Universal versus contextual rationality: a case of Slovenia
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CONCLUSIONIt was not the intention of this paper to present the “right” answers to the challenges of transition in Slovenia. Forces behind boundedness and contextuality of rationality are such that changes can be expected only through actions of decision-makers (managers, entrepreneurs, politicians, bankers, owners, workers, customers,…) and the final outcome can rarely be predicted by a social scientist. However, we wanted to show that if the holistic approach to rationality which assumes both, boundedness and contextuality, would be taken more seriously in the transition process of the last decade, better results could be achieved from the transition. And the same probably holds true for the future. Probably the biggest challenge for Slovenian decision-makers is how to overcome narrow-mindedness of “valley-communities” and open them to global challenges. We have argued that during the transition period the context has changed considerably in Slovenia, which will presumably have a considerable effect on the “background institutions” in the longer period as well. Because of the nature of “background institutions” we do not expect them to disintegrate but to evolve gradually into a new quality. We believe there are many possibilities for this to happen in a way which would support faster socio-economic development in Slovenia. For example, there are well-known cases of the Third Italy and West Jutland in Denmark where strong localism helps local companies to be internationally competitive. International cases also show that informal networks and grey economy could represent a solid basis for the proper entrepreneurial development. High discretion and autonomy of managers could help in developing a special type of “family” SMEs with a similar marketing and R&D logic to German “Mittelstand” companies. Inability of cooperation by managers could help the acquisition process and the establishment of a few larger companies, which would be open to global investors’ opportunities and pressures as well. On the other side, we have seen that there is local mutualism present which could support the development of cooperation between some SMEs, presumably newly established and coming from the grey sector, to become competitive outside their “valleys”. Based on the understanding of Slovenian specifics and knowing the successful cases Slovenian decision-makers could form their own rational decisions for economic success. A social scientist could help with this respect. In addition, much more has to be done with respect to theory and methodology of contextual rational decision-making. References:
1 In the last decades, texts on rationality increasingly use “person” instead of “man” when describing rationality of economic agents. In our text, we will use “person” even when original authors use “man”. 2 Tradition in its broader meaning is for MacIntire simply an “argument extended through time”. In this paper tradition is understood as certain conceptual framework, which is common to all of its members and by which they distinguish themselves from members of other traditions. It can be defined in terms of history, geography, nationality, culture, gender, religion, major believes, et. 3 E.g. the example of Muslim and scientist (Clark, 2000). First is capable to rationally argue about his attitude towards women “because it is the word of Allah”. Scientist could label his belief as irrational. However, if scientist tries to justify his own commitment to evidence, he will encounter great difficulties in trying to justify his conviction that something that has regularly happened in the past will happen again. 4 Consider for example the experiment, known among psychologists as the Linda problem (Tversky in Kahneman, 1983), where the vast majority of subjects in study made a crucial mistake in a very simple probability test on conjunction of alternatives. 5 For example, it is rational to drive on a right side of a road in USA or continental Europe. Drivers do not consciously deliberate on which side of a road will they drive and at the same time they anticipate that other drivers will do the same. 6 Car driving is a fine example. At first we are aware of every aspect of driving, but soon, these actions become automatic, and our attention is turned towards other issues, like keeping an eye on the traffic or conversation with fellow passengers. People do not consciously think on which side of the road they will drive, every time they start their vehicle. But habits are not unchangeable. In Australia, for example, foreigners have to and can drive on the left roadside, but they have to consciously concentrate on that. If they are not careful, they can quickly indulge to their habits and drive to the other side of road. 7 You can expect that all the Muslims would remove their shoes before entering a mosque, and all Germans would drive on the right side of the road, but you cannot suppose that all Muslims are smokers or that all Germans are early risers. 8 With holistic approach to rationality we can, for example, better explain the origins and formation of preferences. For mainstream economics preferences are given that is exogenous, and their formation is not considered to be the domain of economics. But having a comprehensive and consistent set of preferences certainly requires some cognitive endeavour (Pagano, 1991). Understanding of our preferences is tiresome and pretentious activity, and sometimes requires mastering certain knowledge and skills. Because having complete and consistent set of preferences is costly and tiring activity, it is rational for an agent to be economical (bounded) and form only partial preferences. Our initial choices are also very much influenced by institutions, customs and values of the society that surrounds us (contextual) and they very much determine directions and areas where our preferences would be completely developed and areas where they would be incomplete. 9 It must be mentioned, that our definition of contextual factors is similar to Whitley’s (1992) “background institutions”, which are ”patterns of social behaviour” where rapid shifts in “proximate institutions” have no significant effects on the economic development of the country. 10 For more on the “valley mentality” in Slovenia see Kristensen, Jaklic, 1998. 11 In the year 1995 around 50% of the people lived in urban areas. In western Europe the share of the urban population was more than 75% (Plut, 1999). Slovenia has never reached high level of urbanization, but already suburban settlements are growing faster than urban cities. 12 Ribnikar (1994) asserts that inflation was “natural habitat” for Slovenian companies, meaning that they could not have grown or developed without it. In the system of self management companies were usually created by political decisions. Their equity, which at least in principle belonged to all residents of Yugoslavia, was insignificant. Most of the profits was channelled to employees and their families through larger wages, supplements for accommodation, and transportation, stipends, subsidized vacations, etc. Growth thus had to be financed by loans, which has led to very unusual capital structure, where equity represented around 10% and debt represented around 90% of company’s capital. Since nobody was foolish enough to invest their own money into a company where all additional private capital would immediately belong to some 20 million people, there was no regular way for improving companys’ capital structure and the burden of high interest payment would in the long run be to heavy to endure, even though companies have tried to carry it over to consumers via higher prices. But since nominal interest rates were not indexed, high inflation meant that real interest rates were small or even negative, as has happened in the 80’s, thus actually enlarging companies equity and improving its capital structure. 13 It is also a question if merged, centralized larger banks could be large and strong enough for international competition. It might be that this solution would only make it easier and less costly for foreign banks to take over Slovenian banks. As suggested, one solution could probably be to organize a network of small (Slovenian) communal banks, which should work closely with local SMEs and leave the space for larger foreign banks to work with larger foreign and domestic firms. However, the network co-operation between banks is to a large extent not possible because of another “background institution”; inability of managers to cooperate, which is discussed in the following sections. 14 60% of farms have less than 3 hectars and the average size is 3.3 as compared to 14 hectares in the EU (Kovacic, 1996). 15 More on this in section 3.2.2. 16 The infamous »privatisation gap« was estimated to amount around 120 billion tolars, which was approximately 4,8% of BDP in 1998. The problem of »privatisation gap« was still not successfully solved in time of writing this article. 17 Ribnikar (1999) asserts that unlike foreign mutual funds, AIFs are not real financial intermediates. They do not assist in flow of funds from surplus financial cells to deficit financial cells, that is from citizens to companies. They have two distinct functions that do not benefit companies. Their first function is to make it possible for their shareholders to easily sell their free shares. Since most of the shareholders which sell their shares use newly acquired money for every day consumption the only macroeconomic effect is just short term increase in consumption and decrease in saving. Second function of AIFs is to transform their portfolio through transactions on the stock markets. Whereas mutual investment funds in developed economies attempt to lessen the risk by diversifying their portfolio, AIFs are doing just opposite. They are concentrating their assets and are gradually changing into a holding companies, which take an active role in the governance of the companies. Since large part of their transactions does not take place on capital market but on unofficial grey market, they do not contribute to the development and growth of Stock Exchange. 18 This is a very similar game to that among different fractions of managers after the WWII competing for power. For more on this see Kristensen, Jaklic, 1998. 19 Even government has contributed to the growth of grey market. Arguing that the cost of placement on the stock exchange were higher then the benefits of it, the Treasury department has decided not to place some government bonds on the stock exchange. 20 This could very well be a pension fund. 21 It was expected that these investors would primarily be managers of the companies. 22 Companies have spent a lot of money just paying the consultants who were making valuations of the companies. Many managers also tried to decrease the value of the company in order to ensure higher shares of ownership to them and other internal owners, which had a negative impact on their real operations in the market. 23 A group of researchers at the Faculty of Economics in Ljubljana has conducted an extensive survey “Behaviour of Slovenian companies and financial institutions in the period of transition” in 1997 and 1998. We gathered substantial data about all aspects of business behaviour of 70 large Slovenian companies (with more than 500 empliyees) and 130 medium sized companies (from 250 to 500 employees). 24 Survey was conducted by the research group SPEM and by the leading Slovenian business newspaper “Finance”. 25 The power of managers was very clearly exercised through “wild privatisation” which was very common at the beginning of the 90s, when many managers of socially owned companies took advantage of a very liberal federal (Yugoslav) company law that was still valid at that time. This law allowed them to create new companies by dropping down some of their assets and later at least partially privatising these newly established companies without much supervision (Korze, Simoneti, 1993, p. 213). It was not an unusual procedure for managers to simply sign commercial contract favourable to private companies (often owned by the very same managers) and in this was transfer business activity to bypass companies without proper compensation. 26 Some believe that the power of manager came with significant costs, which could in long term seriously weaken the companies. Since majority of employees in Slovenian companies were also their major owners, the problem of “employeeism” occurred (Nuti 1997). “Employeeism” denotes the situation where workers that are also owners have such a power in decision making process that they can bias the decisions towards raising the wages and keeping surplus work force. Prasnikar and Svejnar (1998), using model composed from investment and income equations with data from Slovenian companies, showed that employees of Slovenian companies indeed seize for themselves important part of added value (rent-seeking behaviour), which would have to be used for investments. They show that during the first part of transition (1991-1995) amounts of funds allocated for investments were established in negotiations between employees and managers and have found positive correlation between the negotiating power of managers towards employees and the extent of investments of the company, and negative correlation between former and the rate of growth of wages and other personal incomes. However, we claim that in the companies where managers and workers do not feel threatened from the external owners employeeism does not arise. E.g. one of the highest value-added per employee company, with extremely high annual investments, JUB, is controlled (majority ownership) by managers and workers. 27 Sako (1992, 1994) distinguishes two basic types of inter-firm relations: a) Arm's length contractual relationships (ACR) which combine low mutual dependence between companies, short-term relations, concentration on price and detailed contracts, low trust in the competence of suppliers and goodwill of costumers, low degree of technology and risk sharing, and b) Obligational contractual relations (OCR) which combine long-term mutual dependence and trust with considerable information, technology and risk sharing. Iner-firm relations in the Anglo-Saxon countries are examples of the former and Japanese and some other Asian countries are examples of latter. In general one would expect that in economies where the government does not share risk with private companies, does not foster the development of intermediaries between companies and regulates market bundaries and where developed capital markets exist, there are more incentives to develop short-term ACR relations between the companies. On the contrary, in those countries where the government plays and active role in the development of the economy and where the destiny of the bank and industrial sector depens on a credit-based financial system, one can expect the development of long-term OCR links. 28 For more on this “exercise of power” of different managers and its consequence on regional economic development in Slovenia see Kristensen, Jaklic, 1998. 29 Example of “Slovenian” merger is attempt of a very dynamic and successful Slovenian company Comet to merge with similar, but less successful company Swaty. Since both companies had complementary assortment of product in the machine engineering field, had a strong presence abroad and were relatively small the merger would be beneficial for both companies, especially for Swaty, which could gain access to some markets where Comet had a leading position. Management of Comet wanted takeover to be a friendly one, but management of Swaty was against it, probably because of fear for their yobs. They started strong campaign against the takeover as though “foreign” company is going to acquire their loved company. They have obviously managed to persuade some government officials not to allow the merger. Although Comet had fulfilled all the necessary legal requirements and it was established that merger would not be harmful to the competition in this area, government, which had a power to ban the merger, decided not to allow the takeover to take place. Comet filed a suit against the government because of lack of explanation for the government ban. After a few years of struggle Supreme Court has ruled that the ban on merger was not in accordance with the law. But then in was to late for Comet, which was exhausted by the legal battle. An Italian company has stepped in and become the owner of Swaty. Yüklə 197,43 Kb. Dostları ilə paylaş:
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