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The Economics Of Negotiation

January 11, 2011

The economist Dambisa Moyo has written a new book, ‘How The West Was Lost’. It suggests that Western supremacy is being eroded by years of flawed economic policy and urges radical steps to prevent the emergence of China, India, Russia and the Middle East as the new economic ‘super-powers’.

In a critique of the book, former UK Chancellor of the Exchequer Nigel Lawson made an insightful observation. He commented that Ms Moyo, in common with many in the United States, sees economics as a ‘war’, in which there are winners and losers. In reality, economic growth is something that can be shared – and indeed, if conflict is to be avoided, it must be shared.

This adversarial, winner- loser thinking has also come to permeate the world of business. Power is used to extract short-term economic gain at the expense of longer-term sustainability. This is nowhere more evident than in many contract negotiations, dominated by extracting the lowest possible price.

In a global context, the tensions created by adversarial economics are obvious. Such an approach limits the ability to cooperate and sets the stage for ultimate ‘revenge’. Those who view themselves as professional negotiators should be at the forefront in advocating approaches that create win-win economic outcomes. To achieve this, we must stop selecting trading partners based on the lowest price and instead focus on compatibility of organizational culture and synergy in long-term goals. It is on those foundations that we can achieve continued growth and superior performance.

  1. Forgive the repetitive nature of this comment but until ‘lowest price’ is usurped by ‘best value’ in the Financial & Management Accounting Handbook then we’ll be locked in this reductive cycle forever!

    If Procurement and contracting professionals keep that bigger prize of ‘best value’ in mind in all their internal and external dealings, then that will be a battle worth fighting.

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