Download Ethical Fabric of Transforming Economies

Ethical Fabric of Transforming Economies
(Research proposal for the project Honesty and Trust)
László Zsolnai
Project Summary
The “Ethical Fabric of Transforming Economies” project aims to identify, critically evaluate,
and systematically map those economic, legal, social and moral factors, which shape the
ethicality of economic behavior in selected Central and East European countries during the
transition process. The main focus of the project is the dynamic interplay between selfregulation of economic agents and external regulation of their behavior. Ethical economic
behavior is not just important for its own sake but also crucial for achieving economic
efficiency and social well being in transforming economies.
The project concentrates on the ethical fabric of the Hungarian economy, however,
Poland, the Czech Republic as well as the former GDR, Romania and Lithuania will also be
studied to provide a well-grounded comparative perspective. The results of the analysis can
significantly contribute to the re-building of the ethical infrastructure (“the moral wealth”) of
Central and East European countries.
Setting the Context
Some former projects of the Business Ethics Center should be considered as antecedents for
the “Ethical Fabric of Transforming Economies” project.
Attitudes of Hungarian Managers
In 1995-1996 we conducted a comparative research in collaboration with the Vienna
University of Economics focusing on the ethical attitudes of Hungarian and Austrian
managers and economics students.
The typical ethical attitudes of Hungarian and Austrian managers reflect rather
different ways of thinking. Hungarian managers seem to believe in a “pure capitalist”,
ownership-oriented corporate practice and at the same time they opt for a paternalistic state
that provides public goods and services for the people. In a sharp contrast to this Austrian
managers represent a socially responsible corporate philosophy and at the same time they
prefer a liberal, less interventionist economic policy.
Interestingly enough the ethical attitudes of Hungarian and Austrian economics
students are very similar. Young economist groups in both countries prefer a social market
economy in which environmental values are highly protected. Both Hungarian and Austrian
students typically envision the socially responsible company in which interests and needs of
various stakeholder groups are harmonized with the profit motive of the owners of the
company.
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Ethicality of Companies
In 1996-1997 we conducted an empirical research about the ethicality of companies in
Hungary. (Zsolnai, L. 1997)
The existence of ethical institutions, stakeholder policy and charity were used as
indicator of ethicality of companies. We also included consumer orientation as an indicator
since in the context of economic transformation the attention to the needs and voices of
consumers is not merely marketing but has ethical significance too.
Our results suggest that the ethicality of companies is highly context-dependent. Those
companies, which are operating in well-developed Western economies, display significantly
higher level of ethicality than companies (foreign or domestic) operating in the lessdeveloped Hungarian economy.
Social Reception of the Market Economy
The enormous social cost of economic transformation is reflected by the opinion climate of
Hungarian society. In a recent study by Robert Angelusz and Robert Tardos conducted at the
Business ethics Center in the late 1990s describes the most important changes in the reception
of market economy in Hungary. (Angelusz, R.  Tardos, R. 1997-1998)
The dominant opinion climate having evolved by the eve of the system change in
Hungary unanimously stood for market liberalization and rejected the maintenance of market
barriers. Nevertheless, this condition has later on undergone a gradual shift, first with pro and
contra attitudes coming to a balance, then pro-restriction arguments gaining predominance.
Survey data have made possible to elaborate an empirical typology of global attitudes
on the transition to market economy. The five types revealed by the analyses can be grouped
into three larger categories on the basis of their main orientations. Approximately 14 % of the
population can be taken account of as parts of the liberal field: “pro domestic capital” and
“socio-liberal” groups. They constitute the core of social support for market economy.
Two further types, the “social anti-capitalist” and the “anti-capitalist” amounting
together to 38 % of the population have a tendency of anti-capitalism and aversion toward the
extension of market economy. The largest part of the population with 48 % belongs to the
“inconsistent” type, which is characterized by certain ambivalence. People in this type accept
and support the dominant role of private property, they would restrict, however, market
competition and display special attention to problems of unemployment.
Project Description
The theoretical background of the research project “Ethical Fabric of Transforming
Economies” is constituted from different disciplines and traditions.
Our knowledge about the socialist and post-socialist economies is based on Janos
Kornai’s works. (Kornai J. 1993) Albert Bandura’s theory of moral agency provides a
departure point in understanding self-regulatory and external mechanisms by which the
ethicality of behavior is determined. (Bandura, A. 1991, 1997) The social-contracts approach
to business ethics developed by Thomas Donaldson and Thomas Dunfee contributes a lot to
our analyzes of the changes in macro and micro ethics in Central and East European
economies. (Donaldson, T. & Dunfee, T. 1999)
The literature on social capital, trust and reciprocity in economic life serves as a rich
mine of knowledge that can illuminate the difficulties in achieving higher-level ethicality in
transition economies. (Coleman, J. 1990, Fukuyama, F 1995, Putman, R. 1993) The
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stakeholder theory provides a broad enough framework to rethink corporations and their role
in the capitalist system. (Kelly, G. et al (eds.) 1997)
Institutional and evolutionary economics as well as socio-economics provide welldeveloped analytical tools for reconsidering the role of institutional changes and the function
of ethics and culture in economic development. (North, D.1990, Etzioni, A. 1988, P. Selznick,
1992)
The starting point of the research project is that economic behavior is regulated by
internal self-sanctions and self-reactions generated by the actor as well as by external
sanctions and reactions produced by the actor’s environment. Internal and external sanctions
and reactions are activated simultaneously in shaping economic behavior and determining its
ethicality.
Core hypotheses of the research are as follows:
(α)
Stronger the collective belief in the ethical norms by the economic actors,
less unethical behavior can be expected from the economic actors
(β)
Stronger the pro-social orientation of the economic actors,
more ethical behavior can be expected from the economic actors.
(γ)
Greater the social costs of transgression by the economic actors,
less unethical behavior can be expected from the economic actors.
(δ)
Greater the transparency and accountability of the economic actors,
more ethical behavior can be expected from the economic actors.
The research project tries to corroborate these hypotheses in the light of post-socialist
transition.
Methodology
The project will employ a variety of methodologies and approaches. The ethical institutions
of the economy will be explored by case studies. The public perception of the ethicality of
companies will be studied by sociological surveys including former ones. The “ethical mind”
of companies will be reconstructed by the use of psychological tests. The interaction between
companies and their stakeholders will be analyzed by media reports and independent
investigations.
The main body of research will be combined with special sub-projects, whose topics
include the following:
(i)
building ethical institutions within companies;
(ii)
transparency and accountability strategies of companies;
(iii) changing role of multinationals (including corporate citizenship);
(iv)
public policy dysfunctions and deficiencies;
(v)
the emerging new economy and its “morally free space”;
(vi)
the “ethical profile” of the biotechnology industry
(vii) the freedom of information in economic life.
The research project is basically but not exclusively focusing on the Hungarian economy.
Other Central and East European economies will be included in some part of the project.
Poland, the Czech Republic, the former GDR, Romania and Latvia are expected to be studied.
Collaborative partners may include the following scholars and their institutions from
Central and East Europe:
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Wojciech W. Gasparski,
Director of the Center for Business Ethics, Institute of Philosophy and Sociology of the Polish
Academy of Sciences, Warsaw, Poland.
Lubomir Mlcoch,
Dean, Faculty of Social Sciences, Charles University, Prague, The Czech Republic
Rainhart Lang,
Head of Department of Organization, Chemnitz University of Technology, Germany
Imre Ungvári-Zrinyi,
Lecturer of Applied Ethics, University of Cluj, Romania
Nijole Vasiljeviene,
Head of Center for Business Ethics, Kaunas Faculty of Humanities, Vinius University,
Lithuania.
Expected Results
The research project will provide an empirically well-established and comparative picture
about the ethical fabric of the economy in Hungary and some other Central and East
European countries. From the analyses policy proposals could be derived which address the
key institutional and cultural factors that possibly block the ethical and economic progress of
transition economies.
We do hope that the results of our research project can significantly contribute to the
development of the ethical infrastructure of Central and East European economies.
Bibliography of the Project
Angelusz, Róbert  Tardos, Róbert 1997-1998: Aspects of Transformation and Public
Opinion” Acta Oeconomica Vol. 49. No. 1-2. pp. 207-229.
Bandura, Albert 1991: “Social cognitive theory of moral thought and action” in W.M.
Kurtines & J.L. Gewirtz (eds.): Handbook of Moral Behavior and Development. 1991.
Hillsdale, NJ. Erlbaum Vol. 1. pp. 45-103.
Bandura, Albert 1997: Self-efficacy. The Exercise of Control. New York. Freeman.
Coleman, James S. 1990: Foundations of Social Theory. Harvard University Press.
Cambridge, Mass.
Donaldson, Thomas and Dunfee, Thomas 1999: Ties That Bind. A Social Contracts Approach
to Business Ethics. Boston, Mass. Harvard Business School Press.
Etzioni, Amitai 1988: The Moral Dimension. New York. The Free Press.
Fukuyama, Francis: 1995: Trust. The Social Virtues and the Creation of Prosperity. New
York. Free Press.
Kelly, Gavin et al (eds.) 1997: Stakeholder Capitalism. Macmillan Press - St. Martin’s Press.
Kornai, Janos 1993: The Socialist System. The Political Economy of Communism. Oxford
University Press.
Koslowski, Peter (ed.) 1988: Business Ethics in East Central Europe. Springer Verlag.
North, Douglas C.: 1990: Institutions, Institutional Change and Economic Performance. New
York, Cambridge University Press.
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Putman, Robert D. 1993: Making Democracy Work: Civic Traditions in Modern Italy.
Princeton, NJ. Princeton University Press.
Selznick, Philip 1992: The Moral Commonwealth. Social Theory and the Promise of
Community. University of California Press.
Zsolnai, László 1997: Ethics and Competitiveness of the Hungarian Economy. Budapest
University of Economic Sciences, Department of Business Economics.
Information about the Business Ethics Center
The Business Ethics Center of the Budapest University of Economic Science was established
in 1993. The mission of the Center is to promote ideas and techniques of business ethics in
higher education, academic research, and business life.
The functioning of the Center is based on the conviction is that ethics is a relevant
aspect at all levels of economic activities, from individual and organizational to societal and
global. Complex economic problems require, we believe, multidisciplinary approaches using
models from economics, management science, psychology, and ethics.
The ecological, the communitarian, and the feminist perspectives contribute
significantly to our understanding of contemporary economic and social reality. Business
ethics is practiced by the Center as a post-modern kind of scientific enquiry where normative
and descriptive elements are not separated but intermingled.
The Director of the Business Ethics Center is Dr. Laszlo Zsolnai. Members are Dr.
Zsolt Boda, Dr. Laszlo Fekete, Dr. Gyula Gulyás and Réka Matolay. Rita Ruschel serves as
secretary for the Center.
A number of well-known Western scholars serve as members of the International
Advisory Board of the Center. They include Professor Edwin M. Epstein (Berkeley),
Professor Stefano Zamagni (Bologna), Professor Henk van Luijk (Nijenrode University),
Professor Franz Hrubi (Vienna), and Professor Peter Koslowski (Hannover).
Further information about the Business Ethics Center can be obtained by visiting the Center's
website
www.bke.hu/ethics