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Quest for Progressive Business – Interview with Dr Eleanor O’Higgins

Progressive Business Models: Creating Sustainable and Pro-Social Enterprise, a recently published book endeavors no less than to define and demonstrate by several business case studies what progressive business truly means. These cases prove that it is possible to be profitable and prosperous and at the same time ecologically sustainable, future respecting, and prosocial. The book was edited by Dr Eleanor O’Higgins, professor of University College of Dublin and London School of Economics and by Dr Laszlo Zsolnai, professor of Corvinus University of Budapest. We asked Dr O’Higgins about the creation, objectives and contents of this book.

What did inspire you to write this book? Why did you find it important?
Well, I think there were a couple of influences. Both Laszlo and I are interested in sustainability and corporate social responsibility, also in new ways of corporations behaving in a prosocial way. As I had written some case studies before, Laszlo got the idea that we should collaborate. Partly because of our special interest in the topic of sustainability, but also because of our ambition to look at particular cases. Our ambition was to comprise a book of cases that are exemplars for new business models for the future. Laszlo himself is very prolific in terms of publishing, he takes a lot of initiatives, he likes to run with new ideas. So, it was his idea to do a book about it. Once he proposed his idea, I thought it was a great one, worth working on. We both have contacts in different countries who are also interested in these issues. These are contacts from companies or contacts who would know of companies that are creating new ways of doing business that we call progressive. So, we contacted our various friends and authors to ask if they have any ideas, and if they would like to participate.

What were your selection criteria regarding authors and cases?
There was a core of people that both Laszlo and I know. Because like Corvinus, UCD is in the CEMS group of management schools and we have an interfaculty group for business ethics, many of our authors came from this group. They are people whom we know, whom we have known over several years. They were natural first people for us. Then we had other contacts beyond this group. For instance, I had a colleague in the United States with whom I did some work together in the past. He would be a friend of the CEO of Unilever, a very progressive company, so that worked out well. Also, sometimes people in the group were too busy to write the case, but they referred a colleague.

The first chapter of the book focuses on the definition of progressive business. What is it in a nutshell?
Let me quote from the book. ‘Progressive business is understood as ecologically sustainable, future respecting, and prosocial enterprise.’ What we call ecologically sustainable, is sort of obvious: we mean the physical and ecological Earth system that should be sustainable. Future respecting means that we want our Earth to continue in similar ways, so we want the notion of sustainability and future go together. Prosocial means that we, human beings, live in society and we want to serve the enrichment of societies. So, these are companies that uphold those three principles. The first principle says that business activities may not harm nature or allow others to come to harm. The second principle says that business activities must respect the freedom of future generations. And the third one says that business activities must serve the wellbeing of people. One would hope that the three principles are consistent with each other and that they should be served in a way that they do not conflict with each other. That is, you hope that by sustaining nature at the same time you are not harming society and vice versa.

Is it connected to the triple bottom line concept of CSR and responsible corporate governance?
Only very vaguely connected. CSR is often seen as something tacked on to a business. It is a program you have, but it is not fundamental to your business. In our book, we delineate new business models, new ways of doing business, so that the whole way the activity system or the business model that the company uses is totally integrated with those three principles. Again, it is a different way of doing business altogether. So, while CSR seems to be a voluntary option, this is part and parcel of the everyday business of the company. And the company is totally involved. I am not saying that CSR is bad, but it is not great, it seems to be but an optional extra.

Could the good practices in these case studies be transferred to other businesses? Could these be used by corporate leaders to recreate their business model?
I would say that our cases are all very different. They are different in the ways of being progressive. It is not a one-size-fits-all model. For example, our Spanish case, which I like very much, is a major insurance company. It established a foundation to try to integrate people who are disabled into the workforce. They had people who were disabled to work for them and they discovered that these people made a great contribution, so, in fact, they were not doing them a favor. They did the work. In fact, they were almost more enthusiastic and appreciative of what they were doing than able-bodied employees. It worked out so well that it became a training center and they were able to train more and more disabled people who went to work for other companies. In a sense, it took off. This is but one example of what a company has done.

Another company, an Austrian one in agriculture, does everything organic and natural. It employs a lot of people. It seeks some sort of harmony with nature. So, it does not operate based on efficiency and productivity, that is, we need to employ the least people for the greatest output. It rather looks at employing a lot of people and thereby using people creatively. So those are two quite different companies I can name. Thus, you will not get an exact template that every single company can follow. But I think that by looking at these cases one would hope that people could be inspired. Business leaders could be inspired to revisit their business and look at some of these principles.

Nonetheless, there are some commonalities even though they are very different cases. Like the notion of sustainability, the notion of frugality in a sense that you do not waste things, you recycle and do not manufacture or make unnecessary things that you do not really need. Another commonality is leadership. That all the companies seemed to have an inspired leader or a leader who was like a missionary about what they were doing. Sometimes leadership moved into future generations of leaders. They might have had an original leader but then they got another leader who took over the reins with the same zeal. So, as I see it, there are no templates, but certain principles that somebody who wants to create a progressive business or transform an existing business into a progressive one can follow.

What kind of impact do you expect for your book?
Well, we do hope that the book will be used in teaching, as case studies lend themselves to it. Also, the way we structured the book: every case and every chapter at the end of it has a series of questions that a class of students or participants can consider. Like what are the lessons that we have learnt from this case. We also expect to be a great pedagogical tool for postgraduate students, and of course, executive education. Now, the book is quite an expensive one. This is one of its drawbacks, I must say, although, the publishers have given discounts on it. Also, the online version is cheaper, and it is possible to buy selected chapters online. In this way, even to buy the first and the last chapters and maybe one or two case studies is possible. We hope that it would be used by students who will later become business leaders or managers or decision makers, and by postgraduate students who are in executive education and currently present in companies. So, ultimately, the purpose of the book would be to disseminate our ideas in companies.

What are you currently working on, what are your latest research topics?
Well, along the lines of this book, I also do some work at the London School of Economics. I do some supervisions of minor research dissertations for master students. One of my master students, who happens to be Canadian like myself originally, had her research on B corporations. It is a movement that mainly started in the United States, but that is now present in the UK and other countries. These are companies that try to create responsible business. And again, which is important that this is the foundation of their business. The B corporations are certified, and B stands for benefit. It is a very similar genre, if you like, to progressive business models. Beyond that, with one of my CEMS colleagues, we are looking at interviewing leaders of progressive businesses as a research project. Further, Laszlo and I are contributing a paper on Future Earth Leadership to the next Transatlantic Business Ethics Conference in November. This paper draws on the concept of progressive business models and how courageous business leaders with novel vision and moral imagination transform their business organizations to stabilize life-conditions on Earth.

Apart from that, I am also doing some work on professional ethics with accountants. We are planning to understand ethics in financial corporations and the kinds of attitudes you get. Since the financial crisis and all the scandals, people in the financial corporations here and in the US must sign a statement about their ethics and compliance with certain ethical standards. We are going to look at to what extent they identify personally with these statements. Do they see it as personal identity to be ethical or is it just a matter of compliance? We are going to use my background as a psychologist, as I can use various special structured interviewing techniques to try to get deeper, in-depth sort of feelings on identification and so on. In similar vein, a colleague in the Finance area in UCD and I are looking at ethical identity of bankers, taking account of the financial crisis 10 years ago, and how badly Ireland was affected by it.

Baksa Máté

 

Populism from the right and from the left – where is the world heading? This year Dani Rodrik received the John von Neumann award conferred by the Rajk László College for Advanced Studies

At the invitation of the Rajk László College for Advanced Studies of the Corvinus University of Budapest, Dani Rodrik professor of the Harvard University gave a talk on 16 May 2018 on the occasion of receiving the John von Neumann Award granted by the students of the college.

The professor started by saying that long-standing globalization trends have suffered a political backlash in the past years and this phenomenon has apparently led to concerns among economists. Rodrik said that twenty years ago he had already drawn attention to the fact that globalization was not necessarily sustainable politically as serious social tensions were slumbering beneath the surface.

Why has the phenomenon of emerging globalization triggered populist reactions?
In his structured response the professor noted that within the fabric of society a serious economic gap opened up which raises issues of fairness, fundamental values, the proper representation of certain groups. Although globalization in economic terms has increased the size of the whole cake, i.e. the wealth that created and shared among the various groups of society, the problem is not only that certain groups received a much bigger slice, it is also that large sections of society get a much smaller slice than before. Globalization has turned out to be increasingly redistributive and therefore subject to political challenge. Moreover, employers have gained greater dominance over employees. In fact, whereas most of the barriers limiting the free movement of capital have ceased, the free movement of labour is still restricted both legally and in practical terms. As a result, groups of workers with less bargaining power have been predominantly exposed to the effects of economic shocks. Concerns about the fairness of competition have over time led to market competition losing largely its social legitimation: due to deficiencies in regulation, not every actor competes under the same rules, thereby questioning the outcome of competition.

What is the nature of social issues, who are we to blame?
This question is in the centre of populist counterattacks against globalization. In search of an answer, different narratives have emerged. The so-called left-wing populist answer is that banks, multinational companies, the International Monetary Fund, and generally the rich are responsible for social inequalities and the corruption of common values. Right wing populists, on the other hand, hold the minorities and foreigners accountable for our worsening fortunes. The professor pointed out that these were not random answers stemming from the indignation of certain politicians, but were historically embedded narratives that are present with different undertones in each country. The good, the bad and the ugly: these are the possible future scenarios according to Dani Rodrik. The „good” scenario involves democratic readjustments of societies in the years to come, tends towards reducing inequalities and stronger national self-determination. The „bad” scenario predicts global collapse similar to the one experienced in the 1930s as a result of decline in economic co-operation. Finally, the „ugly” scenario suggests that underlying tensions will undermine the institutional system of liberal democracy. In the light of the above, the professor’s interpretation of the numerous developments of the next few years will be worth following in order to seize the opportunities that might take us in the right direction.

Miklós Kozma
Department of Business Studies

 

What have you done, Zuckerberg? Round-table on data protection

The General Data Protection Regulation (GDPR) entered into force in the European Union on 25 May following a transition period of two years. Besides unifying so far fragmented data protection rules existing in various forms, the regulation gives more say to users, thereby conferring more responsibility on them, but at the same time provides greater protection to their data.

Owing partly to the fact that in the last decade a growing number of scandals surfaced about large amounts of personal data becoming accessible, the news of the implementation of the regulation reached the broader public. The latest scandal receiving wide media attention involved Cambridge Analytica, a British data analysing firm which became reputed for claiming that they brought Donald Trump’s campaign to a successful conclusion using big data, i.e. by possessing the data of 87 million persons. The case involves Facebook and thus Mark Zuckerberg, as many think that they did not handle users’ personal data strictly enough. Since then, Zuckerberg has already appeared before the European Parliament where he talked about the measures they were planning to take and were already implementing against manipulations and data abuse as well as assured the sceptical MEPs about Facebook’s compliance with GDPR.

At the beginning of May, the Institute of Sociology and Social Policy staged a roundtable discussion on data protection and the risks associated with Big Data in the light of the Cambridge Analytica scandal. The invited experts, Karolina Mojzesowicz and Anna Vancsó addressed the question of what could happen to our personal data when using social media websites and online platforms, applications, as well as what we can do to protect our data and how Hungarian and EU legislation protect users. The discussion was moderated by Ágnes Győr journalist. Karolina Mojzesowicz is Deputy Head of the European Commission’s unit in charge of data protection (DG Justice and Consumers), Anna Vancsó is a PhD student of the Institute and senior analyst at Neticle Labs.

The roundtable organized by the Institute was opened by István Vilmos Kovács Director of International Relations and Innovation. Going back to his university years he said that in those times data science had not been so much in the forefront, that big data had not even been in a state of infancy. Today, we create a vast amount of data every minute and it is better not to think about our data footprint: if we are conscious and mindful users, we need not be constantly worried about what might transpire about us. In Mr Kovács’s view, data cannot only be misused, but can also be put to good use, like for instance in the university environment in the form of instant feedbacks during presentations, the real-time display of questions from the audience.

In her presentation Karolina Mojzesowicz summarized the contents of GDPR, the new data protection regulation. The European Union wishes to deal with shocking cases like that of Cambridge Analytica and to prevent the dissemination of disinformation by reinforcing data protection. In order to achieve this, differences in data protection rules between the member states should be dismantled and harmonized, thus clarifying and modernizing rules existing at the member state level. The GDPR contains directly applicable rules which must be met by all entities operating in any of the EU’s member states that handle the data of European Union citizens. It also applies to companies outside the European Union whose goods and services target the member states.

Mojzesowicz also stressed that the entities, companies themselves must ensure compliance with the rules of the GDPR. The handling of sensitive data such as sexual orientation, religion, political views and health data imposes more responsibility on the entities, these can only be used and stored under strict conditions. One of the important benefits of the regulation is that users have greater control over exactly who, how, for what purpose and how long may use or store the data provided by them. Information must be transparent, extensive and easily understandable.

Anna Vancsó pointed out that we use numerous freely accessible services and although we don’t pay money in exchange for their use, we provide our data. In fact, these personal data are valuable for service providers like Facebook and Google that offer their services free of charge. Neticle Labs, a company focusing on media monitoring, media analysis as well as the analysis of online comments, encounters many cases in which it is hard to determine how to act correctly. If, for instance, someone features in the analyzed content with his/her whole name, is it to be protected as personal data? We cannot be sure whether he/she is included with his/her whole name intentionally. We live in an age of visibility, sharing, we could even state that “what is not there on Facebook has not even happened”. The question is whether others can be limited, controlled with the sole objective of protecting them if this is not our responsibility.

With respect to the use of data Anna Vancsó added that many consider big data as dangerous as all our data have now become more visible, more accessible, but big data can be just as useful: The huge databases that are available can be used for good purposes, among others in cancer research and similar areas of social interest. In most cases, individuals are not reluctant to provide their data: with the spread of smart devices an increasing number of applications is appearing, the downloading of which implies giving an automatic consent for their data to be handled. In the US in 2016 it was shown that the time spent on phone applications decreased with age (source: Statista), but these statistics do not include under 18s who are known to spend even more time on phone applications than older generations. Under 18s cannot be expected to act as responsible consumers, namely that they will consciously read the terms of use and privacy policy of the application or the website they are using.

During the roundtable discussion Anna Vancsó stressed that the key issue with respect to data protection was trust: how does one decide whether to trust a company, entity, service provider? In the European Union up to now several institutional rules on data protection were in force and the degree of trust of the society in the various countries also varies. Data stealing unfortunately occurs quite often: databases with personal data often get leaked in such a way that they become accessible to even those who have little experience. Vancsó said that the scandal related to Facebook became so widely known because it was linked to a political campaign.

Karolina Mojzesowicz said that there is a difference in the way the various generations protect their data: older generations are often unaware that in many cases the use of a pseudonym is not sufficient since in the course of analyzing comments it is not the name, but rather a couple of characteristic phrases that make the person easily identifiable.

The contributors ended the roundtable by underlining the responsibility of private individuals. As an example, with the spread of cloud-based storage spaces many people store data on others in the cloud. Each of us is responsible for preventing anyone from accessing these data.

Borbála Szczuka

 

Gig Economy- From Dockworkers to Uber Drivers

Gig Economy

What if from tomorrow on my boss was an algorithm? A reputational system that multiplies the effect of unconscious biases. An erratic, bad-tempered manager that never shows forgiveness and may fire me any time. This is how during his master class at Corvinus, Jeremias Prassl Associate Professor of the University of Oxford illustrated the threats of the gig economy, i.e. an economy that is based on temporary engagements transacted on a digital marketplace.

Academics have been intrigued by the analysis of the gig economy in the last three decades, but the public was unaware of it until this new form of employment started rapid expansion owing to technological developments and a few companies like Uber became known. Gig economy, however, had already existed in 19th century England (in particular in dock labour and hosiery manufacturing) where middlemen hired and paid workers for performing specific tasks. Workers were not offered jobs, therefore on-call time did not represent any expenses for entrepreneurs.

Today the size of gig economy is estimated at 1-3% of the OECD labour market, but is bound to be much higher in the future. In Prassl’s view the phenomenon will not only affect relatively simple jobs, but high-skilled professions as well (doctors, engineers, scientists, artists).

Whereas taskification gives economic value as the job is always given to someone who can do it best and the most cheaply (in the global marketplace this could be anyone from the entire world), it also carries many dangers.

One problem is that it shifts the risks to the worker. Let us think about Uber: drivers use their own car, they buy the petrol and they do not stop even if there is no ride. The application installed in their car prompts them to keep moving in the hope of giving a ride. Employers may also be adversely affected in the long run: persons carrying out fragmented tasks cannot be expected to come up with new initiatives as they lack an overall understanding of the working process. Experience has shown that although in a traditional job, employees are not busy in 100% of their working time, they talk to each other in the breaks and that inevitably leads to discussing how working processes could be made more efficient, which is valuable for the employer.

Two opposing narratives have emerged on gig economy. Supporters consider it as an entirely new, disruptive sector where technological developments bring about flexible employment opportunities and new, cheaper products appear. By contrast, what the other narrative sees in it is rather „tightly controlled insecurity”, i.e. control without assuming any responsibility for the worker. In their opinion, it should be banned. Prassl believes that both views are partially wrong. The first because in most cases the business model is old, with old functions (e.g. the dispatch system at Uber) replaced by new technology. The second because instead of imposing bans, we should rather be applying existing rules to the new sector.

Governments and courts are increasingly forced to deal with the issues raised by the on-demand economy. Prassl thinks that while regulation should ensure fair working conditions as well as protection for consumers, it should also inspire innovation.

Lídia Márton

(Jeremias Prassl held his class in the framework of the EFOP-3.6.2-16-2017-00017 project “Sustainable, smart and inclusive regional and urban models”)

 

The Birth of the Homo Corvinus or Reflections and Inspirations at the Living Knowledge 2018 Conference

The arrival of the Science Shop community’s annual conference at our university had been in the air, we as lecturers and researchers of Corvinus were anticipating it. We knew that this research community and the intellectual current represented by them was centred on inspiration and reflection, the combination of the two being always very exciting. The event matured into one of the key moments of the research work of the local organizing team that was mainly composed of colleagues from the Decision Theory Department of the Institute of Business Economics.

Science can only be authentic and successful in the long run if it works with and for society,
said Philippe Galiay, one of the forefathers of the community revolving around the Science Shops in his plenary opening address. Let us invest in the European future that we envisage, let us mobilize and involve European citizens in research. Let us build relationships between researchers and civil society that are based on reciprocity, let us not only approach the actors of broader society as observers, but as co-creators in advancing science, in exploiting the findings within and beyond our professional lives.

“I was actually born as a citizen”
this could also have been the title of the presentation in the plenary session given by Tessza Udvarhelyi, iconic advocate of the Hungarian scientific community who told how her mind was enlightened at the age of 25. She was taking a tram and noticed several signs of poverty and inequality around her, then she suddenly saw herself as if in a mirror, realized how privileged she was and how little she had done for the welfare of others. She asked herself what her responsibility was in shaping the destinies around her, what she could do against inequalities in the interest of deprived people. “Enlightenment is a nice thing, but what is it good for?” was the second question she asked herself, then having been revitalized as a researcher she decided to react by doing research only with a desire for real change. That is how she discovered participatory action research, her personal goal being to enable people through knowledge to live as fully-fledged citizens and to overcome their social limitations or the ones stemming from their health problems. The speaker concluded by saying that it was not necessary for everyone to become an activist, but let us assume responsibility in order to bring about change with scholarly and political consciousness rather than by just observing nearby events. Let us act against the economic conditions that dehumanize our communities.

The rich offer of the conference accommodated several “dilemma sections”.
An activist of one of the invited grassroots organizations (Vera Kovács from the “City is For All”) which aims to improve the situation of homeless people and if possible, to provide them with a home, mentioned a concrete initiative. Together with university lecturers and business consultants, they took part in a participatory action research to build on the knowledge and assistance of researchers and advisers. Around 20 very active contributors to the session tried to interpret the results and the relative failures resulting from the project. In fact, business consultants had joined the work as possessors of knowledge and not as equal partners as international best practices would have required them to in this particular situation. One of the outcomes of the pro bono (or simply anti-burnout) work of advisers was that at the conclusion of the project one of the most experienced of them recognized that however valuable their knowledge was in the world of business, they were not to change the identity of activists when working with grassroots organizations: neither efficiency nor financial objectives could justify that.

How can university students be persuaded to work on the projects of non-profit organizations?
A number of lecturers (from both Hungary and abroad) shared their experience with each other on the above in parallel sessions. It seems practical to combine problem-focused learning with research for the community and to leave the choice of the preferred project to the students. One of the critical points of the process is when the outcome of the project is handed over to the community partner for what happens with the subjects after the students’ departure is crucial from the viewpoint of social impact. It was also said that the inclusion of social communities in classroom activities increased the social exposure of students, the diversity of their environment, which does not contradict their career plans in business. Diversity may become a source of original ideas, it puts increased pressure on the development of the students’ competences and may ultimately open doors to their innovation potential. Their world view, the environment of their future employer will not be restricted to the business and economic terminology or interpretation of business actors in general, but they will be able to process events happening around them in numerous ways, to rely on a richer toolbox to find solutions to the problems.

Why is the conference and the intellectual community behind it called Living Knowledge?
was the question I addressed to Norbert Steinhaus coordinator of the German Science Shop community during an interview that served as an opportunity for me to try to interpret what I saw and heard at the conference. Norbert Steinhaus said that they viewed their research activities as a shared creative process in which knowledge is not static but should be provided to their community partners on a continuous basis. Knowledge is living if during the work both the researcher and the community partner are part of a conscious growth and development process. One of the declared aims is to involve new subjects in the common reflection each time, to update, develop, increase the knowledge base through constant human interactions in order to bring tangible benefits. What could be the role of profit-oriented enterprises in all this? Norbert Steinhaus stated that it was the mission of the Science Shop community to work with people who could not afford to pay for the knowledge that is so important for them. The financing of the operation of Science Shop is therefore a task to be solved in which enterprises have or may have a significant role. If a company gets involved only for the sake of increasing its profits, that would clearly run counter to the spirit of the initiative. If, however, a company happens to realize a profit owing to its social engagement through the Science Shop (e.g. its employees don’t burn out, the company will be more attractive in the eyes of future employees or consumers), that is naturally all right. In fact, this is something on which successful co-operation can be based.

Who is then the Homo Corvinus?
All in all, there was hardly any participant at the conference who did not get impulses for rethinking their activities as lecturers and researchers or did not make insights with regard to further work or citizenship. Let us ask ourselves whether our colleagues at Corvinus are Homines Oeconomici. Does it mean more to be a Homo Corvinus? What does this exactly imply? Whoever attended the conference might have come closer to answering the question and thereby we together have already made an important step towards achieving social impact through our activities as lecturers and researchers.

Miklós Kozma
Department of Business Studies

 

Will big will be even bigger? Digitalization and its consequences Researcher’s insights: Krisztina Demeter

I interviewed Krisztina Demeter professor of the Institute of Business Economics about the role of manufacturing strategies in digitalization. We know that manufacturing in its current form and way of functioning does not have a bright future, the replacement of existing practices owing to digitalization is only a question of time.

Why does a company need a manufacturing strategy?
The management of a company might be aware of the necessity of digitalization and may introduce systems relying on new technologies, the success of the company, however, cannot be maintained without knowing what the new system is used for and how it is used. The way in which the company takes a new direction requires conscious decisions. One objective might be substituting workforce, i.e. to substitute the work of employees performing repetitive tasks with technological solutions. Another direction might be to increase the reliability of manufacturing through digitalization by eliminating human errors and lowering costs. The professor mentioned a particular case when one of the operators of General Electric noticed that the sound of the machine had changed, it was not as it used to be. When the engineers examined the machine, one of the parts turned out to be worn out. They could intervene before the machine would have broken down. It is good news that as a result of digitalization sensors make sure that worn out parts are only replaced when this becomes really necessary. Companies don’t need to rely on experienced ears anymore and can realize considerable savings.

Digitalization entails „top-heavy” costs
a fact that is often underestimated by company executives. In order to realize the digital transition of manufacturing, basic systems need to be built properly, for instance internet-based connection between the devices must be ensured in a stable way. Each unit must be equipped with a sensor and communication between them should rely on a central database. The recognition of how high the initial investment is can itself justify the rationale for a digital manufacturing strategy.

Will small companies be left out and go out of business?
In Krisztina Demeter’s view it cannot be excluded that the digital transition of the manufacturing systems of large companies that is currently taking place will represent a serious threat for smaller companies. Transition to the so-called additive manufacturing (more widely known as 3D printing) enables large enterprises to manufacture prototypes easily and cheaply and also to deal with small-batch orders in a cost effective manner. The question of how the competitive advantage of small companies in the field of manufacturing can then be maintained is still to be answered.

We live amidst market and technological turbulences
In a survey questionnaire compiled with Tamara Keszey, researcher of the Marketing Institute and János Kiss of the Institute of Business Economics, Krisztina Demeter is examining how far innovation and manufacturing performance can have a positive effect on business performance if we take into account current environmental turbulences. Owing to among others disruptive innovations, market turbulence cause demand trends to become increasingly volatile in a growing number of industrial segments. The problem of technological turbulence, on the other hand, means that corporate decision makers might be confronted with new technological solutions as often as every year, thus forcing them to face the eternal dilemmas of exploitation and discovery. It is not easy to decide, as a matter of fact, if higher business performance should be achieved through the further exploitation of the existing technology and product platform or time has come to try out new technologies, to introduce new products by means of major investments and thereby risk achieving return on previous investment.

Understanding the transformation of supply chains
in the light of the digitalization of manufacturing is in the focus of a major research project funded by EFOP (Human Resource Development Operational Program) involving the professor and many other colleagues at the university. The work is carried out with the contribution of colleagues engaged in different fields and involves major sectors like the retail sector, the FMCGs (Fast Moving Consumer Goods), mechanical engineering, SSCs (Shared Service Centres) and logistics service providers. The research topic addresses major questions out of which the optimization of the workforce of companies, i.e. whether major lay-offs can be avoided in the wake of digitalization is perhaps one of the issues of the widest general interest.

Miklós Kozma
Department of Business Studies

 

The Science of Success: Interview with Albert-László Barabási

Barabási Albert-László

How can success be measured, what do we know about the connection between performance and recognition? To answer the question, Albert-László Barabási and his colleagues examined the works of scientists, artists and sportsmen. They found that „whereas performance depends on you, recognition depends on us”: while human performance is limited, success can be virtually unlimited. We talked with Albert-László Barabási during the Social Futuring Conference in March.

You mentioned in your lecture that success is a notion that is based on perception. How is this influenced by receptiveness? We have heard several stories about people who could not achieve success in their own times and the real value of their work was only discovered later.
That is true and actually that is why we say that it is better to be the last one to discover something rather than to be the first. Being the last to discover means that there is no point in discovering it again. Interestingly, many discoveries were made several times, but the moment comes when the community recognizes the fact. This happened in my life as well. It transpired that one of the mechanisms of scale-free networks, the so-called preferential selection had been published in scholarly literature fifty years ago. More precisely, György Pólya was one of the scholars who described it in mathematics. Although it did not appear in the context of networks, but it did exist and I was unaware of it. Preferential selection cannot be discovered anymore as it has been sufficiently discovered.

It is worth clarifying what exactly we are talking about in this context. When we think about success we should very carefully distinguish between performance, i.e. what the individual does and what is usually very concretely assignable to an individual or to a piece of work. And then there is success, which is the appreciation of the same performance by a certain community. These are important to distinguish because performance cannot always be measured precisely, but can always be assigned to an individual. Success, on the other hand, is a collective phenomenon, consequently has more available data points. Owing to the fact that it reflects the activity of not one, but hundreds, thousands and sometimes even millions of individuals, it is easier to measure and to forecast. Every time we talk about the activity of several millions of individuals, these tend to average, unify and render a mathematically calculable quantity. Success therefore is easier to calculate and to handle than performance.

What is the role of social networks in all this? Does our position within the network influence receptiveness to our performance?
Networks play a very important, actually a key role when performance is hard to measure. If performance can be measured precisely, like in the case of runners, it will define success unidimensionally. At the other extreme is art where it is extremely difficult to measure performance. The importance of the work and the artist depends on who else considers it important, which institutions, which curators deem it good enough. It is the institutional and curatorial network that creates the value. We are working on this too and can very accurately forecast the artists’ future career. This is because performance cannot be measured, and as a rule only the network counts. It is the network that mediates the success which can already be measured quite accurately, thus giving us considerable predicting abilities.

What about science, how well can it be measured?
Science is about halfway between art and sports. A large number of network effects influence what is important, what is worth researching, what the public see sas an achievement that is to be recognized. If, however, a result has been achieved, there are some sufficiently objective measures - at least in exact sciences - to help us decide whether it is true or not. If for example you and I both have a formula for the same phenomenon, sooner or later an experimental measurement or an empirical test will be carried out to decide for instance that your formula is valid, mine is not. And then you will have the success and not me. In fact, there is a degree of objectivity which measures the results after they have been achieved. Nevertheless, there is a very strong network effect in what we are researching, in which institutions and how we access the tools necessary for conducting the research.

In your book entitled „Bursts” you wrote that although there were some breaking points, the behaviour of individuals can be fairly well predicted on the basis of previous data. Can this be handled at the social level? Could we predict the behaviour of society?
It is essential to identify what phenomena we are talking about. Our findings presented in Bursts show that if we follow the movements of a man, we can collect enough information to be able to predict with an accuracy of 98% where he will be tomorrow at three. What made our prediction so successful? It was so successful and accurate because the movement of humans is very repetitive and the physical, spatial and temporal limits of where one can be at a certain time are given. We don’t go to the bank to withdraw cash at 2 am, as only ATMs are accessible at this hour.

If, however, someone moves to another location, chooses a new home or a new job, graduates from school etc., there are breaking points. Breaking points can also be brought about by technological developments, for instance a new underground line is constructed, I will opt for a different means of transport to get to my office. Or I will ride as a new bikeway was built. As a result of biking, many more places become accessible than before when I took the metro and flashed past underground. These breaking points are there and cannot be really predicted. We are looking at behavioural patterns that seem to be stable. That is, if someone changes his job or moves otherwise, will he return to a former behavioural pattern. There is a fairly strong returning effect.

At the same time it is very well known that the patterns observed at the level of the individual can hardly be applied to another individual or the same individual in another period of his life. That is why Asimov in his famous book Foundation froze scientific development in order to be able to make predictions. In fact, scientific development changes patterns of behaviour dramatically by creating possibilities that had not existed before.

Thus, it is not always possible to make predictions, but by collecting a sufficient quantity of data, we can decide how far the phenomenon in question can be predicted. There are phenomena, for instance human movement, where predictability is around 95% and there are phenomena where predictability is low. Irrespective of whether predictability is high or low, it can be quantified and handled with the tools of mathematics. This, however, does not mean that my tools and data are certain to predict what you will be doing tomorrow.

What are you working on currently, what is your upcoming project?
Two things are worth mentioning. One is that I am about to finish my book entitled The Formula- The Science of Success. It formulates in more general terms what I presented today, that is the difference between success and performance and how the former can be quantified. Writing the book has taken up much of my time in the past months, but I trust it will be ready in a few weeks. The Hungarian version is planned to be published in September in Budapest. The other thing that we are focusing on in the laboratory is to understand the connections between networks and diseases. Recently we have also been trying to grasp the effect of dietary habits on cellular processes and ultimately, our health. Many of us in the lab are and I guess will continue to be engaged in this area.

Baksa Máté

 

CONNEXT – Social Futuring Center

Csák János

The great Hungarian political reformer of the first half of the 19th century, Count István Széchenyi closed his treatise „Hitel” (Credit) with the words: “many people believe that Hungary belongs to the past, but I believe firmly that Hungary is not a part of the past but the future." Most probably, the colleagues working for the Social Futuring Center established at the University share this view. So far, they have staged three workshops with the titles of Social Futuring- Concepts and context, Social Futuring- Expectations and risks and Social Futuring- Changes and Communities. Their very first international conference will take place in March with a line-up of world-renown speakers. We have taken this opportunity to introduce the research unit to our readers.

The head of the project team is Mr. János Csák Honorary Professor, former Chairman of MOL (Hungarian Oil and Gas Company) and former Ambassador of Hungary to the United Kingdom. We interviewed him about the philosophy and approach of the Social Futuring Center.

“Social Futuring” may have several meanings. Should it be understood as an adaptational capability to new and fast changing situations, be they climate change or a new economic context?
Social futuring is the feature of social entities signifying their capacity to interpret the developments occuring around them and ensuring their preservation and reproduction by interpreting them, that is, how far they are able to organize themselves in order to influence their future, manage their destiny. To give a simple example, when we take a three-year old child to a swimming lesson or a six-year old to school or to a language class, we are not yet aware of his or her future, or the changes he or she is to cope with in the future, but we are trying to equip him or her with as many capabilities as possible. Professor Tamás Roska, the excellent man and outstanding scholar, who passed away a few years ago and was an international authority in bionics maintained that successful civilizations and cultures in the long run rest upon their capacity to interpret the world in a precise and realistic manner and to organize themselves accordingly in order to influence their future.

Could resilience, an ability to resist negative trends be such a feature? Or the ability to form, shape the future?
We are talking about a complex, multidimensional concept. It includes the reactive ability to cope with changes, something needed for instance during a natural catastrophe or an attack on an entity. Then there are a number of proactive abilities, which are applied when the entity shapes future trends and circumstances. Furthermore, there are active abilities meaning the creative exploitation of the changes in progress, when the entity captures the wind that is blowing anyway in its sails. Interestingly, while this approach sounda pretty simple , it has just now emerging as a whole new research field globally.

You mentioned that in order to appraise ourselves, we need social self-awareness. Is the center planning to take up research in that field?
We are not planning to do basic research or to proprietory data collection. We are rather relying on the findings of a number of disciplines and seek, together with colleagues of various backgrounds, to elaborate a framework in which the futuring of social entities can be understood and measured. Such entity can be the family, for instance the Ford, the Bertelsmann or the Esterházy families, it can be a country, a city, a company, a foundation, a church or the entire culture, civilization…

Our goal is to develop the Social Futuring Index. There is vast array of indices for measuring the economic aspects of an entity, if we only think of the GDP. An index can only be sound if what it measures is unambiguously defined. There are also several indices that try to capture the quality, of human life in entities, the UN’s Human Development Index for instance is a summary measure assessing the human development in a broader context. As a matter of fact, every decent research center or consulting company develops some kind of index to represent and explain the differences between entities investigated. In each scholar’s life there comes a moment when through classifying facts he or she creates a systematic comparison of the research subjects. They might, nevertheless, not call it an index. Let us take, for instance, the simple question of “what is the good life” that is worth preserving and reproducing. This ancient philosophical question had been addressed by Aristotle and Plato. What are the attributes of the good life? How should one shape one’s individual and community life to make it good and worth preserving?

Aristotle in his Nichomachean Ethics seeks to answer the question of how man can achieve happiness. The focus of his ethics is eudaimonia, literally translated as the “good-spirited” life. The Social Futuring Index handles these qualities and ambitions for both the individuals and the social entities simultaneously. While modern western thought promotes the individual, it is rather difficult to imagine the individual’s “good-spirited” life without the social entity behind it being “good”, and vice versa. Our research objective is to capture the notion of “good”, something that had already been sought for by the ancient Greeks, in a systematic way. This notion implies a state of social entities that is equally good for the individual and for the community. We hope that such an index, a ranking of the various entities will inspire the members and leaders of social entities to think systematically about their current situation and their future.

What are the specific areas of your enquiries?
We examine four pillars, the fist being the ecological- geopolitical background. It makes quite a difference, for instance, if a country is located by the sea or is land-locked, if there is an abundance of natural resources, arable lands, water in its territory or its land is bare and infertile. All this was described by the representatives of the French Annales school focusing on social history through the broad notion of “space”, i.e. how a people, a culture can articulate their abilities, how they can shape their future within that space. The second pillar is technology. I am referring to human-inflicted changes of our natural and human environment, and even the human being itself. Arguably, they have an enormous impact on the futuring of social entities.

The third pillar is the socio-economic one. Economy does not exist in itself, only within the metaphysical and ethical context of a social entity. Take alternative sources of energy such as solar or wind, for instance. Insofar as they are cheaper and entail better externalities, they logically decrease GDP. Nevertheless, we try to develop them as we do not only consider merely economic aspects, but socio-economic reasons as well. Another example would be the effect of purely economic decisions related to the systems of human “reproduction”, the family and educational institutions on the given entity’s ability to embrace the future.

In everyday life, the expressions “our way of thinking, our way of life” indicate the metaphysical and ethical context as well as the basic value and belief system of an entity. We examine the meaning of these expressions in our research. What is the way of life of the given entity like if its goal is to bring about good individual and community life? What is to be preserved and what is to be changed?

We have now reached the world of values, haven’t we?
We have, in fact this is the fourth pillar, cultural relations and the spiritual foundations of social entities. Understanding and mapping the world of values is indispensable for social futuring. We are thinking about such concepts as the image of man, a community’s view of the human person, about the entity’s organic and durable existence, its understanding of itself in the changing world. Our index will be tested when for instance, we will check what data from the 1980s would have predicted as far as futuring is concerned and where the social entity in question actually is in the present.

Who is involved in these research projects? I assume that you did not only invite researchers from the Corvinus University?
We invite a wide range of researchers and will continuously upload the findings on our website. We co-operate with a number of Hungarian research groups and universities as well as with Chinese and American institutions. We have invited three eminent speakers, George Friedmann (Geopolitical Futures, Austin, TX), Huang Ping Director of the Chinese Academy of Social Sciences, Beijing and Albert-László Barabási one of the greatest authorities in network science (Northeastern University, Boston, MA).

Many think that futuring depends on our ability to get involved in various networks. Is the future really about networks?
Ever since the world has existed, the key to futuring has been the ability to connect to networks. There existed networks within tribes, villages, larger settlements and entities, and the individual’s destiny have always been largely influenced by the quality and strength of his or her connections, be they kinship or relations beyond blood. The social being lives and unfolds within the context of networks defined by space, technological, socio-economic, cultural-spiritual factors. This therefore is not a novelty. Owing to technological developments, however, we can gain unprecedented knowledge about the functioning of mass society in the form of digital information. Until recently, sociologists had gained information, beyond the data collected through large statistical surveys, by observing certain populations or information that was based on self-declaration. The late Professor Rudolf Andorka himself had us conduct time-use survey through self-declaration. By contrast, nowadays the information on where people are located, with who and – to a certain extent – what they are doing is available, obviously ona population-level, without individual specifics. What is the movement pattern of people? How much time do they spend and on what subjects on the internet? Putting together this vast quantity of factual information is essential for portraying ourselves in a more precise and perhaps less flattering manner than we would have preferred to see ourselves. It shows who we actually are. As a matter of fact, networks have always been present in our lives, but today we can know way more than, say, 20 years ago. If we raise the right questions, we are able to learn a lot about human life and networks.

Although with a different research objective, futures research had already existed at the University headed by Professor Erzsébet Nováky. I believe that one of your first tasks was to demarcate the two research areas…
Certainly, futuring is a multidisciplinary area that exploits the synergies between sociology, network science, and as you said futures studies, sustainable development, demography, philosophy, psychology, economics, political science. Three of our key studies have served to specify our research area. The study by Professor Petra Aczél analyses the scientific discourses on the future and identifies the conceptual-linguistic-cultural characteristics of futuring. Tamás Kocsis examines the differences between the approaches of ecological sustainability and futuring. Eszter Monda presents the differences between futures studies and futuring.

As the University might also rely on these research projects to build its strategy, may I ask how you are planning to make available your findings within and outside the University?
The center is characterized by utmost transparency. On the one hand, owing to the publication of the methodological premises that is coordinated by Zoltán Szántó who is also the Head of the Research Center. On the other hand, due to the fact that we use publicly available databases, and as a result, anyone can check our findings both with regard to data and method. We are currently working on the specific components of the index and will share our findings at conferences going forward. We are trying to achieve similar transparency with respect to the normative framework that serves as a basis for our research projects. This area happens to belong to me, expert consultations are underway which will be followed by the publication of the framework.

What do you mean by normativity in the context of research?
I will tell you an example. In a country or in a city the percentage of one-person households increases by 20% in ten years. This in itself is a data, but is that good or not? It is obviously good for the electricity utility company since each household consumes electricity, it is good for the TV broadcasters, the book publishers. It might, however, not be good for producing children. It might allow people to contemplate as they are not disturbed in their thought by anyone. This social development may, however, have unintended personal and socio-psychological consequences. The question of what is “good” cannot be avoided. Our Research Center is concerned with what is equally good for the social entity and the individual as this what we consider as one of the key aspects to futuring.

A huge challenge…
It is, and that makes it so exciting.

Your personal attachment to the University is indubitable. Why have you taken up the challenge in the light of what you have achieved so far?
I graduated from this university in 1987 in Finance and Sociology. Since then, I have mainly been active in business and cultural endeavours. In retrospect, my life, my work seems to have always been dedicated to contributing to the futuring of entities, be it MOL, Central Europe, my loved ones or persons I mentor. How and by what can I help a person or a social entity to preserve what seems to be good in an unknown future? Even when I am not there anymore. I am delighted that my relationship with the university has recently become tighter, besides my work at the Futuring Research Center I have also been awarded an honorary professorship by the Faculty of Business and Management of Corvinus. It is an honour to share my experience in this temple of systematic thinking and to learn just like in 2009 when I spent nearly a year in the US as a visiting researcher in political economics and energy security. I hope that my mentor Professor Andorka enjoys what he sees when he looks at me from the heaven above.

(JS.)

 

Looking at the euro zone with optimism – interview with Bruno Dallago

Dallago

Bruno Dallago is an economist, professor at the University of Trento, guest lecturer at Berkeley, the University of North Carolina and Kyoto University, as well as member of the External Counselling Body of the Hungarian Academy of Sciences. He last came to Budapest on the occasion of the Kornai90 conference but is otherwise a regular visitor to our city. He speaks excellent Hungarian. We talked with him about the future of the euro zone, his relationship with Professor Kornai and about delicious food.

How come that you speak Hungarian? When did you have the opportunity to learn our language so fluently?
I suppose I have to tell the truth. The real reason is that I like good food: I eat little, but well. And I am also fond of travelling. As a student I did not have money but wanted to travel abroad. ERASMUS did not exist yet, so the only chance was to get a grant from the Italian Ministry of Foreign Affairs. I was awarded a scholarship to come to Hungary. In 1972 I spent two weeks in Budapest at a conference on the results of the Hungarian economic reforms implemented in 1968. I was in the last year of my Masters studies and decided to choose this topic for my dissertation. After graduation I returned to Hungary and worked here at the Karl Marx University. In the meantime, I met a Hungarian girl who has been my wife for 42 years. She had a wonderful grandmother, the best cook in the world who talked to me in Hungarian all the time. As she saw that I liked good food, she asked me what I could cook. I realized that I would have to learn Hungarian. Since then, I have been coming to Hungary two, three, four times each year to work together with colleagues here. When our children were born I asked everyone to speak Hungarian so that they could learn the language. It is a very charming language and the Hungarian culture is also very exciting.

What has been your favourite research topic recently?
In fact, my working method as a scholar resembles the way I use the computer: I keep a lot of windows open and click from one to another, I like doing many things at a time. In terms of duration my most important research area is Central and Eastern Europe, the Socialist countries, the transition, with particular attention to the Visegrad countries. We recently published a book with Professor Steve Rosefielde in which he covered Russia and Ukraine, and I wrote about the Visegrad countries.

This continues to be one of my key research areas, but right now the euro zone definitely enjoys priority. We have not really come to terms with the euro zone, this „strange animal” and in this respect János Kornai’s approach, his research methodology is essential despite the fact that he himself did not address the issue of the euro zone. I was very pleased to accept this invitation because it gives me an opportunity to re-read a lot of things. I actually think that what he had written has increased relevance now.

My third research area on which I also published has been enterprises, a crucial factor in competitiveness. We will probably have think about the euro’s effect on competitiveness. Italy, for instance, was once well-known for entrepreneurship, there were a lot of enterprises. Nowadays it is the opposite: we sleep, we are afraid, we wait. What happened? I do not think it is the euro itself that is to be blamed: it is rather our way of looking at the euro. We had thought that we would only gain from the euro, that we would have free meals and had not understood in time that if we join a common currency, we have to behave, work and arrange things in a different way and that we have to reorganize our institutions.

Although the European set-up faces several challenges, you still said in your talk that you were optimistic about its future. Why is that?
I am positive about the future of the euro zone and not about the individual countries. This two should be clearly distinguished from each other. I am not scared of populism as I do not believe in its predominance. As a matter of fact, populism shows us that to simply wait and hope is not an option. Problems will not just go away, we must act. And this is where my optimism comes in the picture: fear from populism and from the extreme right explains how the political situation has changed in Germany. Proceeding towards a political union is not only backed by the German federal government, but by the Bundesbank too. One of the objectives is to establish a European monetary fund that would support countries with liquidity problems. We can be confident, at least to some degree, as previously rigid discipline was applied to convergence parameters.

Now I believe that if we are heading towards the creation of a common European ministry of finance and economics, that will allow greater flexibility in the long run. Subject also to what the situation of the individual countries requires and what they would like to do about it. In a country like Italy where productivity has stagnated for 25 years, something must be done. If, for instance, the Italian government works out a serious financial investment program that is approved by the EU, we will not be forced to reduce debts in the short run, but we will be accorded some time and flexibility. This will be a significant step forward.

The role of Greece seems to be crucial in this respect, as what happened there was bad enough, but not lethal. They had to pay the price but managed to do that as they wanted to stay in the Union. Therefore, Germans have more and more trust in Greeks – and perhaps others can be trusted as well. Moreover, the position taken by the US and the UK in foreign politics makes it clear to the Germans that the sound functioning of the euro zone is in their best interest. To achieve this, reforms are necessary. As far as I can see, every ingredient is there: there is will on behalf of the Germans and France is politically strong. Therefore, I believe that a considerable restructuring period has started which might be lengthy but might bring about a completely different euro zone. We are not going to be one country, we will not have one government, the political union might not be full, but conditions will be there for the euro to be strong and to exert a positive influence on national economies.

What about the long-term effects? Will other members also join the euro zone or European development will be characterized by two speeds?
The two or multi-speed EU is already there and that is not a concern: it grants greater flexibility both politically and economically. If certain countries do not wish to adhere to certain agreements, they should not be forced to do so. At the same time, they might thus deprive themselves of additional funding. If you want to, go a bit slower, but if you wish to accelerate, you are welcome to do so.

The euro zone is slightly different: one cannot pick and choose, either they want the whole of it or nothing. Money perhaps is the only factor in economy for which overall decisions should be taken. As I said this morning, I think it is essential for Hungary to join the euro zone, but also not to commit the same errors as Italy had. The intention to join after a while should be declared, but reforms aiming at aligning the economy should be started immediately. This way Hungary would not fall in the same trap that had caught Italy, Portugal or Spain. The Hungarian economy is extremely open, German, Austrian, Dutch and even Italian economic ties are very important. I feel, however, that it is not yet strong enough to join the euro zone, it is not ready, it should be developed. A country which starts to develop later has the advantage of learning from the cases of the others. But they should understand that nothing is for free, they have to work and fight with determination to get admitted in the club.

What do you think is the most important contribution of Professor Kornai, and why is it relevant now and for the future?
I would say it is that he showed one thing to economists clearly. Namely, that in the economy there is no such thing as taking just a little of something. One must understand that small pieces constitute a bigger system and interact with the other parts. While they affect the others, the others also affect them. Even though we researchers are unable to handle everything and therefore focus on particular details, we should think in systems. This approach is to be followed in case of the euro zone too. Thus, Professor Kornai’s contribution is unquestionable even here.

What was your main takeaway from today’s conference?
Well, that we are still able to think. Professor Kornai has inspired various ideas, but as he himself said in his closing speech, he could suggest thirty or forty dissertation topics to students based only on today’s discussions. What is valid for Professor Kornai also applies to me. I take home a lot of ideas. Of course, I do not agree with everyone, but that is how it should be. The driving force behind our work is disagreement: if we all agreed, the whole thing would be of no interest.

Máté Baksa

 

Conflicts in Europe- can they be addressed together? Researcher’s Insights - István Benczes

István Benczes

István Benczes is professor at the Institute of World Economy of the Faculty of Social Science and International Relations. Out of his current research projects, he selected one that focuses on the reform of European studies.

He uses a theoretical approach to analyse the „unparalleled” institutions of the EU. Studies related to this specific institutional system neglected US mainstream discussions on economics and political science. For decades, the American literature did not look upon European Studies as a separate discipline that they thought was based on a somewhat ”naive belief” in integration.

The turning point occurred when the crisis reached Europe in 2008 and called in question former achievements:
it became evident that thinking about Europe in terms of a straight-line progress as assumed by the prevailing neofunctionalist ideology and as advocated by the ”supranational elites” was unrealistic. The process of integration turned out to be at best an undertaking ridden with conflicts that Europe had attempted to survive. They preferred to keep silent on the dividing lines. The negotiations, coordination between the members were dominated by the topics of co-operation, common construction and the details thereof. The time had come for the integration theories that had so far determined our thinking on Europe to return to the mainstream discussions in which conflict and its management are both focal points.

As a matter of fact, by the 1990s the American realist school (underlining conflict) and the representatives of the neoliberal institutional theory (placing co-operation in the centre) had already merged into a rational synthesis that promoted the simultaneous management of conflict and co-operation between the states as main actors. István Benczes thinks that what happened in Europe in the past 8-10 years can paradoxically be interpreted as a trade-off among states that awakened to the sobering effects of crisis. It became clear that the deepening of integration cannot be taken for granted, i.e. states may not gradually renounce a slice of their sovereignty in order to hand it over to a supranational body. We are coming to understand why US economists held that the euro zone without political integration was condemned to fail. They predicted that the euro zone would either fall into pieces or would entail a federal structure with a larger central budget. By contrast, the European narrative argued that it was possible to build Europe from the bottom up and the jointly elaborated set of rules could safeguard the future of the euro zone.

Nevertheless, the pragmatic question to be addressed is how Europe can be made stronger without strengthening its centre,
but rather by enshrining the desired progress in intergovernmental treaties. So much so that practical issues like “who pays to who, how much and what for” arise more and more often. It is a sobering recognition that co-operation does not lack conflicts, and that the resolution of conflicts is by its nature ridden with conflicts. Conflicts result from the fact that European leaders do not deliberate on regulatory issues only, they also take a position in conflicts over distribution. This mundane approach reflects the crisis of the former views. István Benczes believes that the current situation is not only about the crisis of the euro zone, but also an outcome of mistaken policies at the level of the member states, i.e. to some extent a failure of their economic policies, exchange rate policies and decisions connected to competitiveness.

How do we see the future, Europe’s future?
István Benczes stressed that rather than seeking the origin of the problems in the institutions of the Union, we should take a closer look at the member state level. If we manage to grasp the consequences of local decisions, it will be worth thinking about the systemic shortcomings affecting Europe as a whole. Another practical question is whether sanctions can be enforced against the offenders. Thus, the tightening of rules does not offer a solution in itself.

Can the euro zone be saved?
Yes, with the following conditions: better policies at the level of member states, smarter decisions and in addition to these, a stronger central budget (corresponding to 5-6% of the GDP) in order to make central measures enforceable through transfer policies. There are doubtless many question marks, even in Germany which has been an engine of European integration from the very outset. Surveys show that at present the German public is mainly concerned with migration and the public budget, consequently Germany, as required by the pressures of domestic politics, tries to make any support to the functioning of the Union subject to certain conditions. In such a situation it is crucial that while bargaining may take on an increasingly materialistic character, both the leading powers of the Union and we ourselves stick to European values. Interestingly, whereas the core countries of the Union are prepared to move forward, domestic politics often prevents the elites from taking up highly controversial European issues.

All in all, István Benczes considers that the greatest problem
is that while the EU is undergoing a distribution crisis, we fail to react to global power shifts. For instance, no breakthrough has been achieved towards increasing the European defence budget, despite the fact that the United States under Trump is less keen to police the world than in previous decades. Will Europe in the midst of its internal disputes perceive that it is left out of global power games and may easily slide to the periphery?

As regards research cooperation opportunities,
István Benczes said that his Institute maintained good research relations with the Institute of World Economics of the Hungarian Academy of Sciences, with the international and world economy research centres of the universities of Szeged and Debrecen, as well as with the University College London and several Czech and Polish universities. Although within the Corvinus University the Faculty of Social Science and the Corvinus School of Economics are natural allies of the Institute, there is a huge potential in working together with the Corvinus Business School, too. The theme of International Business Economics at the Institute of Business Economics may be connected to the subject discussed in this interview as it is within the context of international institutions and politics that businesses are managed.

Miklós Kozma
Department of Business Studies

 

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