Wild capitalism, privatisation and employment relations in Serbia
| Pages | 316-333 |
| Published date | 28 June 2011 |
| Date | 28 June 2011 |
| DOI | https://doi.org/10.1108/01425451111140613 |
| Author | Martin Upchurch,Darko Marinković |
| Subject Matter | HR & organizational behaviour |
Wild capitalism, privatisation and
employment relations in Serbia
Martin Upchurch
Middlesex University, London, UK, and
Darko Marinkovic
´
Megatrend University, Belgrade, Serbia
Abstract
Purpose – This paper aims to examine the phenomenom of wild capitalism under post Communist
transformation. Many commentators on post Communist transformation focus their attention on
dysfunctional corporate governance and the deleterious consequences of liberalisation on business
ethics. Poor business ethics and bad corporate governance may be a consequence of labour
exploitation for comparative advantage, and the abandonment of party authority. This allowed
rapacious rent-seeking by a minority well placed to benefit from the newly de-regulated regime. A
by-product is a burgeoning informal economy encouraged by insider dealing of privatised state assets.
State regulation, where it exists, is often ignored. Employment relations are fragmented, with
state-owned enterprises retaining some form of collective regulation, while newly privatised
enterprises seek to marginalise union activity.
Design/methodology/approach – The paper analyses why Serbia has diverged from the
Slovenian case in the former Yugoslavia and determines norms of behaviour as a product of both
structural and agency dynamics. Evaluates the Privatisation Agency’s programme and reviews
documentary evidence on business transparency. Records evidence of labour disputes from trade
unions, press reports, semi-structured interviews with trade union leaders and activists. The
researchers also held a Round Table of trade unionists, journalists and employers in Belgrade in
September 2008, funded by the British Academy.
Findings – The paper concludes that wild capitalism is an integral, rather than deviant mode of
behaviour in Serbia.
Originality/value – The findings have relevance for other post Communist states, which may be
subject to a greater or lesser degree to political clientelism and fragmentation of employment relations.
Keywords Serbia, Capitalism, Business ethics,Corporate governance
Paper type Conceptual paper
1. Introduction: post Communism, VoC and corporate governance
Post Communist transformation has sometimes been framed within western concepts
of varieties of capitalism (VoC), with reference inter alia to industrial relations regimes
and dominant patterns of corporate governance. Commentators have drawn a
distinction between those countries which have adapted to market capitalism by
following a liberal marketisation model (LME) and those which have followed a more
co-ordinated market model (CME). Feldman (2006), for example, isolates Estonia as an
example of the LME approach and Slovenia as CME and proposes that such
development mirrors the variation in advanced OECD countries and suggests that it
may not be necessary to invent new models of capitalism to analyse all the new
economic institutions in transition countries (Feldman, 2006, p. 850). Both Buchen
(2007) and Bohle and Greskovits (2007a) isolate the former Yugoslavian state of
Slovenia (exceptionally) as a case of CME. However, other commentators have noted
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Employee Relations
Vol. 33 No. 4, 2011
pp. 316-333
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DOI 10.1108/01425451111140613
specific spatial and socio-political variants within transformation states, including a
cluster “with high levels of state control, relatively little privatisation and an
undeveloped market” (Lane, 2005, p. 227). This might suggest that marketisation has
been stalled or delayed in some post Communist states, and the role of the state in
maintaining control over production and distribution of goods and services remains
strong. Other commentators focus their attention more precisely on dysfunctional
corporate governance and point to the deleterious consequences of market
liberalisation on business ethics and governance (see Kaufman and Siegelbaum,
1997 for a review of evidence). Following King (2007), studies may suggest that a mo re
nuanced interpretation of developments is necessary, which takes special acc ount of
the nature of legacies from the past, as well as the dependent nature of many
transformation states on western MNC investment.
In particular, poor business ethics and bad corporate governance may be a
consequence of the combination of market liberalisation and the abandonment of one
party authority over control of industrial production. This chemistry of events allowed
rapacious rent-seeking by a minority of individuals well placed to benefit from the
newly de-regulated regime (Filatov, 1994). The dominant doctrine of “shock therapy”
acted to de-regulate labour codes, privatise state assets, and attract MNC inward
investment. The rush towards profit maximisation and capital formation “by any
means necessary” was fed by neoliberal prescription which suggested that the
regulatory aspects of the Command Economy created rigidities and barriers to
successful market-based relations. These rigidities had to be cleared. Central to this
process was the power and influence of the international financial institutions (IFIs)
such as the IMF and World Bank, whose conditionality clauses encouraged
de-regulation and market liberalisation (Stiglitz, 2002; World Bank, 2004; Woods,
2006).
A common feature of unrestrained rent-seeking capitalism has been high incidence
of gangsterism, corruption, mafia crime and a burgeoning informal economy. Such
illegal or semi-legal business activity is characterised by insider dealing as privatised
state assets are bought up by individuals who are well connected with (sometimes)
competing elites within the political class. This form of “state capture” by well-placed
private individuals is particularly well documented in the case of Serbia, as well as
other western Balkan states such as Albania, FYR Macedonia, and
Bosnia-Herzegovina (Pesic, 2007). The clientelism and reliance on personal networks
sits side-by-side and interplays with more conventional ownership patterns reflecting
lingering state management, as well as transnational corporate activity and foreign
direct investment. A fragmented business system results outside the varieties of
capitalism (VoC) taxonomy. MNC behaviour may be exemplary but can be a “cathedral
in the desert” of non-regulated and unrestrained rent-seeking. Standards of corporate
governance are weakened by the fragmentation, while state regulation, even where it
exists, is sometimes ignored. Employment relations are similarly fragmented, with
state-owned enterprises retaining union membership and some form of collective
regulation, while newly privatised enterprises seek to marginalise union activity and
former collective agreements are abandoned (Pollert, 2000; Martin and
Cristescu-Martin, 200 4). Evidence also sug gests that many inward investing
multi-nationals often prefer to construct or take advantage of non-union
environments (Winterton, 2004). Commentators have referred to this darker side of
Employment
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