30 YEARS OF TRANSITION-International Academic Conference

The Book of Abstracts International Academic Conference Thirty Years of Transition Ljubo Sirc Centenary Conference September 25 2020 Katoliški inštitut, Fakulteta za pravo in poslovne vede Catholic Institute, Faculty of Law and Business Studies, Ljubljana, Slovenia The Conference is under the honorary patronage of His Excellency Mr Borut Pahor, President of the Republic of Slovenia Program committee members: • Mirela Alpeza; (Associate Professor, Faculty of Economics, J.J. Strossmayer University, Osijek & Managing Director, CEPOR – SME policy think tank, Zagreb, Croatia) • Anže Burger; (Associate Professor, Faculty for Social Sciences, University of Ljubljana, Slovenia) • Martina Basarac Sertić; (Research Associate, Croatian Academy of Sciences and Arts, Economic Research Division, Zagreb, Croatia) • Alexander Chepurenko, (Distinguished Professor, Head of the School of Sociology, Higher School of Economics, Moscow, Russia) • Richard Connolly; (Senior Lecturer and Co-director of the Centre for Russian, European and Eurasian Studies (CREES), University of Birmingham, UK) • Philip Hanson OBE; (Professor Emeritus, Centre for Russian and East European Studies, University of Birmingham, Associate Fellow of the Russia and Eurasia Programme at Chatham House UK) • Silvana Malle; (Emeritus Professor, Department of Economic Science, Verona University Santa Marta, Centre for International Studies, Italy) • Tomasz Mickiewicz; (Professor, Aston Business School, UK) • John H. Moore; (President Emeritus, Grove City College, Pennsylvania, USA) • Svetozar Pejovich; (Professor of Economics Emeritus at Texas A&M University, Senior Research Fellow for the International Centre for Economic Research in Torino, Italy) • Rado Pezdir; (Senior Lecturer, International School for Social and Business Studies, Celje, Slovenia) • Abel Polese; (Senior Research Fellow, School of Governance, Law and Society, Tallinn University, Estonia & Senior Research Fellow, School of Law and Government, Dublin City University, Republic of Ireland) • Krassen Stanchev; (Professor, Sofia University, Bulgaria) • Mitja Steinbacher; (Assistant Professor, FPPV – Faculty of Law and Business Studies, Ljubljana, Slovenia) • Ružica Šimić Banović; (Assistant Professor, Faculty of Law, Zagreb University, Croatia) • Vlatka Škokić; (Associate Professor, University of Split, Faculty of Economics, Split, Croatia & Visiting Research Fellow, School of Hospitality and Tourism Management, Faculty of Arts and Social Sciences, University of Surrey, Guildford, UK) • Janez Šušteršič; (Professor, International School for Social and Business Studies, Celje, Slovenia) • Zoran Vaupot; (Dean – FPPV – Faculty of Law and Business Studies, Ljubljana, Slovenia) • Valentina Vučković; (Assistant Professor, Faculty of Economics and Business, University of Zagreb, Croatia) • Andrei Yakovlev; (Professor, Director of HSE Institute for Industrial and Market Studies, Higher School of Economics, Moscow, Russia) Editor: Matej Kovač (CEO, Lexpera, Zagreb, Croatia) 2 Economic Well-Being, Life Satisfaction, and Corruption Aversion: Evidence from a Transition Gaygysyz Ashyrov School of Economics and Business Administration, University of Tartu, Estonia ashyrov@ut.ee Luca Andriani School of Business economics and Informatics, Birkbeck University of London, UK luca.andriani@bbk.ac.uk ABSTRACT The fight against corruption cannot rely exclusively on appropriate formal institutions. It requires social support and public engagement, particularly in countries subject to institutional and economic transition. Individuals with a better life condition are more likely to provide this support, as life satisfaction arguably makes people better citizens, more civically committed, and better able to conform to institutional rules. Following this line of argument, we use data from the third wave of the Life in Transition Survey (2015-2016) to test whether economic wellbeing and life satisfaction are predictors of corruption aversion across 29 former socialist countries in Eastern Europe and Central Asia. Here, corruption aversion means individuals’ negative predisposition toward corrupt acts. Both economic well-being and life satisfaction represent indicators of individuals’ evaluation of the quality of both the institutional framework and society in which they live and which they wish to have. Preliminary results through a 2SLS estimation report greater corruption aversion among individuals reporting higher economic well-being and higher scores in life satisfaction. Furthermore, probit marginal effects estimations suggest that both life satisfaction and economic well-being increase the probability of an individual reporting a corrupt behavior when they see or experience it. These results are robust to a series of sensitivity analyses. Keywords: economic well-being, life satisfaction, corruption aversion, transition countries 3 Reform-Socialist Past During a Return to Market Order: A Plus or Sticky Legacy Item? The Case of Hungary Péter Ákos Bod Economic Policy Institution, Corvinus University of Budapest, Hungary petera.bod@uni-corvinus.hu ABSTRACT Western views on CEE nations under Communist rule were rather unsophisticated (“Eastern Block”) in the decade preceding the political regime changes in the CEE, with the exception of Yugoslavia (for geopolitical reasons) and, perhaps, Hungary (as the only remaining ReformCommunist state within the CMEA and the Warsaw Pact in the 1980s). The transition literature generally regards pro-market concepts and institutions conceived under the “New Economic Mechanism” of 1968 in Hungary as promoting the country’s shift toward the market model. Similarly, most analysts in and outside of Hungary have regarded the liberalizing measures as well as financial and trade opening to the West in the 1960s and after as assets in the eventual transition to a fully market-based system after 1990; some have noted high levels of inherited external debt as perhaps the only serious handicap that a transitioning Hungary inherited from the “Gulash Communist” regime of J. Kádár. The author takes issue with received wisdom concerning the valuation of assets and liabilities that the pre-transition Hungarian regime left behind and calls for differentiations between the short-, medium-, and longer-term calculus of the legacy. Critical remarks are made concerning the dominant views of the IFIs on the starting position of CEE nations as well as the reluctance of Western stakeholders to accept the idiosyncratic features of the nations in transition. The role of institutions of democracy and market order in the process of socioeconomic transformation is scrutinized. The paper also elaborates on the evident contrast between the formal conformity of institutions in most transition countries with EU norms and rules and the divergent tendencies in the same counties concerning market substance (e.g., competition) and liberal democracy (e.g., checks and balances, separation of constitutional branches). The Hungarian case is investigated to explain the emergence of the symptoms of a crony state and the seemingly high tolerance of organized corruption and favoritism. The paper concludes with the tentative recognition of a stronger-than-assumed path dependence in country cases where regime change did not coincide with nation-building. 4 Marginalization of SMEs in the Context of a “Backward Systemic Transition” and the COVID-19 Pandemic: The Case of Russia Alexander Chepurenko National research university, Higher School of Economics achepurenko@hse.ru Olga Obraztsova The Center for Statistics and Data Science Plekhanov Russian University of Economics Obraztsova.OI@rea.ru ABSTRACT Thirty years ago, the small and medium-sized entrepreneurship (SME) was seen as being among the core drivers of the market economy and democracy in Russia. However, over the two last decades, at least, the SME sector has been stagnating, and the entrepreneurship framework conditions (EFC) have failed to support its development. The paper is focused on three questions: The actual state of the SME sector in contemporary Russia; Reasons for the marginalization of the SME sector in Russia; The possibilities for a reloading of SME policy in Russia after the COVID-19 pandemic. Empirically, the paper found that all key indicators regarding SME statistics, including the aspect of business demography for the period 2005–2020, show that the sector has been stagnating and that it has been in decline since 2016. Theoretically, in order to explain the dynamics of the EFC in 2005–2020 in Russia, we employ on the concept of “institutional traps” (Polterovich, 2000), showing how they led to the formation of a “limited access order” (North et al., 2010) in the country. The paper found evidence of the possibility of a reloading of the SME policy agenda of the Russian state after the COVID-19 pandemic toward a more demand-driven approach and probable junctions along this way. Keywords: SME sector, SME policy, transition, institutional traps, limited access order, Russia 5 Who Received Governmental Support in the Russian Manufacturing Industry? Changes in Priorities after the 2014-2015 Crisis Andrei Yakovlev, Nina Ershova, Olga Uvarova National Research University, Higher School of Economics, Moscow, Russia ayakovlev@hse.ru ABSTRACT This paper analyzes the shifts in priorities of Russian authorities in support of large and mediumsized manufacturing enterprises in the last decade. Based on data from 2009, 2014, and 2018 surveys of Russian manufacturing firms and the use of a set of logit regressions, we identify factors that affect the provision of financial and organizational support for firms by different levels of government. The analysis shows that, in 2012-2013, the share of manufacturing firms receiving governmental support shrank significantly compared to that of 2007-2008; moreover, the support was concentrated on enterprises with access to lobbying resources (e.g., state participation in ownership or business association membership). In 2016-2017, the scale of state support coverage recovered; however, support at all levels of government was provided to firms that had carried out investments. Assistance to regional or local authorities for the social development of the region was another important factor, while state participation in ownership became insignificant. The paper provides a possible explanation for these shifts in state–business interactions in Russia. Keywords: governmental support, manufacturing exchanges, Russia 6 firms, state-business relations, elite Private Property and State Re-Building in Post-Soviet Russia: Features of Neo-Patrimonialism Cristina Poncibò Department of Law, University of Turin, Italy cristinaponcibo@unito.it Cristian Collina Department of Law, University of Turin, Italy cristian.collina@unito.it ABSTRACT After a period (1985-1999) of failed radical reforms targeting privatization and the market economy, in the early 2000s, Russian leaders undertook a new political project aimed at reestablishing state authority. The system set up under Putin seeks to strengthen the economic and political power of the state while maintaining a market-based economy and private property rights. Russian leaders have endorsed economic sovereignty, state dirigisme, and a strong role for the state in key industrial sectors. This paper addresses the impact of these choices on private property and discusses the concept of (neo-)patrimonialism as an attempt to harmonize property and sovereignty. Max Weber described patrimonialism as a mode of political domination over the economy and property rights based on personal and bureaucratic power exercised by a “royal family.” Power is formally arbitrary, and the administration is under the direct control of the chief. Starting from this concept of patrimonialism, the paper will argue that Russia’s contemporary variants of patrimonialism are a result not only of Soviet legacy (especially the convergence of property and power) but also the peculiar institutional dynamics of the post-Soviet transition. Keywords: Russia, private property, state power, Socialist legacy, transition, patrimonialism 7 Governance Trends among European Union Countries: Is There Institutional Convergence? Ružica Šimić Banović Faculty of Law, University of Zagreb, Croatia ruzica.simic@pravo.hr Martina Basarac Sertić Croatian Academy of Sciences and Arts, Economic Research Division, Croatia mbasarac@hazu.hr Valentina Vučković Faculty of Economics and Business, University of Zagreb, Croatia vvuckovic@efzg.hr ABSTRACT The goal of this paper is twofold. First, we reviewed the existing body of knowledge dealing with the questionable convergence of Eastern European countries as a possible consequence of both the transfer of selected Western formal institutions to those countries and the adoption of the acquis communautaire. This issue dates back to the beginning of the 1990s when the predominant expectation was that successful formal institutions in Western countries would yield the same results in transitional countries. Using descriptive statistics, we show that this is a misconception and that it is highly unlikely that Mediterranean and CEE countries will catch up with the three leading groups (Liberal, Nordic, and Continental countries) in the coming decades. Second, we focused on a quantitative analysis of sigma and beta convergence based on governance trends in the EU in the last two decades. The results also demonstrate rather divergent paths, with Liberal, Nordic, and Continental countries performing much better than Mediterranean and CEE countries. Keywords: convergence, divergence, institutions, post-socialism, transition 8 Legal and Judicial System Transformation in Transition Economies: The Macedonian Case Hristina Runcheva Tasev Political Science Department Law Faculty “Iustinianus Primus,” Ss Cyril and Methodius University h.runchevatasev@pf.ukim.edu.mk Aneta Stojanovska-Stefanova University Goce Delchev-Shtip, Republic of N. Macedonia aneta.stojanovska@ugd.edu.mk Leposava Ognjanovska Law Faculty “Iustinianus Primus,” Ss Cyril and Methodius University Skopje, Republic of N. Macedonia lea.ognjanoska@gmail.com ABSTRACT Economic growth and poverty reduction are highly dependent on well-functioning legal and judicial institutions. Experience in transition countries suggests that legal transitions and economic performance go hand in hand in advancing results. The transition from socialism to capitalism in the Republic of North Macedonia has required fundamental reforms of legal and judicial institutions. The paper analyzes the country’s experience in the transformation of legal and judicial institutions, a long-term process with active and ongoing reforms. Despite the adoption of the structural preconditions for judicial independence (i.e., a legal framework, judicial councils, and academies), political intervention, corruption, and influence in judicial decisions remain common, with the attendant legal uncertainties. The authors draw data from official sources/reports to explore the effects that the transformation of legal and judicial institutions has had on Macedonia’s economic development. The conclusions suggest that creating a well-defined judiciary with enforcement capabilities should be a priority for the executive branch of the Macedonian government in order to achieve improved economic performance and a functional market economy. Keywords: legal and judicial institutions, transition, economic development, Macedonian case study 9 Property Restitution in Eastern Europe and the European Court of Human Rights Case Law Mariana Karadjova Lawyer, Sofia, Bulgaria ABSTRACT In the second half of the 1990s, I worked on private property protection in Eastern Europe, and in 2004, I published an article titled “Property Restitution in Eastern Europe: Domestic and International Human Rights Law Responses.” The ECHR contributed to the establishment of basic principles of private property protection in Eastern Europe after decades of the planned economy model. Now, 30 years after the fall of Communism, I wish to examine how ECtHR case law evolved and guided restitution and post-restitution in Eastern Europe and how it influenced different Eastern European countries’ legislations and restitution practices. Can we now say that the restitution process was beneficial for Eastern European countries, that its purpose was achieved and the process terminated, or that this is an endless process with controversial results? Keywords: outcomes of privatization and property restitution, property restitution, property law 10 Organized Anarchy: How Informal Rules and Institutional Corruption Shape the Labor Market in Bosnia and Herzegovina Elma Demir Goldsmiths University of London, United Kingdom e.demir@gold.ac.uk ABSTRACT Although various labor market liberalization policies have been adopted in Bosnia and Herzegovina, they did not result in increased employment or an improved economic situation. The case of Bosnia and Herzegovina is not an isolated one. Similar problems have been noted across the developing world: labor policies are difficult to implement and, even when implemented, they fail or do not generate desired outcomes. In an attempt to provide answers to the question of why attempts to reform the labor market constantly fail in developing countries, and using Bosnia and Herzegovina as a case study, this study moves beyond the usual focus on formal labor institutions. Based on empirical research, this case study demonstrates that behind the formal institutions (i.e., policies, taxes, organizations, etc.), there is an extensive informal framework of rules shaping the labor market. Using the mixedmethods approach, it investigates the incentives of the formal-informal framework in relation to labor market institutions and relations. In particular, the study attempts to examine the functional interrelation between formal and informal institutions and develops a socio-political framework that shapes the demand, supply, quality, mobility, and social position of the labor force. The study finds that the formal labor market institutions in Bosnia and Herzegovina are a co-product of regulation and informal rules based on bribery, patronage, and nepotism, which have created “an economy of influence” that has inverted the purpose of formal institutions to foster development and provide social protection. In the long run, the impact of institutional corruption on the labor market has generated significant economic deterioration. Using the case of a national labor market, the paper reveals the complex relationship among labor market design, institutional corruption, social justice, and economic growth. Keywords: labor market reforms, institutional corruption, informality, 11 Competitiveness and Innovation Performance of SMEs in the New EU Member States: The Case of Croatia Valentina Vučković Faculty of Economics & Business (EFZG) University of Zagreb, vvuckovic@net.efzg.hr Nevenka Čučković Institute for Development and International Relations (IRMO) nena@irmo.hr ABSTRACT The system of innovation largely affects the business competitiveness and innovation performance of SMEs across the EU. This paper aims to shed further light on how public funding policies (from different funding sources, e.g., national and EU R&I) work in practice and their impact on behavioral patterns of SMEs as important innovation actors and conduits. In addition, some insights could be relevant for policymakers, particular in relation to how SMEs respond to funding and how funding affects their R&I investment decisions and performance. The authors will rely on the European Innovation Scoreboard and other empirical sources (Community Innovation Surveys of 2012 and 2014) to identify trends in SME R&I funding, performance, and the intensity of their innovation collaboration. The analyses will also explore the roles and capabilities of SMEs as actors in the innovation system (e.g., science-based innovators vs. supply-chain innovators). In addition, we will explore SMEs’ interactions with other important actors in the innovation system and identify conditions and obstacles stemming from the system. In conclusion, we will assess the strengths and weaknesses of the innovation system for SMEs’ business competitiveness and the specific effects on SME innovation activities in Croatia and a selection of new EU member states. Keywords: SMEs, innovation, research, EU R&I funding, EU member states, Croatia 12 Socialist Directors between Negotiations and Structural Conflicts Jurij Fikfak ZRC SAZU, Ljubljana, Slovenia fikfak@zrc-sazu.si ABSTRACT This study analyzes a sample of directors and leadership elites who were among the most successful in Slovenia and Yugoslavia during the Communist era, some of whom were the subject of various questions on the international stage. These questions include how these successful directors were socialized; how they acted in a managerial role in the given sociopolitical system; how they communicated with the institutions of power, for example, with the party (the League of Communists), the trade unions, the workers’ council, and the workers; how they perceived communism/socialism; and how they engaged in business with the capitalist world. The starting point for the presentation are three chronological and typological types of directors who were active in Slovenia between 1960 and 1990, some even longer: 1) in the first years following the Second World War until the mid-1960s, they were recruited mainly from prominent partisan actors, some of whom were not party members. Among these directors were many former employees of the secret service and the secret police (KNOJ, OZNA, and UDBA). 2) Until the early 1980s, party membership was a requirement for general directors, though not necessarily for the managers under their authority. 3) After Tito’s death in 1980, and especially after 1985, this system began to disintegrate. Another starting point for research was the reflection on a) the hybrid nature (Yurchak) of the Communist and then socialist political system and b) the development of the relationship between the economic and political aspects of management, i.e., on the consequences and changes regarding the constant structural conflict between the economy and politics. 13 Press and Informal Institutions as FDI Barriers: What Changed in Slovenia between 1992 and 2018? Zoran Vaupot Faculty of Law and Business Studies, Catholic Institute, Slovenia zoran.vaupot@kat-inst.si Milena Fornazarič Faculty of Law and Business Studies, Catholic Institute, Slovenia milena.fornazaric@kat-inst.si ABSTRACT Over the last decades, institutional theory has gained prominence in research analyzing the determinants of foreign direct investments (FDI). However, the role of informal institutions remains an especially underexplored theme. Within the framework of institutional theory, we first summarize existing findings about FDI barriers, institutions, and their role in foreign investors’ decision-making processes. In the second part, we present the results of our empirical analysis of press clippings from one of the leading Slovenian dailies for the years 1992 and 2018. In Slovenia, the year 1992 was the first peaceful year following independence and the year in which privatization legislation was adopted. In 2018, a great deal of public attention was focused on several incoming FDI projects. We propose conclusions concerning the change and influence of the press and selected informal institutions as FDI determinants in Slovenia between 1992 and 2018. The main conclusion is that there was a significant change in this period, and we try to explain this observation. The originality of the present research lies in the use of a combination of theoretical findings with empirical analyses and the authors’ personal experiences of the two different periods of time in Slovenia. Keywords: foreign direct investments, FDI determinants, press, informal institutions, Slovenia 14 The Role of Foreign Direct Investments on the Consolidation of Political Power: Turkish Investments in Serbia Sabina Pačariz School of Politics and International Relations Queen Mary University of London, United Kingdom s.pacariz@gmail.com ABSTRACT This paper examines how competitive authoritarian regimes explore foreign direct investments (FDI) to consolidate political power, using contemporary Serbian-Turkish relations as an observation lens. With a primary focus on political elites, the study focuses on the mechanisms that led to increased Turkish investments and subsequent advancement of the bilateral relationship. The rule of Aleksandar Vucic marks rising authoritarianism in Serbia over the recent few years. While trends of fusing economic and political powers were witnessed during the 1990s, through FDIs the current regime exploits novel means for reaching similar goals. Such developments could be monitored more closely only in an environment released from EU conditionality, and in relationship with a foreign state of significant economic might. Moreover, Turkey represents an authoritarian regime itself, additionally boosting non-institutionalised manners of cooperation. Relying on mixed methodology, the paper particularly tracks the role of informality in bilateral economic arrangements. The investigated processes largely attest to the lingering consequences of transition upon the contemporary wielding of political power in Serbia. Key words: Foreign direct investments, competitive authoritarianism, Serbia, Turkey. 15 Return Migration in Southeastern Europe: Current Trends and Future Research Propositions Katarina Štrangarov School of Business, Economics and Social Sciences, University of Graz, Austria katarina.strangarov@uni-graz.at ABSTRACT This systematic literature review represents an overview of, and reflection on, the state-of-theart of the trends and future research propositions in the literature on return migration to Southeastern Europe. The phenomenon of return migration has remained a significantly underresearched area with a great deal of knowledge gaps and research possibilities. The Western Balkans are considered one of the most complex migration regions in the world, as millions of people had moved throughout history. One of Southeastern Europe’s main current challenges is the brain drain and the direct loss of labor, with its countries being among the top-ranked in the world in this category. This makes return migrants and their reintegration one of the predominant foci in the Balkans. Finding the most relevant literature on return migration proved to be a major problem, as many literature sources are overlooked and especially since authors use different keywords. Many significant literature sources are written using Cyrillic and Latin alphabets of different languages in the SEE region, which makes both finding and using these literature sources very challenging. This literature review examines topical orientation, literature typology, year of publication, publishers, scientific field, methodological approaches, samples, age and gender of participants, levels of analysis, affiliations of authors, countries where the studies were conducted, countries where the empirical data were gathered, the language and alphabet in which the studies were written, and future research propositions. As a review paper, it provides an overview of trends, assesses potential topics for future research, serves as a reference point for academics interested in this region and topic, and encourages the development of new studies. This literature review is needed to deepen understanding and further develop knowledge on return migration to the SEE region and its impact. Keywords: return migration, South Eastern Europe, SEE region, literature review 16 Panel Discussion The Impact of European Institutions on the Rule of Law and Democracy: Slovenia and Beyond Panelists Matej Avbelj, Gorazd Justinek, Jernej Letnar Černič New University, Ljubljana, Slovenia The panel will discuss the recent book The Impact of European Institutions on the Rule of Law and Democracy (Hart Publishing, 2020). The book argues that the awe over the depth and breadth of the rule of law and democracy crisis in the EU provoked by CEE member states stems from the old member states’ and the EU institution’s fundamental misunderstanding of the socio-political nature of these countries, not only their institutional and public spheres, but also their ways of doing business in the private sphere. This misunderstanding has been borne out of ignorance on the part of Western stakeholders and partially caused by a deception by the CEE elites and a lack of internalization of the values of modern liberal democracies in domestic systems. Finally, it has been in many ways the outcome of a deliberate, if benign, neglect of the real socio-political state of affairs in these countries by the old member states and the Brussels-based institutions out of a desire to portray the EU big bang enlargement of 2004 as a success story. To a certain extent, inter- and supranational political and economic alliances played a role too. When these alliances were undermined or even broken—largely under the duress caused by the financial and economic crisis that began in 2009—the Potemkin village of the CEE started irreversibly collapsing too. The spearheading country of this Potemkin village scenario and therefore the most suitable means for buttressing the enlargement success story was Slovenia. Since its independence and throughout the accession procedure, Slovenia was portrayed as the best disciple of transition and a poster child of the New Europe. Less than 20 years after winning its independence from Yugoslavia, the country became a full member of the EU, a member of the Schengen regime, and a member of the Eurozone. Slovenia thus embodied the EU dream, proving the success of the enlargement and standing as a role model for all the countries east and south of the present EU borders that have been aspiring to full membership. This book claims that the widely shared narrative of the Slovenian EU dream has, unfortunately, been just a myth. In many ways, Slovenia fares even worse than its contemporary constitutionally backsliding CEE counterparts. The understanding of the depth and breadth of the rule of law and democracy crisis in Slovenia, the authors of this book hope, will also contribute to a critical intellectual awakening and better comprehension of the real causes of the present crises across CEE member states, which threaten the viability of the EU project. It is only on the basis of such better understanding that the causes of the troubles can be more accurately identified and, consequently, more appropriately addressed at national, transnational, and supranational levels. 17 Krekov trg 1, 1000 Ljubljana, Slovenia 18