The Challenges of Sustained Development: The Role of Socio-Cultural Factors in East-Central Europe

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The Challenges of Sustained Development

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The Challenges of Sustained Development The Role of Socio-Cultural Factors in East-Central Europe by Frane Adam Matej Makarovič Borut Rončević Matevž Tomšič

Central European University Press Budapest New York

© 2005 by Frane Adam, Matej Makarovič, Borut Rončević, Matevž Tomšič Published in 2005 by Central European University Press An imprint of the Central European University Share Company Nádor utca 11, H-1051 Budapest, Hungary Tel: +36-1-327-3138 or 327-3000 Fax: +36-1-327-3183 E-mail: [email protected] Website: www.ceupress.com 400 West 59th Street, New York NY 10019, USA Tel: +1-212-547-6932 Fax: +1-212-548-4607 E-mail: [email protected] All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the permission of the Publisher. ISBN 963 9241 96 2 cloth ISBN 963 7326 00 6 paperback

Library of Congress Cataloging-in-Publication Data The challenges of sustained development : the role of socio-cultural factors in East-Central Europe / by Frane Adam ... [et al.]. p. cm. Includes bibliographical references and index. ISBN 9639241962 (hardbound) ISBN 963 7326 00 6 (paperback) 1. Europe, Central--Social conditions--1989- 2. Europe, Eastern--Social conditions--1989- 3. Social change--Europe, Central. 4. Social change--Europe, Eastern. 5. Sustainable development--Europe, Central. 6. Sustainable development--Europe, Eastern. 7. Europe, Central--Economic conditions--19898. Europe, Eastern--Economic conditions--1989- 9. Social indicators--Europe, Central. 10. Social indicators--Europe, Eastern. I. Adam, Frane. II. Adam, Frane. III. Title. HN380.7.A8C48 2004 301'.0943--dc22 2004015797 Printed in Hungary by Akadémiai Nyomda, Martonvásár

Table of Contents

List of Schemes and Charts List of Tables Preface 1. Introduction: The Point of Departure 2. Civilisational Competence 3. Social Capital 4. Cognitive Mobilisation 5. Quality of Governance 6. Entrepreneurial Spirit 7. Social Cohesion 8. The Openness of Societies 9. Developmental Performance 10. Conclusion References Index

vii ix xi 1 15 37 61 85 107 131 151 173 213 217 229

List of Schemes and Charts

Scheme 1

Chart 1 Chart 2 Chart 3 Chart 4 Chart 5 Chart 6 Chart 7 Chart 8 Chart 9 Chart 10

The heuristic model of socio-cultural factors of developmental performance Generalised trust by country Active involvement in voluntary associations Spending time in clubs and associations, weekly and monthly Cooperation between universities and enterprises Educational structure of the labour force Educational structure of the population in 1995 Business R&D expenditure as a share of GDP in 1999 Technological cooperation between enterprises Index of economic freedom in 2001 Availability of capital for enterprise development

8 55 57 58 68 70 72 119 120 122 123

List of Tables

Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14 Table 15 Table 16 Table 17 Table 18 Table 19 Table 20 Table 21 Table 22 Table 23 Table 24 Table 25

Coordination and knowledge Evaluation of democracy in transition countries Trust in institutions Different structures of nonprofit or volunteer sector Structure of financial resources for nonprofit or volunteer organisations by source Assessment of openness of European countries High developmental performance Medium developmental performance Low developmental performance High level of social capital Medium level of social capital Low level of social capital High cognitive mobilisation Medium cognitive mobilisation Low cognitive mobilisation Developed democracies Semi-developed democracies Less developed democracies High entrepreneurial spirit Medium entrepreneurial spirit Low entrepreneurial spirit High level of social cohesion Medium level of social cohesion Low level of social cohesion High openness

11 92 96 141 142 170 178 179 180 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202

Table 26 Table 27 Table 28 Table 29 Table 30 Table 31

Medium openness Low openness High level of civilisational competence Medium level of civilisational competence Low level of civilisational competence Fuzzy-set database

203 204 205 206 207 208

Preface

This book is the outcome of our research orientation and efforts over the last four years. Our participation in three projects was particularly important. The first involved long-term research (1999–2003) on culture and societal development that was supported by the Slovenian Ministry of Education, Science and Sports. The second and third were smaller projects dealing with the indicators of social development and the developmental role of social capital. We believe this book will contribute to an improved and more complex understanding of the socio-economic modernisation taking place in Central and Eastern Europe in both a theoretical sense and in terms of policy-oriented strategic research. It may also be considered as our input to ongoing discussions on the global competitiveness of the European Union and its transformation to a knowledge-based (multinational) society. We are grateful to the many colleagues from various European universities whose critical remarks and suggestions have helped us improve the first draft of the manuscript. However, our special thanks go to the peer-reviewers appointed by the CEU Press editorial board who encouraged us to empirically test our heuristic model of socio-cultural factors and which has thereby given the book more consistency and firmer foundations.

1. Introduction: The Point of Departure

1


The most typical perceptions of the aim of transition is that the former communist European countries should (once again) become ‘truly European’, not only in the geographical but also in the cultural, societal, political and economic sense. They are supposed to become a part of, as a well-known metaphor implies, not only the European house but also of the European home. They are supposed to move from what is considered a semi-peripherial or peripherial position within Europe towards the developed European core. Nevertheless, this cannot be understood as a static and easily definable goal. The developed European core itself is subject to dynamic processes that are necessary to deal with the challenges of the contemporary world. Consequently, one should be aware of the following facts, when speaking about development in the sense understood in this book: • •

•

development is not understood as being directed towards some fixed, static aims, but towards dynamic processes; development is not directed towards passive adaptation but towards active adaptability required in the dynamic turbulent environments of the modern world; and development is not directed towards a self-sufficient survival but towards the permanent competitiveness in relation to the outside world.

These points imply that the aim is a sustained development, namely a self-generating development that never jeopardises its own preconditions, but strengthens them instead. This means that the develop-

2


ment (re)produces (not destroys) the conditions for further development. Therefore, one can no longer speak of a simple one-way causality, but a multi-directional causality where the same element can be a cause and a consequence of development. The central purpose of this book is to provide a heuristic model of the socio-cultural factors of developmental performance. These factors can be both the basis and the result of sustained development. Although the model and its elements are understood as ideal types in the Weberian sense, they also allow empirical verification. In order to make the model empirically testable, the factors can be measured by certain indicators. Some of them can be measured directly, others more indirectly. In some cases, ‘hard’ quantitative data can be provided; in other cases, one needs to rely on ‘soft’ indicators. Both, however, are of high importance for our understanding of the developmental performance and neither should be ignored. Obviously, the authors of this book have no ambition to provide any kind of magical solution for the problems related to post-communist modernisation and achieving a genuine developmental performance. Moreover, the model built for the purposes of this book is not supposed to be an all-encompassing one. Others might want to add other factors and dimensions or perhaps discuss the existing ones from different perspectives. As a heuristic model, it is only a tool for better understanding, not an aim in itself. And as the development it is supposed to analyse, the model itself may be subject to change. Nevertheless, this relativisation does not mean that the model is simply a matter of opinion and that elements can freely be added to and removed from a given model. All elements in the model that will be presented are well-grounded and none of them can be considered irrelevant. Any alternative model aiming towards sustained development could not ignore any of the elements included in our model. When one searches for the basis of such an analysis, one is confronted with certain problems. For the model we would like to develop, at least two important gaps should be bridged: 1. The gap between sociological and economic theories of development. The former are often characterised by a high level of abstraction (Talcott Parsons’s theory of modernisation is the most typical example), which makes it difficult to verify or falsify them directly at the empirical level. The economic theories on the other


3

hand are often too ‘positivistic’ and ‘quantitatively oriented’, often tending to ignore the intangible, ‘soft’, ‘social’ factors. Fortunately, this gap seems to be gradually disappearing. 2. The gap between theoretical and empirical approaches makes it difficult to test the most prominent theories and to make sense of the enormous amount of empirical data. Sociology is especially characterised by such a gap, related to the lack of what Robert Merton would call middle-ranged theories. Building a model of factors and their indicators may be a way to contribute to the development of such theories. Obviously, many authors, sociologists, economists and political scientists have been confronted with such problems before, and many of them provided viable solutions. Therefore, we have reasonably good foundations to build on, and we are indebted to this significant theoretical heritage. At least some of the most important contributions that are particularly important for the development of our model should be mentioned here: 1. The idea that social–cultural and economic aspects of development are mutually interrelated is far from being new. One may just remember Max Weber’s famous Protestant Ethics and the Spirit of Capitalism (1904/1988), which emphasised the role of non-economic factors in (economic) development. The awareness of such links could also be found among great classical economists, beginning with Adam Smith, who had already understood that economic life is deeply embedded in social life and thus inseparable from habits, morals and culture (see: Fukuyama 1995: 13). Alfred Marshall also noted important connections between social and economic processes (Brown and Duguid 2000: 16–20). More recently, the relation between socio-cultural and economic factors has been renewed in influential discussions on human capital and particularly social capital. Consequently, particular attention in our discussion will be placed on social capital as a linking ‘interdisciplinary’ concept. 2. Moreover, we are indebted to sophisticated sociological approaches towards the societal modernisation. Here, one may note the role of Talcott Parsons who, partially following Weber, emphasised the role of cultural factors in societal development. These factors are also included, among others, in our model. Even more

4


important, however, may be Parsons’ emphasis on the shift from adaptation to adaptability, which is supposed to characterise modern societies (Parsons 1966). Modernisation and development thus do not imply adaptation to stable environments but adaptability to permanently changing dynamic environments. 3. Adaptability is mostly understood in economic (but not only economic) terms as competitiveness. Within economics, there has been a long evolution of this concept, beginning with Adam Smith, who developed a relatively simple concept of absolute advantages. The nation that is able to sell its products for the lowest price is the most successful. David Ricardo refined this idea with the concept of comparative advantages, emphasising certain specialisation of various nations. Available resources are supposed to be concentrated in those industries where a certain nation has the greatest comparative advantages over the rest. Recently, however, the single most important contribution to the understanding of competitiveness was provided by Michael Porter’s (1990) concept of competitive advantages. It is based on the idea that no nation is competitive in all fields. The only difference between the successful and the unsuccessful is that the former are able to develop the foundations, on which they can develop relatively favourable conditions for certain industries. Consequently, achieving competitiveness becomes a highly complex and highly localised process, dependent on several different direct and indirect factors, such as economic structures, quality of governance, values, culture, institutions, past development etc. The key question formulated by Porter—what contributes to the fact that a certain environment becomes a suitable basis for the development of internationally competitive economic activities—has no simple answer. The answer can neither be universally valid for all societies, nor it can be found only in economic factors. 4. The recent social systems theories, particularly with their emphases on systems openness and closure (Luhmann 1995), inputs and outputs, reflexivity (Willke 1995) and entropy (Bailey 1994). Societies and their sub-systems are supposed to function as selfreferential and trans-referential systems, maintaining their boundaries and at the same time being open for permanent exchange with their environments.


5

5. Theories that emphasise the shift from simple to reflexive modernisation and new forms of societal coordination related to this shift. These theories have been developed by sociological authors as different as Anthony Giddens, Ulrich Beck and Helmut Willke. Here, a particular role is attributed to knowledge and the forms of coordination of development within extremely complex modern societies. These approaches enable one to move far beyond old dilemmas of the primacy of the free market versus the primacy of the state. Both free market and sophisticated governmental interventions are required. However, they should also both be upgraded by complex networks for negotiations and coordination between various sub-systems and other societal units. Other theories may be of particular relevance here as well, for instance Douglas North’s neo-institutionalism. 6. Theories that emphasise the shift from the classical industrial, Fordist society and economy towards the post-industrial and postFordist forms. Though such shifts are often overemphasised in some theories, they should be taken into account. These theories again imply the shift towards new types of organisation and coordination, based on flexibility, dynamics, horizontal links, knowledge, etc. and are applicable from the micro level of a particular enterprise to the macro level of a society and beyond. Our empirical interest is oriented towards the post-communist societies in East-Central Europe (ECE), the Czech Republic, Hungary, Poland, Slovakia and Slovenia, and particular attention will be paid to them. Sometimes, the Baltic countries may also be discussed: though they do not belong to ECE in its strict sense, they may be similar to the ECE countries in some aspects. All ECE transitional countries are characterised by their semi-peripherial position within Europe. They will be compared to each other and to the developed European core. They will also partly be compared to some other transitional countries that can be considered as clearly peripherial in the European context. We will try to assess the current condition of Europe’s former socialist countries and analyse their probable potentials, using an extensive range of indicators, related to the model developed and applied in this book. The decision to turn our attention particularly to the semi-peripherial post-communist countries of ECE mentioned above is not only a matter of the authors’ discretion, but is also based on some other considerations.

6


It may be argued that these nations currently face some very significant turning points which may crucially influence their further development. Obviously, other European nations may face other crucial turning points in their development, but what the nations mentioned above have in common are the following shifts, which may or may not turn to be successful: • • •

the shift in the their ‘Europeanisation’ from institutional convergence to developmental and competitiveness convergence; the shift from simple to reflexive modernisation; the shift from the industrial and Fordist paradigm to the postindustrial and post-Fordist paradigm.

The first aspect of moving towards the developed European core has already been mentioned. The ECE post-communist countries, such as the Czech Republic, Hungary, Poland, Slovakia and Slovenia have, on the whole, been able to achieve a high level of institutional convergence with the developed European nations. The existence of the institutions required for democratic governance and a market economy is no longer questionable. The process, which began immediately after the collapse of communism in these countries, is now reaching its concluding phases, manifested in the harmonisation of the legal order with the acquis communautaire. The goal of the first phase has been to take over the institutional and normative standards of the European Union (EU) and thereby accelerate modernisation dynamics and qualify for membership in this respectable multi-national organisation. A certain level of systemic effectiveness (i.e. macroeconomic stability, progress in privatisation, consolidation of democracy) has also been expected in this first phase of institutional convergence. However, with the accession of these countries— which have relatively successfully mastered the first phase—to the EU, their developmental or competitiveness convergence—meaning the level of performance closer to the developed European core—is becoming an issue of the utmost importance. It depends on the ability of the ECE countries to achieve not only the compatibility regarding the institutional order but also the ability to strengthen their institutions and productive potential in order to achieve the higher systemic competitiveness. These processes will decide whether the transitional countries would remain in the European (semi-)periphery or manage a developmental breakthrough towards the modernised core of the EU.


7

The ability to achieve such a breakthrough is closely related to the second shift—from simple to reflexive modernisation. This shift has been discussed from various aspects and by various sociologists, who have often built upon different theoretical traditions. Anthony Giddens and Ulrich Beck (1994) have thus emphasised—from various aspects and at various levels—the difference between simple and reflexive modernisation. Helmut Willke similarly stressed reflexivity from the systems’ perspective, underlining the need for reflexivity and contextual steering at the level of societal functional sub-systems, implying the necessity of a sophisticated negotiated coordination among them (Willke 1993; 1995). Regardless of its basis in various theoretical traditions, the emphases on reflexive modernisation imply greater importance of knowledge and expertise in the regulation of social processes, the organisation of learning in society and the ability of intellectual reflection on risks and feasible future developmental trajectories. Finally, the third shift is more directly related to the economic conception of development as such, though it also implies certain wider societal contexts. This shift has usually been described as the transition from the ‘classical’ industrial society, organised around the Fordist paradigm, to the post-industrial society, based on the post-Fordist paradigm, or from the second to the third stage of development. Though the empirical and practical differences between the two have often been overstated (Kumar 1995), the distinction remains useful when understood in the ideal-typical sense. The shifts from the micro to the macro levels imply greater emphasis on highly competent management, flexible organisation of work, innovative technology, transfer of knowledge and partnership between the private and public sectors. It may be argued that at least two major common denominators for these three shifts can be found: •

•

the greater emphasis on coordination, which is supposed to become more sophisticated, contextual, competent, based on complex networks instead of either rigid hierarchies or being left only to the spontaneity of the free markets; and the greater emphasis on knowledge, its production, dissemination, transfer and application.

The aspects that have been stressed are all included in the model as presented below.

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Scheme: The heuristic model of socio-cultural factors of developmental performance S R ET TA M Y R O T IS H

CIVILISATIONAL COMPETENCE

INTERNAL FACTORS ET IV N TE CM EP PO SL OE RV PE DD NF AO TS NR EO RT RC U FA C

EXTERNAL FACTORS

SOCIAL CAPITAL COGNITIVE MOBILISATION

QUALITY OF GOVERNANCE

OPENNESS

(INTERNATIONALISATION)

SOCIAL COHESION

ENTREPRENEURIAL SPIRIT

DEVELOPMENTAL PERFORMANCE

Within the heuristic model developed and applied in this book, three analytical levels can be distinguished. The first level consists of the civilisational competence, which is understood as the historical background of a certain society or a wider region. The historically derived culture of a society, from its values to its material aspects (such as infrastructure) is obviously subject to change. However, the historical circumstances can affect the situation of a given society today: the inherited and accumulated civilisational competence can affect the factors, relevant for the societal competitiveness in the present time. The second, most central, level of our model consists of developmental factors. These factors may be divided into internal and external ones. The former include cognitive mobilisation, social capital, entrepreneurial spirit, quality of governance and social cohesion. The latter is discussed as the openness of a given society to its international environments. Internal factors depend on the organisation and synergy within a certain society. Though the openness is also a


9

result of internal organisation, it implies both the rational usage of external resources for one’s own development and the active adaptability to the environment, which is by definition more complex than the system (a given society) itself (Heylighen 1992). As already emphasised, this is not an all-encompassing model and we have no intention to claim that all possible factors are included. However, it may be argued that all factors included in the model actually are of major relevance and neither should be ignored, though the actual effect of some factors may be greater than others in a certain situation or vice versa in another situation. We assume that the central role at the second level of the model is played by the social capital, because of its spill-over effects for the other elements. In the last decades, social capital has been increasingly recognised as a major factor by a variety of economists, sociologists and other social scientists. Its effects range from the micro level of the individuals’ interactions and organisations through the intermediary mezzo level and to the societal macro level. It enables superior coordination and consensus-building, decreases transaction costs, etc. Moreover, from the aspect of our model, it also affects the other developmental factors and thus contributes to the developmental performance in a more or less direct way. To put it simply, social capital may be understood as an independent variable, while other elements are dependent variables. However, one should also be aware of the effects of the dependent variables back on social capital. Consequently, social capital should also be understood as an intervening variable and sometimes even as a dependent one. The inclusion of the concept of cognitive mobilisation in the model is also not questionable. The strategic importance of knowledge for the developmental performance and competitiveness is widely recognised in theory and empirical research, beginning in a most systematic way in the discussions on human resources or human capital. In the model, cognitive mobilisation includes production, dissemination and application of knowledge. It implies a proper organisation of learning, incentives for innovations and their application, and the development of the information and telecommunication infrastructure. If the recognition of the relevance of knowledge for the developmental performance is no longer questionable, it is even less so for the entrepreneurial spirit. Its effects are the most direct and thus also the most selfevident. Entrepreneurship with all its elements is an inevitable element of

10


any operational market economy. Its most significant manifestation is the creation of new (innovative) enterprises. A market economy, however, always operates within certain regulative frameworks, provided by the state. Quality of governance should therefore also be considered as an important developmental factor. Firstly, it is supposed to enforce the rule of law (or the Rechtsstaat), including such central aspects as the protection of property rights. These aspects have been particularly stressed in recent years by the neo-institutionalists (North 1990). Secondly, the state plays a coordinative role: it enables consensus-building and implementation through democratic processes, (contextually) intervenes, regulates and controls. Finally, it is one of the economic actors in that: it is very likely to be the greatest employer and investor with significant managerial, financial and fiscal functions concerning the collection and the distribution of resources within the system. Perhaps, the relevance of social cohesion from the developmental aspect has frequently been less emphasised. Ignoring it, however, would be clearly unjustifiable. A cohesive societal community is of significant importance for several reasons. It enables the widest mobilisation and utilisation of human potential. The general inclusion of citizens within education, the economy, health services, politics and so on, prevents the exclusion of people’s talents, abilities and potential. Moreover, it contributes to the societal potential for consensus-building, which could be quite difficult or impossible in a society based on the exclusion of some social groups and extreme social inequalities. Cohesion also tends to lead towards a more balanced development. It may provide a sense of identity, important for the individuals, collectivities and their performance. Social cohesion is also—as it will be shown in the following chapters for all other concepts—closely linked to social capital, not only as its result, but also by its contribution to the rise or decline of social capital, whereby social capital may become a dependent variable. Inclusion and common identity contribute to the growth of social capital, while exclusion and extreme and/or unjustifiable inequalities (especially those that are not based on meritocratic principles) severely erode it. Openness as the exogenous factor perhaps requires no particular explanation. The importance of international and transnational environments is quite clear in today’s age of globalisation and regional integration. The third level of the model results from the effects of the factors of the first two levels and especially their interactions: it is the factual developmental performance of the society, already defined in the introductory chapter. Since we are speaking about sustained development, devel-


11

opment itself is also supposed to contribute to the reproduction of the factors that enable it. The model may be clearly related to the theoretical assumptions mentioned above. The cultural factors of development are included in the concept of civilisational competence. The significance of knowledge is included in the concept of cognitive mobilisation, the dynamics of the market economy in the concept of entrepreneurial spirit, inclusiveness for the people and their potentials in the concept of social cohesion, coordination abilities in the quality of governance. Positioning of the societies in the international environment is implied by the concepts of openness and internalisation. The superior basis for efficient use and coordination of all these elements can be found in the concept of social capital. However, there are even deeper relations between the emphasis on knowledge and coordination, stressed above as the most typical common denominators of the major developmental shifts, on the one hand, and the factors included in the model, on the other hand. These can be briefly illustrated by the following table: Table 1: Coordination and knowledge Coordination Civilisational competence Quality of governance

Selective relationship to tradition; invention of tradition The ability of democratic consensus-building and reflexive coordination of development Entrepreneurial spirit Functioning market within a clear normative framework Cognitive mobilisation Competent regulation, intellectual reflection on risks

Social cohesion

Knowledge Competent elites and population; functional literacy Political competence Entrepreneurial competence The utilisation and transfer of knowledge; the learning society General access to knowledge

Integrated, inclusive societal community as precondition for consensus-building Social capital Trust and cooperation as the The ability to produce, disbasis of coordination seminate and use knowledge through cooperation International openness The coordination of inputs and The competence to operate outputs, maintaining balance in inter- and transnational between inner and outer com- settings plexity

12


The result of these factors included in the model and, at the same time, the source of their further (re)production, is systemic performance. Systemic performance is reflected both inwards and outwards. The outward reflection is manifested by greater competitive capabilities, active adaptability to the system’s environments and the successful search for answers to new challenges. As reflected inwards, it implies the synergetic organisation achieved through improved coordination between the centres of decision-making power and through strategic conversation and action. These are what the future of the post-communist societies depends on. * It may be argued that ECE transitional countries, in their efforts to move from the semi-peripherial position towards the developed European core, can only achieve this breakthrough if they develop capabilities included in the six factors at the central level of our model. These factors can also be considered as indicators, used to measure the developmental capacities. In the following chapters all of the concepts included in the model are operationalised and—whenever possible—put in a quantitative form. In this process we make use of various databases and already developed indicators. Thus, developmental potentials and performances of various ECE countries become clearer and are placed in a comparative perspective among each other and with the other European countries, especially the developed ones. This can be considered a step towards the development of a sort of expert monitoring and evaluative system to follow the developmental processes and trends in the ‘transitional’ countries in the context of similar movements and processes in the EU. It thus becomes easier to discuss various strengths and weaknesses as well as promising and problematic tendencies concerning the processes in the various sub-systems of various societies. Every effort is made to demonstrate the advantages of our approach that may be found in: • •

the holistic approach, apparent in the application of various indicators from ‘hard’ macro-economic to cultural and other ‘softer’ indicators; the theoretical considerations of the selected indicators;


• •

13

the methodological reflexivity, which means that we try to test the reliability and validity of the selected databases; the clarity and informative value of the data and its explanations.

Finally, a small but important note should be added. When the transition countries are compared in this book to ‘the EU countries’, the latter only mean the ‘old’ EU-15, not the ‘new’ EU-25.

2. Civilisational Competence

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Introduction The impact of inherited cultural patterns and the whole historically transmitted legacy in various forms of tangible and intangible resources (from physical infrastructure to know-how and values) on the present and future developmental trajectory of a given society or region is one of the most intriguing and controversial topics in contemporary social sciences, including economics. Moreover, there is an agreement that culture and history matter; there are some sophisticated attempts to measure this impact, but at the same time such analysis is usually concluded with rather defensive statements. One of the economists (a propos, a Nobel prize laureate) who is a proponent of the neo-institutional approach begins his book with the short sentence ‘History matters’ and asserts at the end: ‘We need to know much more about culturally derived norms of behaviour and how they interact with formal rules to get better answers to such issues. We are just beginning the serious study of institutions’ (North 1990: 140). But later studies also have a similar prologue like this: ‘Our findings pertaining to cultural values and economic development must be viewed as preliminary, nevertheless’ (Granato, Inglehart and Leblang 1996: 694). Another author who also considers culture as a part of the institutional approach argued that ‘… culture probably matters for democratic and economic performance but much work needs to be done to determine how much it matters and exactly in what ways’ (Swank 1996: 675). The same observations appear in a recent and very instructive book about the impact of cultural values on human progress, where the author of the introduction clearly says that in social sciences we don’t have well-

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developed theories thematising the role of culture and that the aim of the book is to encourage efforts in this direction (Huntington 2000: xvi). It is not surprising either that in the literature dealing with transition to democracy and market economy in post-socialist societies one can hardly find any more systematic analysis focused on the question how historically generated (starting) conditions and value orientations influence the variations in developmental performance. We consider the historical and cultural background as one of the factors explaining differences in social, economic and political modernisation paths and performance in the last ten years of transition. The aim of this chapter is to provide an interpretative reconstruction of the historically transmitted circumstances which to some extent also in the present time shape—in a positive or negative sense—the developmental decisionmaking and selection of options. It is a conceptual sketch which sheds some new light on the meaning of the notion of ECE as a third historical region in Europe (Szűcs 1988, Vajda 1988). The notion of the third historical region can be understood in a developmental sense as a European semi-periphery or in Huntington’s classification of civilisational circles as a sub-zone of Western Christianity. All countries considered as being part of ECE belong to the Roman Catholic tradition—and all experienced the strong impact of the (Protestant) Reformation movement (and have been at least touched by Humanism and the Enlightenment) in their history. In this aspect they differ from the former Soviet and South-East European (SEE) countries with prevailing Orthodox religious traditions. Some authors believe that the divide along religious lines is still an important factor in explaining modernisation and globalisation process, especially if it is taken into account that societies with specific cultural (religious) traditions respond differently to the pervasive change brought about by this processes (Inglehart 2000a).1 In our view it is difficult to isolate this factor, and we consider it as taken for granted, since it coincides with geo-political position and specific historical destiny (for instance living 1 As Inglehart points out: “Third, cultural change seems to be path dependent. Economic devel-

opment tends to bring pervasive cultural changes, but the fact that society was historically shaped by Protestantism or Confucionism or Islam leaves a cultural heritage with enduring effects that influence subsequent development. Even though few people attend church in Protestant Europe today, historically Protestant societies remain distinctive across a wide range of values and attitudes. The same is true for historically Roman Catholic societies, for historically Islamic or Orthodox societies, and for historically Confucian societies” (2000b: 49).


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under the Austro-Hungarian Empire or long period of Ottoman rule in the Balkan region). However, it is not our intention to reproduce the ‘myth of Central Europe’ as a more civilising region and to discriminate SEE and the former Soviet Union (including Eurasia) as less civilised. Our contribution has to be seen as an effort to understand how the historical and cultural factors and patterns can have benign, constraining or stimulating influence on the modernisation process… On the other hand, ECE is not a homogeneous entity, and this also holds for the other former communist countries in Europe. To some extent there is some truth in the conception of a ‘narcissism of small differences’. Nevertheless, we believe that ECE has some distinctive features. It is not our (implicit) policy recommendation that non-ECE countries should be kept outside the EU as long as possible. On the contrary, we believe that the EU must find a formula for integrating them. But, on the other hand, we cannot forget the fact that these countries are not yet on the developmental level which would render possible their stable membership in the EU. We have to deal with a Europe of different velocities, and this is true for the EU itself, but there must be a minimum of compatibility in an institutional as well as in a developmental sense. In some countries, this level will be reached later, and maybe they can learn from the positive experiences, as well as the failures, of ECE, i.e. those countries which will become members of the EU in 2004.

After Ten Years of Transition—a New/Old Divide If we leaf through the European Bank for Reconstruction and Development’s (EBRD) recent report, entitled ‘Ten Years of Transition’ (1999) or if we take into account other available indicators, we are struck by the large developmental differences between transition countries. Taking macroeconomic, financial, political or social indicators as our point of departure, in all cases we will come to the conclusion that the postsocialist countries of Central Europe are significantly better off than the SEE or former Soviet countries. If we compare how the Czech Republic and Slovenia on the one hand and Bulgaria and Romania on the other relate to the EU average—employing GDP per capita (adjusted for purchasing power)—we find that the first two are closer to the EU countries than to Bulgaria and Romania. Slovenia in 1998 attained 68% of the average

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GDP per capita of EU countries (now this number is 71%) and the Czech Republic 60%. In comparison Romania attains only 29% of the average GDP per capita of EU countries, and Bulgaria 23%. If we explain these differences in temporal terms, we find that Slovenia will attain the EU average in approximately 10 years, the Czech Republic in 13 years, while Romania, Bulgaria and other post-socialist EU members will need over 35 years (Sicherl and Vahčič 2000: 56). A similar result will appear if we look at the more complex Human Development Index, which combines GDP with the rate of (il)literacy and life expectancy, meaning that besides indicators measuring economic potential of the given country the level of education and health situation (and implicitly the standard of living) of the population is also taken into account. In the last report we can see very clearly the demarcation line between ECE and other transition countries. The former belong to the 46 countries with high human development, the later are ranked in the second group with medium human development. In the first group is Slovenia ranking in 29th place, Czech Republic in 34th place, Slovakia is 40th, Hungary 43rd, and Poland 44th (Estonia is the last one in this prestigious group). All EU members are well ahead, Portugal (28th place) and Greece (on 25th place) are lagging behind, but they are still better off than all ECE countries. The scores on these indicators (except the literacy) of all other transition countries are significantly lower (Bulgaria is in 60th place, Russia in 62nd and Romania in 64th place). It would be at least informative to employ the data relating to the national productivity, although we don't have complete data at disposal. According to the last report of the World Competitiveness Yearbook, as for the overall productivity (GDP per person employed, USD), Slovenia is placed 29th, Hungary 35th, Poland 36th, Czech Republic 37th and Slovakia 40th. Here we have only comparison with Russia, which is ranked in 44th place but has substantially lower productivity (less than half of the Slovak Republic’s and Estonia’s figure and five times lower than Slovenia’s). Slovenia reaches USD 22,500 per employee; Hungary, in second, has less than USD 12,000, and Russia only USD 3,800. Taking GDP in purchasing power parity, the picture remain similar, but the distance between Slovenia and Hungary and other ECE countries is much smaller (Slovenia USD 35,000, Hungary USD 31,000). It is interesting to note that Greece and Portugal show higher overall productivity than Slovenia and other ECE countries. The figures referring to labour productivity (GDP per person employed per hour in USD) make up the similar rank order.


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Where do the causes for these differences lie? How can one interpret them? Can we be satisfied with the answer that the ECE countries had a particular developmental advantage before transition set in motion in 1990? This probably holds true; however, the nature and logic of this advantage needs to be clarified. We agree that one should take into account the principle that ‘history matters’. The economic, socio-cultural and political legacy remains an accurate indicator of future development. However, it is also true that certain countries have succeeded in breaking out of the vicious circle of dependency, marginality and poverty (in Europe we have the case of Ireland, in Asia the so-called small tigers). Falling back on historical determinism in terms of path-dependency theory is thus not always useful. Instead, the main question lies in identifying the factors that perpetuate the historically determined stagnation spiral in modern times. Furthermore, it is also important to become acquainted with the factors, processes and decisions that contribute to developmental breakthrough and to the shift from the periphery to the vicinity of the epicentre of the modernisation process. A French analyst, the author of many texts concerning the issues of post-socialist transition, has argued that a new tri-polar political geography has developed in the regions of formerly communist Europe: a new Central Europe (the Visegrád countries, the Baltic countries and Slovenia), the Balkans, and the countries east of Poland including Russia and the remaining former Soviet republics (Rupnik 1999). The ECE countries are defined as ‘clear-cut success stories’, while the others are characterised by their inability to break with their communist heritage or with a backwardness whose roots extend further back in time; in the case of certain Balkan states, intolerant nationalism impeded them from focusing their attention on development (ibid). It is probable that the author exaggerated the issue of success stories; however, the fact remains that differences exist among these countries and that in certain segments or cases these differences are increasing.2 According to Rupnik, one can explain the nature of this differentiation with the aid of six factors. The first concerns a country’s communist heritage, which the author expresses only in terms of oppositional organisation. In those countries where oppositional organisations existed (ECE), a 2 It is interesting to note that some very well known authors speaking about the political and economic situation in transition countries actually consider these countries as one block. It seems that they don't see any reason to draw the line or to differentiate the performances between (East)Central Europe and other post-socialist countries (see Berend, 2001; Schöpflin, 2000).

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counter-elite was able to develop more quickly and more efficiently, allowing for democracy to take better hold. The second factor is related to the market economy (entrepreneurship, foreign investment) and to civil society, both of which flowered after the fall of the Berlin Wall; once again, more markedly in ECE than elsewhere. The third factor deals with the heritage of the Austro-Hungarian Monarchy in terms of the rule of law and the organisation of state bureaucracy. The fourth factor concerns levels of national homogeneity or heterogeneity. In the case of countries where the national or minorities question were resolved (once again, the case of the ECE countries, or the case of Slovenia versus the other former Yugoslav republics), the transition was more successful and less violent. The fifth factor is culture, which the author reduces to the dimension of religion. Western Christianity is to have had a more positive influence on the development of democracy and civil society. The problem of orthodox Christianity seems to lie in the fact that the subordination of the state to the church and the identification of ethnos with religion hinders the development of democracy. The author is slightly uncertain here, for on the one hand he rejects Huntington’s thesis concerning civilisational circles or clashes; however, on the other hand he argues that one should not avoid the issue of cultural–civilisational differences in the context of development only on account of ‘political correctness’ (Rupnik 1999: 62). We believe that this cultural factor is unjustifiably narrow and with this the author has wasted the opportunity to develop a more convincing explanation of the differences between different groups of transition countries. Rupnik lists the international context as his sixth factor, a context which, in distinction to previous historical periods, is presently inclined towards the independent and democratic paths which the ECE states have taken: Russia has limited its sphere of influence, Germany is democratic and integrated into Western political and security structures. The author also argues that those countries that will become EU member countries in the first round will have a significant advantage over the remaining candidate countries and that this lag will weaken and maybe even thwart the process of democratic transition in the latter countries. Most probably all the factors listed above—despite the fact that one could define them differently—are important to the distinction between ECE and other countries. However, we can also identify a number of logical–methodological problems as well as conceptual problems. It is clear that these factors belong to different levels of analysis: some are in-


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depth, some are contextual or structural or cultural–psychological, some are historically determined, some are based on the current situation. It is true that one should take into account the interaction between different factors, yet they should be discussed in a more selective and more differentiated manner. If we look at these factors in terms of an ad hoc explanation, there are no comments to add; if we have in mind a theoretically more systematic and efficacious explanation, then we must choose a different path.

Towards a Conceptual Definition One possible path is based on the concept of civilisational competence, outlined years ago by Polish sociologist Piotr Sztompka (1993). One should mention from the outset that the author did not employ this concept to articulate the difference in levels of modernisation among ECE and other (former communist) countries, but to identify the differences between all post-socialist countries and the highly developed Western countries. Civilisational competence refers to a complex of rules, customs, values such as well established and half-automatic skills that are the basis for participation in the modern world (ibid: 88). In these terms he mentions four main components: 1) entrepreneurial culture (innovativeness, competence, rational calculation); 2) civic culture (political activism, participation); 3) discursive culture, in terms of an intellectual exchange of ideas based on mutual tolerance, pluralism and scepticism; and 4) everyday culture (a sense of punctuality, hygiene, precision, orderliness, technical competence). He offers a more well-rounded recapitulation in his latest book (which deals with the issues of trust and social capital, mentioning civilisational competence only on one page): ‘… by which [civilisational competence] I mean the complex set of cultural predispositions embracing a readiness for political participation and self-government, work discipline, entrepreneurial spirit, educational aspirations, technological skills, ethical principles, aesthetic sensibilities—all of them indispensable for full deployment and consolidation of democratic polity, market economy, and open circulation of thought’ (Sztompka 1999: 8–9). The significance of this definition lies in its equating civilisational competence with internalised cultural predispositions as important explanatory variables in the context of modernisation and development. This definition can be associated, albeit only tentatively, with similar sociological concepts.

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Max Weber’s thesis linking an originally religious-based rational– methodical way of life with capitalist entrepreneurship along with his thesis of a specifically occidental mode of rationalisation still represents an inevitable point of departure in the study of modernisation processes. Working from this premise, Parsons formulated two elements of the transition from a traditional to a modern society: instrumental activism and cognitive rationality (more on this in Adam 1992) and has influenced the culturalist approach (applying so-called pattern variables) in early modernisation studies dealt with developing countries of the Third World (Lerner, Inkeles: see Harrison 1988). As a special approach one should also mention here Ellias’s theory of civilisational process, which emphasises the phenomenon of self-discipline as well as the shift from external pressure to internal (internalised) restraint as one of the main achievements of (Western) civilisation (Ellias 1994). Recently (from the end of the 80s onward) we have witnessed the revival of the culturalist approach (often associated with historical dimensions) employed by social scientists belonging to the different schools of thought and research fields: pat-dependency, neo-institutionalism (historic institutionalism), modernisation theory, rational choice theory, intercultural communication and theory of organisational culture. This ‘cultural turn’ (Sztompka 1999) proved to be potentially productive also in enlarging the conceptual repertoire of developmental paradigms. One should mention here at least three representative approaches. Berger coined the term economic culture in order to show the importance of a broader matrix within which the economic processes take place (Berger 1987). Putnam introduced the notions of civic culture and civic tradition (connected with the concept of social capital) as factors strongly influencing institutional and economic performance (Putnam 1993). Inglehart systematically investigates the issue of changing value orientation, i.e. the shift from materialist to post-materialist values and its (cor)relations with economic growth and the modernisation profile of a given nation or region (Inglehart 1997). Also some economists contributed important insights in this regard (North 1990, Greif 1994, Tomer 2002), and the same is true for certain more ethnographically oriented analyses of cultural diversity and distinctiveness of national or regional cultural patterns in business and intercultural communication (Trompenaars 1993, Lewis 2000). Culture in this context is generally conceived as a certain forma mentis, a symbolic–semantic fund which, from the background, informs


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and orients individual and collective behaviour. It is a kind of institutional software, a ‘mental programme’ (Hofstede 1980). However, the significance or range of its influence can be understood only in interaction with structural factors and social actors’ decisions, in terms of the configuration of subjective and structural points of view (DiMaggio 1994). In this context, we cite the following statement: ‘More sophisticated… analyses of cultural influences make it clear that culture is not a once-for-all given, but an ongoing process which is continuously constructed and reconstructed during interaction. It not only shapes its members but also is shaped by them in part for their own strategic reasons’ (Granovetter 1985: 486). It can be said that inherited cultural models are the subject of modifications which actors undertake in terms of trial and error in order to cope with contingencies emanating from the structural environment (Patterson 2000: 210). Or put in other words, culture is a ‘tool kit’ providing resources for facilitating or limiting an actor’s capacity to construct an appropriate action strategy (Swidler 1986). We will illustrate this point in the following section by referring to the structural environment which forced the actors to abandon their traditional passive role and to redefine the value system in order to legitimate their more effective collective action. In sum, we must not fall into cultural (historical) determinism; nor should we relativise cultural factors believing that changes in structural and formal rules inevitably lead to changes in customs and values compatible with the new institutional structure (see North 1990). Generally, one can say that one cannot understand culture to be either an independent or a dependent variable, but more as an intervening variable (see L. E. Harrison 2000). Or, as Berger argues (ibid), one here does not presume culture in terms of values, beliefs and lifestyles to determine what occurs in the economic sphere, or vice versa; establishing a (possible) cause– effect relationship that requires empirical analysis and case studies. This is also a general point of departure for our discussion of historically derived cultural dispositions which suppose to contribute to the mobility and ‘availability’ of human resources in terms of increasing productivity and achievement motivation in the context of the long-term process of modernisation of ECE. Returning to Sztompka and his concept of civilisational competence, we can say that he was on the right track; however, additional interventions are necessary. In our opinion, his concept needs to be modified in the following manner: 1) the functional–instrumental connotation of this concept

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should be emphasised more than the value–moral dimension; 2) the definition should be more consistent and parsimonious; and 3) historical and geopolitical circumstances should be taken more into account as the frame for cultural–psychological processes that play a role in the gradual accumulation of civilisational competence (imitation, indigenisation, diffusion of innovations, demonstration effect, social learning). In terms of the first modification we can say that we must avoid possible misunderstandings when we define a certain country, region or community as more or less civilisationally competent. Here we can rely on Parsons, who argued that the increase in adaptive capacity (which is, however, connected with the process of value generalisation) as the main characteristic of modernisation (civilisational competence making significant contributions in this regard) does not ‘imply moral superiority’ (Parsons 1977: 70). Concerning the definition or implementation of the concept of civilisational competence, we propose certain changes. One should work from a historical context, as the meaning of competence has changed through time. The competence necessary in the early phases of industrialisation (where the Czech Lands pioneered in this process, while others were clearly latecomers; in the case of Slovenia, industrialisation started at the end of the nineteenth century) is different from what needed in the postindustrial societies of the twenty-first century. However, one should proceed from a basic notion of civilisational competence and then develop the necessary elements for theoretical elaboration. Civilisational competence could thus be understood as a psychocultural and socialisation pattern which has been sedimented and transmitted from generation to generation, which may be accumulated, and which is in certain circumstances open for innovative change (invention of tradition). It is a latent structure of cognitive, normative, expressive and motivational elements which enables individuals and social communities to orient themselves in the different subsystems of modern (or modernising) societies. In this context, one could employ the term cultural map. Greater civilisational competence means a more elaborate map with which social actors more easily find their way in the labyrinths of new demands and social changes. Their adaptive capabilities increase. This is an important foundation for every new generation, for every new cycle of social and technological development. In the case of weak (or the lack of) civilisational competence, developing adaptability requires more time, is more costly and implies an inefficient use of resources. Civilisational competence implies the formation and transmission of a motiva-


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tional structure, a flexible repertoire of behavioural possibilities and variations which defines the preparation of social actors to participate in modern civilisation. In other words, it is a culturally inherited behavioural, normative and emotional (expressive) pattern—what we refer to as tradition—that has influence on the efficiency and competitiveness of modern societies and on their ‘systemic intelligence’. Here one should emphasise the extraordinary difficulty involved in conceptualising and implementing these issues. The aim of this chapter is to identify the most important dimensions of civilisational competence understood as the basic contextual frame and as a set of dispositions which develop (in the process of transmission and modernisation) into more complex capabilities and expositions (although the erosion of positive tradition is also possible). It is in effect one of the factors which helps define current and future developmental dynamics. Every society begins with an initial base, be it favourable or less so. Our task is to examine the initial base or the level of civilisational competence of Europe’s postcommunist transitional societies.

Some Premises for the First Step in the Operationalisation Before we turn to some proposals for the first step in the operationalisation of the concept of civilisational competence, let us outline two basic elements—borrowed from Weber, Parsons and Ellias—upon which the concept is based: self-control (self-imposed discipline) and self-initiative (active participation). The first principle implies an emphasis on the internalisation of certain limits and constraints as well as duties and responsibilities; the second, an internalised active relationship with the world. In the case of the former, the need for constant and direct control of social actors is decreasing; in the case of the latter, innovation and responsibility for one’s own personal well-being becomes part of the motivational and legitimating guidelines of a particular society. This leads to a diminishing significance of coercive (disciplining) power and allows for the release of ‘energy’ which in turn helps to develop productive systemic power. With the identification of these two principles, we may now turn to define the components of civilisational competence: 1. Work and vocational ethic, which is particularly important in industrial societies, manifests itself in a high value preference of

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work, work discipline, responsibility, respect for agreements and deadlines, and an identification with the company. From an economic perspective, there exists a correlation between work ethic and productivity. Recently, there is, of course, greater emphasis on innovativeness, training, flexibility, professional (vocational) self-regulation and on the entrepreneurial spirit. But all these elements can only evolve from the basic work ethics and industrial culture. A ‘spiritual basis’ for this sort of ethic does not derive solely from the Western Christian tradition, but also from other ethical–religious sources, such as the so-called neo-Confucian thesis states (Weiming 2000, Eisenstadt 2000). Though some elements of work ethics that originated from religious teaching and everyday culture had emerged before industrialisation took place, it can be argued that this component of civilisational competence is strongly related to the spread of modern (capitalist) enterprises and handicrafts. This process progressed incrementally, and in some cases with great delay, from northwestern countries to the eastern and southern regions (see Berend 2001). Concerning the eastern and central parts of Europe, the Czech Lands and later (inter-war) Czechoslovakia, as the most industrialised region, formed and inherited well-founded work and vocational ethics which was later undermined in the communist planned state-owned economy. Because of the less rigid and less collectivist character of Yugoslav and (later) Hungarian communist regimes, accompanied by more private initiative and autonomy at the work place, it can be assumed that Slovenia and Hungary have some advantage in work and vocational ethics, as well as in managerial competencies. 2. The capacity and motivation for collective action and selforganisation: the possession of organisational ‘know-how’ in the sphere of politics and civil society as well as in the business sphere. In the early phases (as in the beginning of the twentieth century) this shows itself in the establishment of organisations, cooperatives, newspapers, as well as business associations on a national–ethnic basis (here we are referring to the situation in the Austro-Hungarian Monarchy). Trying to operationalise this concept, one could use indicators like the density of literary clubs, sport associations, political groups, the number of newspapers and their readers etc. in various histori-


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cal periods. All these forms of organised sociability refer to the notion of civic tradition. From recent data, we know that voluntary organisations are most dense in the north-western part of Europe, in the former communist countries they are quite strong in the Czech Republic, Slovakia and Slovenia, and this can be explained by the impact of inherited civic participation from earlier periods. 3. The internalisation of formal–legal and bureaucratic discipline: a feeling for the distinction between the formal and informal, the public and private, the readiness to comply with the authority of institutional rules. Only from these value bases, even though they are possibly ambivalent, can a legalistic culture develop that will work against clientelism, nepotism and corruption. Indicators that could be used include the data relating to issues like the spread of corruption and bribery among civil servants, or—on the other side—data indicating confidence in institutions. Although we do not have at our disposal the historical data, we can assume—speaking again about (semi)peripheral parts of Europe—that the regions belonging to the Austro-Hungarian Monarchy inherited somehow more appropriate patterns in this regard as the other regions. We can also argue that national independence achieved in this part of Europe after the First World War had some positive impact, especially in the case of (interwar) Czechoslovakia, which was able to preserve its democratic and Rechtstaat character until the communist take-over in 1948. 4. Basic functional knowledge (here one could refer to functional literacy): this allows individuals and communities an elemental understanding of social change and enables them to adapt more easily to it. This refers to a complex of factors which allows persons to be well-informed and to understand basic technical and social processes. Such knowledge is appropriated through processes of education, through the media and informal learning; it also depends on the level of cultural capital (motivation) in family circles, as well on a broader social (stratification) background. This component historically corresponds to the development of an education system and the inclusion of the broader public in various educational activities. In this case, a more concrete analysis would not be impossible, since we have at our disposal a lot of data from different historical periods. It is known that the western parts of Europe had in this regard a clear

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advantage; in the case of the central and eastern parts of Europe, the regions under the Austro-Hungarian rule inherited relatively good dispositions regarding basic schooling and functional knowledge. Under the communist regime the educational system was expanded, but the quality and openness towards new ideas was in many aspects questionable. * It is worth mentioning here that the interconnection and combinations of these components define new dimensions of civilisational competence. Thus the combination of work and vocational ethic with capacity for collective action and self-initiative can result in strong entrepreneurship and in the capacity for leadership and management. The combination of the professionalisation of intellectuals and the capacity for collective action can result in what Sztompka refers to as intellectual discourse. From the discussion above, it is clear that the purpose of redefining civilisational competence is to explain the developmental differences between ECE and other transition countries. Our thesis is that the former possess a more elaborated stock of civilisational competence due in large part to these countries’ historical heritage and particular geo-political situation and not to some ‘genetic’ or other inherent superiority. In his 1993 analysis, Sztompka outlined his position differently, arguing that stagnation in the modernisation process or a ‘transitional depression’ in this period is due to civilisational incompetence. This was a phenomenon present already in the pre-communist period as well as in the ‘fake modernity’ of the communist period. Sztompka himself states: ‘But in peripheral societies of Eastern and Central Europe the civilisational competence has never had the chance to evolve’ (1993: 89). Instead, a cultural syndrome of civilisational incompetence asserted itself, and not even the fall of communism—at least at the beginning—could hinder or modify it in any significant manner. Old patterns are no longer valid or functional; the new ones are not yet set in place or legitimised. Transition societies during this period find themselves in the phase of anomie and disarray accompanied by intolerance, conflict, lack of cooperation, disrespect for the law and so on. According to Sztompka, the new elite, which was not under the influence of real-existing socialism and which held Western standards, is the only social group that can modernise society and modify the existing civilisational habitus. From a long-term perspective, we can identify four processes that will also contribute to change: globalisation and accession to the


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EU (which will not only bring economic benefits but also the assertion of a ‘civilisational framework’), technological progress, privatisation and political democratisation (ibid: 93–94). Here two questions come to mind. First, does civilisational competence refer to something elitist, something which only the elite possesses and then extends to the remainder of the population? We believe that civilisational competence becomes a relevant factor only in cases where it involves a critical mass, if it is to some degree distributed among all social groups and classes. The second question concerns the accumulation of this competence. Sztompka, for example, argues that this occurred gradually in Western societies, through the centuries. Do post-socialist societies start from scratch, without any accumulation of positive heritage? This would be virtually impossible. The above-mentioned author in his second book, only five years later, registered fundamental shifts in entrepreneurship, democracy and trust in the case of Poland. How can this be explained? Our position is that in these countries there exists an accumulation of civilisational competence; its size and significance varies from case to case. Even the real-existing socialism contributed to the accumulation of civilisational competence, despite the fact that its contribution in many aspects was rather negative than positive.

The General Historical Framework The development of civilisational competence should be analysed within an extended temporal period, which could be divided into three or four sections: the first extends from the end of the nineteenth century and the beginning of (industrial) modernisation until 1918; the second from 1918 to 1945, the third from 1945 (or a few years later) until 1990. Rupnik states that until 1918 the majority of ECE nations lived within the Austro-Hungarian Empire (it is known that Poland was divided and that about five million ethnic Poles lived in the Austro-Hungarian Empire). Although they were in a subordinate position within it (with the partly exception of Hungary after the so-called dualism instituted in 1867), these countries nevertheless progressed in certain respects.3 One could say that this 3 One German historian describes the Slovenian situation as follows: “ Die Slowenen in der ostalpinen Zone (ex) Nordjugoslawiens waren bereits Ende des 8. Jahrhundets unter fraenkische Herschaft geraten und verblieben bis 1918 im Verbund der oestereichischer Kronlaender. Der mit Uebernahme des roemisch-katolischen Christentums einsetzende ‘Verwestlichungprozess’ mit allen

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significant progress was a result of the confrontation (in the period of national awakening after 1848) with the central imperial authority and the German-speaking minority (especially in the case of Slovenia and the Czech Lands) that had a dominant role in the business sphere, in the civil service and even within civil society, as it was the first to begin founding its own newspapers, organisations and associations. If Slovenian and Czech actors4 wished to succeed in their opposition to German domination based on modern technical and organisational grounds, they had to imitate and appropriate German patterns of organisation and life style, indigenise them, accord them national features and link them to their own tradition. Slovenes also appropriated many forms of economic, political and civic organisation from the economically and culturally more developed Czechs, whom they considered as their (Slavic) allies in the fight against German domination. One example of such borrowing is Krek’s cooperative movement in Slovenia (at the end of the nineteenth and beginning of the twentieth century) which bears evidence of Czech and German models. Generally speaking, we can say that during this period the Czechs gained the most civilisational competencies, followed by the Hungarians, who were in a better position politically speaking. As far as the Slovenes are concerned, we can observe an evolving of a work ethic and the foundations of a legal culture during this period; however, they progressed most significantly in organisational know-how and in basic levels of literacy.5 An economic historian describes this progress in the following rechtsgeschichtlichen, gesellschaftlichen, wirtschaftlichen und geistig-kulturellen Begleiterscheininung—man denke an Humanismus, Reformation, Gegenreformation, Aufklaerung etc.—verlieh dem slowenischen Siedlunggebiet einen mitteleuropaeischen Charakter und hat den Uebergang der politisch ueber Jahrhunderte hinaus entrechteten Slowenen in die Moderne erheblich erleichtert. Sieht man von der andersartigen Schriftsprache ab, so unterschied sich die langfristige Entwicklung der Slowenen kaum von der derjenigen der deutschsprachigen baeuerlichen Unterschichten im alten Oestereich” (Sundhausen 1993: 17). 4 As one author recently formulated: “After the 1840s, the Czech lands were caught up in rivalry for economic dominance where on both sides (German and Czech) the frenzy for education, culture, journals, clubs and enterpreneurship became paramount” (Benaček 2001: 137). For the situation in Hungary see Anderson 1983. 5 In the region covered by present-day Slovenia, a relatively high level of literacy was attained during the early twentieth century. In the generational cohort born between 1890 and 1900 only 3% were registered as illiterate (Hočevar 1979). In this aspect Slovenia was significantly better off than the remaining regions of both the first and second Yugoslavias (Gabrič 2000). However, the data from a recent international investigation concerning functional literacy which revealed that 42% of Slovene respondent are functionally illiterate (compared with only 16% of Czechs or 35% of Hungarians) warn us that this positive historical heritage was not made full use of (see the Human Development Report 2000).


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fashion: ‘Basic modernisation refers to the institutions of both the tertiary and quarternary sectors: basic and vocational schooling, agricultural publications, a diversified system of savings and loans, agricultural acquisition and selling organisations (cooperative associations) as well as other activities upon which agricultural production and the modern farmer’s lifestyle was based’ (Hočevar 1979: 45). In other words, one could say that civilisational competence began to develop even before industrialisation and urbanisation. In the early twentieth century, Slovenia was still an agrarian, provincial society. The data concerning the numbers of industrial plants clearly indicate this; in Carniola (Kranjska, the central part of contemporary Slovenia) there were 29 plants per every 100,000 inhabitants in 1914; in Austria there were 60 and in the Czech lands 94 (Hočevar 1965: 45). During the inter-war period (1918–39) Czechoslovakia was, as already mentioned above, the only industrially developed and democratic country in the region. Slovenes—thanks to their relatively well-developed civilisational competence—joined the Kingdom of Serbs, Croats and Slovenes (later to become the Kingdom of Yugoslavia) as its most developed nation or region. The economic data clearly indicate that Slovenia’s GDP per capita during this period was 70 to 100% greater than the Yugoslav average. This ratio—which, some argue, was set into place as early as 1910 (if we take into account the regions that formed the Yugoslav federation after 1945)—remained unchanged during socialist Yugoslavia (Hočevar 1965:115). During the inter-war period, organisational and cognitive capacities influenced the significant development of local entrepreneurship. Communist modernisation was relatively successful at the level of extensive industrialisation and urbanisation as well as economic growth (see Therborn 1996). In these terms, one could speak of an alternative modernisation (Arnason 2000) instead of a ‘fake’ modernisation, despite that in the end it turned out that—a fact recognised even by the model’s most ardent supporters—this sort of modernisation was deformed and that it could not compete with the Western model of (democratic) capitalism. Weber called attention to this on the basis of theoretical analysis alone right after the October revolution, as did Parsons in the late 1960s (see Adam 1992) and Berger in his famous work on ‘capitalist revolution’ in 1987. It is true that communism subverted two basic components of civilisational competence, self-control and self-initiative; despite this, certain civilisational competencies did develop, and others were preserved (for-

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mally and above all informally reproduced). One must take into account that the accelerated industrialisation and the formation of large state institutions (also in the fields of education and science) required at least a minimal level of work and professional ethic. We must not forget that a certain level of civilisational competence also existed during real-existing socialism: 1) regardless of the regime in power (all existing influences could not be thwarted, and the regimes did not set out to do so, as they needed certain levels of civilisational competence—after all people did live in the modern age); 2) in spite of the regimes (the regimes did attempt—either intentionally or not—to suppress certain patterns, but they were not always successful); and 3) thanks to the regimes (in the last phases of communism a certain openness and internal liberalisation was allowed to develop and the regimes began to learn the advantages of adaptability). In terms of the last dimension there exist great differences among individual formerly socialist countries. Yugoslavia’s experience stands out (and within Yugoslavia that of Slovenia); Hungary also became more liberal in the later phases.6 One should also mention here the uniqueness of the Polish case, particularly the phenomenon of the Solidarity movement which developed on the basis of self-organisation. During this period Slovenia attained a (relative) advantage in terms of work organisation and management, as it had more intense contacts with Western companies and a significant percentage of Slovene managers became acquainted with the rules of the market (they acquired more selfinitiative). However, one should also take into account that the roots of Slovenia’s advantage, which have become evident in terms of the highest GDP per capita among the transition countries, can be traced back to earlier periods. Along with Slovenia, Hungary also progressed in terms of civilisational competence, as did Poland, though to a lesser degree. In the case of the Czech Republic, the era of communist modernisation was to a great extent unproductive (Benaček 2001).

6 In light of the uncivilized events in the former Yugoslavia, particularly the ethnic cleansing and other war horrors, it is, of course, rather strange to speak of civilisational competence. However, one must keep in mind that civilisational competence does not necessarily coincide with moral development and that one is dealing with different levels and circumstances. On the other hand, one must also remember that a greater openness and liberalisation are only the conditions for the development of civilisational competence.


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Geographic (Geo-political) Position Even a quick glance at the map of Europe would tell us that certain transition countries share a border with one of the Western European countries or EU member countries, while others do not. Is this simply a banal detail or a fact that has deeper significance? Given the discussion thus far, one can agree with the statement that geographic (and geo-political) position can have serious repercussions (see Whitehead 1999).7 It is characteristic of ECE countries to share a border with at least one Western European country. If we look at the map of Europe more carefully, we observe that Slovenia and the Czech Republic have two western neighbours while Hungary, Poland and Slovakia have one such neighbour; Estonia and Croatia share maritime borders with Western European countries, the former with Finland, the latter with Italy. Lithuania and Latvia do not border any Western country.8 The geographic proximity facilitates the diffusion of innovations and the so-called international demonstration effect. The former process concerns the expansion of technological and social innovations (including civilisational competence) from the innovative centre to the (semi)periphery, and it comprises different forms from mechanical imitation to creative reproduction. The latter case refers to patterns of behaviour, work, lifestyle and consumption that operate as normative standards; more developed areas operate as a point of reference to which lessdeveloped regions compare themselves. Some analysts have pointed out the negative aspects of this process that come to light in cases of attempts 7 It is instructive to note the following statement: “For now the constraints of geopolitics have been eased (more for some than for others), but in no case have they been abolished. Geography may not entirely dictate any nation’s destiny, but Central and Eastern Europe is a region where its effects are likely to remain pivotal” (Whitehead 1999: 79). 8 Yet, part of Croatia (Istria and Dalmatia) has always felt a strong Italian influence; furthermore, the distance between the two countries over land is relatively small (the distance across Slovene land between Istrian Umag and Italian Trieste is barely 35 km). In an analogous fashion Estonia and Finland have a special bond. Both countries were even connected by a land bridge until 1703, when Peter the Great blocked it by creating the city of Petersburg and its outlying districts (Lewis 2000). Recently, the two remaining Baltic countries (Latvia and Lithuania) have also been gravitating towards Scandinavia; it can be said that both of these countries lag considerably behind the Czech Republic, Slovenia and Hungary, as well as being behind Slovakia, Poland and Croatia. Historically speaking, German, Swedish and Russian influences have overlapped in this region. Finally, one must also mention that Bulgaria shares a border with Greece, which is also an EU member country, albeit the least developed member country (it does not form part of the technologically and economically innovative core group of the EU).

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to appropriate patterns of consumption without patterns of production (Janos 1989). Distance from the innovative centre increases levels of underdevelopment. Or, in other words, the further a country is situated from the centre—in this case the group of most developed EU member countries—the greater the possibility that the country will inherit a weaker civilisational competence and thus a weaker basis for modernisation. Even economic and historical studies of the period from the end of the eighteenth to the middle of the twentieth century discovered the ‘extraordinary geographically emphasised pattern of regional income disparity’ (Janos 1989). Sociologically speaking, we can explain this in terms of Ashby’s law of requisite variety, which says that a system can cope with an ever more complex environment if it develops a greater internal variety. ECE systems were more exposed to the influences of a more complex (Western) environment and had to react sooner, adapt and increase their own complexity. This was possible only with the strengthening of civilisational competence.

Conclusion We have introduced the concept of civilisational competence as a system of internalised (cultural) dispositions (which must be observed in their interaction with actors’ decisions and with the particularities of structure) which enable (or render difficult) individuals and social groups to engage in productive participation in a complex modern society. These dispositions can exert a positive or negative influence on current and future socio-economic development. As far as the cases of ECE countries— although they do not represent a homogeneous bloc—are concerned, we are dealing, historically speaking, with a gradual accumulation of this competence, resulting in higher levels of adaptability and a smaller lag behind the modern core countries in comparison to societies which have (had) different historical (cultural) traditions and a less advantageous geographical and geo-political position. Analysing the process of modernisation and the consequent emergence of civilisational competence means to proceed from the assumption about the existence of an innovative core, a semi-periphery and a periphery. We always have to deal with first-comers and latecomers, with trendsetters and trend-followers. If one had to reconstruct the historical legacy


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of the ‘old’ members of the EU-15, some differences would appear. Like ECE countries, these countries also do not have the same historical path. It is true—especially if we do not use very rigorous criteria—that the majority of them could be considered as part of modernisation core (centre), but countries like Spain, Ireland, Portugal and Greece—and to some extent this is also true for Finland—have for a long time been at the periphery of this core group and had more in common with semi-peripheral countries of ECE. From our developmental indicators, it is quite obvious that at least Portugal and Greece are in most economic and social aspects still very far from core countries. On the other side, it is quite indisputable that the majority of former Soviet and SEE countries had a status of developmental periphery, among others Bulgaria, Romania and Russia (which is also a special case due to its ex-super-power role). There are, of course, some borderline cases like Poland and Estonia. Also, some countries had a mixed identity, Slovenia was (and sometimes still is) conceived as a Balkan country because of its belonging to the former Yugoslavia from 1918 until 1991. In general, it can be argued that countries or regions that belonged to the Austro-Hungarian Empire and shared borders with one or more members of the modernised core of Europe (now EU members) are considered as semi-peripheral ECE countries having to some extent more developed civilisational competences on average. It has been emphasised that concepts like path dependency or the vicious circle can be introduced, but it would be one-sided to reduce the analysis and future predictions relating to developmental performance to the notion of historical or geo-political determinism. It has also been mentioned that higher levels of civilisational competence have nothing to do with moral superiority or inborn characteristics of people living in certain parts of Europe. It is rather a matter of evolutionary learning and self-organisation. This means that the peripheral societies that inherited a low(er) level of civilisational competence are not necessarily comdemned to remain backward or under-developed in the future.

An Assessment of the Indicators It has been clear from the very beginning that the concept of civilisational competence cannot be considered and ‘measured’ like other concepts, i.e. factors which are supposed to have a strong impact on the developmental performances of contemporary societies. For this factor, which refers to

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the historical processes of modernisation, it is very difficult and in many aspects impossible to provide adequate and reliable data sources. The methodological approach we have chosen could be defined as an interpretive or hermeneutical reconstruction of general patterns of modernisation in the historical context of European societies. It was possible to conduct a preliminary step toward operationalisation and to identify some useful variables and indicators, but because of a lack of available and comparable statistical data these indicators cannot be quantified, measured and compared like other indicators (factors). We used some data and made some quantifications, but the analysis remained more qualitative. We are convinced that this cannot be considered as a deficiency but, on the contrary, as an enrichment of our methodological and analytical approach.

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3. Social Capital

Introducing the Concept The concept of social capital is undoubtedly one of the most noticeable recent ‘newcomers’ to the social scientific vocabulary. Indeed, since the beginning of the 1990s and especially after the publication of Putnam’s study of civicness and institutional performance in Italian regions (Putnam 1993), we are witnessing what is perhaps the unprecedented acceptance, study and application of one concept. This manifests itself both in the amount of published work that is in one way or another relates to the concept of social capital and in the variety of problems where social capital is used either as explanandum or explanans.9 It is also one of those sociological concepts that did not remain confined to social sciences, but also entered more general public discourse. Certainly, social capital is not the only trendy concept, not to say buzzword, which has risen to widespread prominence. Concepts of globalisation, post-modernism or civil society, to name just a few, are well-known examples.10 Recently, we haveare witnesseding an enormous amount of literature employing the concept of social capital, especially in the second half of the 1990s, as Woolcock’s epic footnote (three pages long) indicates (Woolcock, 1998). Instead of describing the fields of application of social capital, it would perhaps be easier to describe where it has not been used. Fine argues that social theory is being rewritten through the social capital lenses: two thirds of a database of abstracts of articles on social capital being compiled by the University of Michigan make no reference to social capital at all (Fine, 2000: 125). 10 The interest in social capital is a post-modern and a global phenomenon, and can be considered as an extension of an older but still ongoing debate on civil society; in this connection, it is also worth to mention the communitarian debate (see Etzioni, 1993). 9

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However, the concept of social capital differs from other trendy concepts to an important extent in at least two respects. First, while having clearly sociological origins, this concept has been readily accepted by a variety of social sciences since its beginnings. Among the three fathers of the concept, only Bourdieu can be designated ‘purely’ as a sociologist. Putnam, the most popular of them, is a political scientist. Coleman is also a sociologist, but with strong relations to rational choice theory, which is a basis of economic analysis.11 Needless to say that a number of authors that deal with the study of social capital are economists. The interest of organisations like the World Bank and OECD (Healy 2001) in this issue is also very telling. Second, the variety of issues where the concept is applied is indeed great, probably greater than in any of the other concepts. The concept is potentially applicable in the analysis of almost any social entity one can imagine. It is, in a way, a ‘timeless’ concept (see Rothberg 2001). This could be interpreted either as the evidence of the heuristic potentials of social capital or, as a review of the literature might suggest, that it is rather a manifestation of the inflation of the concept, turning it into a cure-all and robbing it of any distinct meaning (Portes 1998: 2). Which is it? Although the answer probably lies somewhere between these two, we believe that the former is more true. Nevertheless, frequent use of the concept as a metaphor that encompasses existing sociological ideas (Sandefur in Laumann 2000: 70) even implicitly questions whether it would perhaps be time to divest in social capital (Foley and Edwards 1999).

Coleman was a close colleague of Becker, a Nobel laureate in economics, who contributed importantly to discussions on social capital. The mutual influence of these two authors is very strong. Becker (1964) is the father of the ‘human capital’ concept. Coleman conceptualises social capital as the catalyst of human capital (Coleman, 1988). Becker attempted to incorporate the ‘social’ into his analysis. Hence his quote of Duesenberry stating that “economics is all about choice, while sociology is about why people have no choices” (in Becker andsn Murphy, 2000: 22). . Becker attempts to demonstrate “that rational choice theory is not inconsistent with the importance of social structure, but rather is crucial in understanding how this structure gets determined. (ibid.:, 23). 11

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What is Social Capital?—A Genotype with Many Phenotypical Applications Needless to say, even those authors who enthusiastically embrace the concept are well-aware of the aforementioned difficulties regarding its definitions. This results in an interesting structure of a substantial body of work that employs the concept in one way or another. Even a decade after the concept started gaining relevance, it is very common that the author who applies the concept in the analysis of a specific problem first discusses the concept and points to its intellectual origins, a diversity of applications and some unresolved issues. Most authors then also accept one of the schools of thought and sometimes contribute their own definition in the general framework of this school and only then start dealing with their specific issue. As a result, we now have a substantial stock of definitions at our disposal. If the introduction of social capital has been labelled with pungent observation as a ‘plethora of capitals’ (Baron and Hannan 1994), the current phenomenon can justly be denoted as ‘plethora of definitions’. This is not so strange if one considers that in a relatively short period of time several quite distinct schools of the contemporary reception of the concept have formed. Even though there are smaller differences, most authors agree that there are three basic traditions.12 The first derives from the work of Bourdieu, who defined social capital as ‘the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalised relationship of mutual acquaintance and recognition—or in other words, to membership in a group— which provides each of its members with the backing of the collectivityowned capital, a ‘credential’ which entitles them to credit, in the various senses of the word’ (Bourdieu 1985: 248). This definition has many variations, the most important being the one from Portes, who defined social capital as the ability to secure benefits through membership of networks and other social structures (Portes 1998: 8). The second school has been formulated around Coleman’s approach. While studying the educational outcomes, he asserted that ‘[social] capital is defined by its function. It is not a single entity, but a variety of different entities having 12 Portes mentions two basic traditions, first deriving from Bourdieu’s work and the other deriving from Loury and later refined by Coleman (Portes, 1998: 3–5). (Similar in Narayan and Cassidy, 2001). Fine (2000) adds Becker to the list.

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two characteristics in common: they all consist of some aspect of social structures, and they facilitate certain actions of actors—whether persons or corporate actors—within the structure’ (Coleman 1988: S98). Elsewhere he adds an important observation: ‘Like other forms of capital, social capital is productive, making possible the achievement of certain ends that would not be attainable in its absence’ (Coleman 1990: 302). His definition was very important as it shifts focus from individual (egocentric) outcomes, which are predominant in the approach initiated by Bourdieu, to outcomes for groups, organisations, institutions or society (socio-centric perspective). Putnam, who is considered as the father of the third tradition, ultimately introduced this focus in his analysis of democracy and development in Italian regions. Drawing on Coleman’s account of the productive and achievement-enhancing nature of social capital, Putnam offers the following definition of social capital: ‘Social capital here refers to features of social organisation, such as trust, norms, and networks, that can improve the efficiency of society by facilitating coordinated actions…’ (Putnam 1993: 167). For epistemological reasons, it is not possible to devise a single concept and a single valid measure of social capital. First, we do not have a strong consensus on what social capital is. It seems that as the popularity of the concept increases we move more and more away from it. True, it is possible to discern a ‘genotype’ social capital; regardless of the disciplinary or theoretical background, most authors agree with the aforementioned formulation by Coleman that we are dealing with some aspects of social structure that enables social action. However, this formulation is too broad for empirical research. Additionally, there is already an impressive (and growing) body of its ‘phenotype’ definitions and applications in concrete social scientific research. Namely, social capital is highly context-specific. This means that any of the aspects of the social world considered to be social capital are so defined ‘by virtue of institutions or social networks in which they are embedded. Moreover, the social capital available … stems not only from the subjective attributes … but more profoundly from emergent and existing social infrastructures which facilitate individual and collective actions of many kinds’ (Foley and Edwards 1999: 154). Furthermore, there are some issues that remain unresolved: the relation between the sources, forms and consequences of social capital and the question of whether social capital is a dependent, independent or intermediary variable.

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From Definition to Operationalisation and Measurement The palette of measures is indeed impressive. Of the three social scientists that have most significantly influenced recent theoretical discussions on social capital, only Bourdieu did not conduct empirical analysis on this issue. Putnam and Coleman, on the other hand, were involved in empirical research and the formulation of indicators, thereby strongly influencing the research efforts that in one way or another employed the concept of social capital. The most known and widely applied measure is the so-called Putnam’s instrument. When referring to this instrument, one usually has in mind data on membership in voluntary organisations, as captured in international surveys. Most often used is the World Values survey (see Inglehart 1997). Interestingly, Putnam’s instrument is not really Putnam’s, but an (over)simplified version of his elaborated index of ‘civicness’, where membership in voluntary association represents only one of four indicators.13 Following from his definition of social capital, these indicators measure the third component, networks. Trust as the first component is usually measured by expressions of generalised trust in people and occasionally with other variations of this measure, such as trust in institutions are also applied. As a measure of the second component, norms of reciprocity, a variety of ‘political culture’ variables are applied. Coleman, on the other hand, used very different measures in his own classical article. He measured social capital inside the family by the physical presence of adults and on the attention children receive from their parents. In his analysis of educational outcomes, he applies the difference between two-parent and single-parent families as a measure of the physical presence of adults and number of children in the family as a measure of the attention given to children. As a proxy measure for outside-family social capital, he employs indicator of the number of times that a child had to change school due to the family’s move (Coleman 1988). These two approaches are the basis on which the bulk of empirical work has been conducted in the past decade. The first, deriving from Putnam’s operationalisation, focuses mainly on attitudes, as measured in various surveys. One of the most simple and—perhaps exactly due to its 13 Putnam's ‘'civicness’' index consists of four components: vibrancy of associational life, incidence of newspaper readership, referenda turnout and preference voting (Putnam, 1993: 91–94).

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simplicity—one of the most famous is the approach by Fukuyama, who practically equates social capital with trust: ‘Social capital is a capability that arises from the prevalence of trust in a society or in certain parts of it’ (Fukuyama 1995). In his comparative case study of the development of economic organisations and industrial structure, he uses the simple difference between high-trust (Germany, Japan and the United States) and low-trust societies (Taiwan, Hong Kong, Italy and France) to explain the outcomes.14 However, given the problems with the definition of social capital and the complexity of the concept itself, the use of a single indicator as a measure of social capital can be criticised as overtly simplistic and can provide us with wrong conclusions. For example, if the relationship between social capital and an alleged indicator changes over time, and this change remains concealed, one automatically makes a false conclusion about the amount of social capital (Paxton 1999: 90). Some authors have acknowledged problems associated with using a single measure and have applied several measures. Knack and Keefer (1997) have adopted two measures of social capital in their comparative study of the impact of social capital on economic growth and investment. The first is the mean value of expressed general trust in people, as measured with the standard World Value Survey variable (Can people generally be trusted?) and the second as a composite index of norms of civic cooperation constructed from several questions.15 The use of multiple indicators was also an approach of Paxton (1999) in her reassessment of Putnam’s claims about the decline of social capital in the United States. According to her definition, social capital consists of two measurable components, objective associations between individuals and a subjective type of tie, which has to be reciprocal, trusting and involving positive emotions (ibid: 93). Taking data from the General Social Survey, she uses a variety of indicators to measure both components. The first is measured with three vari14 While using this simple dichotomy, Fukuyama pays attention to the distinction between what was later conceptualised as a difference between ‘bonding’ and ‘bridging’ social capital. Hence, when he is talking about low-trust societies, he acknowledges the abundance of social capital in the framework of the familial structures. In his subsequent work, he also applied other measures and, proxy indicators forof the absence of social capital, especially indicators of anomie. (Fukuyama, 1999). 15 These questions were about the following behaviours that ‘can always be justified, never be justified or something in between’. These actions are a). claiming government benefits which you are not entitled to, b). avoiding a fare on public transport, c). cheating on taxes if you have the chance, d). keeping money that you have found, e). failing to report damage you’ve done accidentally to a parked vehicle. (Knack and Keefer, 1997: 1265).

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ables (spending evenings with a neighbour, spending evenings with friends and total number of memberships in voluntary organisations). The second is measured with trust in individuals (three survey questions on the helpfulness, trustworthiness and fairness of people) and trust in institutions (organised religion, the education system and the executive and legislative branches of government). Only after testing whether the model fits well in each of the relevant years and that estimated parameters remain stable did she attempt to estimate the change of social capital in this period (ibid). The second and quite different approach, which has been developed on the basis of Bourdieu’s and especially Coleman’s work, focuses on social structural variables, analysing the position of the individual inside social networks. Perhaps the most influential empirical work in this tradition has been that of Burt (1997), who measures social capital in terms of network constraint: more constraint means less structural holes. Because structural holes are the source of social capital, fewer structural holes result in poorer social capital (Burt 1997). Network constraint depends on three dimensions of the network: its size, density and hierarchy. The premise is that smaller networks, dense networks and hierarchical networks are more constraining (ibid). Burt applied this approach on microlevel in his analysis of senior managers in a large electronics firm in the United States. The study of the formation of a network of enterprises in bio-technology (Walker et al 1997) indicates that in this approach the behaviour of collective actors can also be expanded to analyse, as already Coleman emphasised that purposive organisations can be also analysed as actors (Coleman 1988: S98). This very short presentation is quite sufficient to point to the conclusion that we have very substantial amount of different operationalisations and measures of social capital at our disposal. This muddle is clearly a consequence of the aforementioned unresolved issues in theoretical accounts of social capital, but perhaps even more of the relationship between theoretical and empirical work on social capital. Namely, as many observe, much empirical work related to social capital has in one way or another been theoretically unreflexive (Sandefur in Laumann 2000: 70), and ‘[the] lack of an obvious link between theory and measurement has, in some cases, led to the use of questionable indicators of social capital’ (Paxton 1999: 90). The World Bank’s attempt to create the measures for what they call the Global Social Capital Survey is, perhaps, one of the most obvious examples of the neglected link between theory and opera-

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tionalisation (Narayan and Cassidy 2001). Interestingly, Bourdieu’s conceptualisation of social capital, which is observed to be theoretically the most refined (Portes 1998, Edwards and Foley 1999), resulted in much less research work than Coleman’s and especially Putnam’s. Bourdieu himself created a starting-point by offering a measure of social capital; it would be operationalised as the sum of the resources attainable through a network of more or less institutionalised relations (Bourdieu and Wacquant 1992: 119). The problem is how to execute procedures of operationalisation and measurement consistent with certain theoretical premises while at the same time remaining sensitive to context. Another important question is whether it is possible—and how—to differentiate between three interrelated yet distinct issues related to social capital: its sources, its consequences, and social capital itself, while avoiding tautological statements (Portes 1998, Lin 2001). Sources, Dimensions and Consequences of Social Capital

From the beginning of the debate on social capital, much has been said about the issue of sources or determinants, dimensions or forms, and outcomes or consequences. Also in this case, several dilemmas and disputes remain unresolved. One important dilemma is that of networks vs. norms as a source of social capital. In his studies of educational outcomes, Coleman focused on social relations as the source of social capital. He specifically emphasised that certain types of these relations are especially important. The first is the closure of social networks, which can provide a collective sanction and foster the emergence of effective norms. The second is appropriable social organisation—especially multiplex ties— which allows utilising the resources of one relationship to be appropriated in others. Forms of social capital are the obligations, expectations and trustworthiness of structures, information channels, norms and effective sanctions. Portes criticises Coleman on the premise that his definition is too vague and that it in fact opened a Pandora’s box of social capital and, even more importantly, that he mixed the ‘possessors’ (i.e. owners) of social capital, the sources of social capital and the resources themselves (Portes 1998: 5). He attempts at a more systematic definition. Based on a distinction between consummatory and instrumental motivations for human action, he defines four sources of social capital: value introjection and bounded solidarity are based on consummatory norms, while recip-

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rocity exchanges and enforceable trust are based on instrumental motivations. The outcomes of social capital can be both positive (norm observance, family support, network-mediated benefits) and negative (restricted access to opportunities, restrictions on individual freedom, excessive claims on group members and downward levelling norms) (ibid: 8). The second important dilemma is the one between a bottom-up and a topdown approach. The former is strongly present in Putnam’s conceptualisation, which focuses on the role of civic associations and norms in creating social capital. However, while we can here clearly identify the outcome of social capital, the analytical and conceptual distinction between social capital and its sources are less clear. Namely, Putnam understands networks both as a source and a form of social capital. This approach has been countered by the top-down perspective, focusing on the role of the state in terms of coherent and dependable public institutions in creating state-society synergy (Evans 1996). Woolcock attempted to overcome this and other divisions by developing a comprehensive, multi-level model of social capital(s) and taking into account the well-established distinction between ‘bridging’ and ‘bonding’ social capital (Woolcock 1998). Nahapiet and Ghosal (1998) attempted at a more robust definition and distinguished between three dimensions of social capital: structural, relational and cognitive. The first describes the impersonal pattern of ties between people, the ‘hardware’ of social networks. The second describes the personal relationships that influence their behaviour and that fulfil their social motives, such as respect and friendship. Trust and trustworthiness are a part of this dimension. The third dimension refers to resources that have so far been neglected in this discussion, resources providing shared representations, interpretations and systems of meaning. With this dimension the authors emphasise how difficult it is to ‘reap the benefits associated with building social capital’ (Lesser 2000: 7) without a shared understanding of the common terms. Based on this observation (and a review of a substantial bulk of literature) Adler and Kwon concluded that ‘[there] is considerable confusion in the research to date in the sources of social capital. … The views of the different authors appear to depend on their disciplinary background and on the questions they address with the social capital concept’ (2000: 95) and decided that we should focus on networks (the structural dimension), shared norms (the relational dimension) and shared beliefs (the cognitive dimension) (Adler and Kwon 1998).

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In short, we are quite far from any kind of consensus on these issues and the measurement of social capital is still in its infancy. What some authors claim as a consequence others describe as a source. The quality of government structures is one notable example. While Narayan and Cassidy (2001) or Putnam (1993) claim that it is a consequence of social capital, others see it as one of the determinants of social capital (e.g. OECD 2001). Hence, any measure of social capital should be interpreted with considerable caution. The measure of generalised trust is perhaps the most obvious example of enthusiastic application, even though there are numerous problems related to this measure. A literature survey clearly indicates that trust is understood either as a source of social capital (Coleman) or its dimension (Putnam, Fukuyama, and Narayan and Cassidy). The interpretation of trust as a consequence of social capital is also possible: ‘Trust … is not the universal lubricant that oils the wheels of cooperation wherever it is applied. Rather, cooperation is achieved through a variety of mechanisms … Where cooperation succeeds, trust may be presumed to follow.’ (Edwards and Foley 1999: 162, see also Gambetta 1993, Luhmann 1988, Sztompka 1999). Moreover, such an approach neglects the essential ontological difference between the two concepts, between the ‘feature of social structure’ and ‘a psychological state of individuals’ (Adler and Kwon 2000: 101). Any attempt to solve the two basic problems—firstly, that of sources and consequences and secondly, that of whether social capital is dependent, independent or intermediary variable—in a simple straightforward manner is fundamentally flawed. It fails to recognise the complexity of social phenomena and processes. For example, is the quality of governance a source or a consequence of social capital? Claiming that only one or the other is true, would imply that social systems are linear in their nature, even though they are in fact non-linear (Parker and Stacey 1994) and chaotic (Ormerod 1994). The answer has to incorporate a fundamentally different vision of society. Hence, explanations should employ the more complex mechanism of a feedback loop, which can in reality lead to either a vicious or a virtuous circle. The interpretation of a virtuous circle would mean that quality governance encourages the participation of citizens, which in turn increases the quality of the governance.

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The Significance of Social Capital for Economic Development and Institutional Efficiency It is evident from our analysis concerning the nature and epistemic status of social capital that there exist numerous levels, contexts, frames of reference and theoretical backgrounds of social capital. Certain definitions and operationalisations make sense at the micro (or macro) level or in specific contexts. They may not, however, be automatically applied at other levels or in other contexts, for we are dealing with different phenotypical applications of social capital. One such (macro) application involves the issue of development and economic success of a particular region or country, an issue introduced by Putnam in his famous analysis of the roots of developmental discrepancies between the northern and southern (Mezzogiorno) regions of Italy (Putnam 1993). In recent years, a research group of the World Bank has been conducting an in-depth study of the relationship between developmental efficiency and social capital in Third World countries (Woolcock 1998, Woolcock and Narayan 2000). As in many other cases, it holds in this context that social capital ‘matters’—in other words, that it exerts an influence on developmental effectiveness; however, existing studies have yet to provide more consistent or convincing answers as to how this resource works and how it is related to other developmental factors. We may agree with the finding that research on social capital is yet at an ‘early stage’ (Woolcock 2000: 243). Despite this fact, few deny the theoretical or policy relevance of social capital (the exception is Fine 2001). Putnam himself in his research on Italy oscillates between two approaches to social capital. On the one hand, social capital is considered to be a ‘lubricant’ or catalyst of cooperative relations; on the other, we may find formulations in which social capital is raised to the level of a sort of algorithm which provides a definitive solution and explanation for all dilemmas of development and political effectiveness. Putnam states: ‘In summary, economics does not predict civics, but civics does predict economics’ (Putnam 1993: 157). This implies that civic tradition in the form of civil society formations and political participation is a more reliable indicator of socio-economic development than (past) development itself (ibid: 156). If one turns to the model in which Putnam examines the influence of four variables on institutional performance during the 1980s (these include civic involvement during the 1900s, socio-economic development during the 1900s, civic involvement during the 1970s and

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socio-economic development during the 1970s), one concludes that the intensity of initiative and participation on the part of citizens at the beginning of the twentieth century to a great extent determines the political effectiveness of regional governments during the 1980s. Putnam goes on to substantiate this path dependency explanation by arguing that the differences between the northern and southern regions developed and have persisted from the Middle Ages (approximately from the twelfth century) onwards; furthermore, he asserts that institutional reforms will not erase these differences that easily. Many have criticised this aspect of Putnam’s work (see Levi 1996, Sabetti 1996), which in turn raises some important questions. First, one may ask if it is possible to employ a different model—as every model is limited and is derived from certain theoretical expectations—with different variables or if it is possible to add new variables to the four chosen by Putnam in his model. Here we are referring to the level of education (in other words, levels of human and cultural capital), a variable that has been shown to be a crucial factor (stimulus) of political participation in numerous analyses.16 The second question concerns mono- or multi-causal explanations. Although Putnam may not adequately emphasise this point, he still argues that ‘any single factor interpretation is surely wrong’ and that civic tradition should not be considered as the factor or cause which alone triggered the process of economic progress and political efficiency in northern Italy. He himself states ‘that In a fact, Putnam employed this variable in his statistical analysis. He is also aware of the impact of education on political behaviour, but he came to the conclusion that educational attainment does not explain the differences in institutional performance. EmiliaRomagna and Calabria are supposed to have almost the same proportion of people who attended school beyond the minimum school-leaving age (46 percent% vs. 45 percent%) but they differ greatly in institutional efficiency. He asserts that» ‘historically, education may have played an important role in strengthening the foundations for the civic community, but it seems to have no direct influence on governmental performance’ (1993: 118). In our opinion this aspect should be considered more carefully. It is not clear, for instance, what is the share of (active) population with accomplished secondary and tertiary education. The issue is quite intriguing regarding the fact that Italy as a whole lags behind in this respect not only in comparison with the EU average, but also in comparison with East-Central European countries (Slovenia, Hungary, Slovakia and, the Czech Republic). Or put in other words: Italy has relatively low level of human capital, but, on the other hand, its economic performance is above the average of EU countries. Ist its possible that social capital is a substitute for human capital? But it is also known that Italy—according to some more tentative assessments—belongs to the low-confidence countries (see Fukuyama, 1995). 16

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takeoff was occasioned by changes in the broader, national, international and technological environment. On the other hand, civic tradition helps explain why the North has been able to respond to the challenges and opportunities of the nineteenth and twentieth centuries so much more effectively than the South’ (Putnam 1993: 159). It is highly questionable whether this last statement is consistent with the model mentioned earlier. In any case, it is evident that the author is aware of the temptation to explain all the essential differences between the developmental trajectories of northern and southern Italy with a single factor (social capital). At the same time he wishes to make the point that one should approach social capital as the catalyst of the more effective cooperation and social organisation that allowed the North to develop a higher capacity for adapting and responding to development impulses from its environment. Some critics have overlooked this point; however, it is also true that the author does not assume a coherent or clear position on this issue. The third question concerns whether the concepts of civic tradition, civicness and civic involvement are equivalent to the notion of social capital. We believe that the former are concepts that transcend the notion of social capital, for they contain elements of habit, competence (knowledge and informations) and ideology that stimulate active citizenship and the flourishing of civil society. In other words, the use of the concepts mentioned above implies an indirect measurement of social capital (especially if one is dealing with different historical frameworks), and it is not clear whether such indicators contain elements that do not have any direct links with social capital. The fourth question addresses the nature of the relationship between civic participation and business (economic) activity. For example, does membership in choirs, bird-watching associations or other interest groups contribute to the development of entrepreneurship and innovation? Finally, such analysis also begs the question concerning the relationship between cooperation and competition, between collective and individual approaches, between egocentric and socio-centric perspective. Turning to the case of the technologically powerful region of Silicon Valley in the United States may shed light on some of the questions and dilemmas raised above. Before doing so it must be emphasised here that despite the criticism and questions Putnam’s first study has provoked, his findings are extremely important, for they have paved the way for fruitful and innovative discussions concerning the role of social capital in development. We can even argue that as far as Putnam and the entire discus-

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sion concerning social capital is concerned, controversy and debate do not represent a weakness but an advantage, for they stimulate new attempts at verification, as well as searches for more appropriate solutions. Some authors believe that the phenomenal growth of high-tech industry and services in Silicon Valley (which may be compared to certain regions in northern or central Italy, which some refer to as the ‘Terza Italia’) has little to do with civic community (Cohen and Fields 2000). In this case, instead of a tradition of solidarity or generalised reciprocity at the community level we can speak of ‘rampant individualism among its most talented workers’ (Lesser 2000: 10). What operates in this context is ‘performance-based trust’ (ibid: 12). People who wish to succeed with their ideas and their technological innovations must trust each other and work together. An efficient system of interaction and communication at the institutional level is also crucial. Cooperation among large research universities, the government, venture capital companies, law firms, business associations, the stock exchange and the labour market creates the basis for rapid transfers of knowledge and innovations in the business environment of a networked economy. It is interesting to note that Putnam also mentions the phenomenon of Silicon Valley in his latest book; he argues that the success of Silicon Valley does not contradict his thesis. It is true that the civic community does not play such a strong role in this case; however, Putnam states that the productivity of this region depends on the existence of social capital based on formal and informal networks of connection and cooperation between firms and other institutions (Putnam 2000: 324). Social capital in this context is generated on the basis of the selfinterested and economic (rational) calculation of individual actors and institutions. However, Putnam describes a similar situation in the case of the socalled industrial districts of Terza Italia in terms of a ‘seemingly contradictory combination of competition and cooperation’ between small firms endowed with flexible specialisation (Putnam 1993: 160, 2000: 160–61). Even Putnam recognises the possibility that cooperation may occur due to the pressure of competition and that the processes of cooperation and competition may occur simultaneously. Furthermore, it is also possible that egocentric interests do not necessarily imply a zero-sum game but that often they may require a cooperative positive-sum game. Thus, we can argue that Putnam does not subscribe to romantic ideas of solidarity and altruistic community (Levi 1996) as the only sources of social capital. The norms of generalised reciprocity embodied in the net-

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works may also be of a purely utilitarian nature. On the other hand, it is quite obvious that Putnam’s approach contains strong normative elements. Namely, civic community is ultimately a desired end. Economic prosperity is considered to be an expression of the dynamism and creativity as well as of the moral consistency of a democratic civil society. There exist numerous sources of social capital; however, the bearers of social capital are first and foremost active citizens. In other words, social capital is the capital of active (and altruistic) citizens.

How Social Capital Affects Developmental Performance The question is which aspects and conceptualisations of social capital provide the most convincing explanations of the differences in developmental dynamics of (post)modern societies. On the basis of critical analysis of Putnam’s approach and in taking into account other contributions (Fukuyama 1995, Woolcock and Narayan 2000, Lall 2002, Grootaert and Bastelaer 2002), we may select the following aspects and conceptualisations of social capital: 1. Social capital as a catalyst of disseminating of human and intellectual capital. The possession of knowledge and competence—even supposing the existence of economic capital—is not sufficient for the optimal realisation of certain developmental goals. Mechanisms of transfer and intermediation are also necessary—a typical case is the transfer of knowledge and innovation from the academic sphere to the industrial sphere or the policy-making sphere so that accumulated human capital may be efficiently and appropriately applied. Human capital can be ‘dead capital’ unless it is placed into circulation with the aid of mechanisms of recombination and reconfiguration so that it may be made useful for technological application or for the solution of social problems (see Gibbons et al 1994). Social capital in this context may be considered as a source that can perform this role. The existence and maintenance of different networks on the basis of generalised reciprocity, trust and readiness for cooperation is a pre-condition for the transfer and dissemination of knowledge and innovations (Giddens 2000, Fukuda and Hill, 2002). 2. Social capital as the basis for greater levels of synergy and coordination. According to some authors, synergy is linked to complementarity and embeddedness (Evans 1996); investigations conducted by the

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World Bank emphasise the linkages between the government and civil society or the formation of public–private partnership (Woolcock and Narayan 2000). This conceptualisation may also be defined as a discreet reintegration of individual and collective projects and resources into more complex frameworks of strategic steering. Of course, this steering is not hierarchical in nature but can occur only in the form of contextual steering on the basis of ‘intermediary negotiation systems’ (Willke 1995, Mayntz 1993, Messner 1997). Here once again the linking and bridging functions of social capital come to the fore. In the settings where this kind of social capital is absent, disturbances in coordination and consequently suboptimal institutional efficiency are the most probable outcome. The costs of coordination and mechanisms for reducing them are an important part of institutional or firm calculation. In institutional economics they are known as transaction costs, that is costs of monitoring and enforcing agreements. The point is that some economists consider the developmental significance of social capital (especially trust relations) as an efficient instrument for reducing these costs.

3. Social capital as a ‘lubricant’ of network (project) organisations (more about this type of organisation in Kanter 1997 and Messner 1997). One of the problems of transition (post-socialist) societies is connected with the domination of bureaucratic organisations, i.e. with the insufficient diversity of ad hoc organisational forms (see Mintzberg 1989). Bureaucratic types of organisation are maintained even in those areas where different forms of organisation and management should have been developed. The higher level of (postindustrial) development presupposes project-based organisations that are less hierarchical, more flexible models which also require a more demanding form of leadership and communication. In this case, ‘spontaneous sociability’ (Fukuyama 1995) is important, along with a specific know-how and the capacity for empathy and cooperation. In those settings where there is too little social capital (as in the case of transition countries), these forms of organisation—including association-based types of organisation, typical of NGOs—evolve with great difficulty. The same is true for establishing of groups in different areas, from industry to research teams at universities and institutes. 4. Social capital as a facilitator of intermediary institutions. This aspect is linked to project- and association-based organisations,

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though it also has broader implications. Essentially this aspect concerns the issue of relationships and networks within civil society— an aspect to which Putnam refers as ‘horizontal networks of civic engagement’. This concerns the nature of structures which occupy the sphere between individuals and small life-worlds and big instrumental institutions (see also Berger and Luckmann 1995). In other words, we can have here transparent and in principle democratic formations of interest groups or—on the other hand—groups in which dominate clan-like forms of clientelistic (rent-seeking) and corruption-prone networks (or in extreme cases, the Mafia and organised crime). This aspect may have direct negative repercussions for developmental dynamics. In the later case, malign social constellations emerge (we can observe them in certain settings in Latin America, the Balkans, Russia and southern Italy) that have destructive effects on trust and cooperation (see Gambetta 1989). In this manner, a vicious circle may develop, leading to stagnation and path dependency. We should not overlook here the Olson’s thesis about detrimental impact of so-called special interest groups, especially trade unions and professional associations—which are supposed to be in principle rent-seeking—on the efficiency of the market economy and overall systemic productivity (see Kunz 2000). It can only be said that it is a fine line that separates the positive from the negative influence of social capital. The character of intermediary structures depends to great extent on the institutional framework (especially rule of law and the effectiveness of control mechanism) as well as (as it was mentioned in the chapter on civilisational competence) on inherited norms and civic culture. The likelihood of ‘Olson’s effect’ is greater in settings with monopolistic interest associations and where the probability of corruption or self-seeking behaviour of civil servants is high.

Appraisal of the Situation As mentioned previously, social capital is a concept that is difficult to operationalise, especially if it is considered—phenotypically—as an organisational phenomenon related to the above-mentioned four components. Empirical verification would demand many more indicators than

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we have at our disposal. It is quite understandable that there is a lack of systematic evidence, especially if we consider that we need internationally comparable data for all countries in the sample. On the other hand, there are certain databases on various artefacts of social capital that allow inference on the amount of social capital in a specific society. We can make use of three such proxy indicators: generalised trust and two indicators relating to active participation in voluntary associations. The first and the most common such indicator (proxy variable) is the degree of generalised diffuse trust, measured as the percentage of respondents who believe that ‘people can generally be trusted’. As aforementioned, this has become a very common indicator, and the question is appearing in various forms. Very commonly applied datasets are the World Values Survey 1995 and the European Values Survey 1999. The latter provides us with more recent—and thus relevant—data on all countries that are relevant for this study. Chart 1 clearly points to the relevant differences in the levels of generalised trust. The conclusion is unambiguous: the generalised trust in ECE countries is much lower than in Western Europe. Especially high levels of generalised trust can be found in the three Scandinavian countries and the Netherlands, where it is well above 50%. Data from the World Values Survey shows that the level of generalised trust is also at comparable levels in Norway, a highly developed Scandinavian country which opted no to join the EU. Spain, Ireland, the UK, Germany, Austria, Italy and Belgium lag far behind, but with nevertheless quite high levels, between 30 and 40%. The relative high levels of trust in Spain, a southern EU member, is perhaps somewhat surprising, as is the very low ranking of France, which is indeed at the levels of ECE countries. These countries generally rank much lower than most EU member states, with levels of trust between 10 and 25%. Bulgaria and Lithuania have the highest levels of generalised trust among former Soviet, SEE and ECE countries. Four more successful transition countries, the Czech Republic, Estonia, Hungary and Slovenia, are also above 20 percent. The situation in Poland, Latvia, Slovakia and especially Romania is even more critical. The same is true for Portugal. The negative impact of socialist arrangements on levels of generalised trust is to some extent evidenced by the important difference between the former West and East Germany. Namely, data from World Values Survey 1995, which is disaggregated for these two parts, show that 42% of respondents from West Germany and only 25% from East Germany believed that people can generally be trusted. However, some evidence

Ita l Be y lg iu m Bu lg ar ia Li th ua ni a Ru ss Cz ia ec h R. Es to ni a H un ga ry Fr an ce Sl ov en ia G re ec e Po lan d Sl ov ak Ro ia m an i Po a rtu ga l

U K G er m an y A us tri a

N or w ay Sw ed en D en m N ar et he k rl a nd s Fi n Sw lan itz d er la nd Sp ai n Ire la nd

Chart 1: Generalised trust by country (%)

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Source: own calculations on the basis of data from the European Value Study 1999–2000 (Halman 2001) and World Values Survey, 1995

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shows that as transition proceeds, some positive trends are possible. In the case of Slovenia, for example, we can see a trend towards an increasing level of generalised trust. The level of trust in 1999, albeit relatively low, is a nevertheless substantial increase from the beginning of the 1990s, when it stood at 13%, and from 1995, when it was 16%. Data from Estonia also shows a small increase in the period from 1995 (21.5%) to 1999 (23%). We should also briefly mention data from the research on new democracies (New Democracies Barometer). The question is somewhat different,17 and the data is not comparable with the World Values Survey or the European Values Study. As a result, the expression of generalised trust is considerably higher in all ECE countries. Levels of trust are quite comparable among ECE countries (approximately 50% after recording). However, when compared to Austria, the only EU country that was included as a comparison, it is significantly far behind (77%). Another common indicator which is based on findings from the European Values Study concerns the active membership, i.e. unpaid work in 15 voluntary organisations and activities, and spending time in ‘clubs and associations’. Regarding the former (Chart 2), the highest participation is in Sweden, the Netherlands, Switzerland, Norway and the UK. Greece and Slovakia have surprisingly high scores, especially if we consider that both countries show very low social trust. This negative correlation is a challenge for a (Putnamian) theoretical approach which emphasises a positive and mutual enforcing relationship. Three members of the EU, Italy, France and Greece, have a rather modest level of social capital; Portugal is even among the countries which are the most problematic in this regard. In addition to Slovakia, the Czech Republic and Slovenia also perform quite well, while Poland and especially Hungary show surprisingly low scores. Chart 3 shows that the ranking in the third indicator, ‘time spent in voluntary associations and clubs’, reveals a somewhat different pattern. The Netherlands and Denmark, two high-trust societies, again rank highest, with more than 50% of respondents reporting weekly and monthly participation in voluntary associations and clubs. Sweden, also a high17 The question is ‘“There are many different institutions in this country, for example, government, courts, police, civil servants. Please show me on this 7-point scale, where 1 represents no trust and 7 great trust, how great is your personal trust in each of these institutions”.’ After applying the questioning for to a number of institutions, question it is also put for ‘“most people you meet’”.

% &

& #

6Z H GHQ

" !

# $

I Cz taly ec h Re p. Po rtu ga l Sp ain Bu lg ar ia G re ec e La tv ia Li th ua ni a Ru ss ia Po la n Ro d m an ia H un ga ry

UK Fi nl an d Sl ov en ia Es to ni a Fr an ce Sl ov ak ia

D en m ar k G er m an N y et he rla nd s Be lg iu m Ire lan d Sw ed en A us tri a

Chart 3: Spending time in clubs and associations, weekly and monthly (%)

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Source: the European Values Study 1999–2000 (Halman 2001), own calculations

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trust society, is not so high, but nevertheless ranks very well. Germany, a middle-trust society and weak in unpaid work done in voluntary activities (the second indicator), performs much better in this chart. The opposite is true for Slovakia and Greece, both are low-trust societies with surprisingly high scores on the second indicator but which are very weak on the third indicator. The Czech Republic and especially Slovenia have a more balanced relationship between the second and third indicators.

Conclusion Concerning our indicators for social capital it can be argued that trust is a ‘lubricant’ or ‘conductor’ of cooperation and collective action, the unpaid work in voluntary activities and organisations is crucial for maintaining the whole nonprofit voluntary sector, and the time spent in clubs and associations is important for establishing and preserving contacts and for exchange of information. The problem is that some findings from the European Values Study, the only existing data source which met our comparative criteria, are difficult to explain, and they show some incongruencies between the three indicators. The case of Slovakia and Greece has been mentioned. It can be argued here that accumulated social capital cannot circulate and cannot be utilised by other subsystems and for other purposes without trust. Put differently, the lack of trust relations and other incentives might reduce the spill-over effects of other components of social capital. There is no doubt that development can also occur in settings where the stock of social capital is rather modest. But in the context of the breakthrough from the so-called second to the third (post-industrial) stage of development, which was recently so successfully managed by Ireland and Finland, with the emphasis on knowledge transfer, innovations and synergetic societal coordination, it seems that social capital is becoming the critical resource—a . Some of the (most successful) ECE countries (the Czech Republic, Slovakia, Hungary, Slovenia) may soon face this challenge. Whether they will be able to manage this second transition, meaning developmental or competitiveness convergence, depends to a great extent on their ability to regenerate and recycle social capital (see Badescu and Uslaner, eds. 2003). Although the data and indicators at our disposal could be conceived as incomplete and, regarding the theoretical postulates, inconsistent in some aspects, the conditio sine qua non

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overall impression is quite clear: the majority of countries which are considered as the most competitive and as ‘learning societies’ belong to the group with the high(est) level of social capital.

An Assessment of the Indicators It has been mentioned above that we did not have ‘optimal’ data and indicators. From the European Value Study, we used the attitudinal question about generalised trust and self-reported participation in voluntary associations. The problem is that some more objective, statistical data concerning the membership of such associations on a national and transnational level are not available (i.e. they are available only for certain countries, see Putnam 2002). According to our knowledge there is no alternative or better empirical evidence in Europe which could be utilised for our purposes. It is true that some findings from this survey are not easy to understand and interpret, such as the relatively high trust in Bulgaria and low trust in France or the cases of Slovakia and Greece, where no correlation exists between all three indicators, and also Germany, with incongruency between the second and third indicators. We can speculate that there are some unsolved methodological and semantic problems emerging in the process of conducting the survey. It can be concluded, however, that the empirical basis and indicators we used do provide a rough, approximate but informative picture about the potential stock of social capital in individual countries.

4. Cognitive Mobilisation

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The Concept and the Indicators Knowledge becoming one of the most important factors of developmental performance, if not the most important one, is not a recent discovery. This change started to become evident at the time of the first industrial revolution, even though development, indicated by the rise of capitalism, was based more on rational bureaucratic organisation and less on the relatively modest technological innovations that arose from scientific discoveries. Max Weber, at the beginning of the twentieth century, was perhaps the first to recognise this process, which pointed in the direction of intellectualisation and scientific–technological rationalisation; he, however— as a captive of his time—focused more on the contemplative–analytical function of science and less on its concrete applicative potentials. Thereby, this classic author in sociology also became the first to deal systematically with the non-economic factors of development. As these processes accelerated, the awareness increased. The thesis that the main sources and accelerators of development in society and the economy are knowledge, innovations and information was systematically documented for the first time in 1973 when Daniel Bell published his The Coming of Post-Industrial Society. In 1978, Alvin Gouldner published his thesis on the constitution of a new class, composed of humanist intellectuals and technical intelligence. The importance of knowledge as a factor of development was further discussed and researched together with issues such as post-Fordism, the reflexive modern society and the risk society, social capital, transdisciplinarity, new focal points and forms of production of knowledge and the application of knowledge. Even without an attempt to

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formulate a system of indicators, numerous trivial data are very informative about processes of intellectualisation and the increase in cultural capital. These data point to rapid increases in the number of scientists and researchers, funds available for the development of knowledge, increasing book production, a scientific periodical press, numerous cultural events and so on. Cognitive modernisation is one of the most demanding phases of social modernisation. Only on the basis of this process can ‘knowledge society’, characterised by the importance of human capital, information and innovations, be formed. Terms like ‘knowledge society’, ‘learning society’ or ‘information society’, illustrate the importance of cognitive factors for systemic competitiveness. This is the main challenge of today’s societies. It is already evident that the main divide between the center, semi-periphery and periphery, between developed and underdeveloped, is in the ability to activate cognitive and innovative potentials and the ability to use them to these societies’ advantage. This tendency shall be even more relevant in the years and decades to come. In this framework, we are interested in preconditions and mechanisms that accelerate or hinder this process. Enhancing cognitive mobilisation is not an easy task, as it is a demanding and irregular process. Hence, an aspiration for a synchronisation of this process is important. It can be a process of either high or low intensity. This process is one of the constitutive factors of systemic competitiveness and as such it is crucial in developmental strategies of modern societies. As a result, every society is facing the problem of its acceleration. The ‘enlightened’ political elites can directly influence mainly the expansion of formal education. This has been evidenced in the ECE countries, first, by the introduction of obligatory primary education by the Habsburg empress Maria Theresa in the eighteenth century, and also the expansion of tertiary education—through increased public funding—in the final decade of the twentieth century. Informal education, which is perhaps one of the most critical aspects of cognitive mobilisation in ECE countries, depends much more on individuals’ preferences and motivations and is difficult to influence by direct intervention. We can search for verification or falsification of this hypothesis in Inglehart’s ‘cultural map’ (Inglehart 2000). He classifies nations according to two key dimensions of intercultural value variations: 1) traditional vs. secular–rational authority, and 2) survival vs. self-expressive values. The traditional vs. secular–rational dimension reflects differences between societies in which religion is important and those where its influence has


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declined. However, it also reflects other variations, like the importance of individual achievement. The second dimension reflects differences in tolerance, interpersonal trust, degree of materialism, environmental activism and, importantly, differences in participation in social and economic life. This cultural map is revealing: those European states, where the World Values Survey indicates the highest recognition for secular–rational authority and where self-expressive values are prevailing are also societies with the highest level of formal and functional literacy (more on this later in this chapter). These are countries of Protestant Europe: Sweden, Norway, Denmark and Finland, followed by the Netherlands and Germany. They are followed by countries where high self-expressive values are important, but where traditional authority is still recognised. These countries are New Zealand, Australia and Canada. Countries with lower levels of functional literacy have different prevailing value orientations. It seems that the cultural map can be used to make a two-phase distinction. On the basis of survival vs. self-expression dimension, we can quite reliably differentiate between countries with high levels of functional literacy and the rest. On the basis of the traditional vs. secular–rational dimension, we can make a fine-grained distinction between countries with highly literate populations. Four countries which have achieved the lowest levels of the functional literacy scores have similar positions with regard to survival vs. self-expression dimension (i.e. emphasis on survival values) and differ with regard to traditional vs. secular–rational dimension. For a more precise definition of cognitive mobilisation, we have to proceed from its four components. Management of Production, Dissemination and Application of Knowledge

Here we are referring especially to the formulation of scientific, technological and educational policies in tune with global strategic– developmental needs. The main purpose of this component of cognitive mobilisation is to increase the extent and transfer of knowledge, to increase cognitive competence and to ensure the ‘availability’ of knowledge for different purposes. The key variable here is the existence of effective institutions and mechanisms for the transfer of knowledge and for the mediation between sources of knowledge (universities, scientific institutes) and the economy and between public administration and political institutions. This is optimally a diversified network of different organisa-

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tional entities such as technological parks, regional innovation centres, business incubators, spin-off firms, offices for technology transfer (i.e. liaison officers), think-tanks etc. This is not just about passive transfer of knowledge and diffusion of innovations, but also about the formation of new focal points of knowledge creation, based on the recombination and reconfiguration of competencies, in order to satisfy the sophisticated needs of users of knowledge (Gibbons et al 1994). We have to search for variables that measure the mediation between sources and the applications of knowledge, i.e. the levels of availability of knowledge. Ideally, these would indicate the existence and operations of intermediary mechanisms for the transfer of knowledge.18 Consequently, we shall rely on managers’ estimates from a survey of managers (WCY). Additionally, we shall apply the ‘linkages index’ from The Global Competitiveness Report. This index, based on Porter’s diamond model of competitive advantage (Porter 1998), is composed of two survey questions19 and measures ‘the strength of linkages between the common innovation infrastructure and a country’s clusters’ (The Global Competitiveness Report 2001–2002: 110). Organisation of Education and Learning

Knowledge can be attained with various forms of education and learning. Cognitive mobilisation presumes a learning society, lifelong learning and permanent education. Formal and informal learning, as well as both indi18 An iInteresting concept and and corresponding indicators wereere developed by BoleKosmač (1998), but the synchronised comparative data does not exist, and as such the concept cannot be applied. Additionally, there are certain specifics of post-socialist societies, which would make the interpretation more difficult. Unavailable indicators are: 1). cContracts between R&D institutions and industry as a share of all R&D contracts, 2). the number of hightech incubators, 3). regional distribution of these incubators, and 4). data on public institutions for the transfer of knowledge. Key available indicators are: 1). the number of people with Ph.D.s employed in the private sector as a share of aell people with Ph.D.s. and 2). the share of Ph.D.s employed in R&D of the private sector. However, due to the poor financial situation ofin most post-socialist societies and consequently due to the ‘internal brain-drain’ from the R&D institutions, such transfer did not contribute to an increase of R&D in the private sector (Mali, 1998a: 354). Hence, the validity of these indicators is questionable. 19 These questions touch upon 1). the quality of scientific research institutions and 2). the availability of venture capital for innovative but risky projects (reflecting the importance of capital for translating research into marketable products). Both variables are good predictors of international utility patenting.


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vidual and social learning, are equally important. Formal institutions (schools, universities) can no longer be considered as the only source of learning and means of acquiring new knowledge. Various forms of study circles, distant learning, education through media etc. are becoming increasingly important. While estimating this component, we shall focus on both formal and informal accumulation and reproduction of knowledge. To evaluate the formal educational processes, we shall employ a number of well-established indicators of the stock of knowledge and educational processes, such as data on the educational structure of the active population or the enrolment ratio at primary, secondary and tertiary level education. Additionally, spending on education (as a share of GDP) can serve as an indication of congruity between governmental strategic directions and a country’s developmental priorities, as well as data on the share of spending at the different levels of education. In addition to these ‘general’ indicators, we shall also apply some more ‘specialised’ ones. The availability of technical knowledge and knowledge from the field of information technology is often emphasised as an important aspect of systemic competitiveness. We shall employ data on the proportion of students in the ‘hard’ sciences (as compared to the HDR, which looks at all sciences) and some soft indicators from the WCY (i.e. the attention given to science in the educational process, are the sciences taught adequately, do children show interest in this type of knowledge and so on). Their opinion on the availability of qualified engineers and IT knowledge, and also on the influence of basic science on applied science, shall also be of interest to us. It is much more difficult to evaluate the development of informal education, especially if we want to do it directly by evaluating institutions that perform life-long education. Comparative studies have shown that different societies deal with this project in different ways (ACS 1998). Perhaps the most appropriate (proxy) variable would be the data from the international research Literacy in the Information Age (OECD), where literacy is not understood as the most elementary ability to recognise letters, but as an ability to fully understand texts, enabling individuals to participate in social processes, based on knowledge and the ability to communicate. Support and Implementation of Technological and Social Innovations

The key issue here is a synergetic approach. We are referring to the problem of coordination between those who identify the problem and those

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who can solve it. Mechanisms for transfer are a ‘must’, but are insufficient by themselves. Interest in and perception of the need for technological modernisation and innovative strategic management are necessary. When assessing the development of this component, we shall apply both qualitative and quantitative data. By employing data on spending on research and development, we can indicate the ability and willingness of the society to invest for these purposes. Additionally, we shall employ data on relative number of researchers, and some soft data on the inclination of the environment towards these activities. We shall do this using survey data from WCY, which indicates the influence of the financial and legal framework on research and development, and data from the report Towards a European Research Area (2002) by the European Commission. Formulation of the Information and Telecommunication Infrastructure

Here we are referring to the stimulation of computer equipment, informatisation of production processes etc. To assess the development of this component, we can rely upon a number of comparative data on informational infrastructure. First, we shall use the ICT index from The Global Competitiveness Report. It is a composite index, consisting of five ‘soft’ variables from a survey of managers and five ‘hard’ variables covering different types of informational infrastructure.20 To specify relevant differences between the EU and ECE countries, we shall also analyse data on more specific aspects of this infrastructure. As it is changing relatively fast, we shall employ the latest data from the progress report on implementation of the eEUROPE+ programme. Existing data enable the analysis of two ‘types’ of such infrastructure. The first are about the penetration of fixed and mobile telephones, the availability of personal computers and various aspects of the internet, such as internet access and associated costs, number of web hosts etc. We shall also apply indicators which can point to possible trends in the near future, especially the data on investments in telecommunication and the adequacy of IT in creating a favourable developmental habitat.

These two groups of indicators are weighted, with ‘'soft’' variables accounting for one-third 1/3 and ‘'hard’' variables for two-thirds2/3 of the indicator. 20


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Comparison of EU and ECE countries The First Component—Management of Production, Dissemination and Application of Knowledge

Chart 3 combines indicators from the World Competitiveness Yearbook and The Global Competitiveness Report. Generally, according to this evidence, ECE countries are performing quite poorly when compared to those EU member states where the transfer of technology from universities to enterprises is positively evaluated. Not surprising, the situation is the most favourable in Finland, the most recent new-comer among developed countries, followed by another country with substantial levels of social capital, the Netherlands. Note that all three Scandinavian EU member states, as well as Norway and Germany, with high levels of social capital, also rank among highest in this respect. The data on Germany and France is somewhat inconclusive due to substantial differences between both data sources. Hungary, often evaluated as the (economically) most vibrant of the ECE countries, is closest to the developmental core of the EU, followed by Estonia. Generally, technology transfer in ECE countries is rather poor when compared to better-off EU member states, at the level of less-developed EU countries like Greece, Spain and Portugal.21 As we can see from the chart, data differs to some extent, which can be explained by different methodologies. However, we can discern a similar common situation. Both the managers’ evaluation and the linkages index point to the conclusion that the production, dissemination and application of knowledge are poorly managed in the southern members of the EU and ECE countries. According to both indicators, countries with high levels of social capital, such as Finland, Sweden, Denmark and the Netherlands, are at the top, indicating a very rich and fruitful cooperation between research institutes and the business sector. Indeed, the linkages index from The Global Competitiveness Report shows a somewhat different situation in the case of some countries. This is the case both in the EU and ECE. The difference is especially high in less-developed southern EU countries (Italy, Spain, Portugal) and ECE countries (Estonia, the Czech Republic, Slovenia). But the overall picture remains unchallenged, and the lag between core, semi-periphery and periphery is evident. Luxembourg is a special case, due to the lack of institutes of higher education in this small country. Slovenia’s managers awarded the most negative evaluations. 21

Chart 4: Cooperation between universities and enterprises

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s e d d n lan and ede rlan ranc F Fin therl Sw itze Sw Ne

. a a y y n d d k y UK man mar rwa lgium elan elan ustri ngar stoni Spai chR r o re n e c e u I A H I E N B G De Cz linkages index

e d ia al ia ia ly Ita rtug oven olan Russ ovak reec P G Po Sl Sl

WCY managers' estimates

(WCY estimates: 1 is insufficient; 10 is sufficient) Sources: The World Competitiveness Yearbook, 2002: 553 The Global Competitiveness Report 2001–2002


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The Second Component—Organisation of Education and Learning

The comparison of educational structures in the populations cannot proceed in a straightforward manner, due to substantial differences in educational systems between different countries. Hence, data has to be interpreted carefully, even if we are dealing with information from organisations like OECD or ILO. According to ILO data (own calculations based on ILO data—Labour Force Survey22), the proportion of labour force with completed tertiary education in ECE countries was generally lower than in most EU countries in 1999. The exceptions were Portugal, with the worst educational structure of the labour force, and Austria and Italy, which also have very low proportions. Due to the decreasing importance of less demanding manual work in demanding flexible types of production, and increasing emphasis on flexibility, innovativeness and learning ability, it is very important, that the share of the unqualified workforce is as low as possible. In this regard, the low share of people with tertiary education is seen as less crucial, due to the fact that the proportion of unqualified (less than secondary education) is very low. The same is true for the Czech Republic, Poland, Hungary and Slovenia. Other EU member countries have a better-educated labour force. Interesting are comparisons with Spain, Greece, Belgium or Ireland, which have higher proportions of the workforce with tertiary education, but also higher proportions of unskilled labour within the workforce than the ECE countries. Hence, we can evaluate the educational structure of the workforce of these countries as relatively similar (among ECE countries) and not very unfavourable when compared to many EU countries. However, they are lagging behind countries like Germany, Denmark, Sweden and the UK. These countries typically have a very high proportion of workforce with tertiary education (around 30% or more, as compared to between 10 and 20% of ECE countries) and a low proportion of unskilled workers. We can conditionally add the Netherlands, Belgium, Ireland and Luxembourg to this group, but with a higher proportion of the unskilled (though there is a high proportion of the population with tertiary education, especially in Ireland). However, some projections show that we can expect an increase in edu22 Our calculations of educational structure were based on data from the Yearbook of Labour Statistics 2000 for active population aged 25 to 64. Primary education are levels 0 to 2 in the old ISCED classification. Secondary education is level 3 and tertiary education isare levels 5 to 7. Data is not fully comparable due to differences in educational systems. Comparability is the greatest at tertiary level.

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cational and human capital in ECE countries in the years to come.23 Chart 5 presents the educational structure of the population that is active on the labour market. Chart 5: Educational structure of the labour force (25-64 years)

Portugal Austria Italy Czech R. Hungary Poland Slovenia France Finland Spain Germany Greece Netherlands Denmark Belgium Sweden Luxembourg UK Ireland 0

10

20

30

40

50 Tertiary

60

70

80

90

100

Secondary

Source: The Yearbook of Labour Statistics 2000, own calculations

However, it has to be acknowledged that the population that is not participating for any of the reasons—social exclusion being perhaps the most critical—is not included in such analysis. The disadvantageous effect of the less educated on the labour market results in an educational structure of the population which is generally somewhat more skewed to the lower levels than the data from LFS suggests, as comparison of our LFS data 23 For example, in Slovenia more than one quarter of the labour force willshall have tertiary education by 2005. Half of every generation willshall continue education at tertiary level, thereby increasing the relative number of students to 35 per 1000 people, above the current EU average (Delo, 19. June 2000).


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with the data on the educational structure of the entire population (Nolan 2002: 5) clearly shows. It is not a general rule, but this difference seems to be higher in both less developed countries (such as Spain, Greece, Hungary, Slovenia etc.) and in recent latecomers (Ireland). These countries are shifting towards the production of more sophisticated products, and this automatically excludes the need for less educated and flexible workers who remain at the edge of the labour market. The investment of these countries into education are increasing; however, it is mainly younger generations that benefit from them. A substantial proportion of the older, less educated generations are excluded from the knowledgebased economy. This also explains why some countries with high proportions of tertiary education still have high proportions of unskilled workers (Spain, Greece and even Ireland). However, we should also note the data on the educational structure of the population as a whole. This data shows that the younger populations of some of the less advanced countries are catching up with those where the population is most educated, most notably in Poland and Greece, while the educational structure of the Czech population remained very high, as it was in the past. The current educational structure of the population depends on past investments, and we cannot influence it in the short run; it is a long-term investment. However, we can evaluate the current investment and quite reliably estimate future prospects by means of the data on the combined enrolment ratio. According to the Human Development Report, only Greece (0.81), Italy (0.84), Switzerland (0.84) and Iceland (0.89) had enrolment ratios below 0.90 in 1999 among developed European countries. ECE countries are, therefore, lagging far behind most EU countries. This includes Estonia (0.86), Poland (0.84), Slovenia (0.83), and Hungary (0.81), which are doing somewhat better and catching up with the aforementioned worst performers of the EU. The Czech Republic (0.74) and Slovakia (0.76) are even further behind. The tertiary enrolment ratio is also not a reason for optimism. We can see the relatively poor position of all the ECE countries as compared to the EU member states. However, these data should be interpreted carefully. For example, in Slovenia the relatively poor situation has improved rapidly in the course of only a few years. Similar trends are taking place in other ECE countries. Due to the increase in the number of students in Slovenia, already by 2000 the tertiary enrolment ratio equalled the enrolment ratio of more successful EU member states. We can reliably conclude that the poor level of developmental performance and systemic competitiveness is a consequence of

Chart 6: Educational structure of the population in 1995 (% completed upper secondary education and above)* 100 90 80 70 60 50 40 30 20 10 0

d lan Po

l ga rtu o P

ain Sp

ly Ita

nia ve o l S

e eec Gr

d lan Ire

e nc Fra

ark nm e D 25-64 years

ia str Au

en ed w S

UK

ay rw o N

nd rla e z it Sw

R. ech z C

25-34 years

*data for Poland on the population 25–64 years not available Source: The Human Development Report Slovenia 2001–2002

y an rm e G


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the long-term effects of the poor enrolment ratio in the past. We should emphasise that the success rate for secondary education is quite high in these countries. In the Czech Republic, it is the highest in Europe, even above that of Finland and Sweden. Slovenia is also performing very well in this respect. With regard to public spending on education (as a percentage of GDP) the picture is more varied, and the ECE countries are not uniformly lagging behind the developed European countries. Namely, according to WCY 2002, Estonia (6.4%) and Hungary (6.3%) were among the highest spenders in 1999, together with Denmark (8.3%) Sweden (8.0%), the Netherlands (6.9%), Norway (6.9%), Ireland (6.7%) and Switzerland (6.7%). Furthermore, Poland (5.9%) and Slovenia (5.4%) are spending a proportion similar to Austria (6.3%), Iceland (6.3%), France (6%), Finland (5.9%), Portugal (5.6%) and Belgium (5.2%).24 Only the Czech Republic (4.2%) and Slovakia (3.9%) are among the low spenders of the EU. Greece is spending only 3.4% of its GDP on education. With regard to more specialised factors, we can take a look at the share of students that study natural and technical sciences. We can see that there are no specific differences between EU and ECE countries, as the share was around 30% in the period 1994–1997 in most of the countries, according to HDR. Finland has the highest proportion, with almost 40%, while Denmark and the Netherlands have only 20% of students in sciences. The Czech Republic has the highest percentage of these students among ECE countries. What should be of interest in the future are perhaps specific trends in countries. For example, Slovenia is an interesting case: in 1991 almost 40% of all students enrolled at tertiary level were studying natural and technical sciences. By 1997, this share had decreased rapidly to 26%. Another interesting indicator, also from the WCY, is managers’ estimate on whether the educational system meets the needs of a competitive economy. Managers in Finland and Ireland gave the most positive evaluation of the situation in their country. Iceland, Switzerland, Austria, the Netherlands, Belgium and Hungary, the best performing ECE nation, follow these countries. Managers in Slovakia and the Czech Republic have 24 The sSituation is somewhat specific in Luxembourg, which also spends a lower percentage of GDP onfor education. Due to the small size of the country students continue education at the tertiary level in neighbouring countries. This also implies that the real enrolment ratio is greater than the data shows, as the HDR methodology does not capture students studying abroad.

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also quite favourably evaluated the situation. Estonia and Slovenia are closer to the bottom of the ladder, in company with Spain and the UK. Managers in Poland are most critical in evaluation of their educational system of all ECE countries. Poland, Greece and Portugal are estimated to have the least appropriate educational system. The relevance of informal education is increasing in the context of the transition to a ‘lifelong learning’ society. One has to emphasise that we do not have recent, reliable and comparative data for this field at our disposal. Additionally, measuring informal types of education is difficult exactly due to its informal, and therefore less tangible, nature. However, there are certain indices. Perhaps the most important is the OECD research on functional literacy. Almost as a rule, the countries with the highest functional literacy at all three types of literacy25 are the three Scandinavian member states, followed by the Netherlands, Germany etc. The Czech Republic is performing the best of all the ECE countries and is quite close to catching up with the first group of countries (and is outperforming all except Sweden and Denmark in quantitative literacy). Functional literacy in other ECE countries is much lower (Hungary, Poland, Slovenia). Indeed, they were at the bottom of the countries participating in the research. Of the participating EU countries, only Portuguese functional literacy was equally low. (Data for Slovakia, Greece, Spain, Austria and Italy is not available.) This is not strange considering the low spending on informal education of adults. While spending comparable proportions of public financial resources on formal education, the spending of ECE countries on informal education is very low. In Slovenia, for example, this amount was 0.05% of GDP in 1992 and increased to 0.08% in 1995. In some EU countries, this share was much higher: Denmark (1%), Sweden and the UK (0.7 to 0.8%), Finland and Belgium (0.3 to 0.5%) (ACS 1998). Additionally, it should be emphasised that the research on functional literacy has revealed that participation in either job-related or other forms of continuing education and training is generally lower than in core countries, especially in the Scandinavian EU member states (Literacy in the Information Age 2000: 42). 25 This research distinguishes between three types of literacy: prose literacy (ability to read and understand information in different types of prose), document literacy (ability to understand and apply information from forms and documents) and quantitative literacy (ability to understand and apply basic calculations) (Literacy in the Information Age, 2000).


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The Third Component—Support and Implementation of Technological and Social Innovations

Probably the most straightforward indicator of implementation of the innovative potential would be the number of granted or secured patents. We shall use this as an indicator of developmental performance in the ninth chapter. However, we can note that differences between countries are striking, not just between the EU and ECE, but also within two groups of countries. Switzerland, Luxembourg, Sweden and Finland are the most innovative countries in this respect, followed by Germany, the Netherlands, Denmark and France. Southern EU member states, as well as more advanced post-socialist countries are far behind the European core, not to mention Latvia, Lithuania, Poland, Romania and Russia. What are the reasons for these enormous differences? They are undoubtedly complex, but low spending is inevitably one of them. To start with, the spending of the ECE countries on R&D is very low, especially when compared to more developed European countries.26 The lag is somewhat smaller if we compare relative spending, i.e. R&D spending as a share of GDP, but it is nevertheless still far behind core countries. Sweden (3.78%) and Finland (3.37%) were the only two countries to spend over 3% of GDP and more than Europe’s main competitors the USA and Japan in 1999 and 2000. Switzerland, Germany, Iceland, France, Denmark and the Netherlands spent more than 2% and Belgium just a fraction less. Slovenia spends 1.5% of GDP on R&D, which is similar to Norway and Ireland and more than Italy, Spain, Portugal and Greece. The Czech Republic spends 1.3%, Poland and Estonia 0,75%, Hungary 0.69% and Slovakia 0.66%. Only the southern EU member states spend around 1% (Italy and Spain) or less (Portugal and Greece) (Towards a European Research Area 2002). The situation is somewhat better if we compare total R&D personnel nation-wide per capita. (WCY 2002) Indeed, ECE countries are far beSlovenia, the highest spender among ECE countries, spent USD 138USD per capita in 2000. This is more than Spain (USD 128 USD) and even far more than Portugal (USD 88USD) or Greece (USD 80 USD). However, it is lagging far behind the highest European spenders like Switzerland (USD 1143 USD), Sweden (USD 1036 USD), Finland (USD 775 USD), Iceland (USD 752 USD), Denmark (USD 681 USD). Indeed, with the exception of Italy (USD 213 USD), Spain, Greece and Portugal, all other EU countries spend at least twice the amount per capita aslike Slovenia. The situation is even worse for the Czech Republic (USD 67 USD), Hungary (USD 37 USD), Poland (USD 29 USD), Estonia (USD 25 USD) and Slovakia (USD 24 USD), (World Competitiveness Yearbook 2002: 626). 26

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hind Finland (9.8 per 1000 people in 1999), Iceland (8.7), Sweden (7.5), Switzerland (7.1) or Denmark (6.7). The second group of countries, which includes Germany (5.8), Norway (5.7), the Netherlands (5.5), France (5.3) and Belgium (4.8), are slightly ahead, too. Slovenia (4.3) is comparable with Austria (3.8) and doing better than Ireland (3.3). Other ECE countries are comparable with Spain, Italy, Greece, Portugal and the UK (1.6 to 2.8). Importantly, in some of ECE countries the relative number of researchers has increased in the period 1994–1998 (+21.2% in the Czech Republic, +8.8% in Poland and + 3.8% in Hungary, although there was a reduction of 4.2% in Slovenia). The trend of increase can be observed also in the EU countries. Spending on R&D is indeed low in post-socialist countries and southern EU member states. It is, therefore, not surprising that managers in these countries evaluate that the lack of financial resources constrains technological development to a much greater extent than in the EU and the European Free Trade Association (EFTA) countries (Iceland, Liechtenstein, Norway and Switzerland). The most optimistic are, of course, managers from the highest spenders: Finland and Sweden, followed by Germany, the Netherlands etc. The situation is, according to managers’ estimates, especially troubling in Slovakia and Poland, which are also among the lowest spenders of the ECE countries. The situation is quite similar with regard to estimates of the extent to which the development and application of technology are constrained by the legal environment. There are smaller variations, though. Especially interesting cases are two low spenders, Estonia and Hungary, which attempt to be competitive through the importing of technology via foreign direct investment (FDI), assisted by offering advantageous locations. The Fourth Component—The Formulation of the Information and Telecommunication Infrastructure

Somewhat dated data on investment in telecommunications (1999) show the opposite picture when compared to most other indicators: relatively less developed countries spend relatively more financial resources. Estonia spent 1.9% of GDP on investments in telecommunications, followed by Hungary (1.1%) and the Czech Republic (1%), Poland (0.9%) and Slovenia (0.8%) (WCY 2002). When interpreting these data one has to take into account lower GDP in these countries and also the less developed infrastructure. This implies that it is necessary that


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these countries invest more to build the infrastructure. Developed countries have to maintain and upgrade their infrastructure, which is usually less costly. This is nevertheless an important indicator, pointing to efforts in ECE countries to strengthen this component of cognitive mobilisation. This data has to be analysed, together with quantitative data on development of the infrastructure, to get a more comprehensive account. Other data (from December 2001) still indicates that there is a certain lag behind the EU countries even with regard to more traditional types of telecommunication infrastructure. For example, the percentage of households with fixed telephone service is below the EU average (approximately 85%) in most ECE countries. The exception is Slovenia with household penetration above 90%. The gap is even larger with regard to mobile telephones penetration. Only Slovenia is at the level of the EU average of approximately 75% penetration. Penetration in the Czech Republic is at some 65%. The situation in Estonia, Slovakia, Hungary and Poland is much worse, even in comparison with Slovenia and the Czech Republic. The situation is even less favourable with regard to internet access and the regularity of use of the internet among the population. All ECE countries, including Slovenia and the Czech Republic, are far behind the EU average, not to mention the most developed countries, both in internet access and regularity of use. Almost 50% of the population in the EU have internet access. In Slovenia, the most advanced ECE country in this respect, access is at some 30%, while in other countries the situation is worse or even much worse. This should not come as a surprise, due to the comparatively poorly developed infrastructure in the ECE and, importantly, more expensive dial-up access, adjusted for purchasing power. While prices are quite comparable during off-peak hours, they are especially high during peak hours. According to the eEuropa+ Progress Report there is a strong negative correlation between the price of access and the regularity of usage. In terms of the number of estimated PCs per capita, only Slovenia is close to the EU average, but far behind the developed countries, especially the Scandinavian countries or the Netherlands. Other four countries have less than half the EU average. And the data on the number of internet hosts per capita show that no ECE country is even close. The data point to an unambiguous conclusion. The gap between core and less developed countries is substantial. While the situation is, per-

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haps, somewhat less critical with respect to less demanding information technologies, it increases substantially with the sophistication of the communication technology and its applications, which has very important implications.27

An Appraisal of Cognitive Mobilisation in ECE Countries With regard to the ‘amount’ of accumulated knowledge captured by the educational structure of the workforce, ECE countries cannot contest with the demanding competition, such as that from the developmental core of the EU: above all the Scandinavian member states, but also the Netherlands, Ireland, Germany, France etc. and other developed European countries (Iceland, Norway, Switzerland). Nevertheless, the situation is not catastrophic: ECE countries can quite successfully compete with less developed countries like Greece, Portugal, Spain and in some respects even with Italy.28 A similar statement cannot unfortunately be made with regard to the processes of reproduction of knowledge. Participation in education has been lower than in all EU member states, with the small exception of Greece, which is approximately at the same level as Slovenia, the ECE country with the highest levels of participation in formal education. This lag has important policy implications for ECE countries. Namely, an important part—although not the only one—of the success of the most recent latecomers, Ireland and especially Finland, has been the acceleration of the processes of cognitive mobilisation, especially improvements in the cognitive competence of the workforce. Enrolment ratios in ECE countries have been even lower than in Portugal, generally recognised as the least developed EU country. The situation is perhaps somewhat better only in Slovenia. To be even more critical, we can add that the combined enrolment ratio presents a As a result, managers’ estimates of whether the implementation of information technology meets the business requirements are not surprising: they lag behind most of the EU member states, especially its most successful and developed countries. It should be noted that the estimates are generally quite high, with the exception of Italy, where managers are the most critical. ECE countries are again in the company of Portugal, Spain and Greece. 28 We have to acknowledge substantial inter-regional differences in Italy, especially differences between poorly developed southern regions and the industrial core of ‘Terza Italia’. 27


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somewhat embellished image.29 To denote the difference between core and semi-periphery on one hand and periphery on the other, indicators of formal literacy and primary education are still very important. However, to differentiate between the EU and ECE countries, secondary and tertiary enrolment ratios are perhaps more important indicators. These show that— especially at the tertiary level—the lag between the European core and semi-periphery is even greater than the combined ratio would indicate. However, some data indicate positive trends in this very important aspect of cognitive mobilisation. The enrolment to formal education has been increasing in the past years. Between 1994 and 1999, the combined enrolment ratio has increased by the highest amount in Estonia (from 0.72 to 0.86) and Slovenia (from 0.74 to 0.83), but has also increased in other ECE countries. However, we can assume that these trends have continued. In Slovenia, for example, there has been an ‘explosion’ of tertiary education in the 1990s, and the total number of students quadrupled in just one decade. Additionally, public investments to education have also been increasing in the past decade in ECE countries. We can estimate that a consensus on the importance of knowledge is being formed in these countries. Informal education is also insufficiently developed in ECE countries and does not enable them to participate successfully in new, knowledgebased social processes. These countries are not ‘learning societies’ or societies of permanent, life-long learning. Hence, the benefits of the intensification of formal education cannot be fully exploited; constant upgrading human capital, which is a ‘must’ for any competitive economy, is not a rule in these countries. The aforementioned research on functional literacy reveals that informal education strongly influences an individual’s functional literacy. However, certain data indicate that the number of these activities and their variety is increasing. The lag is nevertheless substantial. The ability to support and implement technological and social innovations is also much weaker in ECE countries. There are differences among them: the Czech Republic and especially Slovenia invest substantially higher resources than Slovakia, Hungary or Poland. Slovenia is quite close 29 The cCombined enrolment ratios also include the primary and secondary enrolment ratio. Due to a long tradition of obligatory primary education in ECE countries and due to a high share of relevant population, that continues studies at secondary level, the total ratio obscures important differences in tertiary enrolment ratio, which is the most important factor in fostering systemic competitiveness at this level of development. Note that the World Competitiveness Yearbook 2001 does not include the indicator of primary education, but includes indicators of secondary and tertiary education.

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to the group of medium achievers of the EU and performing better than Greece, Portugal or even Spain. However, all countries, including Slovenia and the Czech Republic, are far behind the developmental core of the EU. ECE countries are also lagging behind the most developed EU countries with regard to information technology. Slovenia and the Czech Republic are perhaps somewhat closer to the EU average but nevertheless are far behind the most developed countries, especially in the more demanding applications of modern technologies. To sum up, there is a lag between the developmental core of the EU and ECE countries. Indicators also reveal certain differences between ECE countries. Nevertheless, we can assert that a certain level of cognitive competence exists in these countries. We can also identify some improvements. These are trends that have taken place for decades and have intensified since the 1990s. Hence, one would not need to commence intensification of cognitive mobilisation from a zero base. However, cognitive mobilisation is a complex societal process. An important quality of this process is the phenomenon of ‘emergence’, when the quality of the whole is more than a sum of its parts, a new and distinctive quality. Having this in mind, we can estimate that the cognitive mobilisation in ECE countries is still in the inception phase. Basic scientific research is not related to technological research. Technological research is poorly marketed, and inventions do not become marketable innovations. Formal education is based on knowledge of facts and supports individualism, while the contemporary economy, research and public administration require teamwork and a project-based approach. It seems that these countries are not capable—even though there is some predisposition—to make a qualitative shift that is not easily identified with the indicators. Why cannot different types of knowledge, which are identifiable, be combined to form productive intellectual capital, which would contribute to systemic competitiveness and help to reduce the lag between these countries and the developmental core? The weakness of the mechanisms for transmission and the application of knowledge is the main reason. These mechanisms can multiply the benefits from the inputs to research and development.30 This is even more true in the case of indigenous en30 The case of Ireland, one of the most vibrant societies in the final decade, is very telling. The is the contribution of itsthis research to systemic competitiveness is substantial, although its R&D spending is comparable to that of Slovenian. This is possible because they have (aslike in Finland) created mechanisms of successful cooperation between universities, institutes and the economy (Sočan, 2002).


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terprises, which are, unlike local branches of the multinationals, financially weak and not capable to finance their own R&D. Hence, the cooperation between enterprises and universities and other public research institutions, which own most of the equipment, is even more important. Interestingly, we do not have systematic evidence at our disposal, such as data on organisations, which deal with the diffusion of innovations and that would allow us to comparatively evaluate this concept of cognitive mobilisation (Stare and Bučar 1998: 38, Bole-Kosmač 1998). This is why we have difficulties evaluating the first component. We have to rely on expert ‘guesstimates’, partial research, various case studies etc. However, these clearly indicate that cooperation between universities and enterprises is limited and unsystematic, especially in Poland, the Czech Republic and Slovenia. This is clearly the legacy of past decades; the universities were not given the role of research centres and research projects were formal in nature (Mali 1998: 350). If the cooperation between universities and large institutes was well-developed, it would be based on personal contacts (Stare and Bučar 1998). Additionally, large enterprises were capable of their own R&D efforts when perceived as necessary. When large systems disintegrated, the system was rendered obsolete. A wide network of specialised and competent intermediary organisations, enabling relatively simple and effective transfer of knowledge from research institutes to users of knowledge, is a necessary precondition for knowledge sharing. This system has only started to form. Specialised institutions are few in number and are not capable of offering full support (Stare and Bučar 1998). It is, therefore, not strange that in Slovenia, the highest R&D spender, the level of research and development is above the level of industry (Komac and Krawczynski in Stare and Bučar 1998). Realistically, a number of structural constraints stand in the way of a more extensive collaboration between common innovation infrastructure and the economy.31 Cognitive mobilisation should also be reflected on the level of organisational structuring. A knowledge society demands a new type of regula31 Mali identifies four such obstacles (1998: 351–352). First, there is clear lack of opportunity to commercialise research. This is a consequence of the rapid decomposition and decline of the old industries, while new ones are insufficiently developed and financially weak. Second, there is the disintegration of the former centres of industrial R&D, where the technologically most competent groups were operating. Third, there is a lack of industrial interest in cooperating with domestic universities, as a consequence of the predominantly short-term vision of managers. Finally, a number of problems also derives from privatisation, especially if we are dealing with spontaneous privatisation.

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tion that exceeds (and not abolishes) pure market self-regulation and political–bureaucratic hierarchical intervention. This type of regulation has different names: contextual steering based on intermediary mechanisms, regulated self-regulation, techno-corporatism, policy network, public– private partnership etc. Its advantage (and difficulty) is the synergetic– strategic approach to the steering of social development. Managerial capitalism, as formed in societies in transition, does not support or need this kind of approach. Two distinguishable hegemonic fractions are present in this type of capitalism, political–bureaucratic and managerial. Hence, there is the oscillation between bureaucratic interventionism or short-term crisis management and the liberal ‘hands-off’ approach. The result of this unusual combination is a ‘muddling through’ form of (non)decisionmaking. This can be successful in stable and predictable circumstances. However, it usually fails in turbulent, unpredictable and complex situations. The short-term perspective and success in static macro-economic indicators—ignoring the aforementioned processes that distinguish between developed and successful societies from semi-peripheral ones—has a high cost as it contributes to perpetuating the inactivity and rigidity of the system and non-synergetic steering, which starts to loose attributes of rationality. In such circumstances, strategic visions based on scientific expertise are no longer needed. Managers are not interested in technological modernisation of enterprises on the basis of an innovative and strategic approach. Instead, short-term crisis management is in place.

An Assessment of the Indicators We have to pay attention to the importance that a specific factor plays in the creation of systemic competitiveness. Porter has stressed the importance of a hierarchy32 among the factors of national competitive advantage (Porter 1998: 76–80). Although it is a very different concept from 32 According to Porter, two distinctions are relevant in the analysis of competitiveness (Porter, 1998). First is the distinction between ‘basic’ and ‘advanced’ factors. This is the distinction between natural resources, favourable climate, location, sufficient supply of unqualified and semi-qualified workers on one hand, and modern informational systems, research institutions, highly qualified workers on the other. The second is the distinction between ‘generalised’ and ‘specialised’ factors. Generalised are transportation networks, supply of debt capital, supply of motivated and educated workers. Specialised factors are narrowly specialised personnel, special infrastructure etc.


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competitive advantage, we can also discuss a specific hierarchy among the factors of developmental performance. This hierarchy is formed on the basis of the explanatory potential of a specific indicator with regard to positioning a specific society among others.33 We can differentiate between ‘basic’ and ‘advanced’ aspects of cognitive mobilisation. The first are those that can explain differences between societies that are in central, semi-peripheral and peripheral societies. They also indicate policy measures that have to be performed with regard to cognitive mobilisation if they wish to reduce developmental lag. See, for example, the indicator of formal literacy level. The Human Development Report 2001, which includes 174 countries, reveals substantial differences in literacy levels among highly developed (98.6% average literacy level), medium developed (87.9%) and undeveloped countries (68.9%). With this focus, formal literacy level is an important indicator. However, in our case, when we are focusing on a much smaller and more homogeneous group of countries, this kind of indicator cannot explain the differences in developmental performance, as the formal literacy in ECE countries is virtually the same as in the EU countries, the USA, Japan etc. To successfully tackle these related problems we have to resort to three research strategies while attempting to asses countries’ cognitive mobilisation. First, we have attempted to eliminate those indicators that lack explanatory power. For example, we did not utilise the data on the levels of formal literacy, as there are no substantial differences among European countries. Second, we attempted to simultaneously use several indicators and thereby analyse and present national and subnational variations of processes of cognitive mobilisation. Third, we added a qualitative dimension where possible. This implies that we employ not only objective, quantified indicators, but also knowledge about the specific context and, if necessary, results from qualitative comparative case studies. The indicators that we applied in our analysis were formulated for a different purpose. Therefore, we did not apply them uncritically. 33 This is valid also in the case of other factors of developmental performance as well. An interesting case is the comparison of the index of economic freedom and the level of economic development (measured with PPPGDP, adjusted for purchasing power parity)[Query: PPP?]), as reported in the Index of Economic Freedom 2001. The report also explains the strong dependence of the economic development on economic freedom, on the sample of 155 countries. However, our own calculations show that when we only include countries with a GDP above USD 10,.000 USD per capita, this link is very weak.

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We should also emphasise a quite distinct, but nevertheless important, motivational aspect: namely, self-criticism in the evaluation of functional literacy. The OECD research on functional literacy is very telling. Substantial proportions of individuals that have a very low level of literacy proficiency have not estimated their functional literacy as either poor or moderate. It is a general feature of all participating countries, with the notable exception of Portugal. However, these proportions have been especially high in three participating ECE countries (Hungary, Poland and Slovenia). Even lower proportions of them estimate that their reading skills limit their opportunities at work.

Social Capital and Cognitive Mobilisation The policy implications are quite straightforward. The possibilities for direct influence are rather limited. A different kind of intervention is in place. An environment conducive to education and learning has to be formed. This does not imply only offering opportunities for acquiring knowledge, or even demand it. Instead, an environment that would positively reward the competence of both individual and collective actors has to be supported. Consequently, support for the processes of cognitive mobilisation only depends on the synergetic actions of various actors. This is only possible if there is sufficient amount of a resource that enables cooperation—social capital. Social capital is the key resource for the acceleration of cognitive mobilisation. It is not the only resource or a sufficient condition, but it is a necessary condition: cognitive mobilisation is not possible without sufficient amount of social capital as it requires a synergetic approach, involving a number of actors with different, sometimes even competing interests. These actors have to constantly synchronise their individual efforts. The positive consequences of social capital can be helpful in shaping any of the components of cognitive mobilisation. Intermediary institutions for the transfer of knowledge between its sources and users cannot function without social capital. Neither can institutions for the implementation of technological and social innovations. Countries with high levels of social capital have an active network of intermediary institutions and they are more capable to meet the demands of users. The effectiveness of investment in the informational infrastructure is only possible when heterogeneous actors form policy networks and when users become actively involved in formulations of policies.

5. Quality of Governance

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Definition of the concept When we analyse governance in a sense of its ‘quality’—especially if we have the ambition to ‘measure’ this phenomenon and compare different units (in our case, different countries)—we have to be aware of the fact that we are dealing with one of the most complex and multi-layered social phenomena. The term ‘quality’ itself is not ‘value neutral’, which means that it is related to the values of the researcher or to the wider cultural context of a particular society that defines the desirability of a certain type of governance. Considering that our analysis is focused on the situation in post-communist countries of ECE, where after the breakdown of communism the installation of Western-type democracy was accepted with a wide national consensus, it is natural that the political system with the norms and principles characteristic of Western democracies is the referential frame of our analysis. However, it should be pointed out that democracy is a complex phenomenon which could refer to some kind of ideal state of society, characterised by perfect freedom and equality and where the real power is located in the hands of people, as well as to real-existing forms of sociopolitical order, usually referring to modern Western societies (often in connection with a market economy). Even by the notion of democracy as an existing system (which is, nevertheless, our research interest) we have different definitions of its ‘scope’ (in the sense of what its constitutive elements are). Many theorists advocate a minimalist approach in the sense of Schumpeter’s definition of democracy as a system in which citizens can choose between different political actors or elites (Schumpeter

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1996). In this case, the most important issue is the existence of institutional mechanisms which enable free political competition (of course, with constitutionally determined exceptions) and the selection of a preferable alternative. The weakness of this approach is its ‘shallowness’. Namely, because of its focus on the normative level of politics, it often disregards events behind the scenes, as well as factors that are not a part of the political system but nevertheless importantly influence its nature. However, there is another, more ‘qualitative’ notion of democracy which takes into account the conditions needed for its healthy functioning. Robert Dahl’s concept of polyarchy as ‘real-existing democracy’ contains the following institutional factors necessary for the persistence of democracy: elected officials; free, fair and relatively frequent elections; freedom of expression; alternative sources of information; the autonomy of associations and inclusive citizenship (Dahl 1998: 85–86). With regard to the existence of alternative information sources, it could be said that it is a ‘non-political’ factor related to media pluralism, which is not formally an element of the political system but which is nevertheless necessary for its democratic performance. Some theorists stress the importance of institutional factors like a viable civil society, rule of law, a competent and an autonomous civil service etc., without which democratic political life is not possible. Guillermo O’Donnell stresses the need for control over power-holders through mechanisms of so-called horizontal accountability, which refers to mutual control in the sense of a system of checks and balances—the principal condition for it is the existence of independent control institutions (the judiciary, different agencies etc.) (O’Donnell 1998, compare also Schedler et al. 1999). There are also some other factors that are often mentioned as conditions of a fullydeveloped democracy, for example the existence of welfare policies and other mechanisms for tackling social inequalities. Despite the desirability of this kind of qualitative input, it is necessary to warn against other kinds of bias in a case where one wants to include into a framework of democracy everything that is thought to be necessary for the happiness and the well-being of people. In this way, the characteristics of the concept could become blurred. Too idealised a notion of democracy is even more problematic in comparative analysis. Namely, considering the fact that every existing democracy has deficiencies and is thus imperfect, it soon becomes obvious that real democracies do not fully match the ideal, which could lead the researcher into disappointment and the belief that democratic order does not exist at all. In this way, such


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a person neglects the differences between different levels of democracy of existing political systems. Considering this, we could agree with Samuel Huntington, who says: ‘Governments produced by election may be inefficient, corrupt, short-sighted, irresponsible, dominated by special interests, and incapable of adopting policies demanded by the public good. These qualities make such governments undesirable but they do not make them undemocratic’ (Huntington 1993: 10). But we could add to this that such characteristics make democracy of less quality. And this very issue, namely the quality of democracy, is one of our research topics. The issue is comparison of the different dimensions of governance in transition ECE countries with relevant countries, especially other transition countries and members of the European Union, whose institutional system is the referential frame of their development. In this context, the comparison with three ‘less-developed’ EU members who were latecomers in the process of democratisation, Spain, Greece and Portugal, is especially interesting.

The Model and its Indicators Our definition of the quality of governance is in accordance with the ‘wider’ notion of democracy. It refers to governance as politics (the expression of different interests, political competition and relations between political actors), as well to governance as policy (the creation and implementation of different policies concerning different social spheres), to the institutional level and to the level of political action. In this sense, it matches to a considerable degree the concept of governance as defined by World Bank analysts. It is an empirical model, consisting of six clusters of indicators: voice and accountability, political stability, government effectiveness, regulatory burden, rule of law and control of corruption (Kaufmann et al 1999).34 Our model consists of four dimensions: level of democracy, stability, efficiency and transparency.

34 Their estimates and indicesexes are constructed on the basis of a very wide spectrum of more than 300 indicators from 14 existing databases. For more information on indicators, databases and the methodology of index construction, see Kaufmann, Kraay and ZoidoLobadon, Governance Matters and Aggregating Governance Indicators (both 1999). Data from the research can be found on the iInternet: www.worldbank.org/wbi/governance.

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1. Level of democracy The level of democracy denotes the level of matching of the actual institutional arrangements and the political process with the standards of the polyarchic type of democracy. The level of freedom and protection of human rights undoubtedly belong here, without which the development of democracy is not possible. The functioning of the political process and the accountability of power-holders are also very important, as well as the participation of citizens and their inclusion (citizenship as whole and different social groups) in politics through different channels (for example, the proportion of women in politics). Besides, as it has been mentioned, the level of democracy is also influenced by some factors of the political system’s environment—the media here is especially important. The persistence of democracy and the possibilities for its development are to a great extent dependant on the strength of democratic values, i.e. the development of a democratic political culture. In our evaluation of the level of democracy we will mostly use indicators and composed indices created on an opinion basis. Regarding the level of freedom in society, the most influential is the study of Freedom House which every year in its Freedom in the World report presents the state of human rights and civil liberties in countries around the world. The estimated level of human rights and civil liberties in a particular country ranges from 1 to 7, where 1 means the highest and 7 the lowest level of freedom. More detailed analysis of the situation in postcommunist countries is presented in the report Nations in Transit, which also contains an evaluation of the political process. The comparative analysis of the comprehensively defined concept of governance made by the above-mentioned World Bank study also deals with the level of democracy. Its assessment—it can be found in the Worldwide Governance Data Indicators database—is based on the analysis of a very large number of indicators from different research and databases. On the basis of these data, indices measuring different aspects of the quality of governance have been created. For assessments of the level of democracy the ‘voice and accountability’ dimension (index) is especially important. It includes a number of indicators measuring various aspects of the political process, civil liberties and political rights. As the key indicator of political participation, citizens’ participation in parliamentary elections is used (most of the data come from the above-mentioned Nations in Transit and the Handbook of Political Change in Eastern Europe). As an indicator of


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women’s political inclusion, we used the share of women in parliament (data found in the Human Development Report). The evaluation of media freedom comes from the Press Freedom Survey, also conducted by Freedom House. For data on the support of democracy (in the sense of rejection of undemocratic alternatives), we drew from the New Democracies Barometer V survey (1998, conducted by the Centre for Study of Public Policy at the University of Strathclyde) and from the Democratisation in Eastern Europe (1999). 2. Stability In our concept, stability refers to the system’s endurance and the persistence of democratic principles. On the one hand, it means the absence of threats of political destabilisation and political violence; on the other hand, it is related to the dynamics of political change (i.e. political competition). Political stability is a very wide and multi-layered concept which is defined in different ways in theory. We define it in a more narrow sense, i.e. in the sense of robustness of democratic institutions. Nevertheless, even in this case, one should stress the ambiguity of the concept, especially if the frequency of government change—an indicator that is very common in comparative studies—is used for the detection of political stability. It is undoubtedly true that the high turbulence of politics in the sense of very frequent changes of government—low level of stability—have a negative impact on the quality of political life and on social development in general; on the other hand, the absence of changes in positions of power, i.e. the lasting entrenchment of one political group or ruling position (and therefore a high level of ‘stability’), is also not conductive to the development of democracy. What is important for political stability is the proper balance between the reproduction and circulation of political elites. The World Bank’s model contains a cluster of indicators, named ‘political stability’ which contain several indicators that measure the likelihood that the government in power will be destabilised or overthrown by possibly unconstitutional or violent means. One (opinion) indicator of political stability is also in the World Competitiveness Yearbook conducted by the Institute for Management Development in Laussane. Regarding democratic dynamics, we will make a shorter expert evaluation on the basis of different data on change of government (most of them found in the Handbook of Political Change in Eastern Europe and in the

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World Bank’s Transition: The First Ten Years report) and data on elite configuration, especially the relationship between elite reproduction and circulation (from different studies). 3. Effectiveness Effectiveness is also a very complex concept. In general, it refers to the ability of the state or political system to attain consensually reached social goals. This includes the performance of governmental or political institutions (their capabilities concerning the creation and implementation of policies), mechanisms of recruitment to positions in state institutions, competence and autonomy of the civil service on the one hand and the ability of the state to provide optimal functioning of social (sub)systems in accordance with their own systemic logic (especially in the field of economics, this refers to the relative openness and absence of discriminatory regulation). The most important indicators of effectiveness are two indices from the World Bank’s model: ‘government effectiveness’, which contains the quality of public service provision; the quality of bureaucracy; the competence of public officials and the credibility of the government’s commitment to policies; and ‘regulatory framework’ which refers to the ability of the government to provide the conditions for free economic activities. In the World Competitiveness Yearbook one can also find some indicators of particular aspects of effectiveness of governance, such as the ability of a government to implement its policies, the management of public finances and political (in)dependence of the civil service. An indicator of the model of civil service recruitment can be taken from the Business Environment and Enterprise Performance Survey (BEEPS) that was carried out in 1999 in co-operation with the World Bank and the EBRD. The Nations in Transit contains an evaluation of two aspects related to the ability of government to provide the autonomy of the economy: privatisation and macroeconomic policy. 4. Transparency Transparency denotes the ‘visibility’ of a relationship between different institutional actors, an affirmation of social behaviour in accordance with consensually accepted social norms and the sanctioning violation of these norms. Transparency is connected to the existence of a legal framework and especially to the efficient performance of the rule of law. The second


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important element of transparency is related to corruption, i.e. the ability to control it (which is tightly related to the above-mentioned point). The third aspect of transparency is the commitment of government to the accepted rules and responsibilities (on which its credibility depends). In our evaluation of transparency, we will use two indices from the World Bank model related to its two key dimensions: ‘rule of law’ (the level of respect for social rules and the ability to enforce them) and ‘control of corruption’ (different forms of corruption, attitudes towards corruption and the ability to control it). The Nations in Transit also contains an appreciation of these two dimensions. In the World Competitiveness Yearbook, the estimation of personal and property safety and the perception of corruption are included. Very influential is also an evaluation of corruption from the report The Precision and Regional Comparison of Perceived Levels of Corruption prepared by Transparency International. In this study, countries are classified according to the Corruption Perception Index (CPI), with value of index ranging from one to ten—the higher value being more favourable). While other evaluations refer to corruption in general, BEEPS analyses different aspects of corruption. An estimation of the commitment to accepted obligations is included in the Country Risk report, prepared by the publication Euromoney. It has to be stressed that the classification described is to some degree arbitrary because some of the above-mentioned factors are intermeshed and interrelated. For example, the efficiency of governmental institutions influences the spread of corruption and rule of law is related to the level of human rights, the responsibility of the government, the extent of violence etc. Some indicators are of such a nature that they could be included in different clusters (for example, it is a question whether ‘management of public finances’ belongs to ‘effectiveness’ or to ‘transparency’).

The Situation as Reflected by Selected Indicators For the evaluation of the state of governance, we used indicators from different databases conducted in comparative studies. To start with, we are going to present two comprehensive evaluations of governance: democratisation in the Nations in Transit 2002 and government performance in the World Competitiveness Yearbook 2000. Although those estimations do not exactly match our model, they will be, nevertheless, used for comparison with our indicators.

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Table 2: Evaluation of democracy in transition countries CONSOLIDATED DEMOCRACIES Rank 1 2 3 4 4 4 4 8 9 10

Country Poland Slovenia Lithuania Hungary Estonia Latvia Slovakia Czech Republic Bulgaria Croatia

Score 1.50 1.81 1.88 1.94 1.94 1.94 1.94 2.13 3.00 3.25

TRANSITION GOVERNMENTS 11 12 13 14 15 16 17 17 19 20 21 22 23 24

Romania Yugoslavia Albania Macedonia Moldova Georgia Armenia Bosnia Ukraine Russia Kyrgyz Republic Azerbaijan Tajikistan Kazakhstan

3.31 3.63 3.94 4.13 4.19 4.44 4.56 4.56 4.69 4.81 5.38 5.44 5.50 5.88

CONSOLIDATED AUTOCRACIES 25 25 27

Uzbekistan Belarus Turkmenistan

6.56 6.56 6.94 Source: Nations in Transit 2002

The Nations in Transit, which deals only with post-communist countries, classifies them into three categories: consolidated democracies, nonconsolidated democracies and consolidated autocracies. Ten of the total of twenty-seven countries are in the first category (i.e. the group of countries where democratisation has made the biggest progress), fourteen are in the second and three in the third category. All ECE countries belong to


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the first group. Poland (1.50), Slovenia (1.81), Lithuania (1.88), Hungary, Estonia and Latvia (all 1.94) got the highest score (a higher figure means better democratisation); and the lowest went to Turkmenistan (6.94), Belarus and Uzbekistan (both 6.50) (Table 2). The World Competitiveness Yearbook 2000 contains an evaluation of governmental performance in a concept that in many ways covers our dimensions of effectiveness, transparency and partly also stability (it contains the following elements: national debt, government expenditure, fiscal policy and rule of law).35 Among transition countries included in the report, Hungary has the best ranking (30th of 47 countries) followed by the Czech Republic (42nd), Poland (43rd), Slovenia (45th) and Russia (47th). Portugal (34th), Greece (37th) and Italy (46th) are the only EU member countries comparable to them; the others are assessed considerably better. Singapore, Hong Kong and Ireland are the best ranking of all. 1. Level of democracy In Freedom House’s Freedom in the World 2001–2002, the most favourably assessed post-communist countries with respect to political rights and civil liberties are Slovenia, Poland, the Czech Republic, Slovakia, Hungary and all the three Baltic countries. They got 1.5 (1 for political rights and 2 for civil liberties36), the same as some established democracies such as the United Kingdom, Germany and France. Somewhat worse rank Romania (2.0) and Bulgaria and Croatia (both 2.5) which, nevertheless, belong to the group of free countries. The worst situation has been found in Turkmenistan (7.0), Uzbekistan (6.5), Belarus and Tajikistan (both 6.0). The evaluation of the political process in the Nations in Transit 2002 is similar. Hungary and Poland received the highest grade and the lowest Turkmenistan, Uzbekistan and Belarus. Regarding ‘voice and accountability’ from the World Bank model (data from 2000/1 Report), the most favourably evaluated postcommunist country is Poland, followed by Hungary, Slovenia and the Czech Republic. Among the EU countries Italy, France, Greece and 35

Because of a conceptual change that occurred in 2001 and 2002 reports, where the concept of governmental performance isn defined (too) widely (containings elements like education etc.), we used data from 2000 where the definition of this concept is more compatible with our model.) 36 1 means the highest level of political rights or civil liberties while 7 means the lowest.

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Spain lag behind the first two, the others rank higher. (On the top are Switzerland, Austria and Finland.) The key indicator of political participation is citizens’ participation in elections. The voter turn-out in the last parliamentary elections was the highest in Hungary (70.5%), Slovakia (70.0%) and Slovenia (69.9%). It was lower in Lithuania (55.9%), Latvia (55%) and especially Poland (46.3%). An important element of political participation and inclusion is also the political involvement of women. A telling indicator of this is the proportion of women in parliament. According to the Human Development Report 2002, among the transition countries this proportion is the highest in Poland (21%), Estonia (18%) and Latvia (17%). In most European countries, the share of women in parliament is higher (the highest is in Sweden 42%, Norway 36.5% and Finland 36%) although some of them are comparable with transition countries or has a share even lower (France 11%, Italy and Greece 9%). According to the study on media freedom contained in the Press Freedom Survey 2002,37 the following transition countries are classified as having a free media: Poland, Estonia (with the best grade), Lithuania, Latvia, Slovenia, the Czech Republic, Bulgaria and Hungary. Among the EU countries, France, Italy and Greece are comparable with them or even worse than some of them. The worst situation is in Turkmenistan, Belarus and Uzbekistan. Sweden, Switzerland, Iceland and New Zealand got the best scores. Another important requisite of sustainable democracy is the existence of a conductive cultural and motivational framework. This refers to different relationships and attitudes of the citizens towards government—the complex that is usually referred to by the term ‘political culture’.38 In general, we could speak about a heterogeneous political culture existing in transition countries, composed of pre-communist and communist, reli37

The Press Freedom Survey assesses four dimensions of media freedom (for print and broadcast media): laws and regulation, political pressures and control, economic influences and repressive actions. The fFirst three are categories are scored from 0 to 15 and the fourth one from 0 to 5 (the lower the score, the more freedom for the media). 38 What is especially important is the so- called citizen competence, which means the ability of citizens to perform an active role towards government institutions in the sense of participation in the political process and control over power-holders. Citizen or civic competence contains of those attitudes and skills that are needed for successful policymaking (Soltan 1999:1: 17).


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gious and secular, authoritarian and libertarian elements. There are values of individualism, competition and self-confidence (civic orientation) coexisting with values of state-dependence and the need to be guided (a traditional paternalist orientation) (Plasser and Ulram 1996). In such an inter-mix of value orientations, one can witness many inconsistencies in the citizenry’s attitudes towards democracy. These inconsistencies are to a considerable extent influenced by the very nature of modern political culture,39 but they are mostly derived from the turbulent post-communist situation. For ECE transition countries, we can speak about the prevalence of supportive attitudes towards democracy (but the same does not hold for some other post-communist countries, for example, the countries of the former Soviet Union—except Baltic countries). Support for democracy manifested through rejection of different undemocratic alternatives (return to communism, military rule, return to monarchy, rule of strong leader) is, according to data from the New Democracies Barometer V (1998), the highest in Slovenia, where 78% of respondents reject all undemocratic alternatives. It is followed by Croatia (76%), the Czech Republic (75%) and Hungary (68%) while the rejection of undemocratic alternatives is the lowest in Ukraine (24%) and Belarus (46%). According to the Democratisation in Eastern Europe survey from 1999, which covers eight transition countries (Slovenia, Hungary, Poland, Bulgaria, Romania, Russia, Ukraine and Belarus), the support for democracy (the positive answer to the question ‘Do you believe democracy is the best form of government or is there any other form of government that is better?’) is (surprisingly) the highest in Romania—even higher than in Poland and Hungary (the lowest is in Russia and Ukraine). However, there is certain misunderstanding regarding the very nature of democratic system in all transition societies, reflected especially in (too) big demands from the state, paralleled by the notion of the state as something that is out of reach of the influence of ordinary citizens. The consequence of this is depression among many citizens and a low level of confidence in governmental or political institutions—lower than that of Western countries (Toš 2000). (This can be shown with the comparison between ECE countries and Austria—as an example of an established 39 Particular elements of modern political culture could be in anotherdifferent way related to different aspects of the social system, and there could be mutual tension between some of these elements. For more information on the character of modern political culture, see Berg-Schlosser and Rytlewski 1993.

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democracy—regarding the confidence in institutions in Table 3, where it is evident that confidence is higher on average in the latter.)40 Table 3: Trust in institutions (share of those who trust)*

Political parties Courts Police Civil service Government Military Parliament President state Prime minister

Austria

average of the 4 transition countries

Czech Rep.

Hungary

Poland

Slovenia

17 53 54 31 28 32 31 41 45

11 31 32 30 24 40 21 50 39

15 25 29 27 26 31 15 60 50

11 39 35 32 25 40 25 53 33

9 30 32 28 23 53 25 40 36

11 29 34 34 21 34 20 45 36

* Scale from 1 to 7 where 1 represents no trust and 7 great trust. 5–7 is classified as trust, 4 as neutral and 1–3 as not trusting. Source: New Democracies Barometer V 1998

2. Stability Regarding ‘political stability’ (in a narrower sense), according to the World Bank study, the most favourably evaluated transition countries are Slovenia, followed by Hungary, the Czech Republic and Estonia. These countries are comparable to some of the established democracies like Belgium, Italy and Greece. Two other ‘less developed’ EU countries— Spain and Portugal—are in front of them. (Of all the analysed countries, Switzerland, Finland and Iceland are at the top of the list.) The World Competitiveness Yearbook gives us information on the possibilities of political destabilisation (it is an opinion indicator based on a survey question). In the 2002 report, this possibility is, among transition countries, least in Hungary (which is in 22nd place out of 49 countries in terms of stability), followed by the Czech Republic (24th), Estonia 40 Some data from the European Valueeu Survey 1999 also show a lower level of trust on average in political institutions in ECE countries (compared tothan in Western ones). For example, trust in parliament is in some of them (Slovakia, Hungary, Slovenia) comparable to some EU countries (Greece, Italy, Ireland) (or even higher. However,) but the average is, nevertheless, lower.


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(32nd), Slovenia (33rd), Russia (40th), Slovakia (44th) and Poland (44th). Italy (31st) and Belgium (27th) are the only EU countries placed lower than some of them. Portugal is 12th, Spain is 16th and Greece is 20th. In the first three places are Finland, Luxembourg and Australia. An indicator ordinarily used for the evaluation of the dynamics of change of government is the number of governments or the average duration of a single government’s rule in a certain period. However, this could be misleading because it could happen that a relatively large number of governments come and go but their composition stays roughly similar; thus, we could not speak about a real change of power. For example, since the first competitive election in 1990 till 2003 there have been nine governments in Slovenia and seven in Slovakia– counting every change in the composition of the government. This is more than in Hungary (six) and the Czech Republic (five) and could indicate a relatively high level of circulation of power in the first two countries. However, in both cases the government was for most of the time dominated by a single party—in Slovenia, the Liberal Democracy of Slovenia (LDS), whose leader, Janez Drnovšek, headed the government between 1992 and 2002, with only a half-year beak, and in Slovakia, the Movement for a Democratic Slovakia (HZDS) whose leader Vladimir Mečiar was prime minister for most of the 1990s. A better indicator of political dynamics is the number of ‘political turns’, i.e. the number of changes of different political persuasions in power and the duration of them. The number of such turns (including the change in power on the first democratic election) is six in Slovakia, four in Poland, Slovenia, Latvia, Bulgaria and Hungary, and two in the Czech Republic, Croatia, Albania and Romania, while in many countries of the former Soviet Union, even after the fall of communism and the first competitive elections, power stayed firmly in the hands of former (more or less reformed) communists. A similar indicator can be found in the World Bank report Transition: The First Ten Years—the number of ‘executive turns’, i.e. the number of changes in the leading position of the executive branch of government in the period 1989–1999. The number of this turns is: nine in Poland, eight in Lithuania, seven in Estonia, Latvia and Bulgaria, six in Hungary and Slovakia, four in the Czech Republic and Romania and two in Slovenia (turns after 1999 are not included). The difference between these two indicators is that the latter counts every change on the leading position in government as a turn even if the successor is from the same party. For this reason, it seems more appropriate to count as a turn only a change of ruling political option.

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However, even the number of political turns could be an unreliable indicator of the political circulation because the duration of the rule can be very uneven. This particularly holds true for the political situation in Slovakia (with the highest number of political turns) and Slovenia. In Slovakia, the Movement for a Democratic Slovakia held power from 1992 (at the end of which the country gained independence) until 1998—with the exception of a period of nine months in 1994. In Slovenia, the so-called spring block held power for two and a half years, while for the rest of the time power was in the hands of the so-called liberal-leftist block, especially LDS (the ‘spring’ parties actually participated in governing ‘mixed’ coalitions but they were always in an inferior position). The situation is quite different in Poland and Hungary where competing political blocks change power almost on a regular basis (from the first free and multiparty elections, no political party or block has won two parliamentary elections in a row). Data on the relationship between the old and new political elites is also very interesting. According to some studies on elite reproduction or circulation in different transition countries, circulation of elites is relatively high in Poland, the Czech Republic, Hungary and the Baltic countries, while in Russia and also in Slovenia it is much lower. There are, however, some methodological differences between these studies and, therefore, a certain amount of caution in their comparison is needed, but they are worth of consideration (Higley and Lengyel 2000, Adam and Tomšič 2002). 3. Effectiveness Regarding ‘government effectiveness’ (World Bank), the most favourably assessed transition country is Estonia, followed by Slovenia, Hungary and the Czech Republic. However, even they are assessed as faring relatively poorly compared to the EU countries, among which only Italy and Greece lag behind the first two of them. (The highest ranked countries are Singapore, Switzerland and Iceland.) Regarding policy implementation ability, according to the World Competitiveness Yearbook 2002 (using an opinion indicator) Hungary is ahead of other transition countries in 16th place. The Czech Republic (26th), Estonia (27th), Slovenia (34th), Russia (38th), Slovakia (42nd) and Poland (44th) lag behind it. Comparably ranked Western countries (i.e. worse than the first transition ones) are Portugal (46th), Greece (40th), Belgium (33rd), France (32nd) and Italy (28th). (At the top are Singapore, Finland and Denmark.)


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An important aspect of effectiveness is the management of public finances. According to the World Competitiveness Yearbook, the budget deficit for 1999 was the lowest in Slovenia with 0.74%, which puts it into 18th place. It is followed by Poland in 19th place (0.92%),41 Russia in 20th (0.96%), the Czech Republic 28th (1.62%), Hungary 39th (2.91%), Slovakia 42nd (3.58%) and Estonia 45th (4.7%). They are comparable or even better in this respect than a number of Western countries: Greece is in 46th place (5.25%), Italy is 40th (3.1%), Austria is 35th (2.13%), Portugal is 31st (2.02%), Norway is 29th (1.62%), France is 27th (1.6%), the Netherlands is 26th (1.55), Germany is 24th (1.42%) and Spain is 21st (0.96%). Singapore, Luxembourg and Iceland have the highest surpluses. Autonomy and competence of the civil service are, to an important degree, dependent on the method of recruitment into it. In this regard, a lot of problems are caused by different kinds of clientism, i.e. recruitment to important positions according to criteria that have nothing to do with skills and competence. Although such practices are present in all transition countries, the situation is, according to BEEPS 1999, the least problematic in Hungary and Slovenia. Regarding the ability of the government to provide conditions for free economic activities, as reflected in the index of ‘regulatory framework’ (World Bank), Estonia is the best assessed transition country, followed by Hungary, the Czech Republic and Slovenia. The first two (especially Estonia) are assessed better than many EU countries (Italy, Portugal, Greece, France). (The countries with the best assessment are Singapore, Luxembourg and Finland.) The Nations in Transit 2002 also contains assessments of two areas related to regulatory quality: privatisation (the legal framework and the actual situation) and microeconomic policy (property rights, price liberalisation etc.). Regarding privatisation, Hungary (1.50) is ahead of the Czech Republic and Estonia (both 1.75); regarding microeconomic policy, Poland (1.50) is ahead of Hungary, Estonia and Slovenia (all 2.00).

41 Its has to be pointed out thatn in Slovenia as well as in Poland the situation worsened on this matter in recentlast years (till 2003)[Query: define time frame]. Slovenia’'s budget deficit increased toon 2.8% and Poland’'s toon almost 10%. For Slovenia, many indices show that previous figures indicating a low budget deficit was in many ways artificially constructed and a the similar possibly holds also for some other countries.

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4. Transparency Regarding the ‘rule of law’ index (World Bank), Slovenia is the most favourably assessed post-communist country, followed by Estonia, Hungary and the Czech Republic, but all of them are behind all the EU countries except Italy and Greece (both of which are behind the first three transition countries). (The most favourably assessed countries are Switzerland, Singapore and Luxembourg.) The Nations in Transit 2002 also contains an assessment of the rule of law (the constitutional, legislative and legal framework), in which Poland received the most favourable assessment (1.50) (lower numbers are more favourable), better than Slovenia, Estonia (both 1.72), Lithuania, Hungary, Latvia (all 2.00) and the Czech Republic (2.50). The situation is worst in Turkmenistan (7.00), Belarus (6.75) and Uzbekistan (6.50). According to an assessment of personal and property security from the World Competitiveness Yearbook 2002, Hungary ranks the highest (in 32nd place), ahead of the Czech Republic (33rd), Slovenia (35th), Estonia (36th), Slovakia (38th), Poland (42nd) and Russia (45th). Only three EU countries are placed behind some of the transition countries—France (39th), Italy (37th) and Belgium (34th). Security is the highest in Austria, Finland and Singapore. One of the most significant indicators of the quality of governance that at the same time has a great impact on economic performance is corruption, or rather control over it. According to the Transparency International report from 2002 which rank countries with regard to their Corruption Perception Index (CPI), Slovenia is assessed the most favourably of all transition countries included in the research. It occupies 27th place, ahead of Estonia (29th), Hungary (33rd), Lithuania (38th) etc. The most corrupt countries (according to these data) are Azerbaijan (95th), Moldova (93rd) and Kazakhstan (88th). EU countries rating lower than Slovenia are Italy (31st) and Greece (44th). The latter is also behind Estonia, Hungary and Lithuania. Finland, Denmark and New Zealand are assessed as the least corrupt nations. In the World Bank research, Slovenia is the least corrupt country, followed by Estonia, Hungary and Poland. Slovenia is rated higher than some EU member countries—Belgium, Greece and Italy (the latter is also behind Hungary and Estonia). The top three positions are occupied by Finland, Sweden and Iceland. A similar group of countries (Finland, Denmark, Iceland and New Zealand) is also at the top of the assessment of corruption (or better to say, the absence of it) in the World Competitiveness Yearbook. The


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best graded transition country in the 2002 report is again Estonia (25th), followed by Slovenia (29th), Hungary (35th), the Czech Republic (36th), Russia (42nd), Slovakia (34th) and Poland (46th). Behind Estonia are three EU countries—Greece (38th), Italy (31st), Portugal (28th). The best are again Finland, Denmark, Iceland and New Zealand. The Nations in Transit 2002 gives the best grades to Slovenia (2.00), Poland (2.25) and Estonia (2.50) and the worst to Azerbaijan, Moldova and Turkmenistan. There are different types of corruption existing in practice. The socalled petty corruption (in the sense of bribing officials in order to avoid taxes or disobey regulations) is, according to BEEPS, least pervasive in Hungary, followed by Slovenia and the Czech Republic. A serious form of corruption is ‘state capture’, by special interest groups, which refers to the illegitimate influence of companies on decisions of state institutions that are relevant to those companies. The proportion of companies which has reported that state capture has had a significant impact on their businesses (according to BEEP) is the lowest, surprisingly, in Uzbekistan (6%), ahead of Hungary and Slovenia (both 7%) and the highest in Azerbaijan (41%) and Moldavia (37%).42 Risk assessment in Country Risk (2000) also contains the assessment of political risk, which refers to the level of commitment to accepted obligations (especially economic ones) of the country. Among transition countries, Slovenia is the best (in 33rd place) ahead of the Czech Republic (34th), Hungary (35th), Poland (37th) etc. However, even Slovenia lags behind all the EU countries (for example, Spain is 19th, Portugal is 23rd and Greece is 25th). The countries where political risk is the lowest are Switzerland, the USA and the Netherlands.

An Assessment of the Situation There are considerable differences between post-communist countries regarding the aspects of governance analysed, but, nevertheless, we could 42 In 2002, the second BEEPS was carried out which dealt with two dimensions of corruption—administrative corruption and state capture. In most ECE countries, the frequency of administrative corruption did not change significantly from 1999 (in some, like the Czech Republic, Hungary and Lithuania, even decreased). The ‘bribe tax’ (share of bribes in the firms’ total annual sales) is also much lower than in other former socialist countries. The share of forms involved in the state capture practices is also not very different (although is a bit higher) than in 1999.

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distinguish certain groups with similar characteristics. It is evident that the countries of ECE (Poland, Hungary, the Czech Republic, Slovakia and Slovenia) and the Baltic states (Lithuania, Latvia and Estonia) are the most successful in all aspects. These are countries with a relatively consolidated democratic system, which means that they have established the key institutional mechanisms necessary for a successful functioning democracy. Only Slovakia is a new-comer in some way, because of Mečiar’s long-lasting rule, characterised by many authoritarian traits. However, after the victory of a democratic coalition in the parliamentary elections in 1998, the situation has nevertheless developed in a positive direction. However, there are differences even between these countries. Namely, Poland and Hungary are on average assessed as most successful regarding the level of democracy (political participation, competition etc.). The situation is similar regarding stability, where Slovenia also has high rating in some aspects (lack of violence). Estonia rates highly in some aspects of effectiveness (implementation of policies). Regarding the rule of law, the situation is the most promising in Slovenia which is, together with Estonia, the strongest in the control of corruption. In the second group we could put two other countries with association agreements with the EU, Bulgaria and Romania, and Croatia, which has no such agreement. The first two have managed to establish the basic mechanisms of parliamentary democracy but the feebleness and inefficiency of the political institutions and the widespread corruption hinder their performance. The latter is in many way a special case, because it is a country which is culturally and historically closer to the ECE countries of the first group but where, because of a specific situation in the 1990s— the involvement in the war in the former Yugoslavia and the authoritarian rule of President Franjo Tuđman—the consolidation of democracy and the establishment of the rule of law could not happen (at least not until Tuđman’s death in 1999 and the loss of power for his party, HDZ, in subsequent elections). In the rest of the transition countries, i.e. the countries of the former Soviet Union and the Balkans, the consolidation of democracy is still a very remote goal. It is true that there are only few that could be labelled as firm autocracies (Belarus, Turkmenistan and Uzbekistan), which means in most of them exist some elements of a parliamentary democracy, such as competitive elections, political parties etc. However, there is also a lack of other key requisites of democracy: namely, different


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mechanisms of control—in the sense of independent state institutions, as well as viable independent public ones—are weak or even absent, so the government and other powerful actors can unrestrictedly abuse their power. Because of different conflicts of an ethnic, religious or ideological nature, many of these countries are also characterised by political instability. In general, we can say there is a certain group of countries (the abovementioned first group) where the democratic transition has been successfully accomplished and, therefore, the basic institutional requisites of democratic development have been established. However, regarding most of the political indicators, even these countries lag behind the majority of the world’s most developed countries. This also holds true for the majority of EU members, where Greece and Italy are the only ones that are in many aspects behind them (while other two ‘less developed’ members, Spain and Portugal, are on average ahead of them). It looks as if it will take some time even for the most politically developed post-communist countries to achieve a state of democratic stability comparable to that in established Western democracies.

An Assessment of Indicators The indication and evaluation of different aspects of governance is a very difficult task because of the complexity of the research subject, especially considering the fact that we deal mostly with factors based on human action, which are, therefore, hard to quantify. For this reason, analysis of governance is usually based on so-called soft data, mostly data from public opinion surveys and expert assessments. This data is then used in the form of individual indicators or composed indices (referring to wider categories). The problem with this kind of data is in its subjectivity, which could produce biased estimates. An inappropriately composed survey sample can produce such a bias in itself. The data could not be reliable as an objective indicator of a situation if the answers are provided only by selected focus groups that express their self-interest through them. In our research, this is the case in BEEPS and the World Competitiveness Yearbook where only managers and representatives of companies were included in a survey that undoubtedly would have given somewhat different results if other relevant groups had also participated. Research is often

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affected by the value orientation or even political interests of the researcher. Namely, much analysis of economic policies is characterised by a neo-liberal approach that defends deregulation and large-scale privatisation—and the question is whether this is the most appropriate for transition countries. The second problem is the excessive normativism which could bring similarly biased results if there is a lack of detailed information. Some of the estimates in the Nations in Transit, as well as in the World Competitiveness Yearbook are built on the assessment of a normative and regulative framework (for instance, the [non]existence of certain laws and institutional mechanisms) which is without any doubt necessary but often not sufficient requisite for optimal performance in a certain social field. The problem of researches conducted by Freedom House is in the lack of transparency. Namely, criteria for assessing certain aspects of democracy are often insufficiently specified and estimates are weakly argued. Furthermore, it is not evident who are the authors of these estimates.43 All this together makes checking and critical analysis of particular estimates very difficult. It is also possible that estimates are in a (too) large extent influenced by certain events excessively presented in the media, such as scandals, from which it is not clear whether they represent the actual situation or are exceptional. Furthermore, many of them could be interpreted in different ways. (For example, the increase of the number of public disclosures of corruption scandals could prove actual spread of corruption as well as an increase in the public sensitivity towards this matter.) It is also important how up-to-date the data on which a certain estimate is based are. Namely, in many areas the situation can quite rapidly change in a couple of years, as is shown by the example of the budget deficit in 43

An eExample of this is the assessment of media freedom for Slovenia. In the Press Freedom Survey 2001, Slovenia’'s score was six points lower (i.e.what means better estimate) than in the previous (2000) report in 2000 (the 2000 score was 27 and the 2001 score 21). Comparing the partial scores: on broadcast media, the country scored 4, 6, 3 and 0 in the four categories available in 2000, while in 2001 the ratings were 4, 5, 3 and 0. In print media, the figures were 2, 4, 8 and 0 in 2000 and 2, 3, 4 and 0. in 2000 got in first category 4 points, in second 6, in third 3 and in fourth 0, in 2001 got in first category 4 points, in second 5, in third 3 and in fourth 0; on print media, in 2000 got in first category 2 points, in second 4, in third 8 and in fourth 0, in 2001 got in first category 2, in second 3, in third 4 and in fourth 0. On the basis of these data,e figured one could conclude that improvement happened mostly in the fieldl of print media. However, from a very short description of the situation it is not evident what are the arguments for these estimates and especially what exactly brought about the improvement.


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some countries. Some phenomena like public opinion on some matters can also change in a relatively short time influenced by actual events. All this is usually overlooked in assessments which are based on old data. In general, we could say that the indices in World Bank research on the different dimensions of governance the most credibly reflect the actual situation—in a comparative perspective. This could be expected considering the fact that this research and its evaluation is based on a wide rang of different indicators and databases. The solution to the problem of correct evaluation thus should be in thoughtful combination of different types of data and in subtle caution in its interpretation.

Quality of Governance and Social Capital The main factor that connects the quality of governance with social capital is confidence. Elements of governance like government effectiveness, rule of law and political inclusion influence the level of confidence in political institutions as well as the level of generalised trust. The influence is also reversible—institutional performance to a considerable degree depends on citizens’ confidence in them. In this sense, two different courses of development are possible: a ‘virtuous circle’ where effective governmental and other political institutions strengthen citizens’ confidence in an institution, which consequently increases its performance; and a ‘vicious circle’ where ineffective and dishonest institutions weaken the confidence of citizens, which in turn hinders their performance and also decreases their possibility for improvement (in this case, because of the mistrust in government and politics in general—in the sense of ‘nothing matters’, ‘they are all the same’ etc.—even well-intentioned and welldesigned reforms are often unsuccessful). Besides, through the production of confidence and trust, successful governance helps to produce and optimise social capital, also through its strategic action on the mezzolevel—in the form of intermediary negotiation systems where government in partner-like cooperation with relevant organisations and groups from different social systems participate in the design and implementation of developmental policies. To perform this role, the government and political actors in general need a lot of knowledge and sensitivity. The concept of social capital could also be applied to the relations and functioning of the political system itself. It is a particular type of social capital that could be called institutional social capital, which refers to the

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ability to cooperate and coordinate the actions of different institutional actors; as such, it is an intrinsic characteristic of the political system. Namely, government effectiveness strongly depends on coordinated action of different functionally specialised government institutions based on their consensus about developmental orientations and goals. Social capital is also a link between governance and other factors from our model. Through social capital, governance affects the level of cognitive mobilisation by the establishment of intermediary mechanisms of cooperation of relevant actors—for example, by facilitating the transfer of knowledge between science and industry as well as by providing conditions for different kinds of learning. In a similar way, it helps to strengthen social cohesion—through different programmes for the elimination of poverty and building mutual help etc. The same is true for encouraging enterpreneurship and strengthening the entrepreneurial spirit, in which government plays its role indirectly, i.e. through the creation of an environment conducive to the development of enterpreneurship, as well as in a more direct way through its involvement in intermediary structures. These developmental factors are influenced particularly by the effectiveness and transparency of political institutions, while the level of democracy has a great impact on social cohesion.

6. Entrepreneurial Spirit

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The Concept When discussing entrepreneurial spirit as a factor of developmental performance, one needs to distinguish between two related, yet quite separate, notions: entrepreneurship and entrepreneurial spirit. The former, entrepreneurship, is narrower and more established. Recently it has usually been used to denote two aspects of business (OECD 1998: 41). First, to denote activities of small and medium enterprises. This, of course, leads towards a simple and straightforward operationalisation and formulation of indicators of entrepreneurship, especially by employing data on SME demography, in particular entrance, exit and growth rates. However, one has to be sceptical towards the adoption of such a simplifying definition, even though it refers to an increasingly important aspect of the economic sphere. Moreover, it also omits some equally important aspects. Even if it is ‘user friendly’, it is inappropriate for research with a focus beyond SMEs, because it a priori excludes these aspects, without appropriate argument and account for other important factors that take place in large sized enterprises (LSE). Hence, the second approach towards the definition of entrepreneurship seems much more appropriate for research that aims to formulate a set of indicators of factors of developmental performance. This approach uses the term to denote the more general characteristic of the business sphere, namely the actors’ attempt to innovatively use to one’s advantage opportunities in the business sphere, which is related to some level of risk. This substantively different, but also broader and more inclusive—and therefore more appropriate—approach shifts the focus onto the processes that take place in the business sphere, while at

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the same time acknowledging that entrepreneurship is not just an economic, but also a social process. This implies focus on both processes that are internal to organisations, such as various technological, organisational and social innovations, and processes that are external, such as various types of co-operative practices among enterprises. When dealing with the notion of entrepreneurial spirit, we are not simply referring to entrepreneurship, even in its more comprehensive meaning. Entrepreneurial spirit is a broader concept. Namely, certain forms of entrepreneurship exist in all modern or partly modernised societies. Some economic anthropologists even claim that a specific form of such behaviour exists in ‘pre-market’ societies. Anyway, substantial body of evidence confirms the existence of certain forms of entrepreneurial behaviour in former and in still existing communist regimes and in those where the political system is the most repressive and does not allow even the minimum of economic freedom, such as North Korea, Libya, Iraq or Cuba (2001 Index of Economic Freedom). However, forms of entrepreneurship differ to a great extent. Search for profit can be guided by the principles of a ‘zero-sum game’, where the benefits are confined to a relatively small group. In such a case, it would be difficult to interpret the behaviour of such a group in terms of an important positive contribution to developmental performance. It is more likely that the contribution would be negative, as it cripples participatory potential and fosters inertia and defeatism, as demonstrated in the late 1950s by Banfield’s study of a small town in southern Italy. On the other hand, entrepreneurship in ‘positive-sum game’ forms can be very conducive to developmental performance. In this case, the benefits of entrepreneurship exceed the level of those that generate them in the strict sense, in spite of rational economic calculation and the search for profit. With the notion of entrepreneurial spirit, we are attempting to embrace this phenomenon; it denotes entrepreneurship together with its context. Entrepreneurial spirit is a comprehensive notion: it denotes both entrepreneurial process and those components of the social, cultural and political environment that relevantly affect this social and cultural process. The definition has to cover various aspects of different forms of action in the economic sphere. Due to the demands of comparative research, it is especially important that the concept is inclusive. It has to embrace both processes that take place in SMEs and LSEs. With regard to this, it has to be able to embrace the difference between different societies. For example, there are a num-


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ber of very agile and successful LSEs in Sweden (e.g. Ericsson). When it comes to small enterprises, it seems that they are unable to transcend certain limitations. The situation is reversed in Denmark, also a small Scandinavian country; it is a country of very successful SMEs; the largest Danish enterprise was ranked 25th in size in Scandinavia (ENSR 1998). Should we interpret this as a high presence or as a lack of entrepreneurial spirit? Or is it, perhaps, just that entrepreneurial spirit can appear in different forms? Entrepreneurial spirit is a necessary condition for a positive developmental potential of developmental policies, social cohesion, cognitive competence and social capital. To illustrate, only if there is a certain amount of entrepreneurial spirit can inventions, a ‘by-product’ of cognitive mobilisation, become innovations and be marketed. This principle, of course, goes both ways: in the absence of an insufficient presence of other factors, entrepreneurial spirit cannot suffice (e.g. de Soto 2000). When other factors are insufficiently developed—which may be manifested, for example, as a lack of effective courts that can guarantee property rights—it is quite likely, that degenerative forms of risk-taking will appear (corruption, clientelism, rent-seeking). Entrepreneurial spirit, therefore, contributes to appropriate reactions to a changing environment, new opportunities and new circumstances, or even anticipation. However, this does not imply that entrepreneurial spirit limits itself to new, prospective and growing branches of the economy, even though this is an important manifestation. On the contrary, a number of cases from Denmark, Italy, Switzerland etc. confirm that a whole spectrum of economic activities should be analysed. For a more precise definition, operationalisation and selection of indicators of entrepreneurial spirit, one should proceed from its basic components. 1. Creation of New Enterprises

Entrepreneurship is often defined in economic literature by employing the concept of risk-taking—by defining one’s entrepreneurial potential by the relationship that this individual has towards risk-taking. We are referring to inclination as opposed to aversion to attempt to use to one’s advantage the identified possible opportunities. Many attempts are, of course, unsuccessful. However, a high exit rate cannot be interpreted in a straightforward manner as an indication of a long-term developmental and economic un-

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successfulness. On the contrary, the most vibrant societies are typified with both high entrance and exit rates for enterprises; while new enterprises are being established and successful ones thrive, there is also a process of exit for those that are not successful enough. Hence, when the data indicates both high entrance and exit rates for enterprises, we are most likely dealing with an environment with a high level of entrepreneurial spirit. In this case, high exit rates are an indication of a Schumpeterian ‘constructive destruction’. On the other hand, it would be risky to claim that low exit rates indicate a high level of entrepreneurial spirit. In this case, socialist societies could be designated as full of entrepreneurial spirit, as it was almost impossible for an enterprise to go out of business. Market participation is, by definition, related to a certain level of risk. Hence, a low proportion of unsuccessful enterprises deserves attention. An important element of this component is also the value orientation of a specific environment: is reasonable risk-taking in the business sphere positively evaluated? An absence of stigma towards unsuccessful— perhaps even multiple—business attempts, when unsuccessfulness occurs within the boundaries of reasonable risk-taking, is an important constitutive element of a favourable business habitat (Lee et al. 2000: 9–10, Kwamme 2000). We are referring to a set of cultural characteristics which enable or disable the creation and development of enterprises, such as a readiness for risk-taking, innovativeness, a wish to seize opportunities, an absence of stigma towards unsuccessful ventures, inclination towards identification with the enterprise etc. An environment which is relatively averse to reasonable risk-taking, which stigmatises unsuccessfulness and inappropriately awards success is an important restrictive factor that diverts initiative. Variables that are appropriate for the evaluation of this component of entrepreneurial spirit are quite straightforward. This is ‘demographic’ data on enterprises, especially the birth and death rates of enterprises. Interestingly, even though this is quite basic and simple data, we still do not have databases that would be harmonised and synchronised on the EU level (European Commission 2000).44 Thus, we shall resort to other data The European Commission published a report titled Business Demography in Europe in 2002. However, the report suffers from a number of methodological problems, 44

which are a consequence of differences in national definitions of enterprise birth and death. Consequently, the report is not appropriate for comparative research efforts. The report itself notes that “[strong] differences appear in both birth and death rates, most probably due to the definitions used and not only to economic factors” (2002: 7).


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for the purpose of our analysis. The first is data on entrepreneurial activity from Global Entrepreneurship Monitor 2002 (GEM),45 especially its total entrepreneurial activity index (TEA index).46 We shall compare these data with the managers’ estimates from WCY 2001 survey, on whether the creation of firms is something usual or not. 2. Generation of Competencies and Mobilisation of Resources

Continuous improvements are an essential ‘ingredient’ of an entrepreneurship that is viable and capable of long-term survival. Resting on the laurels of an achieved level of competitiveness or development not only undermines further competitiveness, continuous development and even the survival of the enterprise, but also indicates a lack of entrepreneurial spirit. This emphasis is particularly relevant due to the importance of the search for efficiency, competitiveness and new opportunities, not only in small enterprises but also in large ones. Changes can be both qualitative and quantitative. Quantitative changes are about the ability or inability of an enterprise to exceed certain limitations in terms of its growth. Efficiency alone is insufficient; expansion of the business is also very important. Quantitative changes are about the ability or inability to successfully introduce changes in the structures and processes that take place in an enterprise and among enterprises. Enterprises generate resources and competencies in a variety of ways. One increasingly important way is by linking among enterprises through the creation of clusters, which effectively introduces both types of change to a single enterprise and simultaneously to a whole cluster of enterprises. Equally important are the generation, dissemination and application of innovative ideas. These two changes are, of course, interconnected; in the markets of high quality products, which are typical for the developmental core—regardless of their technological level—only continuous qualitative improvements can lead to quantitative changes. On the other hand, quantitative changes can help trigger qualitative ones (e.g. clustering can lead to economies of scale and specialisation even with small enterprises). 45 Global Entrepreneurship Monitor is a report on entrepreneurial processes coordinated by Babson College, London Business School. The report covers 37 countries containing three-fifths of the world’'s population and 92% of its GDP. It covers most EU countries, but only Hungary, Poland, and Slovenia among ECE countries. 46 The TEA index reports on the proportion of the labour force, that is actively involved in starting a business or are the owner or /manager of a business that is less than 42 months old. Thus, this index appropriately captures the first component of entrepreneurial spirit.

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The evaluation of this specific component requires a more comprehensive set of variables, due to the complexity of the generation of competencies and the mobilisation of resources. However, we shall attempt to tackle this complexity by avoiding too many different indicators and instead employ a combination of indices from The Global Competitiveness Report 2001–2002 (GCR). These indices combine both ‘hard’ quantitative data and ‘soft’ managers’ estimates from a managers’ survey, which was conducted especially for this report and which captures this component of entrepreneurial spirit relatively well. The indices are the ‘innovation index’, the ‘technology transfer index’, the ‘company operations and strategy index’ and the ‘cluster innovation environment index’.47 The innovation index has been calculated for all economies, as the authors assumed that it has a role in fostering competitiveness in all countries. It combines both hard data (on utility patents per capita and the gross tertiary enrolment rate) and soft data (managers’ estimates on the technological performance of enterprises, the role of innovativeness in performance of enterprise, the extent of business collaboration with local universities etc.).48 The technology transfer index has been calculated only for non-core innovators,49 in our case all ECE countries and the southern EU member states, Greece, Portugal and Spain (Luxembourg is not included in the analysis). The authors of GCR have estimated that this is the most important mechanism for technological upgrading and the competitiveness of non-innovators.50 It was calculated on the basis of a They are in fact subindexesindices, designed for the purpose of calculating indexesindices for GCR. However, these composite indexesindices are, due to various reasons, not useful for our analysis, mainly because one or more of the subindexesindices does not match our conceptual framework. For example, the ‘technology index’ is composed of an ‘iInnovation subindex’, a ‘technology transfer subindex’ in the case of non-innovative countries and an ‘ICT subindex’. The latter subindex fits to the third component of cognitive mobilisation and cannot be applied in the analysis of entrepreneurial spirit. An oOverview of subindexesindices, on the other hand, shows that the five aforementioned subindexesindices are indeed very appropriate for our analysis. 48 A fFew variables (tertiary education enrolment and university–enterprises cooperation) overlap with those applied in the analysis of cognitive mobilisation. However, we have judged it best to estimated that we should apply the index as a whole in the analysis of entrepreneurial spirit. 49 Core innovators are countries with more than 15 US utility patents registered per million population. Others are considered to be non-innovative economies. 50 In their calculation of the technology index for non-innovators, the technology transfer subindex accounts for three-eighths3/8 of the index and innovation index only for one-eighth1/8. ICT index accounts for half1/2 of the index in both cases. 47


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managers’ survey question on the importance of FDI in the introduction of new technology and hard data on technology-in-trade residual. The company operations and strategy index consists of 17 ‘soft’ variables from a managers’ survey, covering various aspects of enterprises’ strategic orientations, from the nature of competitive advantage and customer orientation to the quality of management and cooperation in labour–employment relations. By calculating the cluster innovation environment index, the authors of the GCR recognised that although for the purpose of the national innovation capacity the whole national environment is important—as it was in our chapter on cognitive mobilisation—it is enterprises that ultimately transform inventions into innovations. And they do so disproportionately in clusters. On the basis of Porter’s ‘diamond’ model of determinants of national advantage (Porter 1998), the index is calculated from indicators of the sophistication of domestic market demands, the presence of suppliers of specialised research and training and the prevalence and depth of clusters. For verification and illustration purposes, we shall also apply quantitative data on business R&D spending and staff from the report Towards a European Research Area and also some managers’ estimates from The World Competitiveness Yearbook 2002, on the extent of cooperation between enterprises. 3. Qualities of the Entrepreneurial Environment

Entrepreneurship does not take place in a vacuum. The idea of the complete separation of economy from the state belongs to the past. It is more or less clear that the state has to perform an important role in ensuring the basic conditions of stability and the predictability of the environment. By this we mean the existence of supporting institutions to finance economic activities (both business start-up and the generation of competencies and the mobilisation of resources) and the effectiveness of the state (economic policies, the formulation of a legal framework that supports competitiveness, the ability to adapt to economic challenges, effective bureaucracies, active parliament, etc.). All aspects of transparency of political and judicial institutions that have to deal with entrepreneurship are relevant in this case. We shall employ indicators from two sources for the evaluation of this component: the Index of Economic Freedom 2001 and several indicators from the World Competitiveness Yearbook. It should be emphasised that

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in spite of its name, the Index of Economic Freedom is a complex and rich indicator, enabling the analysis of the positive or negative influence of wider institutional and political factors on the economy: fiscal factors, monetary factors, trade policy, FDI, the protection of property rights, regulationism, interventionism, the informal economy, etc. We shall also employ ‘soft’ data from WCY on various dimensions of the political and legal framework that has a role in the entrepreneurial spirit: data on the adaptability of governmental economic policies and of political system to changes in the environment, the legislative activities of parliament, the influence of bureaucracy on entrepreneurship etc. We shall also apply data on the development and availability of financial mechanisms that can either hinder or support the establishment of enterprises and their development, such as the cost of capital, the availability of credits for business purposes, the availability of venture capital, the role of stock markets in financing enterprises etc.51

Comparison of the EU and ECE Countries 1. Creation of New Enterprises

The TEA index shows that there are substantial differences among the relevant countries. There is no general lag in ECE countries that are included in this report (Hungary, Poland, Slovenia) and other countries in transition (Croatia and Russia) behind the EU countries. However, no post-socialist country is among those with the highest levels of creation of new enterprises but are among those countries that have lower levels of enterprise creation. Iceland is the European country with the highest TEA index—as much as 11.3% of labour force is actively involved in starting a new business or managing or owning one that is less than 42 months old. Ireland (9.1) and Norway (8.7) are also countries with high rates of creation of new enterprises. Switzerland (7.1), Hungary (6.6) and Denmark (6.5) could also be described as countries with relatively high TEA rating. Spain, the Netherlands, Finland, Slovenia, Poland and Swe51 These two sources of data overlap to some extent. However, by applying two independent sources we can verify their credibility. After all, the index of economic freedom is based on a different kind of data; whereas the index of economic freedom is based mostly on ‘hard’ data,, WCY is to an important extent based on a survey of managers.


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den are a group of countries with already quite low levels of creation of new enterprises (a TEA evaluation between 4 and 4.6). Croatia, France, Belgium and Russia have the lowest TEA scores (2.5 to 3.2). A glance at the motives behind entrepreneurial behaviour is also quite interesting. The report distinguishes between two different motives of entrepreneurial activity, opportunity and necessity. It is revealing that three ECE countries have the highest necessity-based TEA index (Hungary at the top, followed by Slovenia and Poland), implying that involvement in entrepreneurship is primarily not a manifestation of an attempt to make good use of an opportunity. All developed European countries have very low necessity-based TEA (1.1 or less). The only exception is Ireland, whose necessity-based entrepreneurship is at levels comparable to ECE countries. However, this is a consequence of a very high overall TEA index, and the Irish opportunity-based TEA is indeed among the highest in Europe, together with Iceland and Norway. Interestingly, Russia and Croatia have very low necessity-based entrepreneurship, exhibiting substantial passivity and a lack of entrepreneurial effort even in the case of need. While it is difficult to note substantial differences in the creation of new enterprises among developed European countries and post-socialist countries, with the exception of the highest TEA levels, there are substantial differences in motives for business creation. In post-socialist countries, the creation of enterprises is mainly based on necessity. In the EU and EFTA countries, the situation is quite different. Business creation is based on an attempt to make the best of existing opportunities, regardless of the differences in the overall TEA level. Additionally, we can look briefly at a soft indicator: managers’ opinion on how common it is in their country to create a firm. According to our definition, this is perhaps a very important indication of entrepreneurial spirit. Ireland, the Netherlands and Finland are at the top according to WCY. Belgium and, interestingly, Slovakia and Hungary, are in the second group of countries, not far behind. These countries are followed by Austria, Slovenia, Luxembourg etc. Portugal, the UK and the Czech Republic are at the bottom. In spite of certain differences in rankings, there is a certain pattern in these data. Somewhat surprising are, perhaps, the rankings of Estonia and Hungary, where it is, according to managers’ estimates, very common to create a firm. We shall deal with this more in the following subchapter appraising the situation. Let us just mention that these two countries have

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in common a very similar attitude with regard to liberalisation and an openness towards FDI, and they tend to create a favourable entrepreneurial environment. Ireland ranks highest of all EU countries. It is, like Estonia and Hungary, an open, liberal and fast-growing economy, which almost by definition offers many opportunities for would-be entrepreneurs. At the top, we can also see, as has quite often been the case, the Netherlands and Sweden (Finland and Denmark are, on the contrary, very close to the bottom). The less developed southern members, Greece, Spain and Portugal, are closer to the bottom. Interestingly, some ECE countries are quite close to the top: Slovakia and Slovenia. Poland is also doing quite well in this respect and only the Czech Republic is at the bottom. 2. Generation of Competencies and Mobilisation of Resources

There are significant differences between the states in the innovation index. Finland has by far the highest innovation index score (6.12). It is followed by a large group of countries from the north or west of Europe that have quite similar scores: Norway, Belgium, Sweden, the UK, France, Germany, the Netherlands, Denmark, Austria (scores from 4.81 to 5.19). Southern member states and ECE are much less innovative. The second group of countries is followed by two southern EU member states, Spain and Italy, and also by Switzerland, Ireland, and Iceland (scores from 4.35 to 4.48). Note that Italy’s ranking has to be interpreted carefully, as is the case in many variables. Even though it has quite low innovation score, we should acknowledge that it conceals substantial regional variations and very innovative and successful regions, especially in Terza Italia. A low score for Ireland might be surprising due to its astonishing rates of economic growth. However, taking into account the important role that FDI had played, this is somewhat easier to explain. In fact, it would be very interesting to see data on Ireland for the following index on technology transfer. However, the authors of the report have only calculated this index for non-innovative countries.52 The remaining seven countries all belong to the group of southern EU countries or ECE. The highest of these low scorers are Greece (3.95), Estonia (3.94) and Slove52 The aAuthors of the Global Competitiveness Report distinguish between innovative and non-innovative countries on the basis of data on US utility patents. Countries with more than 15 US utility patents per million population are considered as '‘core innovators’.


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nia (3.80). The least innovative are Portugal (3.58), Hungary (3.30), the Czech Republic (3.24) and, with especially poor scores, Poland (2.98) and Slovakia (2.97). Technology transfer is an important way to introduce new technology to domestic enterprises, especially for less innovative countries. The technology transfer index shows a somewhat different situation. Hungary has the highest technology transfer score (6.19) and is followed closely by the Czech Republic (6.03) and Estonia (5.95). Slovakia has a score of 5.81. The score for Portugal, Slovenia and Poland is somewhat lower (from 5.28 to 5.15). Two EU member states are at the bottom, with scores of 4.96 (Spain) and 4.15 (Greece). Interestingly, the ranking of those countries that are represented in both indices (i.e., the non-innovative economies) is almost the opposite, with the exception of Greece. We shall deal with this in the following subchapter. The company operations and strategy index deals with other aspects of competencies and resources than those in the former two indices. It shows a situation similar to that of the innovation index. Finland is the country with the most sophisticated company operations and strategies of all European countries, followed by the Netherlands, Germany, Switzerland, Sweden, the UK and Denmark. Also close are France, Austria and Belgium. Italy, Ireland and Spain are again close behind them. Slovenia ranks top among ECE countries, but, as we can see, far behind almost all EU member states, with the exception of its southern countries. Following are Estonia, Hungary, Portugal and the Czech Republic. Greece, Poland and Slovakia are far behind all other countries. Finland is also highest ranking country in the cluster innovation environment subindex, with by far the largest score (10.9). It is again followed by a—this time smaller—group of countries: the UK (10.0), Germany (9.9), Switzerland (9.9) and Sweden (9.8). The rest of the countries are lagging behind, including a number of core innovative countries: France and Austria (both 9.3), Italy and the Netherlands (9.2), Ireland (9.1), Denmark (8.8), Iceland (8.8), Norway (8.6), and Spain (8.4), with the highest among non-core economies, are between the top and bottom groups of countries. At the bottom are the Czech Republic (7.9), Portugal (7.7), Slovakia (7.6), Estonia (7.4), Hungary (7.2) and Poland (7.2). Slovenia (6.8) and especially Greece (6.3) are far behind all EU and even ECE countries. A glance at some quantitative data shows a similar picture and also verifies that the above indices enable a realistic assessment of the situa-

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tion, even though they include ‘soft’ variables. Data on R&D expenditure as a share of GDP (Chart 5) shows a situation that is quite similar to that presented with the above indicators. Both ECE countries and southern member states of the EU are far behind the highest spending countries, especially Sweden, where enterprises spend an astonishing amount of 2.8% of GDP. In a number of other countries—virtually all western and northern EU member states, as well as Switzerland and Iceland—this amount is above 1% of their GDP.53 Enterprises from ECE countries and southern EU member states, on the other hand, spend less than 1% of their GDP on R&D. There are important differences both among ECE countries (the Czech Republic and Slovenia spend much more than Poland, Hungary or other post-socialist countries) and southern EU member states (Italy and Spain spend much more than Greece and Portugal). We should emphasise that with regard to business spending on R&D, the situation is perhaps even somewhat better in ECE than in southern Europe, especially due to the relatively high spending of the Czech Republic and Slovenia and to the very low spending of Greece and Portugal. This situation is inevitably reflected in the private sector’s R&D staff per capita. ECE countries and southern members of the EU are again far behind the core economies. Sweden, Finland and Switzerland have the highest R&D human capital (5.3, 5.0 and 4.9 business R&D staff per 1000 people), followed by Denmark (3.9), Germany (3.7), Iceland (3.5) and Belgium (3.2). Interestingly, Russia has as much as 3.9 R&D personnel per 1000 in business. Slovenia is ranking quite well with 2.1 researchers per 1000 people, following Austria, the UK and Ireland. However, Slovenia and Russia are the only outlying nations with regard to a correlation between R&D spending and staff among post-socialist countries (more on this in the following section). Other countries employ around 1 researcher per 1000 people (the Czech Republic, Italy, Slovakia, Spain) or even much less (Hungary, Poland, Greece, Estonia, Portugal). An important indicator is also the extent of technological cooperation between enterprises. This dimension has already been implicitly included in the cluster innovation environment index. Unfortunately, we do not have reliable data at our disposal. However, due to its importance and specificity, we can look briefly at ‘soft’ data. Chart 7 shows what is by now a familiar image: Finland and Sweden are at the top, indicating that 53

Note that data for Austria is of older date (from 1993).

Chart 7: Business R&D expenditure as a share of GDP in 1999

3

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d d y m rk ce en ed inlan erlan rman Fran elgiu nma e e F Sw ti z B G D Sw

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Sources: calculated from data from Towards a European Research Area 2002

Chart 8: Technological cooperation between enterprises

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s a d n any land stri mark gium lan ede and Fin Sw therl Germ Ire Au Den Bel Ne

. a g a a y e n e UK ranc vaki stoni ngar bour Spai veni chR reec e o u F Slo G E z H xem Sl C Lu

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Note: 1 – is lacking 10 – is common Source: World Competitiveness Yearbook 2001: 493


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cooperation between enterprises is quite common. They are followed by a group of western and northern EU countries, where cooperation is also quite common according to managers’ estimates. In ECE and southern EU countries the cooperation among enterprises is best established in Estonia and Hungary. 3. Qualities of the Entrepreneurial Environment

The index of economic freedom, which has been mentioned as an important composite index for the description of specific dimensions of the entrepreneurial environment, shows a somewhat different image. The comparison between ECE, EU and EFTA countries remains unchanged. However, there are certain interesting differences in rankings both at the top and at the bottom. At the top we can find five countries that have been designated as economically completely free: Ireland, Luxembourg, the UK, the Netherlands and Switzerland. With the exception of the Netherlands, the others have usually not been at the very top, although they have previously been among better ranking countries. The high position of Austria is also somewhat unusual in this respect. The Netherlands are the only high-performer that remains close to the top of the ranking. Finland and Sweden, usually the top performers, and also Germany, constantly scoring quite highly, are labelled as ‘mostly free’ countries. Among ECE and southern EU countries, Estonia is the most economically free country—indeed very close to the top of European countries. The Czech Republic, Hungary, Greece, Poland, Slovakia and Slovenia are—albeit mostly free—closer to the economically mostly unfree countries. The situation of Slovenia, which has usually—but not unambiguously—been the top performing non-core economy, is also somewhat surprising, as it is economically the least free country. The availability of capital for prospective business attempts and for the development of existing activities is also a very important aspect of the entrepreneurial environment. The synergy of financial interest and innovative ideas can undoubtedly enhance developmental performance to an important extent, while a lack of it can impose strong constraints, regardless of other forms of capital (de Soto 2000). An abundance of venture capital is often emphasised as one of the important—albeit not the only one—factors that contribute to the vitality of the most dynamic region in the world, Silicon Valley (Lee et al. 2000). Due to the soft nature of these indicators, we have combined evaluations of different aspects of

Chart 9: Index of economic freedom in 2001 3

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e d ia al ia in ly ry ce Ita rtug Spa Fran unga reec olan ovak oven P o G l l P H S S

Note: 1 to 1.95 free; 2 to 2.95 mostly free Source: 2001 Index of Economic Freedom

Chart 10: Availability of capital for enterprise development 10 9 8 7 6 5 4 3 2 1 0

l s a d y e k d n rg an stri gium tuga Spain ranc reece lan lan and ou ede mar F G Fin Ire therl emb Sw Den Germ Au Bel Por Ne Lux cost of capital

venture capital

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stock markets

. a a y d UK ngar vaki chR veni olan e o o u P l l z H S S C access to foreign capital markets

Note: 1 not easily available, high cost, hinders business development; 10 does not hinder business development, easily available Source: World Competitiveness Yearbook 2001: 413, 434, 462, 463

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capital availability in Chart 8. It clearly points that there are important differences in the availability of capital for enterprise development between core EU countries, southern EU countries and ECE. These differences are twofold. First, the cost of capital hinders business development much more in ECE and the south of the EU than it does in the western and northern countries. In fact, five ECE countries are at the very bottom, implying that the cost of capital quite seriously impacts on business development. Enterprises in two recently very successful economies, Finland and Ireland, on the other hand, are least constrained by this aspect of entrepreneurial environment. Second, there are certain differences in the type of capital that is available for business development. This reflects the local specifics and institutional history, and we shall not go into details here. However, it is important to note that regardless of the rankings in the specific type of funding, we can discern a pattern similar to that of the cost of capital. Another important indicator is the adaptability of government’s economic policies. This variable is interesting because Europe’s inability to compete with the evolving and competitive economy of the USA is often accredited to a rigid, inflexible and less adaptable state(s). The ranking is somewhat different with respect to managers’ evaluation of this element. Adaptability is the highest in Luxembourg, Ireland and Finland, three small and very open economies; they are also the only countries that have been evaluated very positively (from 6.53 to 6.79 on a 1–10 scale). Following are Iceland, Denmark, the Netherlands and also Spain and Hungary (from 5.56 to 5.95). Spain’s position is perhaps somewhat different from its usual rankings, but nevertheless quite realistic; due to wise economic policies, Spain has in the past few years been economically quite successful, improving the performance of its economy and reducing its decades-long chronicle problems with high unemployment rates. With regards to the rest of the countries, we cannot ignore relatively poor estimates by managers. Hence, the relatively high ranking of Estonia (5.0), Slovenia (4.7) or the Czech Republic (4.7) should be interpreted not as good, but as less bad than other countries. Two traditionally strong social–democratic countries, Sweden and Norway, have also been evaluated poorly, not to mention Germany, which received the least favourable estimates as a consequence of its inability to tackle numerous structural problems that are crippling economic development.


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An Appraisal of Entrepreneurial Spirit in ECE Countries and the EU On the basis of the indicators presented above, we can discern an interesting image of the entrepreneurial spirit in Europe. There are important differences between the EU and ECE countries. However, it would be an oversimplification to say that there is a general lag between these two groups. The situation is far more diversified, and we can discern important differences both between the EU member states and between ECE countries. The most successful and competitive countries can exert entrepreneurial spirit by showing good performance in all the three components. However, the first component, while very important, cannot be easily explained as there are a number of factors influencing it and it has to be interpreted carefully. This is especially evident in the case of ECE countries, which generally ranked quite high in this dimension. This is undoubtedly also related with the transition itself, which is also a process of unleashing repressed entrepreneurial potentials. The disintegration of the planned economies not only triggered ‘entrepreneurial fever’ by providing opportunities for those with innovative ideas to start their own firms, but also in many cases forced them to attempt to participate independently in the business sphere. Hence the data on the disproportionately high levels of necessity-based entrepreneurship. The bankruptcies of many firms that could not cope with the increasingly open markets and the more sophisticated demands of customers, assisted by welfare retrenchment, if not radically ‘torn safety nets’ (Standing 1996), contributed to a rapid increase in the number of enterprises. The interpretation of these data in the case of ECE countries is also problematic as—especially in the introductory phase—numerous enterprises existed only pro forma.54 Finland, Sweden and the Netherlands are three countries that most constantly rank very high among all relevant countries in this study. Their business sectors have well-developed competencies, they invest into the generation of competencies and the mobilisation of resources of various kinds. Additionally, these countries have a well-developed entrepreneurial environment, one that enables prospective enterprises to expand their 54 In Slovenia, for example, the number of enterprises has increased from 4,.112 in 1989 to 55,.824 in 1999 (Rapid reports, 1989–1999). However, the initial research showed that only some 60–65% of the enterprises was de facto functioning.

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operations and thus enable a synergy of efforts from the private and public sectors. Importantly, cost and the availability of capital enables these businesses to start or expand their activities. Another Scandinavian country, Denmark, is also very high in the rankings of both those factors that are internal or external to enterprises, as are Germany, Switzerland, Iceland and to some extent Norway. We can reliably assume that Germany’s entrepreneurial spirit would be of higher quality, similar to that of Sweden, Finland and the Netherlands. However, we should acknowledge that the costs of the reunification are quite high and have not yet yielded appropriate results.55 These costs undoubtedly influence the overall competitiveness of Germany when expressed in aggregate nation-level statistics. Ireland and Luxembourg are two countries that are quite specific, each in its own way. What they have in common is that while they are in the second group of the EU countries (France, Belgium, Italy, Austria, the UK, etc.) with respect to competencies and resources, they both rank highly when it comes to the quality of the entrepreneurial environment. This is not coincidence: especially in Ireland, forming a favourable investment climate has been an important element of the country’s very successful industrial policies, which led to very high GDP growth rates in the 1990s (O’Hearn 1999). A big inflow of FDI has also assisted in increasing the competencies of enterprises. However, important differences between domestic and foreign-owned enterprises should be acknowledged (OECD 1998a). The third group of the EU countries consists of the southern EU member states. While the first two groups can both be designated as highly developed countries with substantial amounts of entrepreneurial capital— albeit with recognised differences—this group of countries does not fit into the general picture. Indeed, they exert somewhat more entrepreneurial spirit than ECE, but the differences are not substantial. The performance of Spain and especially Italy is somewhat better, and occasionally they also rank quite high in some aspects of entrepreneurial spirit, but much less in 55 Even though East Germany is often omitted from studies of transition, some data clearly indicates that its transition after the reunification has been quite unsuccessful, in spite of the enormous advantages it hasif compared to other ECE countries. The World Bank’s transition report shows that its GDP fell more sharply than the average for CentralECE and South-Eastern Europe and the Baltics in the initial period 1989–1991. In the period 1992–1994, it was rising faster than the average, but in the period 1995–2000 its rise was at anthe average level (World Bank, 2002: 37).


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others.56 Portugal and Greece, on the other hand, exhibit low entrepreneurial spirit and are not above the performance of better developed ECE countries. They are in many aspects even far behind the level in ECE, especially Slovenia, Hungary, Estonia and also the Czech Republic. The indicators clearly show that ECE countries should, in order to boost their developmental performance, adhere to policies supporting the creation of competencies, the mobilisation of resources and the creation of a favourable entrepreneurial climate. It would, as a consequence, also contribute to the creation of new enterprises. The data indicates that so far no country is successfully achieving the level of the top or at least the second group of the EU countries. Estonia and Hungary are sometimes close to the second group of countries, but only in less demanding aspects, which do not require specific competencies but a strong political will—liberalisation and openness towards FDI, for example. One aspect that should be especially emphasised is the poor clustering among enterprises in ECE; even though there are a number of reasons that should support this behaviour, there is even a greater number of reasons that render it less feasible. According to a representative of the Dutch government who assisted in pilot projects of clustering in Slovenia, these include poor transfer of knowledge, insufficient market orientation of scientific institutes, lack of cluster-support institutions and poor knowledge of the advantages and policy techniques of promoting clustering (Delo 2002). The comparison of the ECE countries clearly shows that they are very different in the extent to which they are performing in each of the components. Estonia exhibits the highest amount of entrepreneurial spirit in all the three components. The establishment of enterprises is very common in this country. Enterprises are themselves relatively innovative, but they are also quite successful in technology transfer from abroad, that is probably a consequence of substantial FDI from Scandinavian countries, which are also the countries with the highest levels of entrepreneurial spirit in the EU. Estonian companies have relatively sophisticated company operations and strategies but are perhaps somewhat less active in the creation of clusters. Hungary is somewhat similar to Estonia, according to many indicators. The creation of enterprises is very common and the entrepreneurial environment offers opportunities for the financing of new 56 We have to acknowledge that some regions in Italy are the most dynamic in the EU as a whole. However, as in the case of Germany, we are, due to aggregated data, focusing on nation-level statistics.

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prospective businesses, albeit at costs that are less favourable when compared to Estonia. Governmental policies are also relatively adaptable, even when compared to many EU countries. Hungary is somewhat weaker in the second component, though. The innovation index shows an especially strong lag behind the core EU countries, but also more innovative ECE countries. This is probably a consequence of substantial FDI inflow, which is evidenced by the highest technology transfer score, substituting for greater innovativeness. The company operations and strategy sophistication score is also one of the higher ones among the ECE countries, although it is behind that of Slovenia and Estonia. Clustering is also underdeveloped in Hungary, and still more so than in most other ECE countries. Slovenia’s strength is relative to other ECE countries in those aspects of the second component that are based on the endogenous creation of competencies and the mobilisation of resources, where it ranks quite high relative to other countries and on a par with Estonia. We are especially referring to the innovation index and the company operations and strategy index, which are relatively low but nevertheless one of the highest among the ECE countries. Due to a relatively low FDI inflow, Slovenia’s technology transfer index is quite low, though, as well as its cluster innovation environment. The entrepreneurial environment, on the other hand, is very unfavourable and markedly not conducive to business development. We can describe Slovenia as quite rigid in this respect. The Czech Republic is a different case. Indicators show very different performance in different aspects of entrepreneurial spirit. For example, the index of economic freedom shows that its entrepreneurial environment is among the most stimulative and free among the ECE countries. Bureaucracy, high costs and the low availability of capital, on the other hand, act as a factor that hinders entrepreneurial initiative. The situation is also quite diversified with respect to competencies and the resources of the business sector. Low innovativeness is compensated for by successful technology transfer. Its company operations and strategy sophistication are, on the other hand, at a relatively low level, even when compared with some more successful ECE countries. However, it has a very high cluster innovation index score, the highest among all the ECE countries and also higher than Portugal or Greece. Poland and Slovakia are two countries that generally exhibit the lowest level of entrepreneurial spirit, in all the three components and in most of the indicators presented above.


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A Short Evaluation of Indicators While attempting to estimate different components, we sometimes faced obstacles in the attempt to acquire appropriate data. Interestingly, we could not access ‘hard’ data for the first component, the creation of enterprises, where systematic and harmonised business demography would be very useful. However, data on business creation and destruction is still unavailable even at the European level. Thus, we had to rely extensively on various ‘soft’ indicators, deriving from survey questions and estimates from managers’ surveys, either from the Global Entrepreneurship Monitor, the World Competitiveness Yearbook or from the Global Competitiveness Report. With regards to the latter, we can emphasise that we use these soft variables in composite indices. These are either a combination of different soft data or a combination of soft and hard data. With regard to the World Competitiveness Yearbook, on the other hand, we employed results from individual questions, which can sometimes be problematic from a methodological point of view. Therefore, we attempted to minimise the relevance of these data where possible or compare them with some other indicators. Indicators are mostly derived from an array of existing comparative studies that in one way or another deal with competitiveness and the business environment. However, competitiveness research covers only some aspects of entrepreneurial spirit. Additional attention is required when a dilemma appears: which component does a specific indicator describe? For example, does the measure of availability of venture capital describe the first component, creation of new enterprises, or the relationship that a specific environment has towards entrepreneurship? This and other dilemmas have to be carefully evaluated and resolved on a case-bycase basis. We also have to acknowledge important methodological and substantive difficulties in comparative research when employing uniform indicators, especially the inability to capture the specifics of a certain country. These difficulties occur both in the field of ‘hard’ economic, demographic and technological factors, as well as when we are dealing with ‘soft’ factors. For example, it is relatively easy to assess the national innovative capability on the basis of quantitative indicators. However, what do such indicators tell us? Namely, any uniform indicator implicitly assumes a linear innovative process with measurable input and output. If this is the case, it would then be relatively difficult to explain the phe-

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nomenon of successful small and medium enterprises, which do not have vast R&D resources at their disposal. Empirical evidence shows that in some environments innovative processes are different (Lorenzen 1998). Consequently, innovations can in some cases be ‘cheaper’ and still have an important effect. Variations in the forms of entrepreneurial spirit can be great enough to make it difficult to draw relevant conclusions on the basis of standardised indicators.

Social Capital and Entrepreneurial Spirit The influence between social capital and entrepreneurial spirit works both ways, as indicated in the scheme of socio-cultural factors of developmental performance. Social capital is an important condition for the development of entrepreneurial spirit and can enhance or undermine its development. As the most important economic consequence of this resource, we can emphasise coordination, synergy and cooperation, which can lead to decreasing transaction costs. These are becoming increasingly important as a specific society is leaving the old (Fordist) paradigm and entering a new economic one, based on information–telecommunication technology (Bučar 1999). Indeed, they are the key ingredients of this transition. Semi-peripheral countries, where the ECE countries also belong, have to take this into account in implementing their developmental projects and strategies if they are to become members of the developed core in the medium to long term. It is probably redundant to emphasise that mobilisation of physical and financial capital is insufficient for the successful establishment of new prospective enterprises, the generation of competencies and the mobilisation of resources, and the creation of favourable entrepreneurial habitat. Utilisation of social capital is an important mechanism for its (re)production. Hence, entrepreneurial spirit can contribute to its increase by utilisation of this resource. As we have seen in the chapter on social capital, studies of the positive effects of social capital on entrepreneurship are an important part of this body of work. The question of mechanisms for strengthening social capital is, on the other hand, much less researched (Warner 1999) and deserves more attention.

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7. Social Cohesion

Definition In the last decade, the term ‘social cohesion’ has been increasingly used by both social scientists and policy-makers. Its success is to a considerable extent related to globalisation and its unpredictable consequences—with many risks and uncertainties—which seem to demand the reactions of relevant social and political actors in terms of fostering integration at the global level and the preservation of identities and solidarity at local level (Chiesi 2002: 235). At the national level, institutions like the Canadian Government and the British Liberal Democratic Party have dealt with the issue of social cohesion; and at the supra-national level, the European Commission has been defining economic and social cohesion as one of its main policy goals.57 Because of the great interest on the political level, a number of theoretical conceptualisations and a quantity of empirical research into different aspects of social cohesion have appeared. In general, the concept of social cohesion can be described as a characteristic of society that denotes the nature of relations between different units, such as individuals, groups and associations. Emile Durkheim (a classic sociologist that first used the term) considered social cohesion as an ordering feature of a society and defined it as the interdependence between the members of the society, shared loyalties and solidarity (BergerSchmitt 2000: 3). In opposition to the older concept of quality of life, 57 The European Commission has developed a model of social cohesion composed of two parts; social marginaliszation and social protection (Commission of the European Communities, 2000).

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which is mostly related to individual welfare, social cohesion is focused on different societal qualities, such as equality, security and the quality of social relations that, nevertheless, considerably affect the well-being of the individuals. Yet, social cohesion is a multi-layered concept, which is perhaps the reason that despite the popularity and frequent use of the term, there is no one uniform, satisfactory definition. It contains different dimensions related to particular aspects of a societal setting. Chiesi discerns four dimensions or levels of social cohesion: 1) the structural level—social inclusion and exclusion mechanisms, the (in)equality structure, opportunities for access to different social milieus and the degree of social mobility; 2) the cultural level—the extent to which norms, beliefs and communication codes are shared; 3) the identity level—the strength of sentiments like community belonging, the recognition and rejection of different groups and the level of tolerance; 4) the action level—the extent of participation of individuals in collective activities and their involvement in associations, social interactions and connections in general within their community (Chiesi 2002: 239–240). One could notice the close connection and interdependence between some levels, especially the cultural and identity level (the latter could be also defined as a part of the former). As mentioned, social cohesion is not only relevant as an imaginative theoretical concept but also as an important policy goal. Through the review of various theoretical approaches, Berger-Schmitt established that the concept of social cohesion mainly consists of two societal goal dimensions. The first dimension concerns the reduction of disparities, inequalities and social exclusion, while the second one concerns the strengthening of social relation interactions and ties (Berger-Schmitt 2000: 4). On this basis, she presented a proposal of operationalisation and measurement of social cohesion using a wide range of indicators measuring different aspects of social life.58 Although the concept of social cohesion is rather recent, it is suitable for defining differences between societies, as it links two classic sociological concepts: integration and inclusion. Both imply solidarity, identity and participation. Cohesion does not refer to a monolithic and undifferentiated society, but to a (post)modern social state characterised by a high 58 For more information on the measurement of social cohesion, see Berger-Schmitt, Social Cohesion as an Aspect of the Quality of Societies: Concept and Measurement (2000).

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level of functional differentiation, as well as by a high level of social and systemic integration. At any rate, it is a state that stands in opposition to anomie, disintegration and pure (individualistic) competition. However, this is an ideal-type image, as contemporary societies are in reality more ambivalent and more contradictory; even the most cohesive societies contain certain strong tendencies towards disintegration and inequality. On the other hand, it is clear that there are (national) societies and regions that have developed more effective mechanisms to counteract these tendencies than others. One could say that such societies represent a sustainable model of development and a particular type of societal regulation. In our analysis, we shall address only certain essential dimensions of this concept within the framework of our discussion of developmental factors. Cohesive societies are those that concern themselves with equality (justice) in terms of ensuring similar start-up opportunities for all the members of society and promoting social inclusion. For this reason, in these societies the percentage of socially disfunctional persons is relatively low, citizens feel a sense of belonging and identity in relation to society, and there exists a basic social consensus. Societies that are overly polarised and divided along social, ethnic, cultural or political lines produce a number of unproductive conflicts which in turn burden the operation of individuals as well as of institutions and negatively affect developmental dynamics. It could be said that social cohesion is not only an important goal for itself. It is also a key factor contributing to the developmental success in different fields of society, not least in economy. As it stands in the European Commission’s Report from 2001, ‘regions which are unable to mobilise the economic potential of large sections of their population are handicapped in the increasingly competitive global market, while disparities can breed social unrest which itself can damage economic performance’. However, just as inequality and conflict negatively affect development, it is also true that exaggerated equality and a seeming or artificial lack of conflict can inhibit competitiveness and individual initiative. The systemic intelligence of modern societies is evident in a sufficiently complex framework for processing and balancing out dissent and consensus, competition and cooperation.

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Operationalisation and Indicators From the above, one may conclude that social cohesion is linked to: 1) the role of a social welfare state, which prevents social marginalisation; 2) the level of development of civil society, which enables the activation of non-governmental organisations and solidarity; 3) the national–cultural system, which offers a sense of belonging and identity and which allows for basic consensus, despite the fact that this is linked also to an active citizenry and to the existence of a political community (polity); 4) with the absence of the lowest possible level of social anomie, which otherwise expresses itself through phenomena such as crime, drug or alcohol addiction, suicide, etc. Roughly speaking, one can define social cohesion as a state characterised by an absence of greater social differences and marginalisation, by the development of mechanisms of solidarity and a connection at the level of the non-profit or volunteer sector, and by the existence of an ‘imagined community’ that is not culturally exclusive, but is capable of dialogue with other identities. One may also add here the existence of a basic consensus, which cannot be classified easily into one or another sphere; essentially, it is the result of three fundamental dimensions of cohesion. Concerning the fourth factor, that is anomie, we can say that it is linked to the emergence of corruption (this will be discussed in more detail in the chapter on politics). We can consider corruption to be one of the dimensions of anomie (and low levels of social cohesion); furthermore, the increase of corruption contributes to the weakening of social cohesion. As far as the first aspect of social cohesion is concerned, we focus on the issue of social (in)equality, measured by poverty levels, by the difference between the poorest and richest sectors of society (Gini coefficient) and by public perceptions of social differences and of social stratification levels. In order to analyse social (in)equality, poverty and marginalisation we will employ both ‘hard’ or ‘objective’ data as well as ‘soft’ data, which represents subjective perceptions of these phenomena. Our objective data pool will include information from the following sources: the Human Development Report and the Transition Report published by the EBRD. As far as subjective perceptions are concerned, we will base our analysis on data from the European Values Survey, the New Democracies Barometer and the International Social Survey Programme (ISSP). We analyse the second aspect with data on the density of nongovernmental organisations (NGOs) and data on the percentage of the

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given population that is engaged in solidarity-related civic activities. Here we come across a strong overlap with social capital, as one of the dimensions of social capital also deals with levels of development in civil society as well as levels of cohesion. We employed the following databases to ascertain the extent of NGOs and the entire non-profit or volunteer sector: WVS, the Johns Hopkins project and Freedom House’s reports. Data on active participation in civic associations relevant to social cohesion, i.e. the ones that generate solidarity, can be found in the European Values Survey. We address the third issue, identity, with the aid of public surveys. Consensus is difficult both to define and to measure; however, as a means of approximation, we employ data concerning levels of support for the membership of ECE countries into the EU (which is in turn linked to the factor we term internationalisation). For the issue of identity we will base our analysis on the New Democracies Barometer and Eurobarometer. For the fourth aspect, we employ data concerning the extension of anomie by focusing on the percentage of different criminal activities, the number of prisoners, levels of suicide and of alcohol use. We will base our findings on anomie on statistical data from the Human Development Report.

Social (In)Equality The problem of social inequality has been (and still is) of great interest for different social theories, which have in turn addressed the issue from moral, economic and even political perspectives. These theories espoused different doctrines, the most radical among them being the Marxist doctrine, which aimed at designing a society of the future based on the just distribution of different resources among all members of society. Furthermore, social inequality represents one of the key subjects of sociological research. Social inequality is not only a moral issue; the level of social inequality (here we are referring primarily to the levels of economic inequality) is also linked to the quality of life for members of a given society, as well as to the quality of human resources in a given society. These are among the factors that affect the developmental capacity of individual social systems. Formerly socialist societies have carried out a number of reforms and systemic changes since 1990. New institutions and new forms of regula-

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tion were developed; value systems changed, as did legitimisation patterns. Yet, despite all these changes, a certain continuity is apparent in terms of already tested modes of thinking. A great deal of changes in the social structure of these societies resulted from privatisation, denationalisation and the restructuring of the economy, evidence of which is the firing of workers and unemployment. The social stratification system changed with the redistribution of wealth and power; a new rich class, a new elite came into being while, on the other hand, we have groups that are confronted with the problems of poverty and social marginalisation. Social inequality has increased, though there are substantial differences across individual countries. In Russia, the span between the rich and the poor is so great that it invites comparisons with Latin American countries. Among ECE countries, which are more successful in economic terms as well as in terms of reform, these differences are smaller. Despite the fact that all the data does not confirm this point, one may argue that in the case of those countries that lag behind in the transition process, there is a greater level of social inequality while in the case of those countries that did manage a certain level of progress one finds a still endurable gap between the rich and the poor. This gap is comparable to the circumstances characteristic of Western Europe, while in some formerly socialist countries we find that these differences are smaller—that some postsocialist ECE countries are more egalitarian than certain Western European countries. Yet, at the same time, we must emphasise the limited reliability of the data, sources and methodology used to determine certain indicators; the majority of the ‘objective’ statistical data and public perceptions must be approached with some reserve, cum grano salis. We may draw certain conclusions concerning the social costs of transition and distribution of these costs on the basis of these data. ECE countries are ranked among those countries in which these costs are evenly distributed; in addition, there has been an increase in social product particularly in the last few years, and society as a whole is richer and offers individuals more options.59 There is no doubt that even in these societies there have been important shifts in social structure. Let us look at some statistics: 59 According to the Human Development Report 2001, all ECE Central European countries nations are classified in the group of countries with a high level of human development, whichat implies a relatively high level of material standard (considering all countries included in the Report), as well as the accessibility toof key social services (health, education etc.).

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‘Objective’ data on inequality in East-Central Europe One of the methods used to ascertain levels of social inequality is the ratio between income shares of the richest and poorest 20% of a particular society (Human Development Report 2002).60 Slovakia (2.6) has the most favourable ratio between the rich and the poor (which is an indicator of a low level of inequality), followed by the Czech Republic and Hungary (3.5), and Slovenia (4.1). Poland (5.3) and the Baltic countries (Estonia 6.5, Lithuania 5.2, Latvia 5.3) have higher ratios (and consequently higher levels of inequality). Russia stands out among all the transition countries (12.2). Another indicator used in the study of inequality is the Gini coefficient, which measures the range of income in a given society: the higher the coefficient, the higher the level of inequality. When using data from the same Human Development Report,61 Slovakia measured lowest (19.5), which would imply that it is the most egalitarian country. The coefficient measured in Hungary (24.4), the Czech Republic (25.4) was a little higher and even higher in Slovenia (28.4) and Poland (31.6). Russia’s coefficient was extremely high (48.7), as is the case with the remaining former Soviet republics. In the more egalitarian transition countries, the differences are smaller than in the majority of Western European countries (one can compare them to the Scandinavian and Benelux countries, where these differences are traditionally small). According to the data from the Transition Report, the levels of inequality measured with the Gini coefficient increased slightly even in the more egalitarian transition countries during the decade of the 1990s.62 An important aspect of (in)equality in societies is also the (in)equality between the sexes: in other words, the ratio between accomplishments and the possession of resources between men and women. This is the basis for the GDI index (Gender Development Index) employed in the aforementioned Human Development Report, which depicts the circum60 It has to be mentioned that surveys were conducted in different years (cca. froorm 1992 to 1998). 61 Again, the surveys are froorm different years. 62 Data from Eurobarometer for 1999 show that the level of relative income poverty (measured as 60% of median equivalent available income) in among ECE countries the lowest in the Czech Republic (8%), followed by Slovenia (11%) while the highest is in Estonia (18%). The first two are strongly below the EU level (they belong to the group of countries with the lowest level of poverty).

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stances concerning equality between the sexes in individual countries. According to the GDI index (Human Development Report 2002), Slovenia is once again ranked highest among the transition countries in 27th place, while the Czech Republic is ranked 32nd, Slovakia 34th, Hungary 35th, Poland 36th etc. (one can observe that the rankings are very similar to those in the case of the HDI). Once again, all these countries lag behind all the EU member countries. Australia, Belgium and Norway are at the top of the list. Upon comparing these data, we may conclude that in ECE countries there was an increase of social inequality and stratification after the transition from socialism, yet, at least in certain cases (Slovakia, the Czech Republic, Slovenia) we cannot speak of drastic changes. We must also take into account the fact that these changes existed everywhere during the previous regime and that they have become more pronounced and thus more visible in recent years. Subjective perceptions of (in)equality Public surveys are based on subjective evaluations but nevertheless do point to people’s significant dissatisfaction with social differences and with existing class structures. In the ISSP (International Social Survey Programme) 1999, the great majority of respondents in the countries under research (the Czech Republic, East Germany, Poland, Hungary and Slovenia, but also Bulgaria, Latvia and Russia) were of the opinion that differences in income were too great. The majority of them also believed that the state should decrease the differences in income. Despite having the opinion that the society in which they live is becoming ever more stratified, the majority of the respondents from the countries placed themselves in the middle of the social ladder—except in the case of Hungary and Bulgaria, where the majority ranked themselves lower on the social ladder (see Hafner-Fink 1999). One should also mention in this context the comparative data from the European Values Survey 1999/2000. One of the questions concerned how respondents felt that income distribution policy should be handled, or, in other words, what they considered to be legitimate ranges of income (1 meaning that incomes should be equal, 10 meaning that there should be greater incentives for individual effort). The average score among ECE countries was measured highest in Estonia (6.88), meaning that the recognition of the justification of income differences was the highest in this

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country. Slovenia measured lowest (4.05). Other aspects linked to the question of social equality and prosperity are included in the New Democracy Barometer survey for the year 1998 (this survey includes 11 post-socialist countries). In this survey, Poland measures highest in the legitimacy of income differentiation, as 67% of respondents believed that levels of income should depend more on individuals’ work results (meaning the those that are more successful should be paid better) while 33% believed that these differences should be smaller. Poland is followed by the Czech Republic and Slovenia, while the respondents of Hungary and Slovakia were more egalitarian in their views. Of the remaining transition countries included in the survey, respondents from Belarus and Croatia were surprisingly the most accepting of differences. It is also interesting to note to whom respondents ascribe responsibility for people’s welfare— in other words, whether this is the responsibility of the state or whether every individual is responsible. One may find the greatest number of persons who believe in individual responsibility in the Czech Republic (54%); the Czech Republic is also the only transition country in which there were more respondents who advocate personal welfare being the responsibility of the individual instead of responsibility of the state (in Slovakia, there are 51% who argue the latter position, in Poland 52% and in other transition countries there are higher percentages). We also see this when comparing ECE transition countries with Austria as a typical Western country in the aforementioned study New Democracies Barometer V. In Austria, the proportion of those respondents who felt that each individual is responsible for his or her own welfare is 67%, which is significantly higher than the average of the four ECE transition countries included in the survey (the Czech Republic, Poland, Hungary and Slovenia), which amounts to 43%. From these (and other) sources, one may find that in transition countries—including those in ECE—paternalism is even more present than egalitarianism that respondents demand from the state measures that will ensure a great level of social equality and justice. This is often the cause of their discomfort when faced with the competitiveness of the market economy; in addition, it is often also the motivation behind their evaluation of their country’s situation (particularly from the economic point of view), the perception of which is worse than objective data indicate. Yet, in all the international comparative studies, ECE countries are classified as relatively successful transition cases in which social systems such as education, health and social transfers are effective and the level of pov-

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erty is endurable—especially in comparison with the remaining postsocialist countries (of course, there are differences concerning stratification and the remaining accompanying factors such as poverty across individual ECE countries). As far as the subjective perception of inequality is concerned, it is possible that people wish to call attention to the radicalisation of certain trends and that their answers and responses to survey questions mean some sort of preventive strategy with the intention of forestalling increasing social stratification. In addition, it could be that they want to express their discontent with the criteria of social promotion and material enrichment of some individuals and groups, i.e. the lack of a meritocratic principle.

Civic Solidarity The true image of the non-profit or volunteer sector, which represents an important generator of different social resources, among which solidarity is one of the most important ones, has long been unknown. One could access certain information only with the aid of official records and statistics in which non-governmental organisations were classified in a residual category intended to correct the validity of the statistical balance of accounts. The international project on non-governmental organisations conducted by the Center for Higher Education Policy Analysis at Johns Hopkins University (the Johns Hopkins Comparative Non-profit Sector Project), which also focused on certain transition countries (the Czech Republic, Slovakia, Hungary and Romania), succeeded in remedying this situation significantly.63 The profile of non-governmental organisations in the European postsocialist countries for which we have access to data (see Table 4) is quite similar. Recreational, sporting, artistic–cultural and fire-fighting associations characteristically predominate among the existing active organisations. Of course, these associations play an important social role and are historically well-founded. However, the poor development of the remaining types of non-governmental organisations implies that in these societies this sphere has yet to realise its full potential. When evaluating the 63 In Slovenia, Bernik and Kolarič in 1998 conducted an investigation entitled Civil Society in Post-Socialist Societies: The Formation of Intermediary Structures, which is methodologically compatible with the research project mentioned above.

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significance of these associations, it is also important to take into account the fact that the great majority of these associations are intended to fulfil the needs of its members. The majority of professional non-governmental organisations work in the interest of the common good. They may seem to be many, but they in effect make up only a small percentage of all nongovernmental organisations. The great majority of them are organisations designed to a great extent to fulfil the needs of their members; furthermore, for numerous reasons, these organisations on average have fewer resources at their disposal than foundations or professional organisations. Table 4: Different structures of nonprofit or volunteer sector Predominant structure of organisations Education Health Social services Culture/Recreation Balanced

Countries Argentina, Brazil, Mexico, Peru, Belgium, Ireland, Israel, the United Kingdom USA, Japan, Netherlands Austria, France, Germany, Spain the Czech Republic, Hungary, Romania, Slovakia, Slovenia* Australia, Colombia, Finland

*classified on the basis of Bernik and Kolarič 1998 Source: Salomon and Anheier 1998

Furthermore, the financial profile of volunteer organisations is quite similar in European post-socialist countries (see Table 5). It is interesting that the structure of incomes is such that at first glance it seems that one is dealing with a small yet dynamic, autonomous and viable sector. However, in reality circumstances are different, as one of the largest problems is the lack of funds non-governmental organisations have at their disposal. In this case, we must make a distinction between the financial resources of this sector on the one hand and its organisational capacity on the other. The main characteristic of the majority of non-governmental organisations in ECE transition countries is their financial weakness, which undoubtedly also affects their possible level of social commitment. A survey of income structure in Table 5 shows that even this is not as favourable as it would seem at first glance when making an international comparison. The impression that non-governmental organisations in these countries are even less dependent on public funds than are their Western

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counterparts is completely inaccurate given the smallness of the budgets characteristic of these organisations; their dependence on the state is greater than is the case of Western organisations, in whose case even a small percentage of funds via commercial activities can represent a great deal of money given the size of their budgets. Table 5: Structure of financial resources for nonprofit or volunteer organisations by source64 Country Austria Belgium Finland France Germany Ireland Netherlands Spain UK Czech Rep. Hungary Romania Slovakia Slovenia*

State subsidies

Private donations

Commercial activity

50,4% 77,4% 36,2% 57,8% 64,3% 77,8% 60,4% 32,1% 46,7% 42,8% 27,1% 10,8% 20,7% 32%

6,1% 4,5% 5,9% 7,0% 3,4% 7,0% 1,5% 18,8% 8,8% 17,5% 18,4% 35,5% 23,2% 30%

43,5% 18,1% 57,9% 34,6% 32,2% 15,2% 35,8% 49,0% 44,6% 39,7% 54,6% 53,7% 56,1% 38%

*data from Bernik and Kolarič 1998 Source: Salomon and Anheier 1998

We also find that numerous non-governmental organisations have very weak organisational structures, a small number of members and very few professional members and experts at their disposal (Nations in Transit 1998). Thus the professional segment of non-governmental organisations is very weak and is faced with additional obstacles that impede its growth. The percentage of persons employed in the non-profit or volunteer sector (as percentage of the work force) is 2.8% in the Czech Republic, 1.3% in Hungary, 0.9% in Slovakia and 0.7% in Slovenia. This is higher than, for example, the percentage in Romania (0.3%), yet much 64 The information shown in Table 5 is compiled in such a manner that state funding includes both the state fund and profits from the lottery, one’s own commercial practices are classified as commercial activitypractices, and membership fees are classified as private donations and so on.

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lower than is the case with the larger Western countries (12.4% in the Netherlands, 11.5% in Ireland, and 10.5% in Belgium) (Salomon and Anheier 1998).65 If we compare the percentage of the workforce that is represented by those employed in the private non-profit sector in terms of work hours, we see that this totals 1.3% in ECE while it amounts to 6.9% in Western Europe (Johns Hopkins Comparative Project 1998). Even if we add to this percentage the work of volunteers (so that we convert the hours they dedicate to these organisations into full-time employment), the ratio does not change significantly, as this percentage then totals 2.4% in ECE and 10.1% in Western Europe. ECE countries lag behind even the countries of Latin America in this regard, as on average in these countries the percentage of those employed in this sector totals 2.1% and 2.5% if one factors in the volunteers. The development of the volunteer sector is to a great—if not definitive—extent defined by the institutional framework in which it operates, for it is this framework that represents the conditions of its existence and operation. On the basis of this argument, Green (2002) developed a civil society indicator which measures the suitability of the above-mentioned institutional framework. The indicator is composed of four parts: 1) ‘organisational diversity’, which concerns the recognition of different forms of civil society structures on the part of the legislative framework; 2) ‘registration procedure’, which refers to the forms of registration, particularly the possible existence of legal obstacles to registration; 3) ‘favourable tax treatment’, which concerns the means of financing civil society organisations, particularly the possibility of the financial autonomy; and 4) ‘political advocacy’, which refers to the possibility of political advocacy on the part of these organisations. The state of civil societies in more than 20 former socialist countries from 1991 to 1998 was analysed on the basis of these indicators (they were evaluated on a scale of 0 to 4, the higher the number, the better the evaluation).66 Here the countries of ECE were ranked higher than the remaining transition countries, as the Czech Republic, Poland and Hungary, as well as the Baltic countries received the maximum score of 4, and Slovenia received a score of 3; only Slovakia stood out in a negative sense, 65 The data compiled for these countries is for 1995, except only in the case of Slovenia where it is it for 1996. 66 The evaluation was based on a binary assessment (i.e scoring 1 or 0) of the abovementioned components – 1 or 0 – and their total.

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as it received a score of 1 (although it is important to keep in mind that the most recent data is for the Mečiar regime). The majority of the remaining transition countries received a score of 1, some even 0. This means that in ECE countries the conditions for the development and strengthening of civil society are much better than elsewhere in the postsocialist world. Considering active participation in civic associations, especially the ones which are more community- or welfare-orientated and as such most relevant for social cohesion, there are considerable differences between formerly socialist countries and even between ECE countries. According to the European Values Survey 1999/2000, unpaid voluntary work for social welfare services for elderly, handicapped or deprived people is most widespread in Slovakia (6.1% respondents said they do such work), Slovenia (4.9%) and the Czech Republic (3.4%). This share is lower in Hungary (2.5%), Poland (2.2%) and other countries. The share of people who do unpaid voluntary work in another community-oriented type of civic associations—those that perform local community action on issues like poverty, employment, housing, racial equality, is also the highest in Slovakia (6.7%) and Slovenia (5.8%) and much lower in other transition countries. In this respect, these two countries perform better than many EU members. Generally, one may conclude that (also) in the case of the development of the civil society sphere there are huge differences among the formerly socialist countries. This is apparent also in international comparative analyses, such as the Nations in Transit report for the year 2002—which also includes the development level of non-governmental sectors—in which Hungary and Poland receive the highest evaluations, while countries of the former Soviet Union (Turkmenistan, Uzbekistan, Belarus) receive the lowest evaluations. (The difference between these estimates is very big.)

Identity The issue of different identities, the feeling of belonging to different communities, has not become less relevant even during the present period, characterised by the processes of globalisation and individuation. Actually, the opposite may apply, as the very feeling of belonging to a broader group or community provides a certain emotional and spiritual

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refuge as well as a sense of existential security to individuals in the face of an ever more dynamic and uncertain world. On the other hand, large collective institutions, of which the state is the most complex and the most comprehensive, operate more easily if they have a foundation in the steadfast identification of those individuals whose interests they manage. Given that our analysis is focused on the state level, which in the modern European context is that of the nation-state, we are interested primarily in the issue of national identity and those sentiments that are linked to the national or ethnic community. In the case of certain ECE countries, this issue is particularly interesting in the light of the fact that they have only recently attained statehood and thus have been able to move beyond their previous cultural and subpolitical state to become political nations (this holds true in the cases of Slovenia and Slovakia, as well as in part of the Baltic countries). The new self-confidence of these nations is considered to be linked to their states and above all to their belief in their ability to assert themselves in the international arena. Yet, the results of public opinion poll research does not confirm this completely, as the trust of citizens from ECE countries in their states—including those ‘new’ states—is relatively low. This also probably implies a lower than expected level of identification with the state on the part of these citizens. One can find that in the public opinion research published in the Eurobarometer and the New Democracies Report, the level of national pride is employed as an indicator of the level of citizens’ identification with their state. (The survey question reads: ‘Are you proud to be a citizen of this country?’) According to the data from the New Democracies Barometer V, the ‘level of pride’ was higher only in Hungary (93% of respondents said they were proud—very or moderately—to be citizens of this particular country). In Slovenia 92% of the respondents answered in this fashion, as did 91% of those in the Czech Republic, 87% of those in Poland and 79% of those in Slovakia. In all these countries—with the exception of Slovakia—the level of pride is higher than in the other countries included in the survey (the lowest percentage was in Ukraine, 55%, followed by Belarus with 63%). According to the Eurobarometer for October 2000, of the EU member countries only Ireland (98%), Greece (97%), and Portugal (94%) had a higher percentage than Hungary; Finland had the same percentage as Hungary, and the remaining EU countries had lower percentages. Even these scores indicate a certain ambivalence in the relation that East-Central Europeans have towards their

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own nation-state: on the one hand, one detects a high level of general trust and on the other hand, a low level of trust in key state institutions (especially in comparison with analogous levels of support in EU member countries). In the contemporary world one comes across different, overlapping identity formations, among which national identity still plays a key role, despite the widespread belief that it has begun to lose its influence due to the rise of globalisation and multiculturalism. One should mention in this context that national identity and a broader European identity are not mutually exclusive.67 We focused on the latter, support for EU membership, as an indicator of national consensus. Here we mean the consensus on a general level as well as on the level of national elite. The general support in all ECE countries is reasonably high (above 50%) although it decreased somewhat in the last few years before the EU membership. There is also a consensus on the level of political elites. Namely, all important political parties—at least declaratively—support the integration into the European Union.

Anomie It is probable that there exists among the experts on development as well as among the public a consensus that anomic behaviour does not positively affect the development of society. On the one hand phenomena such as suicide, alcoholism and drug abuse destroy the human potential of a society; on the other hand, different forms of criminal activity that threaten the safety of a society erode the trust between members of a society and consequently their readiness for cooperation. Certain phenomena such as alcoholism and suicide have been to some extent traditionally present in the majority of the countries of ECE. According to the data published in the Human Development Report 2000 the Baltic countries rank highest for the number of suicides among men (73.7 suicides per 100,000 inhabitants in Lithuania, 64.3 in Estonia and 59.5 in Latvia ) followed by Hungary (49.2), and Slovenia (48); the number of suicides is significantly lower in the Czech Republic and in Poland (24). 67 Research in Slovenia also points to the fact that strong national pride has a high correlation with support for membership in the European Union (Adam, Fink-Hafner and Uhan, 2000).

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The number of suicides is also very high in other transition countries (Russia 72.9, Kazakhstan 51.9, Belarus 48.7). Finland follows closest behind these transition countries (38.3), while the number of suicides is significantly lower in the remaining EU member countries. As far as the number of suicides among women is concerned, which on average is much lower, the highest rates among ECE countries are in Hungary 15.6, Estonia 14 and Slovenia 13.9 (of the EU member countries, only Switzerland with 30.9 suicides per 100,000 inhabitants and Austria with 30 have comparable rates). Regarding the crime situation, one may argue that there was a strong increase in different forms of criminal activity in the post-socialist transition countries in the 1990s. According to the data of the Human Development Report 2001, the percentage of persons who were victims of any sort of criminal activity (there are very different forms of criminal activity) totalled 33.3% in the Czech Republic (the data is from 1995), 30.1% in Estonia (1994), 28% in Lithuania (1995), 23.3% in Slovenia (1996), 22.9% in Slovakia (1991) and 22.7% in Poland (1999). Given these indicators, the levels of criminal activity are higher than in the majority of Western countries, though the last three countries mentioned above show rates comparable to those in Western states. The Czech Republic leads ECE countries in the number of prisoners (181.5 prisoners per 100,000 inhabitants), followed by Slovakia (138.6), Hungary (123.7) and Slovenia (52.3) (there is no data for Poland). Among the remaining transition countries only Croatia has a lower number of prisoners (49.9) while the others have much higher numbers (including the Baltic countries— Lithuania 287.3, Estonia 293.6, Latvia 359.7 and Russia with the most at 580). Among the EU member countries included in the report only Greece (surprisingly) has a lower percentage of prisoners per 100,000 inhabitants.

An Assessment of the Situation As far as social cohesion in ECE countries is concerned, the general picture is quite heterogeneous. Regarding some aspects, at least some of these countries perform as well or even better than many of the EU countries; regarding others, they lag behind the majority of them. It holds true in the case of social policies that to some degree they hinder a greater increase in poverty and social marginalisation (the influ-

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ence of social policy differs substantially across countries, which in turn affects the extent of the aforementioned negative social phenomena). In this light, ECE countries represent the group of transition countries in which the level of inequality is the lowest. In any case, the social differences are slowly increasing, evidence of which is the data on poverty and marginalisation, as well as the international comparisons based on the Gini coefficient. Yet, it is also important to call attention to the fact that subjective perceptions of stratification and social differentiation are quite critical. In the light of this, we may speak of a substantial discrepancy between objective data concerning inequality and their subjective evaluation by the public. Some civil society components are less developed, particularly as far as their financial and structural resources are concerned, if we compare them with corresponding sectors in developed Western countries (though they are more developed when compared to the civil societies in the remaining transition countries). However, participation in solidarity-generating civic associations is high in some ECE countries (Slovakia, Slovenia, the Czech Republic) even in comparison with EU countries. A basic consensus concerning EU membership exists (although according to certain indicators it is lower in some ECE countries than in the remaining transition countries); however, tensions and contradictions are also evident. The same holds true when assessing the relation to national identity, where a high level of national pride is accompanied by a low level of trust in key state institutions. As far as certain manifestations of anomie are concerned (alcohol, suicide), the circumstances in some of the ECE countries have been traditionally problematic; other manifestations of anomie such as drug abuse, which was barely noticeable a few years ago, are constantly on the rise. We may also argue that a generalised belief in the increase in crime has become more widespread, despite the fact that some of these countries (Slovenia, for example) are considered to be relatively safe, particularly when compared with certain Western European countries.

An Assessment of the Indicators Because of the complexity of the concept of social cohesion in terms of its composition of several different dimensions, we used different types of indicators for its measurement: statistics, data from public opinion surveys and expert evaluations.

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In this enterprise, we encountered some problems. Namely, some aspects of social cohesion, like the level of consensus, are very difficult to measure. We tried to measure it indirectly through proxy indicators like the level of support for some basic goals such as the membership in EU which is, however, starting to lose its relevance. Other problems also cause contradictory results, showing different pictures of the state of some components of social cohesion. For example, findings from the Johns Hopkins Comparative Project show the feebleness of the non-governmental sector and the prevalence of cultural or recreational type of voluntary organisations in ECE countries; while for some of these countries, data from the European Values Survey gives evidence of a high level of voluntary participation, especially in more welfare-oriented organisations and thus of a quite developed civic life. Some other indicators lack transparency regarding the criteria of evaluation. This is especially true for Green’s civil society indicator where it is not evident how the estimates for some countries have been constructed. (And some of them can indeed be disputed—for example, Armenia ranks higher than Slovenia.) These are not only the types of indicators used or measurements of social cohesion that are heterogeneous. This holds also for the estimates of certain countries from different indicators. Namely, one country can rank very high in one indicator and very low in another, which makes it difficult to create an overall estimate of the state of social cohesion. That is probably due to the above-mentioned complexity of the concept and some theoretical and methodological inconsistencies deriving from this.

Social Capital and Social Cohesion One can notice that social capital and social cohesion are closely related concepts which denote similar social phenomena. They are both related to certain characteristics that enable the proper functioning of a modern, highly complex and differentiated society and thus enhance its quality of life as well as its developmental success. Some authors, such as BergerSchmitt, consider social capital as a dimension of social cohesion—a dimension that embraces ‘interactional’ aspects of social life (social relations and ties, cooperation between individuals and groups etc.) (BergerSchmitt 2000: 4, see also Chiesi 2002). Despite that, we maintain that they should be treated as separate theoretical concepts which are, nevertheless, closely interconnected. There is

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an also very high level of interdependence between them. A high level of social cohesion (strong common identity, basic consensus etc.) is a fertile ground for both trust and mutual cooperation, which are two basic elements of social capital while; on the other hand, successful cooperation between individuals fosters social cohesion—for example, through the extinction of different forms of social anomie.

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The Definition and Relevance of Openness The purpose of this chapter is to define and discuss the relevance of the openness of societies towards their international (or inter-societal) environments. According to its classical sociological definition (beginning with Herbert Spencer and Émile Durkheim) modernisation by itself implies the shift from self-sufficient segmental units towards mutually dependent functionally specialised units. When a segmental unit becomes too small to perform efficiently all of the functions it requires, it becomes dependent on other units. A unit (or, to be more specific, mostly its controlling sub-unit[s]) may assume that it either cannot generate all of the required resources independently, or it is more beneficial for the unit to obtain these resources from the outside than to generate them itself. In societal modernisation, this happens first to the smallest segmental units, such as families. Later on, larger units become subject to the same process, and finally it happens to nation-states as well, as one may observe in the processes of economic, political and socio-cultural globalisation. However, functional differentiation can never completely replace the segmental one. While functional differentiation enables greater efficiency in the production of certain resources, some forms of segmental differentiation may have other significant advantages. Consequently, the nationstate today remains a unit that is required to produce certain resources that are inevitable for societal development. It (re)produces national identity and solidarity at the level of what Benedict Anderson calls the ‘imagined community’. It thus enables the maintenance and reproduction of social cohesion and social capital at this level. For the foreseeable future,

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no significant functional equivalent can be identified to perform this function to a comparable extent. Anthony Smith (1995) argues that supranational communities based on the ambition to supplement the national identity have in most cases proven to be failures. These conclusions can also be illustrated by the relationship between national and European identity in the EU: even in the EU—as one of the most successful international projects of political integration—national identities remain far stronger than the common European identity (see e.g. data from Eurobarometer 2002). The relation between development and openness is, therefore, quite complex. The extreme level of closure of a (segmentally defined) society, organised as a nation-state, implies an acceptance of the lack of certain resources or an acceptance of the higher cost to obtain them. The inevitable consequence is stagnation, regression and the inability of any kind of competitiveness to function in the long run. Extreme openness, on the other hand, implies that the system (i.e. the nation-state) non-selectively accepts the entire complexity of its environments, its borders collapse and the system ‘drowns’ in entropy. Such trends may also jeopardise some specific resources provided by the societal community and organised by the nation-state. Successful development would therefore require the maintenance of a complex equilibrium between both extremes. This task, however, becomes even more difficult in the case of small countries, which have an even smaller amount of options available within this framework. The small size of the system increases the probability that relevant resources will be unobtainable within the system or their production cost too high. This situation requires openness. On the other hand, the very same small size of the system increases the relevance of the problem, derived from the Ashby’s law of requisite variety (see Adam 1998, Bailey 1994). According to this law, a system can only optimally respond to the challenges of its very complex environments when it in itself possesses a sufficient level of complexity. However, this is not very likely in the case of a small system. Consequently, a high level of environmental complexity may be even more jeopardising for the system, which is not able to develop a sufficient level of its own complexity. Sufficient adaptability is thus even more decisive for a small system than for a large one. In spite of these facts, which partially correspond to some dark visions on the future of independent small states (on such ‘prophecies’ see e.g. Adam 1998: 181–82), many small states are in fact able not only to sur-


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vive, but also to demonstrate a great level of developmental performance. To a certain extent, this issue may be related to the developmental strategies of various countries concerning their openness (Menzel and Senghaas 1986). In this sense, three ideal types of strategies may be distinguished, namely: • • •

dependent (peripherial) development closed auto-centric development open auto-centric development (with association)

The first ideal type implies the lack of the system’s own controlling mechanisms. The system is thus mostly controlled by various foreign actors and the major aspects of its development depends on the interests of these actors. The system lacks internal developmental factors and thus strongly depends on external factors, which it cannot really influence. The opposite extreme may be described as closed auto-centric development. It is characterised by strongly protectionist strategies, trying to generate development based on the systems’ own resources and to exclude external factors. The ideal from this perspective can be described as an autarchic model. There is, however, another option, the open auto-centric development. This implies that the system is able to develop its own controlling mechanisms and implement its own strategy while staying open to external factors. It is characterised by a regulated openness and the ability to make use of both internal and external resources. This may be the most preferred and properly balanced strategy, though it is not easy to achieve, since it requires complex and sophisticated mechanisms of coordination. This may also be a key to explaining the relative successful development of several small societies. While explaining their performance and the level of openness, the following elements should be taken into account: 1. Small states may have some comparative advantages over large ones. As small systems, they may experience less difficulty when establishing internal consensus and use its regulative potentials accordingly. Small systems may avoid some problems of their own internal complexity and thus concentrate their regulative potentials on the challenges of their complex external environments. That is how they may maintain a high level of openness. Concrete forms of such internal consensus-building can be found in various versions

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of neo-corporatist arrangements, consociativism and other forms of ‘concerted’ regulation (Adam 1998, Katzenstein 1984). 2. The common-sense perception of the relation between openness and closure usually seems to be a zero-sum game between the two mutually exclusive concepts. According to systems theory, however, this is not necessarily the case. A homeostatic system that is simultaneously able to maintain certain parameters can also maintain its borders to the environment (thus protecting its existence from entropy) and to enable and even stimulate the crossing of these borders both from outside and from inside. Thus Niklas Luhmann claims that the operative closure of the system does not prevent in any way its intensive exchange with its environments— the border is here only to be crossed. As far as a state is able to control certain parameters, it can and even must afford a high level of openness. This can also be described by a concept of autocentric development with association. 3. This ‘association’, which is supposed to be combined with autocentric development, can also be linked to another aspect. Small states may try to compensate its ‘deficit’ in complexity (i.e. in available options according to Ashby’s law) by a well-considered integration into larger systems that offer more options in relation to the wider (world) environment. The EU is an example of such a larger system which may provide more options to states that are smaller, either absolutely (such as Austria) or relatively (such as France in relation to the United States or Japan). The EU may thus be—at least partially—considered as an example of the adaptability of some states to the challenges and even potential threats of globalisation (see Adam and Makarovič 2003: 223).

The Dimensions of Openness Societies can exchange a great variety of resources between each other. For the purpose of this analysis one may distinguish economic, political and socio-cultural resources. One may thus speak of economic, political and socio-cultural openness or closure. These divisions should not be understood as something definite and absolute, but only as a tool for a simplified classification, since these aspects are often very closely combined in reality. The flow of economic resources, for instance, is closely linked


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to political regulation, which can in turn depend on political openness or closure. Moreover, knowledge is an essential economic resource, but it also includes more or less latent cultural aspects. Obviously, our discussion is focused on socio-cultural factors. Consequently, we will be primarily interested in the socio-cultural aspects of openness. However, it may be argued that the socio-cultural aspects of openness are quite difficult to measure directly. The economic and political aspects of openness may also be understood—at least to a certain extent—as a manifestation of socio-cultural openness in its broadest sense, in spite of the possible inconsistencies that may be found between various dimensions of openness as demonstrated below. Therefore, they may also be considered a kind of socio-cultural factor that may be included in the general model. Economic openness Economic openness includes the exchange of goods and services, as well as factors of production, especially capital, knowledge and labour. From the developmental aspect, the production factors are of utmost importance, because they may enable the growth of productivity within the system. Among them, the most important seem to be capital (from various forms of aid and loans to FDI) and, increasingly, knowledge. FDI seems to be particularly significant, perhaps even the most important aspect of economic openness. It does not only provide capital, but may be described as ‘a combination of capital, know-how and technology’ (De Mello quoted in Pavlič-Damijan et al. 2002a: 7) The developmental significance of FDI is thus also related to knowledge inputs. Contrary to the beginnings of ‘classical’ industrialisation, the labour force is also mostly important as a ‘carrier’ of knowledge. Obviously, the input of economic resources does not guarantee development by itself. Development is only possible if ‘foreign’ resources are linked to the elements within the system which are able to use these resources in order to increase their own performance. When economic resources are concerned, it is important to link them to the entrepreneurial spirit and cognitive mobilisation within the system. This fact has also been confirmed by empirical evidence, provided by the research on the effects of FDI. Referring to a substantial body of research, Pavlič-Damijan, Rojec and Polanec (2002) argue that the developmental effects of FDI inputs depend significantly on the human capital

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(i.e. the available human knowledge) of a given country. Policies encouraging cognitive mobilisation within the society are thus no less important than the external FDI inputs. According to the research mentioned above, the net developmental impact of FDI inward flows seem to be significantly more positive than negative, especially when combined with the sophisticated state strategy emphasising cognitive mobilisation and entrepreneurial spirit mentioned above. The positive effects include not only the growth and higher productivity of the enterprise taken over by the foreign capital (though, of course, even those are far from being guaranteed), but may have similar effects on the economy as a whole. Moreover, the long-term cumulative effects also contributing to the accumulation of knowledge (human capital) may be of particular significance, as emphasised by the theory of endogeneous growth. Several aspects of economic openness may be measured by accessible quantitative indicators. As already noted above, the most important among them for our assessment of economic openness are FDI, both inward and abroad and, to a lesser extent, the amount of foreign trade including imports and exports. There are also other ‘softer’ but no less relevant indicators, such as various regulations concerning foreign investments, foreign labour (again especially as a source of knowledge) and so on. The data concerning these facts are mostly based on experts’ assessments. Political openness Political openness may exist on two levels. At the basic level one may speak of openness when the political system of a society uses equal or similar political practices as they are used in other countries. This leads to the use of certain common standards. The most characteristic standards today are the model of representative democracy, a certain list of human rights and liberties, an economic policy that—at least to a certain level— supports the market economy, attempts to resolve conflicts between states in a peaceful way etc. States which accept this level of openness thus accept certain ‘external’ standards (and usually expect from others to act in a similar manner), although they maintain independence in the application of these standards. Classical international organisations, built on the principle of state sovereignty, such as the United Nations, mostly presuppose this level of openness.


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The advanced level of openness, on the other hand, may be defined as a situation, when a state—of course following its own decisions— delegates some aspects of application of the commonly accepted standards to transnational bodies. The most typical example today is the EU, which is no longer only an international organisation based on its smallest common denominator but an organisation with certain transnational elements with the powers of adopting binding decisions. The member states (and, partially, the candidates as well) have deliberately opened themselves up to such binding decisions. Political openness is essential for the development of efficient and democratic governance. At the basic level, it mostly provides standards for the organisation of political institutions, while at the advanced level it also provides an additional—external—mechanism of control over the actual implementation of democratic standards. Nevertheless, national political institutions, if they are to remain democratic, should also maintain their responsiveness to the national public and civil society, since the latter still remains the main source of their legitimacy. This is related to the fact that despite complex procedures providing certain level of rational–legal legitimacy (Weber) or legitimacy through procedure (Luhmann), one can still hardly notice any truly democratic mechanisms at the transnational level. Again, this may be clearly demonstrated by the EU as the world’s most advanced form of transnational political integration. Even there, the role of the democratic institutions (i.e. the European Parliament) remains mostly symbolic. The factual power, on the other hand, is concentrated either in the intergovernmental bodies, which derive their democratic legitimacy from the national levels), or in the transnational bodies (such as the European Commission), which—despite their high level of openness to the influences of a variety of representations—remain institutions of a mostly technocratic nature. Democratic legitimation is thus still almost exclusively limited to the national (and to some extent sub-national) level and the same may be argued for the major political loyalties as already mentioned above. Here, one may even identify certain limits of what we have called advanced openness. The following discussion on political openness will only be concerned with the advanced level of openness, since the basic level has already been achieved by all countries that are subject to our study. Relevant differences can thus only be found at the level of advanced openness. The major indicator of openness is the country’s membership in various international organisations, treaties, conventions etc. For a pre-

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cise assessment, one should obviously take into account both the type of such organisations and the membership status given to a particular country. Membership in organisations such as the United Nations or even the Council of Europe is not of particular relevance for our discussion, since they—with some minor exceptions—only imply the basic level of openness. Definitely the most important indicator of advanced openness in Europe is the membership status in the EU, since this organisation most clearly implies certain transfers of classical sovereignty from the national to the inter- and transnational levels. A special case, at least to a certain extent, may be the North Atlantic Treaty Organisation (NATO). As far as its form is concerned, NATO is a ‘classical’ international organisation that is typical for the basic level of openness, because the membership as such and the consensus-based decision-making imply no transfer of national sovereignty to the inter- or transnational level. Nevertheless, the content of NATO, based on defence issues, implies internationalisation of the so-called high politics. This kind of openness (even in a ‘basic’ form) is quite difficult to achieve, which is very much confirmed by the fact that the NATO concept of collective security is much more an exception than a rule in the modern world. Consequently, NATO membership may be understood as a partial step towards advanced openness, although its form remains at the basic openness level. Obviously, the international organisations and associations of a purely economic nature, such as free trade areas, may have their spill-over effects leading towards various aspects of political openness. For the purpose of our analysis, however, such organisations are not considered an aspect of political openness but rather of the economic variety.

Socio-cultural openness Social and cultural openness is perhaps the most complex and multidimensional aspect of openness. Its major dimensions relevant for our analysis may be the following: 1. the readiness to establish communication with other socio-cultural environments implies the relative absence of various aspects of xenophobia and requires a certain general openness for foreign people and foreign ideas;


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2. the competence to establish communication with other sociocultural environments, including especially the proficiency in foreign languages and the basic understanding of the cultures, to which they belong; 3. the actual inclusion in social networks which bridge the borders between societies, or, to put it another way, the possession of social capital which is not limited to a given nation-state. These aspects of openness are more or less closely related to the political and economic aspects described above. They are especially important as far as they contribute to such a type of openness which contributes to the building of one’s own civilisational competence. However, a complex equilibrium is again required between the openness for foreign cultural and social influences and, on the other hand, the sufficient cohesion of the societal community within the nation-state. A possible equilibrium between (national) cohesion and openness might be based on the positive or inclusive nationalism (especially in the sense of national pride). Contrary to the protectionist and xenophobic nationalism, inclusive nationalism can be compatible with a high level of openness. This may be illustrated, for example by attitudes concerning the European integration— positive nationalists often do embrace European integration (see: Adam, Hafner-Fink and Uhan 2000: 9). Given the complexity of these issues, the selection of the indicators risks becoming an arbitrary oversimplification, sometimes depending more on what is available than on what is in fact the best indicator. A combination of some—though far from ideal—indicators may, however, provide at least a general impression of the levels of socio-cultural openness. To measure the readiness to accept foreigners and foreign ideas, one may use some general evaluations of socio-cultural openness for foreign ideas and influences and some survey questions of xenophobia (e.g. one’s readiness to have immigrants as one’s neighbours etc.). The simplest way to measure competence for socio-cultural openness is comparing the levels of foreign-language proficiency, especially of the languages that are most useful in the international communication, such as English. Measuring the actual inclusion in inter- and transnational networks may include several dimensions of its own. An interesting aspect (though only a single case from the several possible ones) may be the level of inclusion into the ‘global’ (transnational or international) civil society.

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The Openness of East-Central European Societies from a Comparative Perspective The aspects of openness described above may be applied to the analysis of post-communist ECE societies. Despite some deficiencies, there is enough data available to get a general impression of the openness or closure of these societies, or, more specifically of the openness of their political, economic and socio-cultural sub-systems. Our attention in this chapter is, of course, focused on ECE countries, while other countries are also mentioned for comparative purposes. The economic openness in East-Central Europe As far as the economic openness of ECE societies is concerned, some differences between various dimensions may be noted. Openness for the exchange of goods and services is quite high, with Poland as the only major exception. Obviously this is closely related to the size of the societies and their economies, as already mentioned above. According to the World Competitiveness Report (WCY), the export of goods in 2001 represented 63% of GDP for Slovakia, 62% for Estonia, 59,3% for the Czech Republic, 54.3% for Hungary, 50% for Slovenia, but only 17.8% for Poland in 1999. The growth rates for the export of goods differ widely among these countries. In 2001, it was the highest in Hungary (53.8% growth), which also occupied the first place in export growth among the 49 nations included in the WCY for 2001. In the following year, however, the export growth in Hungary was much more moderate, while the greatest growth of export of goods among ECE countries was recorded for Slovakia with 15.9%. Another interesting piece of information concerning openness towards the exchange of goods and services is the trade to GDP ratio provided by the WCY (calculated as [exports + imports] / 2 x GDP) and based on the data for 2000. According to this indicator, Estonia, Slovakia, the Czech Republic, Hungary and Slovenia can be considered as relatively open, since they all rank between 5th and 13th among the 49 nations. Again, the situation for Poland is quite different and it occupies the 34th place. The second aspect is the openness for capital inputs and outputs, where FDI plays a major part. According to the UNCTAD database, the highest direct foreign investment stock inward as a percentage of GDP in


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the region in 2000 was recorded in Estonia (53.2%), followed by Hungary and the Czech Republic (both around 43%). Only three EU nations, namely Belgium, Ireland and the Netherlands, have been comparatively more open for FDI than Estonia. Other ECE countries have significantly lower FDI inward stocks. FDI stocks inward, for instance, represented only 15.5% of GDP in Slovenia. FDI flows, on the other hand, may, of course, significantly differ for various years. According to the WCY data, the inward FDI flows expressed as the percentage of GDP were highest in Slovakia, the Czech Republic and Estonia, placing them at the 6th, 10th and 12th position respectively among the 48 nations in 2000. Poland’s rank was 19th, Hungary’s 27th and Slovenia’s only 42nd. This implies significant contrasts in the annual level of FDI flows inward, between, for instance, Slovakia with almost 11% of GDP and Slovenia with 1%. In the case of the latter, the inward flows have increased recently, most significantly in 2002, though the overall stocks still remain low (Rojec 2003). ECE nations have significantly lower FDI stock abroad than all of the EU nations according to the UNCTAD database. The highest share of FDI stock abroad in 2000 can, again, be found in Estonia (5.2% of GDP), which is only slightly higher than Greece, the EU nation with the lowest share of FDI stock abroad. Hungary, Slovenia and Latvia have shares from 4.5 to 3.4% of GDP, while the other nations in the region are between 1.9% (Slovakia) and 0.3% (Lithuania). As far as direct investment flows abroad are concerned, Estonia and Hungary were in the leading position among ECE nations according to the WCY data from 2000. Nevertheless, both were far behind almost all of the EU countries. Estonia and Hungary also have the highest real growth of direct investment stocks abroad with 75.23% and 41.77% respectively, placing Estonia in 2nd position among the 48 nations and Hungary in 10th place. Significantly lower growth was recorded for Slovenia and the Czech Republic (both about 20%) and even more so for Poland and Slovakia (8–9%). According to the 2002 WCY survey, based on managers’ evaluations, it is quite easy for the foreign investors to acquire control of domestic companies in Estonia, Hungary and the Czech Republic (ranked 3rd, 9th and 14th, respectively), more difficult in Slovakia (24th) and the most difficult in Slovenia (40th) and Poland (46th). The rankings are quite similar with respect to the freedom of cross-border ventures. It is the highest in Estonia and Hungary (ranked 2nd and 11th, respectively),

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lower in Slovakia (25th) and the Czech Republic (28th) and the lowest in Slovenia (45th) and Poland (48th). The 2001 WCY survey produced similar results concerning the question of the equal treatment of foreign and domestic companies. Virtually all ECE nations except Estonia, have troubles with the equal treatment, though the openness is still significantly higher in Slovakia and the Czech Republic (followed by Hungary and then Poland) than in Slovenia. According to the 2002 WCY survey, the situation is quite similar concerning the access of foreign financial institutions to the domestic market and the access of foreign companies to the local capital markets. Estonia, the Czech Republic, Hungary and Slovakia (ranking between 4th and 13th) seem to be more open in this field than Poland (42nd) and Slovenia (48th). The investment incentives seem to be the most attractive for foreign investors in the Czech Republic (ranked first among the 49th nations in the 2002 WCY survey), as well as in Estonia and Hungary (7th and 8th, respectively). They are less attractive in Slovakia (19th) and the least attractive in Poland (40th) and Slovenia (47th). The fears that ‘globalisation may be threatening to your economy’ are higher in Poland and Slovenia than in Estonia and the Czech Republic. Hungary and Slovakia fall somewhere in the middle, according to the WCY. Significant amounts of capital in ECE countries have also been obtained by foreign debt. According to the 2001 WCY, it is the lowest in the Czech Republic (1.6% of GDP), which can be found in 10th place when nations are ranked from those with the smallest to those with the highest central government debts as percentages of GDP. Higher debts can be found in Hungary (8.2%, ranked 22nd), Slovenia (10.9%, ranked 25th) and Slovakia (12.4%, ranked 26th). The highest proportion of central government foreign debt can be found in the Polish case with 23.3%, placing it in 37th position. What about the openness to foreign labour when it is required by companies? It seems, according to the 2001 WCY survey, that immigration laws mostly do not prevent companies from employing foreign labour in Hungary, which ranked 11th among the 49 nations in 2001. This type of openness is lower in the case of the Czech Republic and Poland (34th and 36th rank, respectively) and the lowest in Slovakia (44th) and Slovenia (45th). As already mentioned above, openness to labour force with certain knowledge may be an even more important issue. The data from the


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2002 WCY survey indicate that ‘foreign high skilled people are not very attracted by the business environment’ of ECE economies. The best results, however, can be found in the Czech Republic (16th), Hungary (18th), Estonia (21st) and Poland (24th). The business environment is far less attractive for skilled foreigners in Slovakia (39th) and Slovenia (42nd). The overall input of knowledge which can then be used for economic growth does not seem to be very significant—up to today there has been no manifest breakthrough in this incredibly important field. It seems, however, that the knowledge input may increase, at least partially, as a side effect of FDI. The political openness in East-Central Europe The basic political openness is not questionable for any of the ECE countries. They all clearly accept not only general international standards, but also more strict democratic and human rights standards of the Western world as a whole and Europe in particular. Some obvious deficiencies within the actual functioning of the political system do not change this general adherence to the European democratic standards. The shift towards the advanced level of political openness is directly related to the inclusion of these nations in the EU and to the adherence not only to standards but also to the regulations adopted by its inter- and transnational bodies. In recent years, enormous progress towards the advanced level of openness has characterised the so-called Laeken-10 group, consisting of ECE nations (the Czech Republic, Hungary, Poland, Slovakia and Slovenia), the three Baltic nations, Cyprus and Malta. These countries became full members of the EU in 2004. According to official EU sources, Bulgaria and Romania are supposed to follow in 2007. The political elites in all these counties are mostly highly in favour of European integration. Favourable attitudes are typical not only for the major ruling political parties but for almost all of the mainstream political parties. The support of the general public may be in some cases somewhat lower than the support among the elites. Nevertheless, the support for membership at the referenda in the countries officially invited to the EU membership was quite sufficient. Openness in such cases, however, requires both sides. Therefore, an important issue may be whether these candidate countries/new members

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are really acceptable for the elites, the public and the general population of the EU. The enlargement processes that would include ECE countries has quite a high level of support among the political elites in the EU. Within the general public, however, the level of support, as measured by the Eurobarometer is somewhat less clear and more differentiated. According to a survey in autumn 2002, full membership for Hungary was supported by 52% of respondents within the EU and rejected by 30%. The support for Polish membership was only slightly lower (48% in favour versus 34% against). The Czech membership was supported by 46% of respondents (33% against). Support for the membership for the three Baltic states and Slovakia was in the range of 40–41% (36–37% against) of respondents. In the cases of Bulgaria and Slovenia slightly more respondents were against than in favour of membership (40% for, 39% against and 40% for, 38% against, respectively). Romania seems to be even less popular with 45% against membership and 35% in favour. These expressions of public opinion have not influenced the actual EU enlargement process. However, they should make the policy makers— particularly in the ‘less popular’ countries—think about the public image and perceptions of their countries abroad. Increased movement towards greater openness can also be demonstrated in the enlargement of NATO. While the Czech Republic, Hungary and Poland became NATO members in 1999, the rest of ECE as well as the Baltic nations, Bulgaria and Romania joined NATO in 2004. Solid openness at the basic level is thus no longer an issue in the region of our interest. What remains are the various levels of political openness at the advanced level that are becoming more and more selfevident. Socio-cultural openness in East-Central Europe Socio-cultural openness, as already mentioned above, may be much more difficult to measure. An overall picture cannot be presented, though one may try to mention some possible indicators, which may provide a partial impression of the actual state of the socio-cultural openness. One may, of course, use some very soft indicators, such as evaluations of the general cultural openness. The WCY 2002 survey used a simple question: whether the national culture is ‘open to foreign ideas’. The highest level of such openness among the nations mentioned was recorded for Estonia, which ranked 15th among the 49 world nations. Oth-


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ers, namely Slovakia (27th), Hungary (32nd), the Czech Republic (38th), Slovenia (41st) and, finally, Poland (45th) are ranked lower. The actual readiness of the general populations to establish social contacts and communication with foreigners may exist but is also limited by xenophobic feelings. The European Values Study Surveys 1999/2000 measured xenophobia by asking a question whether a respondent would not like certain type of people for his or her neighbours. The rejection of Muslims, Jews, foreign workers, Roma and people of different races (other categories are less relevant for this discussion) was particularly high in Hungary. The Czech Republic, Latvia and Slovenia seem to be much more open, though still less open than several EU nations. Perhaps the most relevant category here is the relation towards foreign workers or immigrants. They are rejected as potential neighbours by 9.8% of Latvians, 16% of Slovenes, 19.4% of Czechs, 20.9% of Estonians, 21.1% of Romanians, 22.9% of Slovaks, 24.6% of Bulgarians and 62% of Hungarians (Halman et al. 2001: 41). There are also obvious limits of this kind of indicators, since they only measure xenophobia in relation to certain types of ‘internal’ foreigners or quasi-foreigners. Beside the readiness, there must also be certain competence. Here, somewhat harder data may be provided if one investigates foreignlanguage proficiency. Since we are mainly interested in the openness towards the developed European environment, the knowledge of major Western European languages can be understood as being the most relevant. Language skills developed to communicate within the former multinational states, such as Czechoslovakia, the Soviet Union and Yugoslavia, may still be somewhat useful now, but are much less relevant for our analysis of the general socio-cultural openness. This is confirmed by the Candidate Countries Eurobarometer survey, in which languages such as Russian were only considered most useful by an insignificant number of respondents when compared to the Western European languages, especially English and German. There are some significant differences between the various countries according to the 2002 Eurobarometer survey. The knowledge of English, French, German, Italian and Spanish taken together is highest in Slovenia, where 67% of the population is able to communicate in at least one of these languages. In the Czech Republic, this is the case for 45% of the population, in Slovakia 34%, in Poland 33%, and in Hungary only 24%. The figure for the Baltic states is 35%. The lowest level of knowledge of major Western languages can be found in Bulgaria (21%) and Romania (23%).

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The picture is somewhat different when all foreign languages are taken into account, including those spoken in the former multi-national countries, namely the Soviet Union (mostly Russian), Yugoslavia (mostly Serb and Croatian languages) and Czechoslovakia. In that case, the highest foreign-language proficiency can be found in Lithuania and Latvia, followed by Slovenia, Slovakia and Estonia. This kind of foreignlanguage proficiency, however, still remains the lowest in Hungary and Bulgaria. In the Candidate Countries Eurobarometer survey 2002, when asked to name the two most useful foreign languages, only 6% of all respondents, for instance, chose Russian. On the other hand, 88% chose English, 58% German, and only 19% French. The leading role of English in international communication is quite clear, which can also be confirmed by the opinions of the EU respondents, for instance in Eurobarometer 55. English is also the most common foreign language in all EU countries except Luxembourg. Proficiency in what is clearly lingua franca of this age may thus be considered a useful indicator of openness. The actual use of foreign-language competence and another aspect of social openness can also be, at least to some extent, demonstrated by the visits to foreign countries. According to this indicator rankings of ECE countries are quite similar to the rankings in the foreign-language proficiency. According to the Eurobarometer data from 2001, 74% of Slovenes have visited an EU member state in the last two years. This was also the case for 53% of Czech, 34% of Slovak, 27% of Polish and 22% of Hungarian respondents. A far greater challenge than travel, however, would be the creation of certain communities at the trans- and international level. The inclusion into such communities would imply a much higher level of socio-cultural openness. An interesting possibility to capture and measure at least some aspects of this phenomenon is provided by the ‘global civil society index’ (GCSI), introduced by Anheier and Stares (2002). This indicator consists of the measurement of political participation, the density of international non-governmental organisations and tolerance (including the lack of xenophobia towards foreign workers and the belief in the importance of encouraging tolerance). From ECE countries, GCSI indicates the highest inclusion in the global civil society nations for the Czech Republic, which is followed by Slovenia and then Latvia, Slovakia and Estonia. Significantly lower scores characterise Hungary and Bulgaria.


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There seem to be significant differences in the cultural openness of various ECE countries. While some of them, such as the Czech Republic and Slovenia, may be moderately open, at least according to most indicators, Hungary, on the other hand, exemplifies significantly lower cultural openness. It may also be noted, however, that ECE nations are generally less open in a socio-cultural sense than the majority of the EU nations.

A Critical Evaluation of the Indicators Openness towards the international environment is a complex phenomenon. Consequently, there are also several difficulties in the selection of proper indicators. The indicators of economic openness perhaps seem to be the least problematic. Quantitative measures such as FDI stocks or foreign trade are often used as quite clear measures of economic openness. They do not, however, cover all the aspects of economic openness. It is, for example, much more difficult to find proper indicators of the actual knowledge inputs, which may be even more important from the developmental perspective than capital inputs as such. Political openness is a less established concept than its economic equivalent. Using the criteria of membership in various international associations, organisations and conventions seems to be a practical solution, though not without deficiencies. Criteria for membership in the same international organisation may change through time, members do not always strictly obey the rules they formally accept, and so on. Strict neutrality, typical for Switzerland, would formally imply a low level of political openness, though this may be debatable. The need may also appear to develop more precise indicators, because almost all countries discussed in this book are today the part of all major European organisations, and it may become impossible to measure actual differences in political openness between them without more precise indicators. Socio-cultural openness is certainly the most difficult concept to operationalise. The World Competitiveness Yearbook uses the evaluation of the openness of various cultures to foreign ideas. Such measures, however, may be quite questionable, since the respondents in the survey are mostly managers, who can hardly be considered fully competent experts for such evaluations. There are, however, not many viable alternatives for measuring such a complex concept in a relatively simple way.

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Foreign-language proficiency is perhaps the only relatively ‘hard’ measure of socio-cultural openness. Nevertheless, it tells one nothing about whether (and how) this knowledge is actually applied. The data on travel do not tell much about the actual nature of these journeys which may include both the most superficial tourist trips and the most profound links with the foreign culture and society. Perhaps a better way may be to study the inclusion into the transnational civil society is using the Global Civil Society Index. The indicator, however, is only developed at a relatively rudimentary level and the concept of the civil society is far from clear (and thus even more difficult to operationalise) even at the national level, not to mention the global one. Nevertheless, we believe that these deficiencies can be at least partially overcome by the combination of several different—though far from perfect—indicators.

Towards an Assessment of Openness What can be noted about the level of openness of ECE countries? Comparisons of the dimensions described in this chapter may reveal some common patterns as well as some significant differences between these countries. The most typical common pattern may be found in the tendency to adopt the standards of the EU and join this form of integration. There is quite a high level of support for this process, both within the elites and within the general public. Despite some differences in public opinion, the general support for the integration processes clearly prevails. This means that all of the countries discussed are characterised by a relatively high level of political openness, not only at what was called the basic level of adopting general common standards, but also on the advanced level of joining inter- and even transnational structures. As far as economic openness is concerned, there are mostly no significant differences in openness for the exchange of goods and services, since almost all of the countries discussed are fairly open in that respect. The only significant exception is Poland, which can be to a great extent explained simply by the relatively greater size of her economy. More relevant and significant differences can be found in the field of capital inputs and outputs. Here one can notice clear contrasts between the high openness of countries such as Estonia, the Czech Republic and Hungary and the relative closure of Slovenia. These differences are mostly con-


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firmed by both ‘hard’ and ‘soft’ measures. However, a high level of economic openness does not necessarily appear together with high levels of social and cultural openness and vice versa. Despite her economic openness, Hungary, for example, is characterised by a relatively high level of socio-cultural closure, expressed in xenophobia and comparatively low competence for communication with the foreigners. Some other nations, such as the Czech Republic and Slovenia manifest significantly lower levels of xenophobia that should, of course, not be ignored, but are still quite comparable to some Western European countries. Slovenia is also in a leading position in proficiency of major Western languages and in the visits of its citizens to EU countries (which may be, of course, at least to a certain extent linked to the country’s small size and geographic position). Nevertheless, in spite of this relative socio-cultural openness, Slovenia is relatively closed to direct investment capital flows—the opposite of the Hungarian case. It may be noted that one kind of openness may or may not correspond to another kind. Nevertheless, it may be hard to perceive the persistence of great inconsistencies in the long run. Countries that remain socioculturally closed may find it hard to make use of the foreign economic resources for their own development. On the other hand, it may be difficult to maintain and strengthen political openness while remaining closed for some essential economic exchange of resources. A simplified summary of various aspects of openness for ECE nations, together with a comparison with most other European nations, is presented in Table 6. It should be stressed that the labels given to various aspects of openness should be understood in relative terms as comparisons to other countries included in the analysis. Consequently, a low level of openness, for instance, does not imply that a particular country is closed, but only that it is significantly less open when compared to the other countries included. It should be taken into account that only European nations are included, while in the world context, the same labels may denote something quite different. Among European countries, not being open does not yet mean being closed.

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Table 6: Assessment of openness of European countries COUNTRY Austria Belgium Bulgaria Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Netherlands Norway Poland Portugal Romania Russia Slovakia Slovenia Spain Sweden Switzerland United Kingdom

ECONOMIC OPENNESS high high medium high high high high medium medium low high high low low low high high low medium low low high medium medium high high high

POLITICAL OPENNESS68 advanced advanced semi-advanced semi-advanced advanced semi-advanced advanced advanced advanced advanced semi-advanced advanced advanced semi-advanced semi-advanced advanced semi-advanced semi-advanced advanced semi-advanced basic semi-advanced semi-advanced advanced advanced basic advanced

SOCIO-CULTURAL OPENNESS high high low medium high medium high medium high high low high high low low high high low medium low low medium medium medium high high medium

68 Though the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia have joined both EU and NATO, and Bulgaria and Romania have become NATO members, all of them are only considered politically open at the semi-advanced level in our analysis. This is mainly because: (1) the political integration is a complex and gradual process that does not simply ‘happen’, e.g. on 1 May, 2004; (2) the full membership cannot immediately affect nations’ developmental performance. The actual developmental effects of full membership in the EU will only be measured in the following years.


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Openness towards the International Environments and Social Capital The issue of openness or closure of a society towards its international environment is also related to the concept of social capital at two different levels. First, social capital plays an important role in the coordination and regulation of both the internal relations within society and societal relations towards its international environments. As already emphasised above, small systems in particular require superior mechanisms of coordination and regulation in order to deal with the immensely high complexity of the international environment, towards which they need to be open. Among such mechanisms one may find various models based on networks and negotiations, including for instance various neo-corporatist arrangements. These models, which are supposed to move beyond the limits of both hierarchies and markets, require a very high level of social capital, manifested in a high level of trust and the ability to establish, maintain and communicate through very sophisticated networks. The second aspect of the relation between social capital and openness towards the international environment includes the ability to form bridges not only between various groups within a single society, but also between various societies or nation-states. This may be an even more difficult task, since there is no such thing at the international level as an actually cohesive (transnational) societal community. Therefore, it is really about bridging in the most explicit sense, because the development of trust and consequent network-building is required. This complicated process, however, may become easier because of the development of common standards (discussed in relation to political openness) and even more because of the various advanced forms of integration, such as the EU. Such forms of integration are obviously also characterised by a certain ambition to develop a (more) cohesive societal community at the transnational (European) level, which would certainly be a challenge worthy of further discussion.

9. Developmental Performance

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A glance at the various data that in one way or another present the situation with respect to development of different societies (see Chapter 2 on civilisational competence) shows substantial differences between different groups of countries and numerous similarities within these groups of countries. Virtually all the relevant data indicate, first, that post-socialist countries’ performance is substantially below that of most EU member states—with the exception of Greece and Portugal and in some aspects also Italy and Spain—and, second, the existence of sometimes substantial differences between post-socialist countries. As numerous authors have acknowledged, these differences are not only the outcome of developmental trajectories that took place in the last few decades (e.g. Berend and Ranki 1982). We could sarcastically comment that the expected convergence of transition countries’ and the EU member states’ level of economic development—which was in 2001 projected to take from 1 to 34 years69 (European Commission 2001) would be to return to the situation of quite a distant past. Indeed, only at the eve of industrial revolution in the beginning of the 19th century were different European regions at more or less similar levels of GDP, with Great Britain as the only real frontrunner. All other European areas were at that time at approximately similar level of economic development (Bairoch 1975). The industrial revolution changed this pattern substantially; the dynamic of development of industrialised countries increased. The averThis is the period in which the candidate countries are eaxpected to achieve 75% of the GDP of EU-15. 69

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age economic growth accelerated to previously unprecedented levels.70 This influenced stragglers’ levels of economic development from a comparative perspective. Data from 1860 already show substantial differences in GNP between different parts of Europe. Industrialisation was delayed, as various parts of Europe, from Scandinavia through eastern Europe to the Mediterranean, were not included in the first wave of industrialisation. Some parts, especially Scandinavia, were successful through being early among the latecomers, though. A substantial increase in foreign trade is perhaps the other most important consequence of the industrial revolution. In the period between 1750 and 1913, foreign trade grew fifty-fold (Berend and Ranki 1982: 21–22). This increase was the main mechanism of the economic ‘pull’ of Western Europe (ibid). However, this pull did not contribute significantly to the industrialisation of countries that were by the 1860s already backward. Instead, it contributed to the redefinition of relationships between countries in Europe. A new international division of labour begun to emerge, where less industrialised, by-then-already-backward European regions, served the most developed countries with a wide array of raw materials that were needed for industrial production. With the following industrial revolutions, countries faced new challenges and their position depended on their ability to meet these challenges. Although some have argued that communism is the main reason for economic backwardness of ECE, SEE and the former Soviet countries, we agree with Kornai who asserts that there are many historical causes of this and that inefficiency of the socialist system is only one of them (Kornai 2000: 40). Historical data also clearly shows that this ‘experiment’ did not change this basic principle nor could it contribute to the modernisation of these countries: ‘The strongest statement one can make is that state socialism failed to guarantee success as promised; on the contrary, it preserved backwardness. Returning to private-market capitalism, thus, cannot change the historically mediocre economic performance and repeated inability to react positively to structural crises that have characterised the region… The region was unable to join the club of rich, advanced countries…’ (Berend 2001: 257). One could hardly, in strict terms, dispute Berend’s general assessment. However, this assessment fails to transcend the simplistic division be70 According to Maddison’s estimates, GDP per capita in the Western Europe and its offshoots increased from USD 400 USD in 1400 to USD 1,.043 USD in 1820. In 1989, it stood at USD 14,.413 USD (dollar valuess at 1985 prices) (Maddison, 1991: 10).


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tween core and periphery and fails to recognise the more complex nature of the relationship between the economies of Europe, as well as the substantial differences that exist among post-socialist countries and also among the countries of the EU. It fails to recognise the existence of semiperipheral countries, which are not as developed as core countries, but are nevertheless at the significantly higher levels of development when compared to a group of backward, poorly developed countries. Interestingly, these differences were already recognised in the world system theory in the 1970s (Wallerstein 1974, 1976). This theory is more refined in this respect. According to Wallerstein, the basis of the modern world system is the international division of labour. The economy of the core is more productive, more diversified. But the differences between the core and the periphery go beyond this simple division.71 In addition to the core and periphery there is a third group of countries, the semi-periphery. This group of countries with medium levels of development is not a residuum consisting of countries that cannot be classified in either of these blocks. They are quite specific and share common traits, both with respect to their internal social relations and with respect to their position in the international division of labour. They act as an intermediary structure between core and peripheral countries.72 As such, the semi-periphery has important depolarising role (Terlouw 1995: 17). Definition and operationalisation

We shall base our definition of countries’ developmental performance on the role of the country in the international division of labour. According to Porter, successful economic development is ‘a process of successive upgrading, in which the business environment in a nation evolves to support Other factors are important as well, such as organisation and the nature of internal social relations, which are harmonious in core countries when compared with those of the periphery. (Terlouw, 1992: 16). 72 In his network analysis of the role of the countries in the world system, van Rossem distinguished four groups of countries: core, semi-periphery, primary periphery and secondary periphery. . Countries in secondary periphery are tehhe most isolated and only have dependence relations only with core countries. The primary periphery is dependent on both core and semi-periphery and its countries tend to have some limited relations with each other. Semi-peripheral countries have complex relations with each other, but remain strongly dependent on the core. (van Rossem, 1996: 513). 71

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and encourage increasingly sophisticated ways of competing.’ (Porter, in Global Competitiveness Report 2001–2002: 57, original emphases).

He draws a distinction between three stages of economic development. First are the factor-driven economies, whose dominant source of competitive advantage is a cheap labour force. Products with which firms from these countries compete on world markets are relatively simple and are not innovative, often produced by technologies which were sold to these countries from the affluent economic leaders after they had become insufficiently profitable. The main source of competitiveness is not the uniqueness or sophistication of the product, but its low price. As such, these economies are highly sensitive to world economic cycles, commodity price trends and exchange rates. The second phase is the so-called investment-driven economy. Products become more sophisticated. However, technology still to a large extent comes from abroad through licensing, joint-ventures, FDI etc. The main source of competitive advantage is efficiency. Investment in more efficient infrastructure becomes crucial to achieve economic growth. These economies are, however, susceptible to external shocks, especially financial crises and sector-specific fluctuations in demand. Only countries that reach the third level of development, whose economies are innovation-driven, are relatively resilient to external shocks. Companies in innovation-driven economies exhibit the ability to produce innovative products and services. Constant innovations and improvements in products and production methods enable these countries to maintain high levels of income and a leading position in the international division of labour. Following from this, we shall apply four different indicators in ‘mapping’ the countries of Europe with respect to their developmental performance. First, data on secured patents abroad is a clear indication of whether a country’s economy is innovation driven. We include data from two sources. Data on the US utility patents per million population is relevant because the USA is the biggest market in the world and the role a country plays in this market is undoubtedly an important indicator of its position in the international division of labour. Furthermore, this is data on utility, i.e. marketed patents, those that have been put to profitable use and are thus estimated to have some market value. We also apply the European Patent Office data on secured patents abroad. Second, we shall apply what is one of the most classical indicators of the accumulated levels of economic development, GDP in purchasing power parity. Third, we apply data on the overall productivity of workers to indicate the general level of production


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methods. Fourth, we shall apply data on levels of wages. This indicator is intended to point to countries’ ability to maintain high levels of income through their position in the international division of labour and to show whether their companies are competing with unique and sophisticated products with high added value or on the basis of low wages. Tables 7 to 9 show developmental performance of 27 relevant countries, i.e. the EU member states (excluding Luxembourg), Switzerland, Norway, 10 post-socialist EU member states and candidates and Russia. Table 7 shows countries that can be classified as having high levels of developmental performance, i.e. those whose companies are competing on the basis of innovative products, with well-organised production processes, that contribute to labour productivity and can support high wages. Levels of GDP per capita are typically high in these countries. These are the Scandinavian countries, Benelux,73 Germany, France, and the British Isles, northern Italy, and Switzerland.74 It is important to note that not all of the EU shows high levels of developmental performance. Southern member states, namely Portugal, Greece and Spain (including southern Italy, from what we can conclude from the available data) exhibit lower levels of developmental performance, comparable with some of the more advanced accession countries. These countries are Slovenia, Hungary, Estonia, the Czech Republic and Slovakia. The other five EU post-socialist member and candidate countries and Russia are, according to the indicators employed in this classification, part of the European periphery. There are, of course, certain countries, where it would be possible to dispute the classification in one of these three groups. For example, Poland and Slovakia are such border-line cases. However, we have decided to classify Poland as a peripheral country due to the relatively poor innovative performance of its economy and also the relatively low level of GDP. Other countries, including also those for which data on innovative potential is not available, are at significantly lower levels. 73 Data on the innovativeness of Luxembourg is not available. However, an extremely high level of GDP per capita, the highest in Europe, as well as numerous other indicators, clearly justify classification of Luxembourg as a country of the European core. 74 The Global Competitiveness Report 2001–2002 does not provide us with a regional breakdown of data, which could show the proverbial differences between northern and southern Italy. However, let us remark that in 2001 GDP per capita of Italy was USD 18,.783 USD. In the region of Lombardia it was USD 27,.334 (World Competitiveness Yearbook, 2002: 465).

Table 7: High developmental performance Country

US utility patents per million population in 2000

Secured patents abroad per million population in 1999

GDP per capita (PPP in USD 2000)

62.1 67.8 82.3 119.4 64.4 123.6 32.4 29.7 78.1 55.1 177.2 182.1 61.1

518.4 436.9 735.5 1009.5 538.8 882.5 235.1 220.9 768.2 460.8 1069.2 2274.8 401.6

26,765 27,178 27,627 24,996 24,223 25,103 29,866 23,626 25,657 29,918 24,277 28,769 23,509

1

Austria Belgium Denmark Finland France* Germany Ireland Italy Netherlands Norway Sweden Switzerland UK

3

2

Overall productivity GDP/GDP(PPP) per person employed (USD in 2001)

Total hourly compensations for manufacturing workers (USD in 2001)

50,272/58,550 57,263/70,227 59,440/54,641 51,404/55,239 54,885/61,171 50,433/56,685 58,876/66,594 50,603/64,495 53,578/58,249 72,631/60,445 49,912/51,718 62,367/52,774 50,968/51,325

18.86 20.46 19.88 18.90 15.88 22.28 12.41 14.21 19.05 21.61 17.89 21.27 15.09

4

4

1 Data from The Global Competitiveness Report 2001–2002 2 Data from Towards a European Research Area 2002 3 Data from Human Development Report 2002 4 Data from the World Competitiveness Yearbook 2002

1

Table 8: Medium developmental performance Country



GDP per capita PPP in USD 2000)

2.2 2.9 1.7 3.6 1.1 0.7 8.0 6.8

14.8 n.a. 17.9 44.3 14.5 9.6 n.a. 49.6

13,991 10,066 16,501 12,416 17,290 11,243 17,367 19,427

1

Czech Rep. Estonia Greece Hungary Portugal Slovakia Slovenia Spain

3

2



11,965/31,652 8,838/23,627 29,948/46,519 13,567/33,873 23,280/35,668 9,218/29,601 20,543/39,323 39,398/53,492

2.06 1.39 8.61 2.13 4.61 1.41 4.51 10.52

4

4

1 Data from The Global Competitiveness Report, 2001–2002 2 Data from Towards a European Research Area 2002 3 Data from Human Development Report 2002 4 Data from the World Competitiveness Yearbook 2002

2

Table 9: Low developmental performance Country



GDP per capita (PPP in USD 2000)

0.1 0.4 0.0 0.3 0.2 n.a.

n.a. n.a. n.a. 2.95 n.a. 3.6

5,710 7,045 7,106 9,051 6,423 8,377

1

Bulgaria Latvia Lithuania Poland Romania Russia

3

2



n.a. n.a. n.a. 12,263/24,680 n.a. 4,769/19,697

n.a. n.a. n.a. n.a. n.a. 0.47

4

4

1 Data from The Global Competitiveness Report, 2001–2002 2 Data from Towards a European Research Area 2002 3 Data from Human Development Report 2002 4 Data from the World Competitiveness Yearbook 2002

3


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On the Role of the Socio-Cultural Factors In our heuristic model of socio-cultural factors, developmental performance is the resultant of factors that operate on the first and second levels of the model. According to this model, a number of factors have to be sufficiently developed in order to trigger positive developmental trajectories. This is difficult, but not impossible to achieve. In the past 150 years there has been a number of cases, success stories, where more or less backward countries successfully made the transition to the core. We have very good and detailed accounts of the success of not-so-recent latecomers. This is the case of Japanese industrialisation and development, which commenced in the second half of the 19th century (Landes 1998), approximately at the same time as Denmark, Sweden, and Norway in Scandinavia started their successful transition towards the core (Berend and Ranki 1982). In the second half of the 20th century we have the wellknown examples of the four Asian ‘tigers’ (Kim and Nelson 2000), and more recently the success of the ‘Celtic Tiger’, i.e. the remarkable growth and development of the Irish economy in the 1990s (O’Hearn 1998, Sweeney 1998). Last, but not least, one may also look at the case of Finland, which overcame its relative geographical disadvantage and became an important competitor in the demanding market of high-tech products.75 Is it realistic that any of the post-socialist countries could in the foreseeable future, i.e. the medium-term perspective, be able to join the exclusive club of the rich countries of the European core? We believe that this is possible for some countries of post-socialist Europe. But we should limit our optimism to those countries which were classified as countries with a medium level of developmental performance. That means, first, that their economies are already at the investment-driven stage and are capable of building capacities to improve the imported and assimilated technology and production methods and manage the difficult transition to innovation-driven economies. How can this be done? Obviously, no clear-cut prescriptions or recipes are possible, such as those persistently advocated by numerous international institutions and scientists in the course of the past decade. If there is something that one can learn from 75 This does not imply that Finland is purely a high-tech country. Its companies are also important and successful competitors in traditional industries, based on its natural resources (e.g. paper and pulp production, furniture industry etc.).

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the aforementioned past examples of successful transitions from the semiperiphery to the core, it is that no country did it by imitating some other country or by following such prescriptions. Even though it has often been attempted, especially in the case of the post-socialist countries, which in some cases became IMF and World Bank ‘testing sites’, it has to be clear that social scientists are not able to generate solutions in the form of ‘pure’ prescriptions and ‘categorical imperatives’; their role and expertise are more modest. They can produce hypothetical solutions in the form of scenarios, multiple options and cost-benefit or SWOT analyses. They can be very helpful by indicating and evaluating the side effects and potential risks of certain decisions and policies. And, perhaps, most importantly, they can attempt to trace the necessary conditions for favourable outcomes. What are these necessary conditions? Berend points to the importance of transnationalisation, connected with privatisation and marketisation, in his analysis of the recent Irish success story and of the Mediterranean ‘miracle’ (Berend 2001). To focus on Ireland,76 we can indeed say that the massive inflow of FDI and related know-how—which were fostered by easy access to the EU market77 and a well-educated and relatively cheap labour force—and the massive influx of money from the EU Structural Funds played an important role (O’Hearn 1998). However, if this inflow of FDI had not been accompanied with internal qualitative changes (increased education, institutional efficiency, etc.) it would only serve to consolidate the relatively unfavourable position of Ireland in the international division of labour. Namely, if the investments are located primarily in the extraction sectors or if their primary purpose is to expand their own business and gain market shares in new, ‘virgin’ markets. In cases of well-known productive investments, such as Volkswagen’s acquisition of the Czech car manufacturer Škoda, the awaited spillover effects are not possible without the same internal structural changes. Hence, In Berend’'s opinion, the Mediterranean EU member states are also a success story, when compared with the post-socialist countries. By employing long-term data on GDP, he describes a ‘“dramatic departure from their previously similar growth patterns’” (Berend, 2001: 258). On the basis of data indicating the position in the international division of labour and GDP, we would hesitate to talk about a success story. Such a substantial increase of differences between Mediterranean countries and better- off post-socialist countries in East Central EuropeECE is primarily caused by the rupture of the growth rates of the latter and is not the an evidence of of the developmental performance of the former. 77 Most FDI came from the USA (O’'Hearn, 1998). 76


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we can argue that internationalisation and a massive influx of capital is a necessary condition. But it is not sufficient. In earlier work on industrialisation and the formation of the European periphery in the 19th century (Berend and Ranki 1982), Berend offered a much more refined, systematic and holistic analysis of factors of developmental performance. He outlined socio-political prerequisites of change, human factors, the role of the state, the integration into the world market, foreign trade and export branches. We could divide these factors into two groups, internal (the first three) and external (the last two). While it is more or less clear that without external factors a country is not able to join the group of affluent, developed countries—or it has to go through a long and uncertain process of capital accumulation—his analysis makes it even more clear that the internal factors are crucial determinants of the specific effects of a country’s position in the international system. Van Rossem also showed that development is not exclusively a consequence of international environment, i.e. the positioning of the state towards other states. International environment does not determine the dependency and developmental performance of the country. It can contribute to creation of the environment, which imposes certain limitations on countries, especially those that are economically backward. His conclusion is very important in the context of this book: ‘Internal social, economic, and political structures and actors become vital factors in development, and can modify the effects of the international environment.’ (van Rossem 1996: 524) To put it simply, the basic preconditions for developmental performance are endogenous, but we should take the input from environment into account. This is also the main focus and the argument suggested by the model of socio-cultural factors as presented in this book. The important question that we have to ask at the end of the book is whether this model can pass the test of empirical verification. Can it explain developmental performance and point to necessary conditions, those that a country or region has to fulfil in order to achieve positive developmental trends?

A Fuzzy-set Analysis of the Necessary Conditions We shall attempt to verify this model by applying the fuzzy-set method for social-scientific analysis as developed by Charles Ragin (2000). This method is widely applied in hard sciences, when they meet with problems

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of engineering in the face of ambiguity and complexity. One can hardly dispute that the problems that we are dealing with in many of the social sciences are anything but ambiguous and complex, including the analysis of the factors of development of societies. The application of this analytical approach would seem appropriate from this perspective. Furthermore, it is very important that fuzzy-set methodology offers researchers ‘interpretative algebra’, an approach that takes both conceptual and mathematical-analytical aspects into account, thus enabling social scientists to employ dialogue between ideas and empirical evidence, the much-desired systematic interplay between theory and data analysis. Conceptual work and thorough review is undoubtedly an important part of this book, which is another reason why we believe that fuzzy-set analysis is the most appropriate analytical design for empirical verification of the model. In fact, we agree with Ragin that it is possible to become involved in a much richer dialogue with fuzzy-set analysis than with ‘conventional’ analytical procedures for three reasons (Ragin 2000: 5–6). First, with fuzzy sets one can avoid problems with the usual homogenising assumptions deriving from the analysis of a large population. Furthermore, fuzzy sets enable analysis of smaller populations, such as ours (27 countries). Second, fuzzy sets can be used to extend diversity-oriented research. This is potentially important in the context of our analysis, due to the fact that ‘each latecomer has its own story’ on the specific form of its development. Were there a different combination of necessary conditions, it would be important for our analysis to point to them. Finally, fuzzy sets can be carefully tailored to fit theoretical concepts. This is again an important aspect of our analysis. To start the analysis we shall first specify relevant domains. These would have to be theoretically justified in certain cases, but in our analysis domains are determined by our research interest and the focus of our analysis. We have 27 relevant domains, namely countries that are outlined in the tables of developmental performance: the EU member states (excluding Luxembourg), ECE countries (the Czech Republic, Hungary, Poland, Slovakia and Slovenia), the three Baltic states (Estonia, Latvia and Lithuania), two SEE countries (Bulgaria and Romania), two EFTA countries (Switzerland and Norway) and Russia. Fuzzy sets have also already been precisely defined above as different socio-cultural factors and developmental performance. Each country will have to be assigned membership in each set. This membership is anywhere between 1 (indicating full membership in a set of e.g. developed


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countries) and 0 (indicating non-membership in the set). One can also decide on a certain number of anchors and limit available membership scores. We have decided to opt for three anchors. In addition to full membership and non-membership we shall also assign partial membership (value 0.5). These anchors will have to be assigned its set-specific verbal label. After this we will have to define data on the basis of which we shall assign membership scores and assign scores itself. To illustrate, let us take the example of the fuzzy set ‘developmental performance’. We have already defined the concept, three anchors, and their verbal labels (high developmental performance, medium developmental performance, low developmental performance). On the basis of the classification of countries into three groups, we can assign membership scores for each country (1 = high developmental performance, 0.5 = medium developmental performance, 0 = low developmental performance). We will also formulate fuzzy sets for other factors. We shall not go into the details of the concept itself; our attention will be focused on assigning membership scores. To start with social capital, we shall apply three anchors, labelled as high, medium and low social capital. On the basis of the theoretical concept, we shall apply three indicators: the level of generalised trust, active involvement in voluntary associations index and the spending time index. The classification of countries according to these three indices can be seen in Tables 10 to 12. To define fuzzy set membership for cognitive mobilisation, we shall apply three anchors: high, medium and low cognitive mobilisation. We shall assign membership scores on the basis of four different indicators, each representing one component. The ‘linkages index’ from the Global Competitiveness Report 2001–2002 will indicate the management of production, the dissemination and application of knowledge, the combined enrolment ratio for organisation of education and learning, R&D intensity for support and implementation of technological and social innovations, and the density of internet hosts for the formulation of the information and telecommunication infrastructure (see Tables 13 to 15). We shall apply the following anchors for the fuzzy set quality of governance: developed democracies, semi-developed democracies and less developed democracies. Membership shall be assigned by the application of six indicators: the combined average ratings on political rights and civil liberties, the voice and accountability index (both measuring the level of democracy), the political stability index (measuring stability), the government effectiveness index (measuring effectiveness), the rule of law

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index and the corruption perception index (both measuring transparency) (see Tables 16 to 18). We shall apply three anchors for the entrepreneurial spirit fuzzy set: high, medium and low entrepreneurial spirit and employ four indicators, measuring three components of this factor. The creation of new enterprises is measured by the total entrepreneurial activity index. The generation of competencies and mobilisation of resources is measured by the cluster innovation environment index and business R&D intensity index. We have decided to select two indicators because this component can be expressed either in the form of cooperation between smaller companies (but also large ones) and investment to business research and development. Large companies are represented disproportionately in the second approach due to smaller resources of SMEs, which have to rely more on different types of innovation. Thus, we are trying to reduce the impact of differences in countries’ firm sizes and strategies. The quality of the entrepreneurial environment is measured with the index of economic freedom (see Tables 19 to 21). We shall also apply three anchors for the social cohesion fuzzy set: high, medium and low social cohesion. We shall employ three indicators, measuring three of the four components: share of income or consumption (richest 20% to poorest 20%) as a measure of (in)equality, the solidarity index as a measure of civic solidarity, and the relative number of suicides as a measure of anomie. Data with respect to identity is somewhat inconclusive and ambiguous, so we decided to omit it from the analysis (see Tables 22 to 24). We shall apply three anchors also for the openness of societies fuzzy set: high, medium and low openness. We shall employ six indicators, measuring three components. The trade to GDP ratio and the FDI stock are proxies for socio-cultural aspects of economic openness, EU membership is an indicator of political openness and a managers’ evaluation of openness for ideas, foreign-language proficiency and global civil society index is a measure of cultural openness (see Tables 25 to 27). The situation is somewhat different with respect to civilisational competence. It is difficult to measure although one can identify some specific indicators (work ethics, functional knowledge etc). The problem is to find the reliable and comparable data sources, since we have to deal with remote historical sequences. Our assessment is, therefore, not based on specified indicators (or indices) but on two contextual factors, the historical process of modernisation and geo-political location (see Tables 28 to 30).

Table 10: High level of social capital Countries

Generalised trust (%) in 1999

Active involvement in voluntary associations Index

Spending time in clubs and associations (%)

Fuzzy membership

32 29 66 58 33 34 60 67 67 38 33

0.47 0.69 0.63 0.65 0.29 0.56 0.94 0.99 1.15 1.09 0.83

41 50 58 36 58 50 57 / 45 / 39

1 1 1 1 1 1 1 1 1 1 1

1

Austria Belgium Denmark Finland Germany Ireland Netherlands Norway Sweden Switzerland UK

2

3

1 The proportions of respondents who claim to generally trust people. Data from European Values Survey 1999; data for Norway and Switzerland from the World Values Survey 1995. 2 The self-reported unpaid work in various voluntary associations (15 types of organisations) per respondent. Data from European Values Survey 1999; data for Norway and Switzerland from World Values Survey 1995. 3 The proportion of respondents who claim to spend time in clubs and associations at least weekly and monthly.

4

Table 11: Medium level of social capital Countries

Generalised trust (%) in 1999



Fuzzy membership

23 23 22 19 32 16 21 38

0.50 0.27 0.37 0.74 0.46 0.80 0.54 0.27

30 34 33 22 31 32 34 28

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

1

Czech R. Estonia France Greece Italy Slovakia Slovenia Spain

2

3


5

Table 12: Low level of social capital Countries

Generalised trust In % in 1999



Fuzzy membership

28 22 17 26 19 10 10 24

0.24 0.26 0.29 0.16 0.20 0.18 0.20 0.10

24 10 18 15 11 29 11 13

0 0 0 0 0 0 0 0

1

Bulgaria Hungary Latvia Lithuania Poland Portugal Romania Russia

2

3


6

Table 13: High cognitive mobilisation Country

Linkages index 2002

1

Combined primary, secondary, and tertiary enrolment ratio 1999 (%)

R&D intensity in 1999 or 2000 (as % of GDP)

Internet hosts per 1000 people in 2000

Fuzzy membership

0.90 1.09 0.97 1.03 0.94 0.94 0.89 0.91 1.02 0.97 1.01 0.84 1.06

1.80 1.96 2.09 3.32 2.14 2.46 2.56 1.61 2.02 1.70 3.78 2.73 1.85

59.0 29.4 62.9 102.3 19.1 24.8 143.0 29.7 101.9 101.1 67.3 36.7 28.2

1 1 1 1 1 1 1 1 1 1 1 1 1

2

Austria Belgium Denmark Finland France Germany Iceland Ireland Netherlands Norway Sweden Switzerland UK

5.5 5.8 5.9 6.7 6.3 6.1 5.5 5.7 6.6 5.9 6.5 6.3 6.3

3

4

1 Data from The Global Competitiveness Report 2001–2002 (p. 104) 2 Data from the Human Development Report 2002 (pp. 149–150) 3 Data from the World Competitiveness Yearbook 2002 (p. 627); data for Latvia, Romania, Bulgaria, Lithuania from Towards a European Research Area 2002 (p. 70) 4 Data from Human Development Report 2002 (pp. 186–187)

7

Table 14: Medium cognitive mobilisation Country

Linkages index 2002

1

Combined primary, secondary and tertiary enrolment ratio 1999 (%)

R&D intensity in 1999 or 2000 (as % of GDP)

0.70 0.86 0.81 0.81 0.84 0.84 0.96 0.83 0.95

1.35 0.69 0.71 0.81 1.04 0.70 0.75 1.51 0.90

3

2

Czech Rep. Estonia Greece Hungary Italy Poland Portugal Slovenia Spain

4.7 5.0 4.0 5.0 4.7 4.4 4.7 4.5 5.0


Fuzzy membership

15.4 28.4 10.5 10.4 17.8 8.8 6.2 11.0 11.3

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

4


8

Table 15: Low cognitive mobilisation Country

Linkages index 2002

1

Combined primary, secondary and tertiary enrolment ratio 1999 (%)

R&D intensity in 1999 or 2000(as % of GDP)

0.72 0.82 0.80 0.69 0.78 0.76

0.57 0.41 0.60 0.40 1.08 0.70

3

2

Bulgaria Latvia Lithuania Romania Russia Slovakia

3.8 4.1 4.4 2.7 4.3 4.2


Fuzzy membership

2.2 10.7 4.8 1.9 2.2 7.0

0 0 0 0 0 0

4


9

Table 16: Developed democracies Country

Political rights and civil liberties ratings in 2000

Voice and accountability index in 2000

Political stability index in 2000

Government effectiveness index in 2000

Rule of law index in 2000

Corruption perception index

Fuzzy membership

1.0 1.5 1.0 1.0 1.5 1.5 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.5

1.34 1.24 1.60 1.69 1.11 1.42 1.57 1.61 1.58 1.42 1.15 1.65 1.73 1.46

1.27 0.87 1.34 1.61 1.04 1.21 1.21 1.48 1.32 1.41 1.01 1.38 1.61 1.10

1.51 1.29 1.62 1.67 1.24 1.67 1.79 1.84 1.35 0.91 1.57 1.51 1.93 1.77

1.86 1.34 1.71 1.83 1.22 1.57 1.57 1.67 1.70 0.94 1.12 1.70 1.91 1.61

7.8 7.1 9.5 9.7 6.3 7.3 6.9 9.0 8.5 6.3 7.1 9.3 8.5 8.7

1 1 1 1 1 1 1 1 1 1 1 1 1 1

1

Austria Belgium Denmark Finland France Germany Ireland Netherlands Norway Portugal Spain Sweden Switzerland UK

2

2

2

2

3

1 Data from Freedom in the World 2001–2002; (highest value = 1, lowest value = 7) 2 Data from Worldwide Governance Data Indicators 2000–2001; (highest = +3, lowest = -3) 3 Data from Transparency International 2002 (10 = no corruption)

10

Table 17: Semi-developed democracies Country







Fuzzy membership

1.5 1.5 2.0 1.5 1.5 1.5 1.5 1.5 1.5 1.5

1.04 0.98 1.12 1.19 1.10 0.81 1.00 1.21 0.99 1.07

0.74 0.73 0.79 0.75 0.82 0.50 0.29 0.69 0.62 0.87

0.58 0.86 0.65 0.60 0.68 0.22 0.26 0.27 0.23 0.70

0.64 0.78 0.62 0.78 0.72 0.36 0.29 0.55 0.36 0.89

3.7 5.6 4.2 4.9 5.2 3.7 4.8 4.0 3.7 6.0

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

1

Czech Rep. Estonia Greece Hungary Italy Latvia Lithuania Poland Slovakia Slovenia

2

2

2

2

3


11

Table 18: Less developed democracies Country







Fuzzy membership

2.0 2.0 5.0

0.59 0.50 -0.35

0.37 -0.08 -0.41

-0.26 -0.54 -0.57

0.02 -0.02 -0.87

4.0 2.6 2.7

0 0 0

1

Bulgaria Romania Russia

2

2

2

2

3


12

Table 19: High entrepreneurial spirit Country

Total entrepreneurial activity index 2002

1

Cluster innovation environment index 2002

Business R&D intensity in 1999 or latest available year* (as % of GDP)

Index of economic freedom 2001 (lower value means higher economic freedom)

Fuzzy membership

9.3 8.8 8.8 10.6 9.3 9.9 8.8 9.1 9.2 9.2 8.6 9.8 9.9 10.0

1.15 1.40 1.31 2.39 1.38 1.77 1.01 1.17 0.51 1.14 0.95 2.83 1.95 1.22

2.05 2.10 2.05 2.15 2.50 2.10 2.15 1.65 2.30 1.85 2.45 2.25 1.90 1.80

1 1 1 1 1 1 1 1 1 1 1 1 1 1

3

2

Austria Belgium Denmark Finland France Germany Iceland Ireland Italy Netherlands Norway Sweden Switzerland UK

n.a. 3.0 6.5 4.6 3.2 5.2 11.3 9.1 5.9 4.6 8.7 4.0 7.1 5.4

4

1 Data from Global Entrepreneurship Monitor 2002 (executive report, p. 8) 2 Data from The Global Competitiveness Report 2001–2002 3 Data from Towards a European Research Area 2002 4 Data from 2001 Index of Economic Freedom * 1998 Sweden, Denmark, the Netherlands, Belgium, Italy, Greece, Portugal; 2000 Finland, France, UK, Austria, Ireland

13

Table 20: Medium entrepreneurial spirit Country




Index of economic freedom 2001

Fuzzy membership

n.a. n.a. 6.6 n.a. n.a. 4.6 4.6

7.9 7.4 7.2 7.7 7.6 6.8 8.4

0.78 0.18 0.28 0.17 0.42 0.83 0.51

2.20 2.05 2.55 2.30 2.85 2.90 2.40

0.5 0.5 0.5 0.5 0.5 0.5 0.5

1

Czech Rep. Estonia Hungary Portugal Slovakia Slovenia Spain

2

4

3


14

Table 21: Low entrepreneurial spirit Country




Index of economic freedom 2001

Fuzzy membership

n.a. n.a. n.a. n.a. 4.4 n.a. 2.5

5.8 6.3 7.0 6.9 7.2 6.6 7.8

0.12 0.19 0.07 0.13 0.31 0.30 n.a.

3.30 2.70 2.65 2.55 2.75 3.65 3.70

0 0 0 0 0 0 0

1

Bulgaria Greece Latvia Lithuania Poland Romania Russia

2

4

3


15

Table 22: High level of social cohesion Country

Share of income or consumption (richest 20% to poorest 20%)

Solidarity index

4.5 3.6 3.6 5.5 3.7 2.6 3.6

8.6 7.1 8.8 13.0 n.a. 12.8 14.7

2

1

Belgium Denmark Finland Netherlands Norway Slovakia Sweden

Number of suicides per 100.000 people

Fuzzy membership

37.7 34.1 49.4 19.6 25.2 n.a. 28.5

1 1 1 1 1 1 1

3

1 Data from Human Development Report 2002 2 Calculated as a sum of the proportion of people who perform unpaid voluntary work for social welfare services for elderly, handicapped or deprived people and of the proportion of people who perform unpaid voluntary work for local community action on issues like poverty, employment, housing or racial equality, on the basis of data from European Value Survey 1999/2000 3 Data from Human Development Report 2002 for the years 1993–1998

16

Table 23: Medium level of social cohesion Country


Solidarity index

5.5 3.5 5.6 4.7 5.3 6.4 4.2 5.9 4.1 5.4 5.8 7.1

4.4 5.4 5.6 2.3 14.0 7.4 6.9 1.4 10.7 4.5 n.a. 15.1

2

1

Austria Czech R. France Germany Greece Ireland Italy Portugal Slovenia Spain Switzerland UK*


Fuzzy membership

40.0 30.8 41.2 30.2 6.90 22.5 16.7 13.4 61.9 16.2 43.1 14.2

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

3

1 Data from Human Development Report 2002 2 Calculated as a sum of the proportion of people who perform unpaid voluntary work for social welfare services for elderly, handicapped or deprived people and of the proportion of people who perform unpaid voluntary work for local community action on issues like poverty, employment, housing or racial equality, on the basis of data from European Value Survey 1999/2000 3 Data from Human Development Report 2002 for the years 1993–1998 *Figures in columns 2 and 3 are only for Great Britain.

17

Table 24: Low level of social cohesion Country


Solidarity index

3.6 3.5 6.5 5.3 5.2 5.1 4.9 12.2

2.3 3.8 4.4 3.5 1.2 3.5 1.6 1.1

2

1

Bulgaria Hungary Estonia Latvia Lithuania Poland Romania Russia


Fuzzy membership

35.1 64.8 78.4 71.3 77.4 28.7 25.4 86.6

0 0 0 0 0 0 0 0

3

1 Data from Human Development Report 2002 2 Calculated as a sum of the proportion of people who perform unpaid voluntary work for social welfare services for elderly, handicapped or deprived people and of the proportion of people who perform unpaid voluntary work for local community action on issues like poverty, employment, housing or racial equality, on the basis of data from European Value Survey 1999/2000 3 Data from Human Development Report 2002 for the years 1993–1998

18

Table 25: High openness Country

Trade to GDP ratio (2000) 1

FDI stock to GDP ratio (2000)

EU member state

Open for ideas

Foreign-language proficiency

Global Civil Society Index

Fuzzy membership

14.6 155.0 39.5 31.5 24.6 43.8 74.8 23.0 44.9 64.6 30.5

yes yes yes yes yes yes yes no yes no yes

7.27 7.61 6.44 7.39 7.02 7.65 8.63 6.34 7.80 6.86 6.64

55 37 79 50 44 15 75 62 76 n.a. 11

0.50 0.76 0.86 0.70 0.34 0.61 0.83 n.a. 1.00 0.59 0.53

1 1 1 1 1 1 1 1 1 1 1

3

4

5

2

Austria Belgium Denmark Finland Germany Ireland Netherlands Norway Sweden Switzerland UK

50.77 88.99 43.35 38.75 33.92 93.75 69.51 38.27 44.27 43.21 28.03

1 Data from the World Competitiveness Yearbook 2002. Data for Bulgaria, Romania, Latvia and Lithuania calculated using the UNCTAD statistics database. 2 Calculated as (inward FDI+ outward FDI)/(2xGDP), on the basis of data from the UNCTAD statistics database. 3 Managers’ evaluation whether his/her culture is open to foreign ideas (high values mean high openness). Data from the World Competitiveness Yearbook 2002. 4 Self-reported ability to communicate in English or French (the UK and Ireland). Data from the Candidate Countries Eurobarometer 2002 and Eurobarometer number 55 (2001). 5 Index measuring the inclusion of a particular culture into global civil society. Data from Anheier and Stares (2001): Introducing the Global Civil Society Index.

19

Table 26: Medium openness Country



EU member state

Open for ideas



Fuzzy membership

22.0 29.2 26.7 8.1 24.0 13.7 16.5 21.6 13.1 9.9 27.7

2004 2004 yes yes 2004 yes 2004 yes 2004 2004 yes

6.61 7.84 5.70 7.25 6.89 7.24 n.a 8.00 7.16 6.38 6.85

22 29 32 36 14 28 26 22 18 43 18

0.43 0.29 0.64 0.33 0.10 0.44 0.32 n.a. 0.29 0.38 0.37

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

3

4

5

2

Czech Rep. Estonia France Greece Hungary Italy Latvia Portugal Slovakia Slovenia Spain

73.18 97.90 28.77 22.78 69.25 27.31 35.00 35.89 75.56 60.92 31.28


20

Table 27: Low openness Country



EU member state

Open for ideas



Fuzzy membership

13.5 10.4 11.0 9.0 6.2

ex.2007 2004 2004 ex.2007 no

n.a. n.a. 5.85 n.a. 7.14

14 21 22 16 n.a.

0.07 0.12 0.16 n.a. 0

0 0 0 0 0

3

4

5

2

Bulgaria Lithuania Poland Romania Russia

47.00 41.00 30.93 32.00s 35.4


21

Table 28: High level of civilisational competence Country Austria Belgium Denmark Finland France Germany Italy Norway Sweden Switzerland UK

Modernisation*

Geo-political position**

Fuzzy-set membership

Highly modernised Highly modernised Highly modernised Highly modernised Highly modernised Highly modernised Highly modernised Highly modernised Highly modernised Highly modernised Highly modernised

Core country Core country Core country Core country Core country Core country Core country Core country Core country Core country Core country

1 1 1 1 1 1 1 1 1 1 1

*Modernisation refers to the political, economic (industrialisation), political (democracy) and social changes that has occurred in three periods: 1) from the end of 19th century until the First World War, 2) the inter-war period and 3) the period from 1945 until 1990. Highly modernised countries are defined as firstcomers (like the UK or the Netherlands) or early (successful) latecomers (like Finland). Semi-peripheral modernisation refers to the countries which were in the first period under the Habsburg rule (Hungary, Slovakia, Slovenia, Czech Rep.) or countries where modernisation was accelerated after their accession to the EU (Spain, Portugal, Greece, Ireland; the latter already belongs, after the 1990s, to the group of highly modernised countries). Peripheral modernisation refers to the countries which have been in their history very marginally involved in the world economic system and experienced long period of stagnation in terms of modernisation (for instance, the Baltic countries under Soviet rule). Estonia and Poland are special cases being on the line of demarcation between semi-peripheral and peripheral position. ** Core countries constitute the centre of ‘gravitation’ in the context of European process of modernisation.

22

Table 29: Medium level of civilisational competence Country Czech R. Greece Hungary Ireland Portugal Slovakia Slovenia Spain

Modernisation

Geo-political position-borders with core countries

Fuzzy-set membership

Semi-peripheral modernisation Semi-peripheral modernisation Semi-peripheral modernisation Semi-peripheral modernisation Semi-peripheral modernisation Semi-peripheral modernisation Semi-peripheral modernisation Semi-peripheral modernisation

Yes (2) No Yes (1) Yes (1) No Yes (1) Yes (2) Yes (1)

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

23

Table 30: Low level of civilisational competence Country Bulgaria Estonia Latvia Lithuania Poland Romania Russia

Modernisation Peripheral modernisation Peripheral modernisation Peripheral modernisation Peripheral modernisation Peripheral modernisation Peripheral modernisation Peripheral modernisation

Geo-political position-borders with core contries No No No No Before WW2 and after 1990 No Yes

Fuzzy-set membership 0 0 0 0 0 0 0

24

On the basis of this procedure, we can assemble the data for fuzzy-set analysis in the following spreadsheet.

Table 31: Fuzzy-set database Country

DP

CC

SC

CM

QG

ES

COH

OP

Belgium Denmark Finland Netherlands Norway Sweden Austria Germany Switzerland UK Ireland France Italy Spain Portugal Czech R. Slovenia Estonia Hungary Greece Slovakia Poland Latvia Lithuania Bulgaria Romania Russia

1 1 1 1 1 1 1 1 1 1 1 1 1 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0 0 0 0 0 0

1 1 1 1 1 1 1 1 1 1 0.5 1 1 0.5 0.5 0.5 0.5 0 0.5 0.5 0.5 0 0 0 0 0 0

1 1 1 1 1 1 1 1 1 1 1 0.5 0.5 0.5 0 0.5 0.5 0.5 0 0.5 0.5 0 0 0 0 0 0

1 1 1 1 1 1 1 1 1 1 1 1 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0 0.5 0 0 0 0 0

1 1 1 1 1 1 1 1 1 1 1 1 0.5 1 1 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0 0 0

1 1 1 1 1 1 1 1 1 1 1 1 1 0.5 0.5 0.5 0.5 0.5 0.5 0 0.5 0 0 0 0 0 0

1 1 1 1 1 1 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0 0 0.5 1 0 0 0 0 0 0

1 1 1 1 1 1 1 1 1 1 1 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0 0.5 0 0 0 0

Abbreviations: DP—developmental performance CC—civilisational competence SC—social capital

CM—cognitive mobilisation QG—quality of governance ES—entrepreneurial spirit

COH—social cohesion OP—openness

25


209

The Results of the Fuzzy-set Analysis78 After we have formulated the fuzzy set spreadsheet, we can attempt at an empirical verification of the model of socio-cultural factors of developmental performance. We can test relationships between the three levels of the model. First is the impact of the level ‘history matters’ on the level of current and prospective factors. If our model is correct, analysis would have to show that civilisational competence is a necessary cause of other factors. As the data below show, civilisational competence is usually the necessary cause of other factors of developmental performance, with the exception of the quality of governance. If we look at the data from Table 28 we can see why this is the case. Across a range of countries, membership in the fuzzy set ‘quality of governance’ exceeds their membership in set ‘civilisational competence’. This is a consequence of democratisation in a number of countries with lower levels of civilisational competence that took sway in the past few decades. Interesting examples are Spain and Portugal, which have improved their quality of governance significantly since the 1970s, especially as a consequence of the accession to the EU. A special case are the post-socialist countries, where significant improvements also took place as a part of democratisation in the 1990s, although the quality of governance is still not of the highest level.

Dependent Factor

p for different factors

SC CM QG ES COH OP

0.017* 0.033* 0.358 0.012* 0.003* 0.025*

The second is the relationship between the two levels of socio-cultural factors and developmental performance. The model can be empirically verified if the factors are statistically significant necessary conditions for developmental performance: We employed a computer programme designed specifically for fuzzy-set analysis in thefor social sciences (FS/QCA version 0.963). 78

210


PERFORMANCE = CC x SC x CM x QG x ES x COH x OP Number of Cases Tested (Outcome > 0): 21 (77.8% of Total)79 Method: Probabilistic Test Proportion: 0.65 *p < 0.10 Necessary Cause Observed Binomial Variable Outcome Proportion p CC SC CM QG ES COH OP

19 17 19 20 20 12 19

0.90 0.81 0.90 0.95 0.95 0.57 0.90

0.009* 0.092* 0.009* 0.001* 0.001* 0.009*

The results of the analysis of necessary conditions showed that civilisational competence, social capital, cognitive mobilisation, quality of governance, entrepreneurial spirit and openness of societies are necessary conditions for developmental performance. The only factor that is not statistically significant is the level of social cohesion. However, we can note that no country with high levels of developmental performance has a low level of social cohesion and only two countries with medium developmental performance (Hungary and Estonia) have low levels of social cohesion. However, all countries with a low level of developmental performance also have low social cohesion. We have therefore conducted another analysis, where we tested a different relation, namely, the relation between a poor level of social cohesion as a necessary cause of poor deOur sample covers 27 countries, but only 21 were included in the analysis (‘Number of cases tested’ in the table). This is due to the specifics of the fuzzy-set analysis of sufficient conditions. Namely, including cases where the outcome is 0 (in our case six peripheral countries) would positively bias the outcome towards verification of the researcher’s hypothesis. Those cases, where the cause (individual factors of development in our analysis) has a higher or equal fuzzy-set membership than the outcome (developmental performance in our analysis) confirm that a specific factor is a sufficient cause. Hence, the column ‘Observed outcome’ shows the number of cases where the above holds true. The logic is: the higher the ‘observed outcome’, the higher the ‘binominal proportion’. The final row shows the calculated statistical significance. 79


211

velopmental performance. In this case the relationship was statistically significant: a low social cohesion is usually a necessary cause for a low developmental performance. But it is not a sufficient one, meaning that some other negative conditions have to be fulfilled as well. The results of the analysis also showed that a combination of all necessary factors is a statistically significant sufficient condition of developmental performance. The implications of this result are important: a country can embark on positive developmental trends if all factors are present simultaneously. There has to be a cumulative effect and synergy.

10. Conclusion

213

10. Conclusion

It is a truism that societies of the former socialist camp—which ECE societies are also a part of—are undergoing a process of comprehensive systemic transformation. They have launched a wide set of reforms in different social fields and intended to establish an institutional setting comparable to that of the most developed Western societies. However, the course and social consequences of these reforms differ considerably between former socialist countries. The Transition Report 1999 prepared by the EBRD, which analyses economic transition in these countries but also deals with the factors that influence its character, discerns two reform patterns (Transition Report 1999: 22). In the most developed post-socialist countries, early liberalisation, continuous macroeconomic stabilisation and extensive privatisation builds the foundations for a gradual transformation of institutions needed for successful development of the market economy. Meanwhile, in less developed post-socialist countries, there is a slow and uneven progress in economic liberalisation. Macroeconomic stabilisation is endangered by budget outflows in the form of subsidies for inefficient ‘real-socialist’ companies, and the banking and business environment is not conductive for development of new companies. All ECE countries belong—together with the Baltic countries—to the group of more advanced reform countries. Hungary is the most favourably assessed country. It is followed by Poland and the Czech Republic while Slovakia and Slovenia received somewhat lower estimates.80 80 The study analyses eight reform areas: large-scale privatisation, small-scale privatisation, governance & enterprise restructuring, price liberalisation, trade & foreign exchange system, competition policy, banking reform & interest rate liberalisation and securities markets & non markets institutions.

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However, the successful accomplishment of institutional reforms is necessary but not sufficient condition for system competitiveness. For this, more qualitative or dynamic factors are needed—the ones that are the subject of our analysis. These socio-cultural factors contribute to the very reform success but—furthermore—they are necessary to achieve the state of full system competitiveness on the international level. However, it has to be stressed that neither competitiveness nor development should be considered as goals in themselves. Competitiveness should not be considered as a zero-sum-game, but a game where everybody has the opportunity to gain something. In other words, competition has a positive impact when it can induce the development of human resources and the process of synergy and cooperation. In the long run, economic performance and the modernisation of other social spheres must be based on the concept of sustained and sustainable development that includes its social and ecological limits. The analysis carried out in our book demonstrates two general characteristics of the state of selected social and cultural aspects in examined societies. On the one hand, ECE countries on average perform considerably better than other transition countries regarding all examined aspects. On the other hand, they lag behind the countries of the developmental core and—in most aspects—behind the majority of EU members. However, in some important regards they achieved better results than the southern wing of EU—especially Greece and Portugal. We came to the conclusion that historical legacy and the cultural models still have some impact on the productive potential of societies or regions and their developmental trajectories. Investigating the role of civilisational competence, we argue that ECE can be regarded as a third historical region in Europe. Regarding cognitive mobilisation, even the most advanced ECE countries are on average comparable only with the least developed EU countries, although they have positive trends in some of its aspects, especially in enrolment in formal education. The more problematic element is informal education, i.e. the permanent process of a life-long education, which is insufficiently developed in all these countries. What is especially problematic from the point of view of successful cognitive mobilisation is the weakness of mechanisms of mediation, coordination and cooperation between ‘producers of knowledge’ (universities and research institutes) and enterprises and other ‘consumers of knowledge’ (public administration, service industry etc.).

10. Conclusion

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In the political field, these countries have also experienced considerable progress. They are consistently better assessed than other transition countries where democracy is (still) very weak or there have even been backlashes and returns to some form of authoritarianism. For all the ECE countries, it can be said that they managed to consolidate their democratic systems. However, according to the majority of indicators their quality of governance is still lower than in established democracies. These countries lack certain elements of governance related to higher levels of effectiveness and the level of democracy (such as citizen participation, a dynamic system of political associations, the competence and impartiality of state institutions etc.). Differences between the EU and ECE countries also exist with regard to entrepreneurial spirit. However, the situation on this matter is quite diversified. Thus we can not simply speak about a general lag between these two groups of countries. While some Western countries like Finland, Sweden and the Netherlands are far ahead of all ECE countries, some southern EU members like Greece exhibit entrepreneurial spirit that is in many aspects lower than in better developed ECE countries. As far as social cohesion is concerned, the situation is quite heterogeneous. We could say that there exist certain elements (basic value consensus, developed sense of national identity) which social cohesion could rest on. However, one can also observe negative trends like rise of inequality and different manifestations of social anomie. Furthermore, civil society is quite weak and different forms of civic participation are still in the process of formation. The majority of ECE countries are characterised by relatively high levels of political openness, manifested especially by their tendencies to join the EU. While, as far as economic and socio-cultural openness is concerned, we are looking at a more complicated situation. One of the key problems regarding future developmental performances of ECE countries is the still insufficient level of social capital, i.e. generalised trust, cooperation and self-organisation, which has a negative impact on their potential for the establishment of projects and associational types of organisation, as well as the creation of intermediary structures. This impact is especially evident in those components that demand intensive communication and special (often unconventional) solutions on the basis of spontaneous sociability. According to some indicators (taken by the last European Values Study) it seems that the situation in Slovenia, Slovakia and the Czech Republic has improved, but we do not know if

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accumulated social capital is really circulating and being utilised, especially if the data about the low level of trust are taken into consideration. On the basis of our analysis, we can come to the conclusion that ECE countries in the last decade of the 20th century achieved considerable progress and thus created a good starting point for further developmental dynamics. However, they still have not transformed themselves into propulsive, vibrant societies that cherish creativity, open-mindedness and social and technological innovativeness. The final assessment of key issues analysed in our book, i.e. the developmental performances of ECE countries and their future in the EU as well as the appropriateness and validity of the methodological and conceptual design of our book, should be made by readers themselves. Although our model of socio-cultural factors was considered at the beginning as a heuristic model, it turned out that it is able to pass the empirical test on the basis of the fuzzy-set method. This gives to the book a new dimension and a more persuasive image. We could say that in many aspects, we did a pioneering work since we dealt with questions only becoming a part of the research agenda. We also tried to establish a sensitive balance between the impartial interpretation of data and value judgements and theoretical generalisations. It is not our intention to portray the developmental indicators and efforts made by transition countries to catch up with the development level of EU as a competitive ‘race’. It has to be taken into account that we are dealing with comparative (crossnational) analysis where differences (and similarities) among countries or group of countries come to the fore. We believe that such analysis— which reveals the (dis)advantages and developmental insufficiencies of a given country—can be used as a tool for self-reflection, social learning and consequently, perhaps, in the reconsideration of developmental strategy.

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Index

accountability, 86, 87, 88, 93, 185 acquis communautaire, 6 actors, 10, 23, 24, 25, 34, 40, 43, 50, 84, 85, 87, 90, 103–107, 131, 153, 183 political actors, 85, 87, 105, 131 adaptability, 1, 4, 9, 12, 24, 32, 34, 114, 124, 152, 154 Adler, Paul, 45 Albania, 92, 97 Anderson, Benedict, 151 Anheier, Helmut, 166 anomie, 28, 42, 133, 134, 135, 146, 148, 150, 186, 215 Armenia, 92, 149 Austria, 31, 54, 56, 69, 73, 74, 76, 94, 95, 96, 99, 100, 115, 116, 117, 118, 121, 126, 139, 141, 142, 147, 154, 170 Azerbaijan, 92, 100, 101 Banfield, Edward, 108 Beck, Ulrich, 5, 7 Becker, Gary S., 38 Belarus, 92, 93, 94, 95, 100, 102, 139, 144, 145, 147 Belgium, 54, 69, 73, 74, 75, 76, 96, 97, 98, 100, 115, 116, 117, 118, 126, 138, 141, 142, 143, 161, 170 Bell, Daniel, 61 Berend, Iván T., 174, 182, 183 Berger, Peter L., 22, 23, 31

Berger-Schmitt, Regina, 132, 149 Bernik, Ivan, 140 Bole-Kosmač, Daša, 64 Bosnia, 92 Bourdieu, Pierre, 38, 39, 40, 41, 43, 44 Bulgaria, 17, 18, 33, 35, 54, 60, 92, 93, 94, 95, 97, 102, 138, 163, 164, 165, 166, 170, 184, 220 Burt, Ronald, 43 business, 22, 26, 30, 49, 50, 64, 67, 78, 90, 107, 110, 111, 112, 113, 114, 115, 118, 121, 123, 124, 125, 128, 129, 163, 175, 182, 186, 213 business creation, 115, 129 business development, 123, 124, 128 business sectors, 125 business sphere, 26, 30, 107, 110, 125 capital, 18, 27, 62, 64, 67, 70, 79, 80, 82, 114, 118, 121, 124, 126, 128, 129, 155, 156, 160, 162, 167, 168, 169, 183 Cassidy, Michael F., 46 Chiesi, Antonio, 132 civic community, 48, 50, 51 civic solidarity, 186 civil society, 20, 26, 30, 37, 47, 49, 51, 52, 53, 86, 134, 135, 140, 143, 144, 148, 149, 157, 159, 166, 168, 186 global civil society, 166, 168, 186, 217

230

Index

civilisational competence, 8, 11, 15, 17, 19, 21, 23–35, 53, 159, 173, 186, 205, 206, 207, 209, 210, 214 cognitive mobilisation, 8, 9, 11, 61, 62, 63, 64–84, 106, 109, 112, 113, 155, 156, 185, 190, 191, 192, 210, 214 Coleman, James, 38, 39, 40, 41, 43, 44 collective action , 23, 26, 28, 59 communism, 6, 28, 31, 32, 85, 95, 97, 174 competition, 49, 50, 78, 86, 87, 89, 95, 102, 133, 213, 214 competitive advantage, 64, 82, 83, 113, 176 competitiveness, 1, 4, 6, 8, 9, 18, 25, 59, 62–67, 75, 82, 89, 90, 91, 93, 96, 98, 99, 100, 103, 104, 111, 112, 113, 120, 123, 126, 129, 133, 139, 152, 160, 167, 176, 177, 185, 214 system competitiveness, 214 systemic competitiveness, 6, 62, 65, 71, 79, 80 convergence, 6, 59, 173 competitiveness convergence, 6, 59 institutional convergence, 6 cooperation, 11, 28, 42, 46, 49, 50, 52, 53, 59, 67, 80, 81, 84, 105, 113, 118, 121, 130, 133, 146, 149, 150, 186, 214, 215 technological cooperation, 118 coordination , 5, 7, 11, 12, 52, 59, 65, 130, 153, 171, 214 core, 1, 5, 6, 12, 33, 34, 35, 74, 75, 77, 79, 111, 112, 116, 117, 118, 121, 124, 128, 130, 175, 177, 181, 182, 214 developmental core, 67, 78, 80, 111, 214 modernised core, 6, 35 corruption, 27, 53, 87, 91, 100, 101, 102, 104, 109, 134, 186 Croatia, 33, 92, 93, 95, 97, 102, 114, 115, 139, 147 cultural map, 24, 62, 63 cultural turn, 22 culture, 3, 4, 8, 15, 16, 20, 21, 22, 23, 26, 27, 30, 41, 53, 88, 94, 95, 141, 164, 168 economic culture, 22

political culture, 41, 88, 94, 95 Czech Republic, 5, 6, 17, 18, 27, 32, 33, 48, 54, 56, 59, 67, 69, 71, 73, 74, 75, 76, 77, 79, 80, 81, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 115, 116, 117, 118, 121, 124, 127, 128, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 177, 184, 213, 215 Dahl, Robert A., 86 data, 2, 3, 13, 18, 27, 30, 31, 36, 41, 42, 54, 56, 59, 60, 62, 64, 65, 66, 67, 69, 70, 71, 73, 74, 76, 77, 79, 81, 83, 87– 90, 93, 95, 96, 98, 100, 103, 104 democracy, 6, 16, 20, 29, 40, 85–89, 92– 97, 102, 104, 106, 139, 156, 185, 215 consolidation of democracy, 6, 102 level of democracy, 87, 88, 93, 102, 106, 186, 215 democratisation, 29, 87, 89, 91, 92, 93, 95, 209 Denmark, 56, 63, 67, 69, 73, 74, 75, 76, 98, 100, 101, 109, 114, 116, 117, 118, 124, 126, 170, 181 development, 5, 7, 9, 11, 19, 20, 21, 29, 31, 32, 49, 59, 61, 65, 71, 77, 79, 81, 82, 87, 88, 89, 105, 111, 112, 121, 123, 126, 133, 134, 135, 137, 143, 147, 151, 155, 157, 169, 171, 177, 179, 181, 183, 185, 186, 193, 195, 197, 199, 201, 203, 209, 211, 213 closed auto-centric development, 153 economic development, 3, 15, 16, 34, 47, 48, 83, 124, 173, 174, 175, 176 open auto-centric development, 153 sustained development, 1, 2, 4, 6, 8, 10, 12, 16, 18, 20, 22, 24, 26, 28, 30, 34, 36, 38, 40, 42, 44, 46, 48, 50, 52, 54, 56, 58, 60, 62, 64, 66, 68, 70, 72, 74, 76, 78, 80, 82, 84, 86, 88, 90, 92, 94, 96, 98, 100, 102, 104, 106, 108, 110, 112, 114, 116, 118, 120, 122, 124, 126, 128, 130, 132, 134, 136, 138, 140, 142, 144, 146, 148, 150,

Index

231

152, 154, 156, 158, 160, 162, 164, 166, 168, 170, 174, 176, 178, 180, 182, 184, 186, 188, 186, 194, 196, 198, 200, 202, 204, 210, 214, 216 developmental performance, 2, 8, 9, 10, 16, 35, 51, 61, 71, 75, 83, 107, 108, 121, 127, 130, 153, 170, 173, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 209, 210, 211 differentiation, 19, 133, 139, 148, 151 functional differentiation, 133, 151 segmental differentiation, 151 Drnovšek, Janez, 97 Durkheim, Emile, 131, 151

entrepreneurial environment, 113, 116, 121, 124, 125, 126, 127, 128, 186 international environment, 11, 167, 171, 183 Estonia, 18, 33, 35, 54, 56, 67, 71, 73, 74, 75, 76, 77, 79, 92, 93, 94, 96, 97, 98, 99, 100, 101, 102, 115, 116, 117, 118, 121, 124, 127, 128, 137, 138, 146, 147, 160, 161, 162, 163, 164, 166, 168, 170, 177, 184, 210 Eurobarometer, 135, 137, 145, 164, 165, 166 European Values Survey, 54, 134, 138, 144, 149

East-Central Europe, 5, 137, 160, 163, 164 education, 10, 18, 27, 30, 32, 43, 48, 62, 64, 65, 67, 69, 70, 71, 73, 74, 78, 79, 80, 84, 93, 112, 136, 139, 140, 141, 182, 185, 214 educational structure, 65, 69, 70, 71, 78 effectiveness, 6, 47, 48, 53, 84, 87, 90, 91, 93, 98, 99, 102, 105, 106, 113, 186, 215 elections, 86, 88, 94, 97, 98, 102 Ellias, Norbert, 22, 25 entrepreneurial spirit, 8, 9, 11, 21, 26, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 117, 119, 121, 123, 125, 126, 127, 128, 129, 130, 155, 156, 186, 196, 197, 198, 210, 215 entrepreneurship, 9, 20, 22, 28, 29, 31, 49, 107–115, 125, 129, 130 enterprises, 10, 26, 43, 67, 80, 81, 82, 107–118, 121, 124, 125, 126, 127, 129, 130, 186, 214 creation of new enterprises, 109, 114, 115, 127, 129, 186 small and medium enterprises, 107, 130 environment, 4, 9, 11, 23, 34, 49, 50, 66, 76, 84, 88, 90, 106, 108–118, 121, 124–129, 154, 163, 165, 167, 171, 175, 183, 186, 213

Finland, 33, 59, 63, 67, 73, 74, 75, 76, 78, 80, 94, 96, 97, 98, 99, 100, 101, 114, 115, 116, 117, 118121, 124, 125, 126, 141, 142, 145, 147, 170, 181, 215 Fordist paradigm, 6, 7, 130 foreign direct investment, FDI, 76, 113, 114, 116, 126, 127, 128, 155, 156, 160, 161, 163, 167, 176, 182, 186 foreign labour, 156, 162 foreign language proficiency, 159, 166, 168, 186 France, 42, 54, 56, 60, 67, 73, 75, 76, 78, 93, 94, 98, 99, 100, 115, 116, 117, 126, 141, 142, 154, 170, 177 Freedom House, 88, 89, 104 Freedom in the World, 88, 93, 226 Fukuyama, Francis, 42, 46 fuzzy-set analysis, 183, 184, 205, 208, 209 generation of competencies, 111, 112, 113, 116, 125, 130, 186 Georgia, 92 Germany, 20, 42, 54, 59, 60, 63, 67, 69, 74, 75, 76, 78, 93, 99, 116, 117, 118, 121, 124, 126, 127, 138, 141, 142, 170, 177 Ghosal, Sumantra, 45 Giddens, Anthony, 5, 7 Gini coefficient, 134, 137, 148 Global Civil Society Index, 166, 168, 186

232

Index

Global Entrepreneurship Monitor, 111, 129 globalisation, 10, 16, 28, 37, 131, 144, 146, 151, 154, 162 Gouldner, Alvin, 61 governance, 4, 6, 8, 10, 11, 46, 85–105, 106, 157, 185, 213, 215 quality of governance, 4, 8, 10, 11, 46, 85, 87, 88, 89, 91, 93, 95, 97, 99, 100, 101, 103, 105, 185, 209, 210, 215 government, 21, 42, 43, 46, 50, 52, 56, 87– 91, 93–99, 103, 105, 106, 127, 131, 162, 185 government change, 89 Greece, 18, 33, 35, 56, 59, 60, 67, 69, 71, 73, 74, 75, 76, 78, 80, 87, 93, 94, 96, 97, 98, 99, 100, 101, 103, 112, 116, 117, 118, 121, 127, 128, 145, 147, 161, 170, 173, 177, 214, 215 Green, Andrew, 143, 149 Gross Domestic Product, GDP, 17, 18, 31, 32, 65, 73, 74, 75, 76, 83, 111, 118, 126, 160, 161, 162, 173, 174, 176, 177, 182, 186 GDP per capita, 17, 18, 31, 32, 174, 177 Human Development Report, 30, 71, 83, 89, 94, 134, 135, 136, 137, 138, 146, 147 human capital, 3, 9, 38, 48, 51, 62, 70, 79, 118, 155, 156 Hungary, 5, 6, 18, 26, 29, 32, 33, 48, 54, 56, 59, 67, 69, 71, 73, 74, 75, 76, 77, 79, 84, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 111, 114, 115, 116, 117, 118, 121, 124, 127, 128, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 177, 184, 210, 213 Huntington, Samuel P., 16, 87 identity, 10, 35, 132, 133, 134, 135, 144, 145, 146, 148, 150, 186

national identity, 145, 146, 148, 151, 152, 215 imagined community, 134, 151 Index of Economic Freedom, 83, 108, 113, 114, 121, 122, 128, 186 indicators, 2, 3, 5, 12, 17, 18, 26, 27, 35, 36, 41, 42, 43, 49, 53, 54, 59, 60, 61, 62, 64, 65, 66, 67, 76, 79, 80, 82, 83, 87, 88, 89, 90, 91, 97, 100, 103, 105, 107, 109, 112, 113, 118, 121, 125, 127–130, 132, 134, 136, 143, 147, 148, 149, 156, 159, 164, 165, 167, 168, 176, 177, 185, 186, 215, 216 assessment of indicators, 103 infrastructure, 8, 9, 15, 64, 66, 76, 77, 81, 82, 84, 176, 185 information and telecommunication infrastructure, 9, 66, 76, 185 Inglehart, Ronald, 16, 22, 62 innovations, 9, 24, 33, 50, 51, 59, 61, 62, 64, 65, 75, 79, 80, 81, 84, 108, 109, 113, 130, 176, 185 technological and social innovations, 33, 65, 75, 79, 84, 185 innovativeness, 21, 26, 69, 110, 112, 128, 177, 216 institutions, 4, 6, 15, 27, 31, 32, 40, 41, 43, 45, 50, 52, 53, 56, 63, 64, 65, 81, 82, 84, 86, 89, 90, 91, 94, 95, 96, 101– 106, 113, 127, 131, 133, 135, 145, 146, 148, 157, 162, 181, 213, 215 institutional performance, 37, 47, 48, 105 international organisations, 156, 157, 158 Ireland, 19, 35, 54, 59, 69, 71, 73, 75, 76, 78, 80, 93, 96, 114, 115, 116, 117, 118, 121, 124, 126, 141, 142, 143, 145, 161, 170, 182 Italy, 33, 42, 47, 48, 49, 50, 53, 54, 56, 67, 69, 71, 74, 75, 76, 78, 93, 94, 96, 97, 98, 99, 100, 101, 103, 108, 109, 116, 117, 118, 126, 127, 170, 173, 177 Kazakhstan, 92, 100, 147 Keefer, Phillip, 42 Knack, Stephen, 42

Index knowledge, 5, 7, 9, 11, 27, 28, 49, 50, 51, 59, 60–67, 78, 79, 80, 81, 83, 84, 105, 106, 127, 155, 156, 162, 163, 165, 167, 168, 185, 214 dissemination and application of knowledge, 9, 63, 67, 185 functional knowledge, 27, 28, 186 Kolarič, Zinka, 140 Kornai, János, 174 Krek, Janez, 30 Kwon, Seok-Woo, 45 Kyrgyz Republic, 92 Latvia, 33, 54, 75, 92, 93, 94, 97, 100, 102, 137, 138, 146, 147, 161, 165, 166, 170, 184 learning, 7, 9, 11, 24, 27, 35, 60, 62, 64, 65, 69, 74, 79, 84, 106, 185, 216 Literacy in the Information Age, 65, 74, 227 Lithuania, 33, 54, 75, 92, 93, 94, 97, 100, 101, 102, 137, 146, 147, 161, 166, 170, 184 Loury, Glenn, 39 Luhmann, Niklas, 154, 157 Macedonia, 92 Maddison, Angus, 174 Mali, Franc, 81 management, 7, 28, 32, 52, 63, 66, 67, 82, 89, 90, 91, 99, 113, 185 Maria Theresa (empress), 62 Marshall, Alfred, 3 Mečiar, Vladimir, 97, 144 Merton, Robert, 3 middle-ranged theories, 3 mobilisation of resources, 111, 112, 113, 116, 125, 127, 128, 130, 186 modernisation, 2–7, 16, 17, 19, 21, 22, 23, 24, 25, 28, 29, 31, 32, 34–36, 62, 66, 82, 151, 174, 186, 214 reflexive modernisation, 5–7 simple modernisation, 5–7 Moldova, 92, 100, 101 Nahapiet, Janine, 45

233

Narayan, Deepa, 46 Nations in Transit, 88, 90, 91, 92, 93, 99, 100, 101, 104, 142, 144 NATO, 158, 164, 170 neo-institutionalism, 5, 22 Netherlands, 54, 56, 63, 67, 69, 73, 74, 75, 76, 77, 78, 99, 101, 114, 115, 116, 117, 121, 124, 125, 126, 141, 142, 143, 161, 170, 215 network (project) organisations, 52 New Democracies Barometer, 56, 89, 95, 96, 134, 135, 139, 145 non-governmental organisations, 134, 140, 141, 142, 166 North, Douglas, 5 Norway, 54, 56, 63, 67, 73, 75, 76, 78, 94, 99, 114, 115, 116, 117, 124, 126, 138, 170, 177, 181, 184 O’Donnnel, Guillermo, 86 openness, 4, 8, 10, 11, 28, 32, 90, 116, 127, 151–171, 186, 202, 203, 204, 210, 215 economic openness, 155, 156, 160, 167, 168, 169, 170, 186 political openness, 155–158, 163, 164, 167, 168, 169, 171, 186, 215 socio-cultural openness, 154, 155, 158, 159, 164, 165, 166, 167, 168, 169, 170, 215 Parsons, Talcott, 2, 3, 4, 22, 24, 25, 31 path-dependency, 19 Pavlič-Damijan, 155 Paxton, Pamela, 42 periphery, 6, 16, 19, 33, 34, 35, 62, 67, 79, 175, 177, 183 Poland, 5, 6, 18, 19, 29, 32, 33, 35, 54, 56, 69, 71, 73, 74, 75, 76, 77, 79, 81, 84, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 111, 114, 115, 116, 117, 118, 121, 128, 137, 138, 139, 143, 144, 145, 146, 147, 160, 161, 162, 163, 164, 165, 168, 170, 177, 184, 213 Polanec, Sašo, 155

234

Index

policy, 17, 47, 51, 78, 82, 83, 84, 87, 89, 90, 93, 98, 99, 114, 127, 131, 132, 138, 140, 148, 156, 164, 213 political destabilisation, 89, 96 political elites, 62, 89, 98, 146, 163, 164 reproduction and circulation of political elites, 89 political participation, 21, 47, 48, 88, 94, 102, 166 political parties, 96, 102, 146, 163 politics, 10, 26, 86, 87, 88, 89, 105, 134, 158, 218, 221, 222, 223 Porter, Michael, 4, 64, 82, 113, 175, 176 Portes, Alejandro, 39, 44 Portugal, 18, 35, 54, 56, 67, 69, 73, 74, 75, 76, 78, 80, 84, 87, 93, 96, 97, 98, 99, 101, 103, 112, 115, 116, 117, 118, 127, 128, 145, 170, 173, 177, 209, 214 post-communist, 2, 5, 6, 12, 85, 92, 93, 95, 100, 101, 103, 160 post-socialist countries, 19, 21, 75, 76, 115, 118, 139, 141, 173, 175, 181, 182, 209, 213 post-fordist paradigm, 6, 7 Press Freedom Survey, 89, 94, 104 privatisation, 6, 29, 81, 90, 99, 104, 136, 182, 213 productivity, 18, 23, 26, 50, 53, 155, 156, 176, 177 project organisation, 52 Putnam, Robert D., 22, 38, 41, 44, 45, 46, 47–51, 53 Ragin, Charles, 183, 184 rationalisation, 22, 61 rationality, 22, 82 Ricardo, David, 4 requisite variety, 34, 152 Rojec, Matija, 155 rule of law, 10, 20, 53, 86, 87, 90, 91, 93, 100, 102, 105, 186 Rupnik, Jacques, 19, 20 Russia, 18, 19, 20, 35, 53, 75, 92, 93, 95, 97, 98, 99, 100, 101, 114, 115, 118, 136, 137, 138, 147, 170, 177, 184

Schumpeter, Joseph A., 85 self-organisation, 32, 35, 215 semi-periphery, 16, 34, 62, 67, 79, 175 Slovakia, 5, 6, 18, 27, 33, 48, 54, 56, 59, 60, 71, 73, 74, 75, 76, 77, 79, 92, 93, 94, 96, 97, 98, 99, 100, 101, 102, 115, 116, 117, 118, 121, 128, 137, 138, 139, 140, 141, 142, 143, 144, 145, 147, 148, 160, 161, 162, 163, 164, 165, 166, 170, 177, 184, 213, 215 Slovenia, 5, 6, 17, 18, 19, 20, 24, 26, 27, 30, 31, 32, 33, 35, 48, 54, 56, 59, 67, 69, 70, 71, 73, 74, 75, 76, 77, 78, 79, 80, 81, 84, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 104, 111, 114, 115, 116, 117, 118, 121, 124, 125, 127, 128, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 177, 184, 213, 215 small states, 152–154 Smith, Adam, 3, 4 Smith, Anthony, 152 social (in)equality, 134, 135 social capital, 3, 8, 9, 10, 11, 21, 22, 37– 61, 67, 84, 105, 106, 109, 130, 135, 149, 150, 151, 159, 171, 185, 186, 187, 188, 189, 210, 215, 216 bonding social capital, 45 bridging social capital, 42 social cohesion, 8, 10, 11, 106, 109, 131– 139, 141, 143, 144, 145, 147–151, 186, 199, 200, 201, 210, 211, 215 social networks, 159 society, 5, 11, 15, 16, 20, 22, 25, 26, 28, 30, 31, 34, 37, 40, 42, 45, 46, 47, 49, 51, 52, 53, 54, 59, 61, 62, 64, 66, 74, 81, 83, 85, 86, 88, 130, 131, 132, 133, 134, 135, 136, 137, 138, 140, 143, 144, 146, 148, 149, 152, 156, 157, 159, 166, 168, 171, 186, 215 industrial society, 7, 61, 218 knowledge society, 62, 81 post-industrial society, 7, 61, 218 socio-cultural factors, 155, 181, 183, 184, 214, 216

Index socio-cultural factors of developmental performance, 2, 8, 130, 209, 210 Spain, 35, 54, 67, 70, 71, 74, 75, 76, 78, 80, 87, 93, 96, 97, 99, 101, 103, 112, 114, 116, 117, 118, 124, 126, 141, 142, 170, 173, 177, 209 Spencer, Herbert, 151 stability, 6, , 93, 102, 103, 113 political stability, 87, 89, 96, 186 Stares, Sally, 166 Sweden, 56, 63, 67, 69, 73, 74, 75, 76, 94, 100, 109, 116, 117, 118, 121, 124, 125, 126, 170, 181, 215 Switzerland, 56, 71, 73, 75, 76, 78, 94, 96, 98, 100, 101, 109, 114, 116 systems theory, 4, 154 Sztompka, Piotr, 21, 23, 28, 29 Tajikistan, 92, 93 technology transfer, 7, 64, 67, 112, 116 The Global Competitiveness Report, 64, 66, 67, 112, 129, 185 Towards a European Research Area, 66, 75, 113 trade, 53, 76, 113, 114, 156, 158, 160, 167, 174, 183, 186, 213 transition, 74, 82, 87, 90, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 114, 125, 126, 130, 134, 136– 139, 140, 141, 143, 144, 147, 148, 173, 181, 213, 214, 215, 216 Transition Report, 126, 134, 137, 213, 227 transparency, 87, 90, 91, 93, 100, 104, 106, 113, 149, 186 Transparency International, 91, 100 trust, 11, 21, 29, 40, 41, 42, 43, 45, 46, 50, 51, 52, 53, 54, 56, 59, 60, 63, 96, 105, 145, 146, 148, 150, 171, 185, 215, 216

235

generalised trust, 41, 46, 54, 56, 60, 105, 185, 215 trust in institutions, 41, 43, 96 Tuđman, Franjo, 102 Turkmenistan, 92, 93, 94, 100, 101, 102, 144 Ukraine, 95, 145 UNCTAD Database, 160, 161 United Kingdom, 93, 141, 170 Uzbekistan, 92, 93, 94, 100, 101, 102, 144 values (value orientations), 4, 8, 15, 16, 21, 22, 23, 41, 54, 56, 62, 63, 85, 88, 95, 134, 138, 144, 149, 165, 174, 215 value orientations, 22, 104, 110 van Rossem, Ronan, 183 voluntary associations, 54, 56, 60 voluntary work, 144 Wallerstein, Immanuel, 175 Weber, Max, 3, 22, 25, 31, 61, 157 Western Europe, 54, 136, 143, 174 Willke, Helmut, 5, 7 Woolcock, Michael, 37, 45 work ethics, 26, 186 World Bank, 38, 47, 52, 87, 88, 90, 91, 93, 96, 97, 98, 99, 100, 105, 126, 182 World Competitiveness Yearbook, 18, 67, 75, 79, 89, 90, 91, 93, 96, 98, 99, 100, 103, 104, 113, 120, 123, 129, 167, 177 World Values Survey, 41, 54, 56, 63 Worldwide Governance Data Indicators, 88 xenophobia, 158, 159, 165, 166, 169 Yugoslavia, 31, 32, 35, 92, 102, 165, 166

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