Business Leaders and New Varieties of Capitalism in

Business Leaders and New Varieties of Capitalism in Post-Communist Europe

Edited by Katharina Bluhm, Bernd Martens and Vera Trappmann

I~ ~~o~~~~n~~~up LONDON AND NEW YORK

First published 2014 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OXl4 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint ofthe Taylor & Franc1s Group, an informa business 2014 selection and editorial material, Katharina Bluhm, Bernd Martens and Vera Trappmann; individual chapters, the contributors The right ofthe editor tobe identified as author ofthe editorial material , and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 ofthe Copyright, Designsand Patents Act 1988. All rights reserved. No part ofthis book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information Storage or retrieval system, without permission in writing from the publ ishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library ofCongress Cataloguing in Publication Data Businessleaders and new varieties of capitalism in post-communist Europe / edited by Katharina Bluhm, Bernd Martens, and Yera Trappmann. pages cm. - (Routledge contemporary Russia and Eastern Europe series; 48) lncludes bibliographical references and index. 1. Elite (Social sciences) - Europe, Eastern . 2. Leaders) - Europe, Eastern. 3. Capitalism)- Europe, Eastem. 4. Post-communism) - Europe, Eastern . 1. Bluhm, Katharina. II . Martens, Bernd, 1955- III. Trappmann, Vera. HN380.7.Z9E415 2014 306.3'420943-dc23 2013006151 ISBN : 978-0-415-80963-4 (hbk) ISBN : 978-0-203-79734-1 (ebk) Typeset in Times New Roman by RefineCatch Limited, Bungay, Sutfolk Cover design Marina Dafova

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Contents

List offigures List of tables Notes on contributors Acknowledgements

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IX X XIII XV

Introduction: business leaders and the new varieties of capitalism in post-communist Europe KATHARINA BLUHM, BERND MARTENS AND VERA TRAPPMANN

2

Institutional transformation and business leaders of the new foreign-led capitalism in Poland

23

KRZYSZTOF JAS!ECKI

3

The 'small transformation' in Hungary: institutional changes and economic actors

58

GYÖRGY LENGYELAND DENES BANK

4

The long shadow of the 'German model': business leaders in social and institutional change

79

KATHARINA BLUHM, BERND MARTENS AND VERA TRAPPMANN

5

From 'deputy revolution' to markets for executives? Social origin, careers and generational change of business leaders twenty years after regime change

109

KATHARINA BLUHM AND BERND MARTENS

6

Contractual trust: the long shadow of the shadow economy BELAJANKY AND GYÖRGY LENGYEL

134

viii

7

Contents

Varying concepts of corporate social responsibility: beliefs and practices in Central Europe

148

KATHARINA BLUHM AND VERA TRAPPMANN

8

1

Institutions or attitudes? The role of formal worker representation in labour relations

176

VERA TRAPPMANN, KRZYSZTOF JAS!ECKI AND DARIUSZ PRZYBYSZ

9

Income and inßuence: Hungarian, Polish and German business leaders compared

205

GYÖRGY LENGYEL, NIKOLETT GESZLER AND ZITA ÖRDÖG

References Index

220 246

1

Introduction Business leaders and the new varieties of capitalism in post-communist Europe Katharina Bluhm, Bernd Martens and Vera Trappmann

Introduction The research on economic actors in Central and Eastem Europe (CEE) can be divided into two periods. In the early stages of the transition from planned to market economy, elite research played an important role, for several reasons. As the implementation of the market economy and electoral democracy was not the result of an evolutionary process but started with top-down decisions, the role of elites, and elite confticts and collaborations, was crucial; the transition of the 'cadre elite' to a pluralist, sectorally differentiated elite was in the making and the question was who would gain control over these sectors, especially to what extent would the old ' cadre elites ' manage to become the new ' propertied class' by converting their political power into economic capital. In the early studies, this issue of 'class formation' was raised within the classic elite categories of elite reproduction vs circulation (cf. for example Dogan and Higley 1998; Eyal et al. 1998; Higley and Lengyel 2000; Walder 2003 ; King and Szelenyi 2005; for a critique ofthe elite approach, see Burawoy 2001). With the growing literature on the emerging varieties of capitalism, that has focused particularly on the new EU member states since the beginning of the new century, the institutionalist approach has come more to the forefront, shifting the focus from personalized elites to corporations and organizations. The privatization of key sectors to foreign investors and the additional inflow of foreign capital has hindered the emergence ofthe envisioned 'grand bourgeoisie' in most ofthe East Central European countries. Now the emergence ofa Polanyian 'comprador service sector ' has been observed, consisting of top managers in westem subsidiaries and their domestic subcontractors, who work in the interests of foreign investors instead of representing an autonomous national economic elite (Drahokoupil 2008a, 2008b). From that perspective, it seems less important who the elite actually are and what their views on the market economy might be. In this book, we bring the two perspectives closer together. Apart from historically rare breakdowns, elites act in certain institutional settings. lnstitutions shape what they perceive as their rational interests and influence their ideas about the surrounding world. Institutionalists explore these settings but often view actors only as institutionally constructed entities who perform like Marxian

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Katharina Bluhm, Bernd Martens and Vera Trappmann

' character masks', following only institutionalized rational interests. Blending out individual actors, the institutionalists also tend to underestimate the role of ideas in creating, stabilizing and changing institutions. In the literature, there are several theoretical suggestions on how to grasp this interaction. One inftuential attempt was provided by Arthur Denzau and Douglass North (l 994), who expand the rational choice framework using the concept of ' shared mental models', as intemal representations which individuals create in order to interpret the environment in a situation ofuncertainty (ibid.: 4). ' Mental models' are permanently under revision through experience-based leaming processes and are framed by 'ideologies' which the authors define as ' action-outcome mappings' . ldeology in this sense relates the utility-relevant outcomes to possible actions' (ibid.: 15), that is, a chosen action is assumed to lead to a certain outcome. Sociological new institutionalism perceives 'cognitive schemata' or ' common beliefs' as an element or ' pillar' ofinstitutions with a view to Max Weber 's premise that ' action is social only to the extent that the actor attaches meaning to the behaviour' (Scott 2008: 56-8; DiMaggio and Powell 1991 ). In this view, different levels of institutionalization of cognitive schemata and beliefs exist until they are taken for granted. In the German institutionalist tradition, ideas take on an even more crucial role as complex institutions are regarded as guided by leitideen ideas on which institutions are built (Lepsius I 990a, 1990b; Rehberg 2002). Although it is acknowledged that people not only follow their interests but also have ideas that ifthey are collectively shared may become crucial for institutional stability and change, this cognitive dimension is widely unexplored in the recent literature on the varieties of capitalism. Considering Denzau and North's definition of ideology, we can formulate, however, one basic assumption . As different institutional frameworks shape corporate strategies in different ways, making some strategic choices precisely therefore more effective than others, people also adopt specific ' action-outcome' mappings about what serves a purpose best and how business should be conducted in general. This underlying assumption is most obvious when it comes to the understanding of company 's goals. While the Anglo-Saxon corporate govemance system is usually associated with a narrow shareholder-value-oriented understanding of company goals, business leaders in Continental (westem) Europein general and Germany in particular are supposed to share an understanding of company goals that does consider a wider set of organized stakeholders and which is institutionalized in participation practices (see e.g., Albert 1993 ; Streeck 1997; Höpner 2003). Although the definitions of company goals are institutionally constructed by laws and rules, it should also find wide agreement among economic actors in order to be stable. Thus the institutionalist view suggests a correspondence between ' ideologies ' and institutional structures. However, ideas are not determined by institutions: the way business leaders perceive their environment may also be inftuenced by the zeitgeist in public discourse, individual experience and by the immediate organizational setting in which they operate. This is precisely why ideas also represent a source of institutional erosion and change.

lntroduction

3

The goal of our research project has been to examine business leaders within changing institutional settings. Therefore we study key aspects of these institutional changes, a defined set of socio-political attitudes on the part of business leaders, and what shapes these attitudes. For the institutional dimension, we chose a comparison ofthree countries: Poland, Hungary and Germany. With this collection of countries, we take a unique position in the literature of transition or post-transition. The inclusion of Germany means that on the one hand we can expand the post-socialist comparisons ofbusiness leaders to a forgotten case, East Germany. On the other hand, it also allows us an East-West comparison that parallels the transition in East Central Europe with the changes in Germany after the end ofthe European and German divide, that is with the economic and institutional transformation of the biggest market economy in the European Union. lt is only in this context that we use the term post-communism, rejecting the widespread equation of communism and state socialism ; we reserve the term post-communist Europe for a Europe after the fall ofthe Berlin wall that marked the end ofthe Cold War. For the regime change from planned to market economy we speak of 'post-socialist' transition or transformation as this fits better with the self-characterization ofthe Soviet-type regimes as socialism, while the term 'communism' only refers to the ruling Communist Party system. From the neoliberal public discourse that dominated the last two decades, the transformations in both East Central Europe and Germany are supposed to have gone in the same direction of deregulation and liberalization. The two transformations are intertwined, first because the German reunification not only led to an encompassing transfer of institutions to East Germany but also accelerated the institutional change in West Germany. In addition, (West-)German industrial companies play a major rote as investors in East Germany, Hungary and Poland; and finally, Hungary and Poland have in part a pre-Soviet institutional history with Germany or Austria, which was important in the institutional re-building after the collapse (cf. Bohle and Greskovits 2012). Hence, we take on a kind of Central European perspective in this book that includes Poland, Hungary and Germany, Jooking for tendencies of convergence and the rote of historic legacies. The hypothesis we started this project with has been that the convergence of ideas went further than the institutional convergence since institutions create path dependency and inertia, and because in both transformational settings neoliberalism has become a leitidee for institutional change in the 1990s. In Poland and Hungary not only the initial ' shock therapy ' but the whole transition period was shaped by this leitidee or 'action-outcome mapping'. A rapid withdrawal of state from market regulation and equally quick establishment of hard-budget 'real' ownership (cf. Komai 1990) represented the key actions to be taken for establishing efficient resource allocation and an increase of general welfare at least in the longer run. Gil Eyal, Ivan Szelenyi and Eleanor Townsley in their famous study on CEE elites ('Making capitalism without capitalists', 1998: 87) suggested for the entire 'post-communist power block' a stark affinity with anti-collectivist, individualistic ideologies, as well as with monetarism , and an aversion to state intervention that is usually identified with a Friedmanian kind

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Katharina Bluhm, Bernd Martens and Vera Trappmann

of neoliberalism (cf. also Machonin et al. 2006). Scholars of the post-socialist transition overwhelmingly agreed on the discourse hegemony ofneoliberalism in East Central Europe at least until the financial crisis - even though the elites in the individual countries varied in their rigour in following its market liberal recipe (see Chapter 2 and 3 ofthis volume; cf. Orenstein 2001 ; Rae 2008; Shield 2012).1 At the same time, the neoliberal discourse also gained ground in the westem part ofContinental Europe, nurtured by the collapse ofthe planned economy- a development that reached its peak in Germany under the coalition between the Social Democratic Party (SPD) and the Green Party under Chancellor Gerhard Schröder at the beginning of the twenty-first-century, whose tax, labour market and pension reforms represented a massive blow against key institutions of the ' German model' (cf. Chapter 4). This agenda stands at the end of a decadelong public discourse about the encrusted structures of the corporatist German system, the overburdening costs ofthe welfare system and the persistently high rates of long-term unemployment in the West but particularly in the radically deindustrialized East Germany following the abrupt integration of the East German economy into the West German currency and markets. The tool-kit of neoliberalism promised, here too, to be the best solution, as it promised to guide CEE safely through the 'valley of tears' of 'shock therapy' . And for most of the observers of this development it was common sense that business leaders shared in the belief system of hegemonic neoliberal discourse (cf. Imbusch and Rucht 2007; Hartmann 2006). Hence there were good reasons to argue that the perception of key market-economy institutions on the part of the economic decision-makers might converge into a similar set ofideas or ' mental model' : the German transformation of institutions was moving more slowly but in the same direction of abandoning coordination, along which Hungary, Poland and even East Germany were already travelling. The financial crisis and the subsequent European crisis have partly changed the public discourses - in Hungary under Victor Orban even very drastically. The neoliberal tool-kit has lost some of its attractiveness in all three countries. Although the austerity measures enforced by the European Union and Conservative- Liberal coalition under Chancellor Angela Merkel in order to solve the ::