Market Economy， Transition and Culture： How Do They Fit？

郭爽

1.Introduction

Since the fall of Iron Curtain fell， states in East Europa started to switch from the model of socialism to that of capitalism. A great drive was peoples enthusiasm and hope about the market economy， which was expected to inject new power to the disappointing economy. However， the road turned out to be laborious and hard， while the results were different in different countries. Many economists and organizations are devoted to studying the role of culture， which greatly influences peoples mind and economic behaviors in the economic transformation. In this paper， the cultural roles in economic of transformation in former social countries will be discussed.

2.Definitions of Economic Transformation

In this paper， economic transformation refers to the situation when the formal social countries change their economy systems from command economy or other forms of economy into market economy after the collapse of the Comecon （Common Council of Mutual Economic Assistance）. According to the Transition Report published by EBRD （European Bank for Reconstruction and Development） in 1999， there are several factors in economic transformation： privation from small and large scale， price liberalization， competition policy， governance and enterprise reconstruction， trade and foreign exchange system， banking reform and interest rate liberalization as well as securities markets and non-bank financial institutions.（EBRD， 1999， p.25） These factors help establish the order in a typical market economy.

According to this evaluation， the transformation did not turn out to be what people had expected. Most countries went through economic recession and trade disruption in the initial stage as the fundamental reforms took place. Although they managed to stabilize the economy in the end， the process was turbulent. The scale of recession and turbulence varied across countries and differences among countries appeared and became an obstacle for overall development. While countries such as Poland， Hungary or Estonia have managed to overcome quite rapidly the initial transformation recession， others， notably Russia， Belarus and Ukraine continue to struggle against obstacles.（Rosenbaum， 1999， p.1） Today the gaps between countries are more and more obvious.

3.Definitions of Culture from Economic Perspective

Di Maggio has divided into culture into “constitutive” and “regulatory” aspect”of culture and the latter better explain the definition of culture from an economic perspective. Norms， values and routines belong to this category （Panther， Stephan， 1997， p.97）

Norms are rules of behaviour in a given situation， classified by the way they are enforced.（Panther， Stephan， 1997， p.98） Different cultural groups hold different rules and instructions， which tell the members what to do or what not to do. An example is “ When in Rome， do as Romans do”. When a foreigners lives in a foreign land， he or she will gradually accept the rules under another culture as a part of integration.

Values are the basic principles people holds， which plays a fundamental role in peoples activities. This can be proved in the cases of Muslims. Muslims firmly believe that receiving interests is unethical and have created new models of bonds and financial leasing without interests， when debtors and lenders share the risk and return equally.

Routines are habitual procedures of problem solving. People in different cultural groups have different tendencies. Long influenced by communism and equalitarianism people tend to be conservative， lack creativity and motivation， avoid risks in investment and therefore miss the potential returns. In contrast， capitalists seek profits and are more welcoming to risks and changes and then rise the chances to gain more profits. This explained why former social countries with stronger mark of socialism tend to struggle longer in the economic transformation.

4.How Culture Influenced Economic Transformation

After the definitions of economic transformation and culture have been discussed， in this chapter a connection between culture and economic transformation will be established. From the evaluation of transformation indicators， conducted by EBRD， “Just as progress in reforms varies widely across countries， it also differs markedly across its key dimensions”（EBRD，1999， p.27）. Meanwhile there are two obvious trends ： firstly the degree of transformation decreases from the west Europa to east Europa and secondly， the regional variances grow from west to east.（ Wrobel， 2002， p.33.）This conclusion corresponds with the cultural division in the famous “the Latin Center and Orthodox Periphery”theory.

In this theory the influence of Latin and Orthodox culture in economic development can be explained from the perspectives in history， social structure， values and routines.

After the cultural split， the European land was divided into countries in Latin center in the west and countries in Orthodox periphery in the east. Countries in the east went through a series of changes and reforms. The Revolution freed the people from the stiff rules of the church and laid a foundation for the development of protestants who emphasized the accumulation of capital， enhance of efficiency etc. On this basis enlightenment， political revolutions and industrial revolution swept this region and established the new system and modern economic models. In contrast the east stayed separate from the west and were not influenced by the ideas of capitalism. Lack of the capital spirit can to some extent explain the failures in economic transformation in these countries as the people did not have the awareness to be a capitalist.

One important drive for the development of the countries in the west is that the social structure was diverse， dynamic and mobile. There was a hierarchically structured organization of clergy centered around pope while at the same time， church and worldly authorities competed for surf， which gave rise to the development of autonomous cities and bourgeoisie（Panther， Stephan， 1997， p，108）. New classes confined new ideas， supported the transition and helped the development of capitalistic economy model. On the other hand， social structure in the east was stagnant and fixed， because of the combination of the “highest political and religious authority” by a unitary caesaro-papist hierarchy（Panther， Stephan， 1997， p，109）， which did not give space for the development of another power. As a result of no competition and no mobility， people just accepted the governance and were stuck to certain ranks in the society.

What makes the transition more difficult is that the “economic spirit” of Orthodox lacks the rationality and strong motivation of its Latin counterpart. The value of “fairness” and “democracy” worked as strong motivators in the creation of wealth. The differences in values can be also explained be routines. Christians emphasize “daily behavior” and happiness in worldly life， while Orthodox cultural activities are worship and rituals， which is mysterious and not practical. Therefore， people in the west in work driven by the worldly happiness while people neither have such awareness nor consciously solve such problems in the transition.

A good example is the contrast between Russia and Estonia. Estonia has a high degree of economic transition in various perspectives according to the evaluation of EBRD （EBRD， 1999， p.24.） It still possesses the historical heritage from capitalistic invaders. Estonians are mostly protestants （Royal Institute， 1938/70， p.3） who possess a strong capitalistic spirits and value subjective initiative. On the other hand， Russia suffered from the stagnant and laborious reformation. The stagnant social structure， strong worship and stiff minds worked as obstacles in the reformation. An important group in the process of transformation， the individuals neither had the awareness to generate wealth for the worldly happiness nor were motivated to do so.

5.Conclusion

The paper has developed a framework of the study in the relationship between cultural factors and the economic transition to market economy and applied it to the transition in countries in east Europe in 1990s. The papers also focuses on the famous Latin Center and Orthodox Periphery theory and discussed the cases of Estonia and Russia in detail. It is assumed， that culture can influence peoples decision-making and behaviour and shaped different economic styles. Culture is influencing major participants in relevant economic activity and will also be an important principle in decision-making in the future.

Reference

Wrobel， Ralph （2007） Culture and Economic Transformation： “Economic Style” in Europe， Russia and China， in： Jovanovic， Mica et al. （eds.）： System Transformation in Comparative Perspective： Affinity and Diversity in institutional， Structural and Cultural Pattern， Berlin， pp. 163-185

Wrobel， R. （2002） Cultural Aspects of Economic Transformation： The Example of the Baltic States， in： The Korean Society of Contemporary European Studies （ed.）： European Identity Formation and The Community Citizenship， Seoul 2002， pp. 33-43.

European Bank for Reconstruction and Development [EBRD] （1999） Transition Report， London

International Monetary Fund [IMF] （2014） 25 Years of Transition， Washington， D.C.

Word Bank （1993） Estonia， The Transition to Market Economy， Wellington， D.C.

Royal Institute of International Affairs， Information Department （1970） The Baltic States， London， Oxford University Press， 1938； reprinted Greenwood Press， 1970

Panther， Stephan （1997） Culture Factors in the Transition Process- Latin Center， Orthodox Periphery？， in： Blaclhaus Jürgen / Günter Krause （eds.）： Issues in Transformation Theory， Marburg， pp. 95-122