Free Market in Its Twenties: Modern Business Decision Making in Central and Eastern Europe

George Soros, Foreword

– xi – George Soros FOREWORD T he story of the rise of democracy and a market economy in Central and Eastern Europe (CEE) over the past twenty-five years is often told as a series of historic events: the fall of the Berlin Wall, the collapse of the Soviet Union, the brutality of the Balkan Wars, the accession of a number of CEE states to NATO, the “color revolutions” in a number of post-Soviet countries , and the eastward enlargement of the European Union. But behind these obviously monumental events—sometimes spectacular, sometimes tragic, and often both—lies another story: that of the effort to build the fledging CEE market economies. This largely untold story is less about politicians and more about managers and entrepreneurs seizing remarkable economic opportunities that history has given them. In my writings, I have often emphasized the reflexive relationship between thinking and reality: We create conceptual frameworks to make sense of the reality that surrounds us, but these frameworks end up affecting and distorting the reality itself. Applying this reflexive prism, we may conclude that the overwhelming focus of the CEE public discourse on macro-political narratives, and the concomitant neglect of managerial and entrepreneurial narratives, contributed to the poor record of the region in areas such as innovation and global competitiveness. Political economy often focuses on the interplay of factors influencing large groups of people, but managerial and entrepreneurial perspectives taught at modern business schools emphasize organizational decision making and indii6 FM.indb 11 2014.06.05. 12:20 – xii – vidual agency. Successful entrepreneurs whom I know believe in their ability to find opportunities in even the most flawed and volatile environments. For them, the fall of communism represented what the economist Joseph Schumpeter called a “gale of creative destruction.” To be sure, in some circumstances this entrepreneurial drive can lead to highly undesirable social outcomes. In The Crisis of Global Capitalism, I discussed at length how, in Russia, the opportunistic behavior of newly minted entrepreneurs led to “robber capitalism” and a massive transfer of wealth to a narrow group of corrupt oligarchs. However, such a specific counter-productive experience should not overshadow the fundamental point that CEE needs effective professional managers and risk-taking, opportunity-seeking entrepreneurs. Even before the fall of the Berlin Wall, I decided to do something concrete to nurture such attitudes and capabilities in the region. In 1988, with a group of like-minded businessmen, we decided to create in Budapest the International Management Center, which later came to be known as CEU Business School. Our actions attracted a great deal of interest and generated considerable excitement . Over the past twenty-five years, CEU Business School has produced a generation of management professionals who have significantly contributed to the development of the region. Now, CEU Business School is entering its next quarter century. The landscape is quite different today, and in many ways the challenge for the School is more difficult than it was when it was founded. The region is still experiencing the aftershocks of the 2008 meltdown and the more recent euro crisis. In many CEE nations, the political situation contributes to economic instability. Economic growth is uneven and, as I mentioned earlier, the region lags in crucial indicators of innovation and competitiveness. Both the region and CEU Business School must develop new and compelling strategies for the next twenty-five years.This faculty-authored volume highlights some of the approaches the School is taking to address key elements of that essential task. This volume is notable for its grounded and multifaceted outlook on the current CEE business environment. It should serve to promote the crucially important discussion of the need to make this region more agile and attractive in the global economy. I am gratified by this work and the promise of CEU Business School to stimulate even greater innovation and world-class managerial education for the region and beyond. i6 FM.indb 12 2014.06.05. 12:20 ...