal under human rights or data protection law and should be scrapped or substantially redesigned”and also "The current spend on IT within the UK public sector is over £16bn a year on IT, with (approximately) £100bn planned for the next five years: yet only about 30 per cent of government IT projects succeed.”

A common methodological error in such systems development is the limited utilization of the full technological capability of available computer technology. Basically, they are just aimed at the computerization of routine paperwork, but not on the optimization process itself or its results.   


Records standards in databases of different Ministers are not unified, and due to this there are a lot of data duplications. Interoperability between such systems with a system-on-system review does not exist and the systems have accumulated a large number of files with duplicate information (data), or files with inaccurate and unreliable data.


Constantly growing duplicate files necessitate large expenses for their storage and processing, require extra inspection and comparison and records updating in all Ministries’ databases.  Unreasonable demands for the protection of private information have resulted in difficulty of data access, which is necessary for making the urgent decisions. On the other hand these demands have opened up splendid opportunities for falsification, forgery and concealment of crime.

Duplication of personal, private data in official forms (passport, identification card, medical card, driver’s license, etc.) is fraught with a lot of mistakes and deliberate fraud. This situation requires unnecessary maintenance cost and salary expenditures, for reviewing and correction of data, because without it a thorough search for people who committed frauds, crime or threatened state security, would be almost impossible.   


Another problem that exists in Ministries’ databases is an incompleteness of information necessary for making optimal administrative decisions, but officials usually do not paying attention to this.

Knowledge for producing optimal decision requires the availability of necessary and sufficient reliable current information, but due to unsystematic character of data it is very difficult to achieve the goal. Only using System Analysis method is it possible to detect missing data and factors, and have a clear idea about the degree of uncertainty, when making a decision.


There is no doubt, that the existing method of registering and storing personal and business information requires a radical improvement, and the sooner the better, otherwise, we will be left wondering when the next offender, who committed robbery or terrorist act, will be caught.

In competition between offender and investigator, the advantage goes to the “troublemaker”, because the registration system helps him hide his trace.


Developments of former computerized control system or design (expert) systems in various industrial fields did not use the methodology that conforms to computer technological facilities; therefore they did not live up to their developers expectations. This applies to the information systems currently being designed at a great cost. For example: methodological approach for design of the Information database named “Electronic Health (Medical) System”, which is in the process of development and implementation in almost all developed countries. These systems have to be used as a substitute of conventional paper-files to Data Base files, but are not able to assist medical specialists in design of optimal medical treatment. 


Although the access to a patient’s personal health data on a computer could be easier and more reliable compared to finding the same data in a paper-file, it doesn’t mean that the doctor’s decision regarding the medical treatment will be optimal. The more information there is about a patient’s health, the more difficult it will be for the medical doctor to choose the proper treatment, based on his/her limited knowledge. This paradox is a result of human nature, because it is not possible for the human mind to consider more than 5-7 factors simultaneously. This is why medical doctors’ intuitions based on experience are the main means for diagnostics and treatments. This is why medicine will never get rid of medical errors, or even reduces them to a minimum, without using a computerized advisor.   


Computerized advisors are necessary in any professional field.

Computer Technologies that are capable of accumulating authentic information and could be used as a professional advisor/assistant are just arriving.


As mentioned above, conventional Expert Systems do not use System (s) Analysis as a   necessary method for optimal decision making, however, such systems became the barest necessity. The DISK Company of Canada in cooperation with a non-government organization, the “Alliance of Technology and Science Specialists of Toronto Inc.” (ATSS) have developed a model of the architecture and a demo-version of the “Nation-wide Intelligent Information and Expert System” (NII&ES), which includes a universal Knowledge Base – Info-Environment© as the main part of the system. The system’s implementation was developed by using the CoSMoS© software complex. This feature allows the user to get the optimal results from control design.

The System architecture is based on the general “Methodology of Computerized Systems Analysis and Design” (MCAD)©


It has become more evident that even a new Information Systems with separate databases connected by external networks, cannot be more effective than a System with intersystem software interoperability.


Without using Systems Analysis for evaluating the situation and accounting for all necessary factors, it is not possible to make the optimal decision, and it is not possible to use the Systems Analysis without the necessary knowledge, which is very limited for individuals. The NII&ES System as a computerized designer (advisor, assistant) has become more and more necessary for optimal decision making. The main part of the system is the universal Knowledge Base, which accumulates scientific information (knowledge) from different fields of Science with direct intersystem interoperability between them.


The effectiveness of the proposed System consists also in the reduction of financial and human resources on its development, maintenance and improvement, when compared with separate systems connected by external networks.    


An integrated implementation of the System and Knowledge Base will allow making both of them global and thereby avoiding the information chaos. Without the proposed computer technology the optimal decision making on any administration level will not be possible.


Edited by Elijah Guitberg, B.A.  


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