Drago Čengić: We Need to Analyze ‘Economic Nationalism’ in Hungary and Poland

Sociologist Dr. Drago Čengić is a scientific advisor at the ‘Ivo Pilar’ Institute. His areas of interest include economic sociology and the sociology of modern society and development. He commented for Lider on the current economic situation and the collapse of the previous development model.

After the financial collapse of Agrokor and the disintegration of the entire system and the economic model of so-called oligarchic capitalism, which direction should Croatia take if it wants to build an economic system on solid foundations?

– The collapse of oligarchic privatization, the inglorious end of the model of ‘two hundred wealthy families’, a company that grew like an octopus preventing others from growing, Agrokor as an example of growth without development… these are all concepts that analyze the characteristics and possible consequences of Agrokor’s potential failure in our media. To make a turnaround, politically and economically, it is necessary to analyze with a cool head what the key negative, but also potentially positive characteristics of Agrokor’s business model are, visible from its previous suboptimal growth, not only from the usual accounting-balance perspective but also from the standpoint of political economy and development sociology. Building a system on solid foundations would mean several things:

a) To reconsider our understanding of the market economy and establish a market that respects the property rights of all market participants, especially those economically small, e.g., the issue of small suppliers; the development of the dominant participant in the market system cannot be based solely on economic power that ultimately jeopardizes the development of others in business and thus delegitimizes the entire system.

b) The idea of a fair market and socially sensitive economy should indeed be protected by the institutions responsible for it, but ‘in real time’ to enable the normal circulation of goods and money, without the escape of value into so-called collateral securities.

c) The state should establish a new ‘early warning system’ that would allow the political system to receive timely information, based on the work of institutions, about how participants in the ‘negotiated economy’ are circumventing not only regulations but also the basic rules of market operations; above all, it is necessary to eliminate the parallel financing system, as the current case of Agrokor shows, due to the exposure of ‘domestic’ banks to the company.

Do countries, if they want to have a strong and sustainable economic system, need national corporate giants that pull along medium and small companies or many more strong, but smaller companies? Is there a unique and correct recipe?

– This is one of the important questions, also prompted by the ideas of some politicians that Agrokor should be divided into smaller companies if it survives future restructuring. It is important to have both large corporations and small businesses, but it is crucial that politics and business collaborate on what these companies serve, as, after all, does the ‘market economy’ itself. It is necessary to put some classic and not so classic questions on the agenda: first, how to establish a market system that enables not only self-employment for as many people as possible but also the emergence of as many growth companies; second, it should then be seen how much small businesses can grow independently faster, and how much they can gather under the umbrella, i.e., business network of large companies; and third, large companies make sense if they are capable of participating in the global economy while fulfilling certain ‘national goals’.

For example, is it important for us that Agrokor is in BiH, in Serbia… and why? The ‘why’ needs to be answered by politics, in dialogue with key representatives of our economic sector. Since there is no public dialogue, employers reduce the meaning of their own business to the minimal common denominator (‘we employ’) based on which they constantly expect some benefits from the state (sometimes justifiably), while politics holds real ‘deals’ with ‘its employers’, without publicly defined developmental obligations towards them as market participants.

What is the situation regarding this in more successful transition countries (Hungary, Slovakia, Czech Republic, Poland), how does it function in practice there?

– In principle, the situation is different in each of these countries. In Poland and even more in Hungary, it is evident that part of the coordination between politics and business related to the meta-economic goals of the largest companies is achieved within the framework of both muted and visible concepts of ‘economic nationalism’. What this specifically implies should be analyzed, not only in the case of these countries but also in ours.