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Symposium: business education in Eastern Europe.

The elimination of bureaucratic and centralized planning and the democratization of many of the countries of Eastern and Central Europe has changed the geo-politicaleconomic map of the world. We can no longer think in terms of two groups of countries facing each other: the mixed market democracies of the west versus the planned socialist countries of the east. But as yet, the change in Europe is fluid. It is all very well to say that capitalist institutions, private property, market mechanisms and business entrepreneurship are to be the new features of these countries, but it is very much harder to make them effective.

In fact, the process of restructuring is proving to be much harder and much more fraught with difficulties than many of the reformers, to say nothing of their western advisors, had originally anticipated. At the risk of simplification, we can identify three major elements of restructuring. First, the replacement of bureaucratic centralized planning with the market mechanism. This implies that business enterprises will no longer simply accept the orders given to them by the planners, but will be free to make their own production decisions. This means they will be required to answer those microeconomic questions (what to produce? which resources to use? how many? how much output to produce? what price to charge?) and so on.

The second element is privatization, the changeover from state ownership of resources to private (or perhaps some form of cooperative) ownership. This move is intended to release the enterprise and initiative of the population.

Finally, the moves to democratization are intended to reinforce the economic changes: ifrestructuring is to have any meaning, it must be accompanied by increasing responsibility.

Two very different approaches to restructuring have been proposed and put into effect. Hungary, which can trace a reforming element back to the 1950's, is the best example of the gradualist approach; China is another example. This contrasts with the so-called "shock therapy" approach, the approach whose best analogy is diving into an icy swimming pool in the middle of winter. Poland has been subjected to this; some of the republics of the former USSR are flirting with it.

The main problem with the shock therapy approach, and one that has direct relevance to the theme of this issue's symposium, is that the institutions and skills needed to make it work are simply not present. Amitai Etzioni said of the Polish experiment that the presumption was that the Poles were basically good people held down by bad institutions. Thus, remove the institutions, and the innate ability of the people will come through. If only life were that simple ! It is impossible to introduce market mechanisms and expect them to work unless people know what is expected of them in a market environment. Business managers cannot make decisions unless they know how, Privatization will not be effective unless the legal system changes. Monetary incentives cannot work unless they are accurate. The ability to take responsibility and show initiative is not inherent, it is learned behavior ....

These are some of the issues facing the socialist economies in transition. We present here some of the efforts to address the particular problems faced by managers in the newly-decentralized enterprises. It is often difficult for westerners to understand how difficult it is to start from scratch; having lived in our environment, we take too much for granted. For the new managers in Eastern and Central Europe, all of what we take for granted has to be learned and internalized if the effort is to be successful. Not specifically covered here, but also important, is training in specific skills - which will be needed by the new accountants, customer service representatives, controllers, marketing experts and so on.

Even with the flurry of activity now going on in the area, this will take time. And there is also a word of caution we should remember at this time. Perhaps these specific skills and attitude changes can be learned quickly, but the real success of restructuring will be apparent only when entire populations have accepted and adapted to their new economic and political environment. It is during this learning process that the support and encouragement of the West will be most needed.
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Publication:Review of Business
Date:Mar 22, 1992
Previous Article:The New Telecommunications: Infrastructure for the Information Age.
Next Article:In support of reform: Western business education in Central and Eastern Europe.

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