A look at current and future CEE superclans: how do old and new money co-exist in Central and Eastern Europe?
The historical context
The history of capitalism in Central and Eastern Europe differs significantly due to the rupture created by the communist period. As in most countries of the world, capitalism developed in the late 1800s and early 1900s. Whether it was the Russian institution of serfdom, the high rate of illiteracy in places like Spain, legal bans in China or elsewhere, a lot of that turned out to be speed bumps rather than insurmountable barriers to capitalism. So too in Central and Eastern Europe, where capitalism took hold despite a predominantly agrarian and illiterate society – and flourished.
With the arrival of communism, the cultural, legal and institutional development of capitalism froze deeply and much of the aforementioned capital was duly expropriated. Communism itself did in fact produce some successes and, by pushing for mass education, urbanization and health care, created, somewhat counterintuitively, many of the forces that would enable Eastern Europe in the 1990s and 2000s to engage in fairly high economic growth rates. .
However, Communism also turned out to be nothing more than a “red wash” of feudal structures and customs, simply replacing the old nobility and “old money” with a self-proclaimed nobility that reduced even the positive, growth-promoting aspects of socialism and Marxist thought to the extreme “slave morality” and brutal authoritarianism of a system that cannot tell the difference between humans and cattle. The effect of 40 years of inoculating the extreme version of what Samuel Huntington has called a “development resistant culture” has been that, of the seven societal values that RAND has identified as key to national success, to know
1. National ambition and will,
2. Unified national identity,
3. Shared opportunity,
4. An active state,
5. Effective institutions,
6. A society that learns and adapts, and
7. Competitive diversity and pluralism,
much of Eastern Europe started in the 1990s with its exact opposite. The transition to capitalism has often been rather chaotic, making trust and capital scarce. A savings crisis and years of deep stagflation have helped neither.
The old background and the old money
From this arose what, in the context of Eastern Europe, is now “old money”, mainly dominated by where scarce capital and scarce confidence could be found, namely:
- the family unit, and
- old intelligence structures that took advantage of networks built during communism.
From these have sprung various private, often family-owned, debt-financed conglomerates that tend to dominate the business landscape. One of the disadvantages of this emerging development has been that many companies in this culture are either domestically oriented or export raw materials or because it is the domestic market where the benefits of credit and relationships are the most efficient, or because they operate in an extractive industry. .
The new context and the new currency
The above would hardly constitute all that is necessary for the healthy development of a business environment or economy. Fortunately, from the 2000s, most economies in Central and Eastern European regions have developed much more heterogeneous trading environments. Specifically, a new generation of export-oriented companies has emerged, largely aided by integration into global supply chains that have repolarized across the globe.
These new ventures helped set in motion what decades of government policy before or after 1990 did not necessarily achieve. Emma Capital in the Czech Republic, eMag in Romania, OTP in Hungary, Qumak in Poland represent this most welcome development in Central and Eastern European capitalism, showing how 100 years of unfortunate events have only delayed the rise of entrepreneurship in Eastern Europe.
Written by Radu Magdin.
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