Managing Global Transitions International Research Journal EDITOR Anita Trnavčevič, National Leadership School, Slovenia CO-EDITOR Dušan Lesjak, University of Primorska, Slovenia ASSOCIATE EDITORS Roberto Biloslavo, University of Primorska, Slovenia Andrej Koren, National Leadership School, Slovenia Egon Žižmond, University of Primorska, Slovenia EDITORIAL BOARD Boštjan Antončič, University of Ljubljana, Slovenia Zoran Avramovič, University of Novi Sad, Serbia and Montenegro Terriče Bassler, Open Society Institute, Slovenia Cene Baveč, University of Primorska, Slovenia Jani Beko, University of Maribor, Slovenia Vito Bobek, University of Maribor, Slovenia Suzanne Catana, State University of New York, Plattsburgh, usa Fedor Cerne, Government Office for European Affairs, Slovenia KariDehli, University of Toronto, Canada David Dibbon, Memorial University of Newfoundland, Canada Jeffrey Ford, The Ohio State University, usa Tim Goddard, University of Calgary, Canada Noel Gough, Deakin University, Australia George Hičkman, Memorial University of Newfoundland, Canada Andras Inotai, Institute for World Economics of the Hungarian Academy of Sciences, Hungary Hun Joon Park, Yonsei University, South Korea Štefan Kajzer, University of Maribor, Slovenia Jaroslav Kalous, Charles University, Czech Republic Neva Maher, Ministry of Labour, Family and Social Affairs, Slovenia Massimiliano Marzo, University of Bologna, Italy Luigi Menghini, University of Trieste, Italy Marjana Merkač, College of Entrepreneurship, Slovenia Kevin O'Neill, State University of New York, Plattsburgh, usa David Oldroyd, Independent Educational Management Development Consultant, Poland Susan Printy, Michigan State University, usa Jim Ryan, University of Toronto, Canada Boris Snoj, University of Maribor, Slovenia Ian Stronačh, Manchester Metropolitan University, uk Ciaran Sugrue, Dublin City University, Ireland Zlatko Šabič, University of Ljubljana, Slovenia Mitja I. Tavčar, University of Primorska, Slovenia Nada Trunk Širča, University of Primorska, Slovenia Ivan Turk, University of Ljubljana, Slovenia Zvone Vodovnik, University of Ljubljana, Slovenia Min-BongYoo, Sungkyunkwan University, South Korea Pavel Zgaga, University of Ljubljana, Slovenia EDITORIAL OFFICE University of Primorska Fačulty of Management Koper Cankarjeva 5, SI-6104 Koper, Slovenia Phone: ++386 (0) 5 610 2021 Fax: ++386 (0) 5 610 2015 E-mail: mgt@fm-kp.si www. mgt.fm-kp.si Managing Editor: Alen Ježovnik Editorial Assistant: Staša Ferjančič Copy Editor: Alan MčConnell-Duff Cover Design: Studio Marketing jwt Text Design and Typesetting: Alen Ježovnik Printed in Slovenia The publication of the journal is supported by the Ministry of Education, Science and Sport of the Republic of Slovenia. Managing Global Transitions International Research Journal VOLUME 2 • NUMBER 1 • SPRING 2004 • ISSN I58I-63II Table of Contents 3 The Editor's Corner 5 The Mediating Role of Corporate Entrepreneurship in the Organizational Support-Performance Relationship: An Empirical Examination Boštjan Antoncic Otmar Zorn 15 The Philosophy of Supply Chain Management in the New Economy: Net Readiness in the Net Supply Chain Zbigniew Pastuszak 31 Is There a Gap in Economic Culture Between eu Countries and the Transition Economies? Milan Zver Tjaša Živko Vito Bobek 41 Welfare State Retrenchment in Central and Eastern Europe: the Case of Pension Reforms in Poland and Slovenia Igor Guardiancich 65 Teaching and Globalization Pasi Sahlberg The Editor's Corner In the light of the events, symbolically marked by May ist when the European Union was enlarged by accessing countries, also our Jour- nal acquired an additional meaning. When the title Managing Global Transitions was chosen by the Editorial team we had much discussion about what 'transitions' mean. Traditionally the word was associated with countries in transition, their efforts and attempts to change and ad- just to European and global trends and movements, and also to embrace changes that have been noticed world-wide. Today we can add broader meaning to the word 'transitions', as we can already notice that transition has not only been a process in former ac- cessing countries but also a required and needed process in the European Union. How the enlarged Union will influence global economies, educa- tion and other areas of social life is therefore a challenge for researchers to inquire into changes in local, European and global contexts and flows as well as for professionals and practitioners who will identify changes and will also have to respond to them in their everyday practice. 'Revolutions' seem to belong to the past, to what we might label mod- ern societies, while transitions seem to be the way of living in the post- modern societies. Despite this quite strong distinction which could be contested and challenged by a simple question, asked by Bruno Latour (1993) 'have we ever been modern?' the clash of modern and postmod- ern world, globalization processes and what Beck (2003) labels 'glocal- ism' reveals transitions in all areas of social life. Studying, researching and not lastly shaping these transitions presents a challenge, opportunity and choice that we, as researchers and profes- sionals, take up in order to make the world a better place for living. This number already raises some issues and also provides some findings in the specific area of interest of the authors. In this number, Boštjan Antonäc and Otmar Zorn provide an em- pirical examination of the mediating role of corporate entrepreneurship in the organizational support performance; Pasi Sahlberg discusses edu- cational policies, teaching, globalization and school reforms; and Milan Zver, Tjaša Živko, and Vito Bobek raise the question about the possi- ble gap in economic cultures between eu countries and the transition economies. Igor Guardiancich raises issues about welfare state retrench- ment in Central and Eastern Europe and focuses on the case of pen- sion reforms in Poland and Slovenia. Also Zbigniew Pastuszak's article is devoted to economic questions and provides the philosophy of supply chain management in the new economy. The next number of the Journal will be published in the fall of 2004. As the holidays are just about to start we hope that fruitful 'time off' from work will also result in articles that the Editorial Board will consider for publication. Anita Trnavcevic Editor References Latour, B. 1993. We have never been modern. Cambridge, ma: Harvard Uni- versity Press. Beck, U. 2003. Kaj je globalizacija? Ljubljana: Krt. The Mediating Role of Corporate Entrepreneurship in the Organizational Support-Performance Relationship: An Empirical Examination Boštjan Antoncic Otmar Zorn Corporate entrepreneurship has been recognized as an important ele- ment in organizational performance. Organizational support in terms of training and trusting individuals within the firm to detect opportu- nities and in terms of resource availability has been proposed to pos- itively influence a firm's entrepreneurial activities. Despite the recog- nition of the organizational support-corporate entrepreneurship- performance linkage, this relationship has been approached in differ- ent ways from the theoretical and empirical perspective. Some un- solved mediation issues of past research are addressed in this study by testing three alternative hypotheses. The research design was a cross- sectional, mailed questionnaire. The findings indicate that corporate entrepreneurship (new firm formation, product/service and process in- novation) can be considered a potent mediator in the organizational support-performance relationship. Introduction Corporate entrepreneurship (i. e. entrepreneurial activities at the level of an established organization) has been recognized as an important el- ement in organizational and economic development, performance and wealth creation. Organizational support in terms of training and trust- ing individuals within the firm to detect opportunities and in terms of resource availability has been proposed to positively influence a firm's entrepreneurial activities. Despite the recognition of the organizational support-corporate entrepreneurship-performance linkage, this rela- tionship has been approached in different ways from the theoretical and empirical perspective. For example, first, organizational support Dr Boštjan AntonCiC is Assistant Professor of Entrepreneurship at the Faculty of Economics, University of Ljubljana, Slovenia. Otmar Zorn is the owner-manager of Zorn Otmar Ltd. and a doctoral candidate at the Faculty of Economics, University of Ljubljana, Slovenia. has been seen as a part of the corporate entrepreneurship construct or the corporate entrepreneurship antecedent, and second, the mediating role of corporate entrepreneurship in the linkage has usually not been tested appropriately. These unsolved issues of past research are addressed in this study by testing alternative hypotheses. Corporate Entrepreneurship Corporate entrepreneurship is defined as entrepreneurship activities within an existing organization. Corporate entrepreneurship refers not only to the creation of new business ventures, but also to other inno- vative activities and orientations such as development of new products, services, technologies, administrative techniques, strategies and com- petitive postures. The three most pronounced elements of organiza- tional level entrepreneurial activities are: new venture formation, and product/service and process innovation. First, new venturing can in- clude the formation of more formally autonomous or semi-autonomous units or firms, often labeled incubative entrepreneurship (Schollham- mer 1981; 1982), internal venturing (Hisrich and Peters 1984), corporate start-ups (MacMillan, Block, and Narasimha 1984), autonomous busi- ness unit creation (Vesper 1984), venturing activities (Guth and Ginsberg 1990), newstreams (Kanter and Richardson 1991), and corporate ventur- ing (Sharma and Chrisman 1999). Second and third, product/service and process innovation refer to product and service innovation, with the emphasis on development and innovation in technology. In the words of different researchers, corporate entrepreneurship includes the exten- siveness and frequency of product innovation and the related tendency of technological leadership (Covin and Slevin 1991), new product de- velopment, product improvements, and new production methods and procedures (Schollhammer 1982), or development or enhancement of products and services as well as techniques and technologies in produc- tion (Knight 1997). The Organizational Support-Corporate Entrepreneurship-Performance Relationship Corporate entrepreneurship is very likely related to improved organiza- tional performance, usually in terms of growth and profitability (Covin and Slevin 1991). Past research has presented much evidence for the relationships of corporate entrepreneurship to organizational growth (Covin and Slevin 1986; Covin 1991; Zahra 1991; 1993; Zahra and Covin 1995; Morris and Sexton 1996; Stetz et al. 1998; Wiklund 1999; Antoncic and Hisrich 2001) and profitability (Covin and Slevin 1986; Zahra 1991; 1993; Zahra and Covin 1995; Wiklund 1999; Antoncic and Hisrich 2000; 2001). One important organizational element that is beneficial for corpo- rate entrepreneurship is organizational and management support for en- trepreneurial activities. This support includes top management involve- ment (Merrifield 1993), encouragement (Hisrich and Peters 1984), sup- port, commitment, and style, and the staffing and rewarding of venture activities (MacMillan 1986). Organizational support has been seen as an important antecedent of corporate entrepreneurship. In particular, supports in terms of training and trusting individuals within the firm to detect opportunities (Steven- son and Jarillo 1990) and in terms of resource availability (Kanter 1984; Pinchot 1985) have been proposed to positively influence organizational entrepreneurial activities and behavior. Antoncic and Hisrich (2001) have provided empirical evidence for this linkage. They also found a pos- itive relationship between intrapreneurship and performance (growth and profitability). This research suggests that corporate entrepreneur- ship would act as a mediator in the organizational support-performance relationship. In past research the exact mediation role of corporate en- trepreneurship in the organizational support-performance relationship has not been appropriately empirically tested. In their structural equa- tion model findings, Antoncic and Hisrich (2001) report neither a co- efficient of a direct relationship between organizational support and performance elements nor an analysis on the nature of the mediation. Mediation could exist, but it may be in one of three alternative forms described by Baron and Kenny (1986). The first alternative form is a single, dominant mediator. In this case, the direct relationship between the independent variable and the outcome variable is zero, whereas the outcome variable is impacted through the mediator. The second alter- native form is a potent mediator. In this case, the outcome variable is also impacted through the mediator but the direct relationship between the independent variable and the outcome variable is not zero, hence indicating the operation of multiple mediating factors. For a mediator to be considered potent, the path from the independent variable to the outcome variable should be significantly reduced by the introduction of the mediator. If the path is not significantly reduced the mediator can be considered non-potent (the third alternative). Research in corporate entrepreneurship, as described above, would suggest that entrepreneur- ship can be considered an important mediator in the organizational support-performance relationship but does not indicate a preferred al- ternative between the dominant and the potent moderation form. For this reason two alternative hypotheses are formed: Hypothesis 1: Corporate entrepreneurship activities (new ventures, product innovation, and process innovation) are dominant me- diators in the organizational support-performance relationship. Hypothesis 2: Corporate entrepreneurship activities (new ventures, product innovation, and process innovation) are potent mediators in the organizational support-performance relationship. Alternatively to the mediation issue, organizational support has been considered a complement or an integral part of corporate entrepreneur- ship activities. Zahra (1993), for example, included organizational sup- port activities (such as training and rewarding employees, and establish- ing procedures for dealing with new ideas) designated to foster creativ- ity and innovation as a part of a corporate entrepreneurship construct, rather than considering them as antecedents of corporate entrepreneur- ship. This is the basis for a third alternative hypothesis: Hypothesis 3: Corporate entrepreneurship activities (new ventures, product innovation, and process innovation) are neither dominant nor potent mediators in the organizational support-performance relationship. Method The research design was a cross-sectional, mailed questionnaire, admin- istered in Slovenia. All constructs were measured by multiple items. Cor- porate entrepreneurship was measured by items, which pertain to prod- uct/service innovativeness (8 items) from the corporate entrepreneur- ship scale (Zahra 1993), process innovativeness (6 items from Zahra 1993; two from Lumpkin 1998; and one from Covin and Slevin 1989 and Knight 1997), and by four items reflecting new venture formation in terms of new autonomous or semi-autonomous unit or firm formation. Orga- nizational support was measured by items from Hornsby et al. (1993) and items reflecting support activities for creativity and innovation from Zahra (1993). Organizational support questions (12 items) refer to man- agement encouragement, worker's discretion about their work-related decisions, designating idea champions, establishing procedures to solicit and examine employee ideas, permeability of job boundaries, training, rewards and reinforcement, and availability of time and financial re- sources for pursuing new ideas or projects. Variables of performance, the dependent variables in the model, were measured in terms of abso- lute growth and profitability. Growth was assessed by two items. While the first asks about the average annual growth in number of employees in the last three years, the second asks about the average annual growth in sales in the last three years. Profitability was assessed by three items: aver- age annual return on sales (ros), average annual return on assets (roa), and average annual return on equity (roe) in the last three years. Con- trol variables were also used. Respondents checked appropriate boxes for age, size and industry for their organization. Questionnaires were sent to 2,086 established firms (477 responses were usable for analysis). All measurement scales were examined for their convergent and discriminant validity. The existence of mediations was tested with regression analyses by using a hierarchical procedure as pro- posed by Baron and Kenny (1986). Results The results of regression analyses are displayed in Tables 1, 2, and 3. Hy- pothesis 1 stated that corporate entrepreneurship activities would act as dominant mediators in the organizational support-performance rela- tionship. The relationships between organizational support and all three corporate entrepreneurship elements were found positive and signifi- cant (unstandardized coefficients in prediction of new ventures 0.33, product innovation 0.40, and technological innovation 0.54, see Table 1). The relationships between two out of three corporate entrepreneur- ship activities and performance elements were found positive and sig- nificant (unst. coef. in predicition of growth: new ventures 0.13, prod- Table 1: The organizational support-corporate entrepreneurship relationship (regression equations with unstandardized coefficients) Dependent variable New ventures Product innovation Technological innovation Intercept 0.00 0.00 0.00 Organizational support 0.33* 0.40* 0.54* R2 0.11 0.16 0.29 * p < 0.05. Table i: Corporate entrepreneurship mediation in the organizational support- performance relationship (regression equations with unstandardized coefficients, de- pendent variable: growth) Model 1 Model i Intercept 0.00 0.00 Organizational support (os) 0.12* 0.24* New ventures (nv) 0.13* Product innovation (pi) 0.14* Technological innovation (ti) 0.08 Interaction terms os x nv 0.03 os x pi 0.15* os x ti 0.0i R2 0.14 0.06 Adjusted R2 0.1i 0.06 Significant differences in coefficients (p < 0.05) in italics. * p < 0.05. Table 3: Corporate entrepreneurship mediation in the organizational support- performance relationship (regression equations with unstandardized coefficients, de- pendent variable: profitability) Model 1 Model i Intercept 0.00 0.00 Organizational support (os) 0.09 0.22* New ventures (nv) 0.03 Product innovation (pi) 0.16* Technological innovation (ti) 0.1i* Interaction terms os x nv 0.00 os x pi 0.07 os x ti 0.06 R2 0.11 0.05 Adjusted R2 0.09 0.05 Significant differences in coefficients (p < 0.05) in italics. * p < 0.05. uct innovation 0.14; unst. coef. in predicition of profitability: product innovation 0.16, technological innovation 0.11; see Tables i and 3). To- gether with these findings, a non-significant or even zero relationship between organizational support and performance would indicate domi- nant mediation effects. However, the organizational support-growth re- lationship was found positive and significant in both models (unst. coef. 0.12 in Model 1, which includes organizational support and corporate entrepreneurship elements; unst. coef. 0.24 in Model 2, which includes organizational support only; see Table 2). The organizational support- profitability relationship was found positive in both models (unst. coef. 0.09, non-significant in Model 1; unst. coef. 0.22, significant in Model 2; see Table 3). On the basis of these findings Hypothesis 1 can be rejected. The alternative Hypothesis 2 stated that corporate entrepreneurship activities would not act as dominant, but still as potent mediators in the organizational support-performance relationship. Findings presented in the previous paragraph indicate the presence of mediation of en- trepreneurship elements in the organizational support-performance re- lationship, and the non-existence of dominant mediation effects. In sup- port of Hypothesis 2 the path between organizational support and per- formance was found to be significantly reduced with the introduction of the mediation elements in both cases of prediction of growth (unst. coef. from 0.24 to 0.12) and profitability (unst. coef. from 0.22 to 0.09). The alternative Hypothesis 3 stated that corporate entrepreneurship activities would neither act as dominant nor as potent mediators in the organizational support-performance relationship. Hypothesis 3 can be rejected on the basis of supporting evidence for Hypothesis 2. It needs to be noted, however, that a trace of moderated mediation was found in the organizational support-growth relationship (a positive and signifi- cant unst. coef. 0.15 for the organizational support-product innovation interaction term, see Table 2). Conclusion The findings indicate that corporate entrepreneurship (new firm forma- tion, product/service and process innovation) can be considered a po- tent mediator in the organizational support-performance relationship. Organizational support can be most properly viewed as an important antecedent, or even a necessary condition, for development of corpo- rate entrepreneurship activities and subsequent improvement in firm growth and profitability. In addition to these two most important con- clusions and research-related implications, some practical recommen- dations for managers can be proposed. Both corporate entrepreneurship activities and organizational support for these activities are important for subsequent performance improvements. In order to foster corpo- rate entrepreneurship, managers need to take good care to: encourage other members of the organization, enable worker's discretion about their work-related decisions, designate idea champions, establish proce- dures to solicit and examine employee ideas, assure permeability of job boundaries, training, rewards and reinforcement, and availability of time and financial resources for pursuing new ideas or projects. In addition to the management and organizational support, managers may need to se- lect and pursue new firm formation, product and process innovation as primary strategic goals of the organization, in order to achieve goals of growth and profitability. The findings of this research can be generalizable to some extent, de- spite the limitation of using one sample from Slovenia. Past research (An- toncic and Hisrich 2000; 2001) indicated that corporate entrepreneur- ship research-related findings can be comparable to the United States and perhaps also to other economic contexts, especially to economies that have gone through transition from the social or state to the private ownership structure and from the state- to the market-oriented economy in the past decades. We are confident that corporate entrepreneurship activities and organizational support for these activities are particularly important for the performance of firms in Slovenia, in countries that followed similar transition patterns, and in other countries. References Antoncic, B., and R. D. Hisrich. 2000. Intrapreneurship modeling in tran- sition economies: A comparison of Slovenia and the United States. Journal of Developmental Entrepreneurship 5 (1): 21-40. Antoncic, B., and R. D. Hisrich. 2001. Intrapreneurship: Construct refine- ment and cross-cultural validation. 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Wiklund, J. 1999. The sustainability of the entrepreneurial orientation- performance relationship. Paper presented at the 1999 Babson College - Kauffman Foundation Research Conference, Columbia, nc. Zahra, S. A. 1991. Predictors and financial outcomes of corporate en- trepreneurship: An exploratory study. Journal of Business Venturing 6 (4): 259-85. Zahra, S. A. 1993. Environment, corporate entrepreneurship, and financial performance: A taxonomic approach. Journal of Business Venturing 8 (4): 319-40. Zahra, S. A., and J. G. Covin. 1995. Contextual influences on the corporate entrepreneurship-performance relationship: A longitudinal analysis. Journal of Business Venturing 10 (1): 43-58. The Philosophy of Supply Chain Management in the New Economy: Net Readiness in the Net Supply Chain Zbigniew Pastuszak The internet has been described as breakthrough technology. Its use in business can drastically change the situation in the business sector lead- ing traditional enterprise to collapse. In the era of the Digital Revolu- tion, postindustrial society is evolving towards the information society creating the foundation of the New Economy. Its basic elements in- clude globalization processes, massive implementation of Information Technology and the establishment of virtual enterprises. Implemented processes take the form of pro-active business that fosters innovation and personification of its market offer. Enterprises that utilize Internet infrastructure in their activities carry out a specific e-business model. Their key commodity is information. It is based on changing the traditional scm into e-scM as well as on cre- ating the so-called 'Internet value network.' In order to be created, the enterprise has to be properly prepared for the new conditions, which is called net readiness. This article describes the characteristics of sup- ply chains in the new economy, stresses the significance of information and effective business management in addition to a potential effect of the new economy on the market competitiveness of enterprises. Net readiness has been described here based on a study of a group of the biggest Polish businesses. From Old to New Economy World economies function under the conditions that result from human evolution based on a continuous creation of added value1 (Table 1). The 'virtuality' of our era has its roots in 'tough' historic solutions. Digital Revolution changing the post-industrial era society into the in- formation society laid the foundations for the New Economy based on a massive implementation of Information Technology - it. Here are 11 principles of the New Economy according to D. Tapscott (1998): 1. Information - departure from physical labor; 'information input' is an essential component of products. Dr Zbigniew Pastuszak is Reader at the Faculty of Management, Lublin University of Technology, Poland. Table i: Evolution of Old Economy (author's analysis based on Sadler 1988) Degree of Period Social Significant Basic Value added Basic Basic Value Client's development systems technological economic for the future tools product added for expectations (phase) inventions activity of economy the client Pre-agrarian Beginnings Uncompli- — Hunting, Simple tools Force of Meat Satisfying Lack of of civilization cated society gathering operated by human basic clients (2-4 mln. of nomads direct human muscles physiological years) force needs Agrarian Approx. 7000 Agrarian Metal- Agrarian Tools Force of Bread Satisfying Basic years b.c. settlements working economy operated by animal force human and animal muscles group physiological needs existence a Industrial Approx. 1800 Industrial Steam engine Production Mechani- Force of Basic Self- Industrial S S a. d. towns of goods zation human muscles, machine industrial goods sufficiency of local society goods Post-industrial 1965 Suburban communities Computer Services Automation Human brain, computer Highly- processed goods Simple information systems High scale of production, high quality Electronic 1983 Virtual World Wide E-business Robotizaton Human Infor- Satisfying Variety of communities Web brain, hardware, Internet mation (proces- sed) international economic needs production, access to information S3 1 Post-electronic 1999/2000 Virtual Mobile com- Information Artificial Human Infor- Global Acces- s information reality, munications, processing and intelligence brain, mation security, self- sibility of S -s information cordless management based on software, realization infor- s society Internet information Internet mation Table 2: New Economy and production processes Business challenges before 2020 Ways of accomplishment Reaching high level of competitiveness in all operations (on all levels of the process of production). Integration of human and technology resources in order to raise production effectiveness and customer satisfaction. Immediate transformation of information obtained from a wide network of various sources into useful knowledge which facilitates making effective decisions. Reduction of production waste and influence on the natural environment to 'almost nil'. Fast reconfiguration among production businesses in response to changes in various needs and opportunities. Quick innovations in production processes and products keeping in mind a constant reduction in their physical size. Source: Manufuture 2003. lee - Lean, Effective Enterprises cre - Customer Responsive Enterprises tce - Totally Connected Enterprises Environmental Sustainability Knowledge Management Technology Exploitation 2. Power of digital technology - departure from analogue technology. 3. Heading toward virtual reality by searching for virtual solutions corresponding to present ones. 4. Molecularization - departure from systems hierarchy toward 'indi- vidual creators of values'. 5. Integration (work) on the Web. 6. Elimination of intermediaries and indirect functions. 7. Correlation of market areas - combining their organizational struc- tures, areas and functions (e-content). 8. Innovation - key success factors. 9. Consumer-producer - consumers participate in production already on the level of product design. 10. Functioning in real time (real-time economy). 11. Globalization. 12. Era of anxiety and threat (for societies outside the 'loop'). These processes require a continuous process of adaptation on the part of businesses to meet evolving consumers' needs (Table 2). New Economy Enterprises - Virtual Organizations New economy enterprises apply new principles of operation. Tradi- tional solutions based on the concepts of Total Quality Management Figure 1: Sources of internet value network in the New Economy (author's analysis) (tqm), Business Process Reengineering (bpr) or Value Based Manage- ment (vbm), see a comeback in popularity in the informational era. The implementation of the Internet guarantees an ever-increasing effective- ness within the Time Based Management (tbm). Capitalizing on the advantages of Human Resources Management (hrm), it creates a pre- viously unthinkable synergy effect in the form of holistic (multi-aspect) management of an entire chain of cooperating enterprises in all areas (Figure 1). The logistics pipeline comprises physical, informational and financial flows. The processes described lay real foundations for the development of the new economy through the creation of virtual organizations defined as:2 1. Temporary, goal-specific network of independent businesses joined by Internet Technology, based on synergy-effect cooperation (al- liances, joint ventures, coopetition).3 2. New business that integrates processes previously implemented by different enterprises but now operates independently and creates added value due to the synergy of its combined functions. 3. A totally new creation offering totally new products and totally new functions. Practically speaking, virtual organizations are treated as production systems, i. e. designed and organized economic unions (enterprises) used in order to create certain products and satisfy customers' needs. They utilize concrete supplies, i. e. input, (e. g. hardware, software) or infor- mation supplies (e. g. data base, graphics etc.) and output (e. g. Web page content, financial transactions, contacts with subcontractors) that satisfy the needs of the market and ensure expected profit. Virtual Supply Chain - Internet Value Network escM Enterprises that utilize Internet infrastructure in their operations can be divided into three groups: users, telecommunications businesses and suppliers. They offer both traditional and virtual enterprises a wide vari- ety of services to access on-line resources and opportunities. This access is based on the '5c' (Afuah and Tucci 1003): 1. Coordination, 1. Commerce, 3. Community, 4. Content, 5. Communications. In this way a virtual supply chain is created which is strictly connected with the traditional supply chain based on the flow of goods and services (Figure 1). The synergy of Internet properties, wide use of Electronic Data Inter- change (edi), knowledge and intellectual capital of organizations as well as the effectiveness of traditional scm system solutions all lead to man- agement of the supply chain in the new economy, i. e. escM (electronic Supply Chain Management) and to the creation of the Internet value net- work (Afuah and Tucci 1003). Though it is based in many cases on the so-called dynamic network, utilizing the cooperation of the mother com- pany with a network of specifically selected partners, it is generally based on a wide use of the Internet in the following processes: commerce, pro- duction, physical movement, planning, supply and product design (Fig- ure 3). Knowledge and intellectual capital of new economy enterprises create, according to L. Edvinsson's rooted tree theory (Edvinsson and Malone 1001), the basis for their real sphere, i. e. physical and produc- tion flow, which stimulates the development of other spheres of their ii. Telecommunications companies 1 5. Skeleton network companies Virtual supply chain Figure 2: Virtual supply chain (author's analysis based on Afuah and Tucci 2003) eLogistics Growth ePlanning Customer loyalty Contract efficiency Product availability Flexibility eProduction / \ eDesign escM eSupply Reduction Reaction time Operating cost Servicing cost Sales cost Figure 3: Elements of escM (author's analysis)4 activity in their close and global environment as well as contributing to their growing competitiveness. characteristics of the supply chain in the new economy The specific characteristics of the supply chain functioning in the new economy are mainly based on the synergy effect of traditional business solutions and Internet technology applications. The comparison of the characteristics of the chains in the old and new economies is presented in Table 3. Net Readiness of Polish Enterprises research methodology The utilization of evident advantages of supply chains in the new econ- omy is conditioned by a number of factors that are chiefly related to the internal characteristics of a business. They are referred to as Net Readi- ness (nr), i. e. the degree to which an enterprise is ready to conduct its business activity using the Web. Employees of Cisco Systems (Hartman, Sifonis, and Kador 2001) are the authors of the Net Readiness methodology used to research Polish Table 3: Internet value network: characteristics of supply chains in the Old and New Economies5 Sphere of activity Old economy (description) New economy - information economy Characteristics Subsystems escM Sources of synergy Basic Processes Production preparation and internal logistics Production External logistics - supplying of products to consumers Marketing and sales Production preparation is based on demand analysis and collecting orders sent traditionally from sales network. Scale Economy decides about the position of a competing business. Products reach their final consumer mostly through a company's distribution network using own means of transportation. It extends the time of customer service. Limited scope of marketing and advertising. A brand is promoted in sporadic advertising campaigns. Sales are conducted through traditional channels, usually agreements with chain stores. Client communications is done on-line.6 Information ePlanning, comes directly from consumers, mostly through ecr, crm, Websites. It reduces the time for demand analysis and tqm, bpr. the process of production preparation. Wide variety of production, high quality of goods and eProduction, high level of logistic customer service. bpr, ecr, tqm, crm. Sales takes place through an Internet store. Sales eCommerce, documents are transmitted electronically. Goods are eLogistics, delivered by delivery companies which results in ecr, tqm, lowering costs and prices, reduction in order fulfillment crm. time, expanding credibility of exchange through the Internet due to the so-called 'third-party transactions'. The image of a business is strengthened through ePlanning, electronic marketing methods such as its own Websites eCom- or actions directed at specific consumers. Sales are merce, usually conducted electronically on line and take place eLogistics, mainly on the b2b, b2c or b2g markets. ecr, hrm, tqm. Supporting Processes Human Employee is usually the supplier of work force. Work is Resources organized on the basis of strictly defined lists of duties Management and limited competencies. Supply Supply costs are reduced by the just-in-time methods. Their amount is the result of searching for suppliers using traditional, low-effectiveness, time-consuming methods. Services (excluding service enterprises) Enterprise is not prepared to perform services not directly related to its product. Infrastructure Infrastructure is very developed; it includes production and social functions. Investment is related to production assets expanding production capabilities. Technology development Technology development is mainly related to the production sphere and aims at increasing production scale. Employees are the most important business resource (knowledge). They create its know-how and generate its innovations. The company adopts features of a virtual organization. Work is organized on the basis of wide competencies and limited formalization. Markets b2b and e-marketplaces contribute to lower supply cost. Information technologies speed up the process of searching for profitable market offers, reduce the time of setting up cooperation agreements and add to the flexibility of supplier selection process. Services are treated as an integral part of the enterprise operation. In addition to basic services, information and entertainment services are offered among others. Infrastructure of the enterprise is adapted to the range of e-commerce it conducts, it investment is the most important. The main asset of the enterprise is know- ledge and information. Investment is related to tech- nical and organizational aspects of accessing data base. Modern technologies development is top priority. They reduce the time of filling orders, increase effectiveness and competitiveness of the enterprise. Computer networks, ecr, crm, tqm, bpr, hrm. eSupply, vbm, ecr, bpr, tqm. ePlanning, eProduc- tion, eCom- merce, tqm, ecr, bpr. ePlanning, bpr, vbm. ePlanning, eDesign, vbm, tqm. enterprises. They refer to Net Readiness as a subjective combination of '(...) four factors that enable enterprises to activate highly effective busi- ness processes utilizing Internet technologies and having a real, concen- trated and measurable character.' They include: leadership, management, competencies and technology. Cisco research proves it is very unlikely for any company to be successful in e-business if either of these factors mal- functions. The main nr research tool is the nr evaluation chart. It describes the level of involvement of an enterprise in e-business solutions. It also en- ables the position of the enterprise to be determined in relation to the best representative in its group. The authors of the methodology divide enterprises into five groups: 1. Internet visionary - enterprises displaying best preparation to oper- ate in the Net, 2. Internet expert - Net Readiness of the enterprise is impressive but certain significant elements are missing, 3. Internet savvy - enterprises showing 'higher than average distance from the concept and language of Net Readiness', 4. Internet aware - enterprises that are more conscious of than ready for the Net economy challenges, 5. Internet agnostic - e-business remains outside of the enterprise's range of interest. research results nr research of Polish enterprises was conducted between October 2002 and November 2003. It was funded through a grant from the Polish Sci- entific Research Committee and was entitled 'Adaptation of Polish En- terprises to E-Business Competition'. 71 enterprises were researched that had been selected from the year 2001 list of 500 biggest Polish enterprises. The stock exchange and non-stock exchange companies that were stud- ied gained profit in 2001 in the 60 million-2,9 billion usd range (1 usd = 3.5 pln). They employed between 100 and 100,000 employees while their investment reached from 290,000 to 1,5 billion usd. Managers of the en- terprises that took part in the study answered questions regarding the use of information technology, application of the Internet while contacting main customers and suppliers, opportunities for individualization and virtualization of products and processes, speed of services as well as the clients' attitudes to accepting new means of product delivery. The Net Readiness Evaluation Chart that was used in this research consisted of 20 questions concerning the following: leadership, manage- ment style, competencies and technologies (Table 4). Survey participants rated respective areas on a 1-5 point scale. A comparison of overall results achieved in the group of researched companies to the ideal model and Cisco research population (Table 5) confirms the broad technological opportunities of Polish enterprises. However, with lack of e-business orientation (Table 4, question no. 20 - minimum value - 2.67), the results point out, at the same time, that the it infrastructure is sufficient to conduct e-business (question no. 17 - highest average - 4.42). The discrepancy among these answers clearly shows deficiencies of the largest Polish companies in developing e-business. This has been observed mainly in e-business management. Admittedly, the bosses of researched companies seem to notice some op- portunities in e-business, but they lack ideas on how to utilize them, e. g. lack of development strategy, administrative procedures and e-project evaluation. Marked disproportions can also be noticed between production- and non-production companies as well as between companies with high as opposed to low levels of sensitivity to e-business competition (Table 6). Researched companies generally reached a relatively high level of readi- ness ('Internet sense'). However, the leading group of the 'Net experts' includes non-production companies in addition to companies with a high level of sensitivity to the risk of e-competition. On the level of leadership and management, the majority of compa- nies are highly sensitive to competition's e-business. They also show a rel- atively high level of e-business competencies and technological advance- ment. This group can only be compared to the non-production compa- nies that dominate as far as technology and competencies are concerned. This fact confirms a general observation that it is relatively easy for these companies to undertake activities leading to the use of the Internet. It is obvious that production companies with low sensitivity to e-business competition, on the other hand, rate much lower. This results from a low susceptibility of their products to virtualization processes. Summary Business solutions used in supply chains of the new economy lead to time savings, contribute to value creation for cooperating businesses and en- able maximum adjustment of business offer to the needs of the market. Table 4: Polish enterprises net readiness evaluation chart (median, N = 71) No. Net readiness factor Mean Leadership 3.68* 1 Top leadership keeps in mind opportunities/threats resulting from Internet economy. 4.12 2 Internet projects under implementation are well integrated with the overall business strategy of the company. 4.09 3 There is a culture of information sharing within the entire organization. 3.97 4 Company has a clearly defined and accepted 12- to 18-month development strategy regarding e-business. 3.21 5 Company's e-business efforts stress more the strategic significance of value creation rather than concentrate on its operational effectiveness. 3.00 Management 3.32* 6 Company has standard principles of work organization of e-business projects. 3.36 7 We have stable indices rating the effects of e-project implementation. 3.00 8 Company has clearly specified functions, range of duties, responsibilities and control in relation to e-business projects. 3.39 9 E-business projects are implemented by the right people who are properly motivated to achieve expected goals. 3.33 10 it Department sees itself as a business partner and consultant in utilizing Internet services by the company's business units. 3.48 Competencies 3.62* 11 Company is able to function in the face of rapid and constant change. 4.18 12 E-business projects are implemented quickly and efficiently, i. e. by 3 to 6 people in less than 3 months. 3.15 13 Business managers have it knowledge while it managers have business knowledge. 3.70 14 Company is experienced in simultaneous management of internal and external relations. 3.79 15 Company can quickly start and develop cooperation with business partners. 3-30 Technology 3.90* 16 Entire company is covered by a stable and standard it infrastructure. 4.27 17 Company has an indispensable technical infrastructure such as the networks, hardware etc. 4.42 18 Company's solutions are flexible enough in response to changes in the environment. 4.15 19 Company's solutions can be easily adapted to changing needs of its customers, 3.97 20 Majority of company's solutions is e-business oriented. 2.67 * Arithmetic mean of the rating obtained from all answers regarding the specific nr factor. Source: Author's analysis based on Cisco methodology and results of research. Table 5: Researched companies net readiness Leadership Management Competencies Technology Ideal model 5 5 5 5 Cisco population 4,4 3,9 4,1 4,2 Polish companies 3,7 3,3 3,6 3,9 Source: Based on Cisco methodology and results of research. Table 6: Net readiness of enterprises according to type of activity and sensitivity to competition Leadership Management Competencies Technology Productive 3,56 3,32 3,57 3,73 Non-productive 3,7i 3,19 3,9 4,2 Low sensitivity 3,39 3,13 3,46 3,74 High sensitivity 3,9i 3,47 3,65 3,93 Source: Results of research. Modern supply chains do have a number of advantages; however, they are not free from threats resulting from the characteristics of e-economy (Table 7). Generally, these threats lie in low net readiness to operate in the e- business environment as well as in the necessity to make broad invest- ments in it solutions. Limits in new opportunities that can also be no- ticed are due to a world-wide economic stratification and a clear division into digital civilization and outsiders. Additionally, there are difficulties in a free flow of information connected with specific persons or compa- nies (e. g. problems with infrastructure) or problems with a revolution- ary transition from the old to the new economy omitting intermediate stages such as the technological gap, social factors, mentality, level and features of consumer needs. Nevertheless, it can be stated that the cor- relations generally taking place in many aspects of economy will have a growing influence on its basic processes. Economic evolution in different countries, on the other hand, will be wider and more intense, which, in turn, will be conducive to the transition into the new economy of more countries. In this process, the only companies to reach a high level of competitiveness will be the ones effectively managed and ready to func- tion in the Net, showing this readiness by participating in modern, highly flexible, virtual supply chains. Table 7: Elements of swot analysis for escM (vs. traditional scm capabilities) Strengths Weaknesses • High flexibility of action • Low level of net readiness • High speed of processes • Necessity of wide it solutions • Very high integration of chain members implementation, especially integrated • Great influence of needs on offer software creation • Necessity of purchasing (creating) and • Lower cost of transaction completion constant updating of data base • Lower cost of investment in • Necessity to trust all members of development of cooperation within e-supply chain supply chain. • Lack of examples to follow Opportunities Threats • Opportunity for quick action in case of a • Failure of it systems market niche • Lack of generally accepted legal • Globalization of business activities and regulations consumer expectations • Lack of preparation of supply chain • Diversified consumer expectations members for operating in the new • Opportunity to use latest technical supply chains innovations, e. g. cordless Internet, • Lack of interest on the part of the new micro payments supply chain consumers (and potential • Synergy of opportunities and cooperating firms) resulting from delays experiences of supply chain members related to infrastructure, local culture, • Lack of barriers to the flow of mentality or organization information Adapted from Kisielnicki 2002. Opportunities for Future Research A diagnosis of the current degree of enterprises' readiness to function in the new economy creates new directions for research. Questions ahead are related to, among other things: 1. Posibility and potential scope of process and product virtualization in enterprises with varied levels of technological advancement. 2. Rate of achieving new competitive positions within e-business so- lutions. 3. Influence of companies' countries of origin, basic activity markets and international connections on effectiveness of e-business solu- tions. 4. Influence of the past on the functioning of enterprises in the for- mer 'Eastern Bloc' countries in comparison with enterprises from Western Europe, Japan and the us. Notes 1. The term 'added value' refers, in this case, to an additional input in the development of civilization at a specific phase of world economy. 2. Author's elaboration based on Grudzewski and Hejduk 2002,93-7 and 164-5. 3. Coopetition is a tool and a form of competition. It consists in mak- ing unions among businesses in order to serve the client and compete more effectively on the market (Pastuszak 2002a). 4. Author's analysis based on Korff and Knak (2001) and author's study of 53 Polish production enterprises (Pastuszak 2002b). 5. When characterizing supply chains in the new economy, the classifi- cation of business activities within the supply chain was based on an article by M. E. Porter and V. E. Millar (1985). 6. A lot of attention is paid in this process to the concept of the Vir- tual Customer, who influences, through the Internet, product devel- opment in all stages if its production (see Dahan and Hauser 2001). References Afuah, A., and C. L. Tucci. 2003. Biznes internetowy: Strategie i modele. Krakow: Oficyna Ekonomiczna. Dahan, E., and J. R. Hauser. 2001. The virtual customer: Communication, conceptualization, and computation. mit Papers 104. Edvinsson, L., and M. S. Malone. 2001. Kapital intelektualny: Poznaj prawdziwac wartosC swojego przedsiebiorstwa odnajdujacc jego ukryte ko- rzenie. Warsaw: pwn. Grudzewski, W. M., and I. K. Hejduk. 2002. Przedsiebiorstwo wirtualne Warsaw: Difin. Hartman, A., J. Sifonis, and J. Kador. 2001. E-biznes: Strategie sukcesu w gospodarce internetowej. Warsaw: Liber Kisielnicki, J. 2002. Przedsiebiorstwo przyszlosci w warunkach nowej ekono- mii. In Przedsiebiorstwo przyszlosci: Wizja strategiczna, ed. W. M. Grud- zewski and I. K. Hejduk. Warsaw: Difin. Korff, K., and H. Knak. 2001. Co moze producentom dac eZarza^dzanie Lancuchem Dostaw? cxo, December, 51-6. Manufuture. 2003. Working document for The Manufuture 2003 Confer- ence. European Manufacturing of the Future: Role of Research and Education for European Leadership. Milan, 1-2 December, 23. Pastuszak, Z. 2002a. An enemy or a friend: Coopetition in scm. Polish Journal of Logistics 4:13-5. Pastuszak Z., 2002b. Innovation and competition in Polish sme. In Pri- vatisation of enterprises in Polish industry, ed. M. Baltowski. Warsaw: State Scientific Publishing House / pwn. Porter, M. E., and V. E. Millar. 1985. How information gives you competi- tive advantage: The information revolution is transforming the nature of competition. Harvard Business Review, July. Tapscott, D. 1998. Gospodarka cyfrowa. Warsaw: Business Press. Is There a Gap in Economic Culture Between eu Countries and the Transition Economies? Milan Zver Tjaša Živko Vito Bobek The process of eu enlargement is in its final stage, the ceecs have more or less adapted to the western standards, which is not yet sufficient for successful completion of the transition process successfully. We have learned from the failed communism that the imported norms, institu- tions and practices can cause entropy, unless they reflect the prevailing cultural orientation in the society. People should believe that what they are presented as right (norms) is also good (values). For this reason the system of norms and values should be developed simultaneously. The research results show that the symptoms of economic cultures are less evident in the ceecs than in the selected eu countries, thus the democratic socialization (stimulated from outside) is the key issue. For this reason the ceecs should be included in the network of the Euro- Atlantic integrations as soon as possible in order to ensure the demo- cratic stability and economic efficiency of Europe. Introduction The process of eu enlargement has reached its final stage. The most ad- vanced accession countries have closed almost every negotiation chapter.1 In the process of transition the post-communist ceecs2 are becoming more similar to the democratic societies3 and to the modern economic systems from the structural and cultural point of view. Structural adaptation requires the adoption of basic institutional, ju- ridical and behavioural standards in force in the developed western so- cieties. This process depends on the socio-economic resources, human Dr Milan Zver is Assistant Professor at the Faculty of Economics and Business, University of Maribor, Slovenia. Tjaša Živko, ms c, is Researcher at the Faculty of Economics and Business, University of Maribor, Slovenia. Dr Vito Bobek is Associated Professor at the Faculty of Economics and Business, University of Maribor, Slovenia. capital, skills, willingness and the interest of the social elites for imple- menting structural reforms. These resources differ from case to case; some transition states are more successful than others. While normative and behavioural patterns, as also the organisation and institutional structure, can be 'standardised' relatively quickly in favourable conditions, the problem is more complex at the level of the core of culture, i. e. the value systems. The process of structural and cultural synchronisation should not be understood as a general cultural standardisation in the sense of unifica- tion and assimilation of different cultures, or as a one-way adoption of certain cultural patterns of Western Europe. However, the rich cultural plurality of Europe should be provided with a core module of mutual democratic and modern political and economic values, which would en- sure the political and economic stability of the European Union in the long run. Such a core of values was already created in Western Europe after World War ii. The purpose of our analysis is to find out whether there are signifi- cant differences in the economic cultures of the ceecs in comparison to selected eu countries. These will be compared on the basis of selected variables, which will mark the cultural economic value orientations.5 Premises and Hypothesis The specific cultural traits of the states are conditioned by the rate of the general social development, the concrete historical experience, the reli- gious orientation, the persistence of traditionalism, etc. The economic culture is correlated with values and principles of the modern market economy. We presume that: Hypothesis 1: The selected European countries have developed a high level of economic culture. Hypothesis 2: In ceecs the symptoms of economic culture are less de- veloped than in selected eu countries. Hypothesis 3: The ceecs, which are more successful in the structural adaptation to the western European standards, show similar pat- terns in the phenomenon of the economic culture. Research Model The theoretical concept of the political culture is resumed after Almond and Verba,6 the concept of economic culture after P. L. Berger.7 The no- tion of economic culture, inspired by Almond's notion of political cul- ture, was developed by Peter L. Berger, director of the Institute for the Study of Economic Culture (isec)8 at Boston University, in the mid 8o's. The notion of economic culture after Berger cannot be confined to the frame of economic science, but can be investigated as a 'global', non- economic phenomenon (1986, 3-30). In conceiving the empirical model Hofstede,9 Trompenaars10 and Inglehart's11 approaches to modern em- pirical researches were used, which consider values to play the central role in determining cultural orientations. Professor Inglehart's ongoing research focuses on cultural change and its consequences. To explore this, he is coordinating a worldwide survey of mass values and attitudes, the World Values survey. This database re- veals astonishingly strong linkages between the values and beliefs of mass publics and the presence or absence of democratic institutions, support- ing the thesis that political culture plays a crucial role in the emergence and survival of democracy. The findings indicate that the evolution of industrial society tends to make democratic political institutions more likely, partly because the publics of these societies are becoming increas- ingly likely to want democratic institutions, and increasingly adept at getting them. This transformation does not come easily or automatically. Determined elites, in control of the army and police, can resist pressures for democratisation. But as they mature, industrial societies develop in- creasingly specialized and educated labour forces, which become rela- tively adept at exerting political pressure. Moreover, the emergence of economically advanced welfare states leads to gradual value changes in which mass publics give increasingly high priority to autonomy and self- expression in a sphere of life, including politics. As these things happen, it becomes increasingly difficult and costly to repress demands for polit- ical liberalization. These cultural changes are also transforming people's motivation to work, sexual and religious norms, and a number of other central society and political orientations. In order to investigate these changes, Professor Inglehart is analysing data from the three waves of the World Values survey (carried out in 1981,1990 and 1996 in 60 coun- tries containing over 70% of the world's population^), and the 1970-1996 Euro-Barometer surveys. Culture^ in a narrower, operational sense, can therefore be defined as the system of values, which orientate people's behaviour and approach to the environment. In the empirical researches particular attention is paid to the analysis of the values which constitute the core of a culture. The economic culture, which is defined as a combination of economic value beliefs, which orientate the economic behavior, can also be mea- sured by the value indexes of the following variables: • eds - the 'economic democratic syndrome', which measures the share of agreement with the statement that 'democracy has a bad influence on the economy'. 14 • sta - the 'statist syndrome' measures the share of those who believe that 'the state should own industry and business', i. e. the opposite of the belief that 'industry and business should be private ownership'. 15 • MK - the 'Martin KrpanV6 syndrome' measures the share of those who think that 'taking the opportunity of tax evasion can always be justified', i. e. the opposite of believing that 'taking the opportunity of tax evasion can never be justified'. 17 • ras - the 'rivals syndrome' measures the share of those who believe that 'competition is harmful and it brings out the worst in peo- ple', i. e. the opposite belief to 'competition is good and it stimulates people to work hard and develop new ideas'. 18 • pts - the 'paternalistic syndrome' measures the share of those who believe that 'the government should take more responsibility to en- sure that everyone is provided for', i. e. the opposite belief to 'people should take more responsibility to provide for themselves'. 19 The symptoms of the economic culture are variables, by which simi- larities and differences in national cultural orientations will be measured (units being the single states). The following units (states) have been in- cluded in the research: Great Britain, Germany, the Netherlands, Esto- nia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria, and Slovenia, i. e. a combination of selected West- ern states with more or less stable democracies and successful market economies (three eu members) and the ceecs (10 transition economies and at the same time eu potential accession countries). All deductions are based on the presumption that the higher the in- dexes, the more difficult the compatibility with the standards of democ- racy and market economy in Western democracies. The Creation of the Database and the Results We used the database from the evs 1999, which is kept in the Archives of Sociologic Data of the Faculty of Social Sciences at the University of Ljubljana. The European Values Survey includes 31 European countries^0 Table 1: Syndromes of economic culture (indexes) State eps sta mk ras pts Great Britain 4.68 4.77 2.41 4.00 4.43 The Netherlands 4.56 5.48 2.68 4.70 4.64 Germany 4.00 4.62 2.36 3.80 4.23 Estonia 5.81 6.10 3.15 4.39 6.09 Latvia 6.41 7.35 2.35 3.42 6.66 Lithuania 6.09 4.59 3.78 3.99 5.39 Poland 6.33 6.64 2.22 3.99 5.76 The Czech Republic 5.95 6.03 2.08 3.25 4.90 Slovakia 6.26 7.12 2.16 3.59 6.38 Hungary 5.81 6.65 2.11 3.76 6.12 Romania 6.52 6.20 2.79 2.73 4.81 Bulgaria 5.86 5.40 2.00 3.50 5.22 Slovenia 6.31 5-53 2.34 3-24 6.53 and interviews have been made on samples of approximately 1,000 peo- ple in each country (all together 38,759 interviews). The 114 questions posed to the interviewees were about relationship to the environment, personal happiness, social distance, work and employment, fair pay, dis- crimination at the workplace, religion, democracy, and many more. As far as sta, mk, ras and pts syndromes are concerned, the interviewees in evs 1999 could answer with grades 1 to 10. When answering the ques- tion about eds, the interviewees had to choose the answer on a four-level scale. The calculations of indexes for the observed states were explained in the previous chapter and are given in Table 1. We have also performed a cluster analysis from all variables, which is represented as a dendrogram in Figure 1 (discussed in conclusion). Values of eps are highest in Romania, Latvia, Poland, Slovenia and Slovakia, which means that these countries recognize a weak connection between democracy and economy, while in Great Britain, Germany and the Netherlands we can observe the opposite opinion. Greater differences between countries can be seen in sta values. The meaning of the en- trepreneur's initiative is more important in Great Britain, Germany and - perhaps surprisingly - in Lithuania, while in Latvia, Slovakia, Poland and Hungary they believe, that the state should have more control over the smes. Tax evasion is understood in Europe as something negative, it Case Label Num o + Rescaled distance cluster combine 5 10 15 20 + + + Latvia Slovakia Poland Hungary Estonia Slovenia Czech Republic 8 Bulgaria 12 Romania Lithuania Great Britain Germany Netherlands 5 9 7 10 4 13 J J Figure 1: Dendrogram using Ward Method is not an economic value (differences in mk values are small). The com- petition is also not a defining factor for differentiation of economic cul- ture in the European countries (the differentials in ras values are small and atypical). The pts values are lowest in the western European coun- tries (Great Britain, Germany and the Netherlands). In these countries dominates the ethics of individual responsibility. By contrast, there is a prevailing belief in the transition economies that the state is responsible, that everyone is provided for. This syndrome is most present in the value orientation of Latvians, Slovaks, Slovenes and Estonians. Conclusions The transformation process from a centrally planned economy to a mar- ket one is a very complex issue in which normative and behavioural patterns, as also the organisation and institutional structure, can be 'standardised' relatively quickly in favourable conditions. The problem is more complex at the level of the core of culture, i. e. the value systems. If a critical mass of the appropriate political-democratic and modern economic values is not reached, this will present additional obstacles to the process of transition in the long run. This problem has been often neglected both in theory, as well as in practice. The theoretical concept of the political culture has been resumed after Almond and Verba, the concept of economic culture after P. L. Berger. The database from the Evs-99, which is kept in the Archives of Sociologic Data at the University of Ljubljana has been used. Various variables of the economic culture had been taken into account, by which similarities and differences in national cultural orientations have been measured in 13 countries, representing a combination of selected Western states with more or less stable democracies and successful market economies (three Eu members) and the ceecs (10 transition economies and at the same time eu potential accession countries). In the dendrogram the two branches join relatively late, which means that differences between the eu countries and ceecs are significant. Two basic groups of countries were formed, which differ by the pres- ence of the symptoms of economic culture.2! Great Britain, Germany and the Netherlands represent the first, and the second is formed out of ceecs. This proves the first (higher degree of economic culture in se- lected eu countries) and the second hypothesis (the existence of the basic gap economic culture in Europe). The differences among the other sub- groups in the ceecs, show too little evidence to allow any valid conclu- sion, a part from the fact that we can detect similarities among the sub- group Latvia-Slovakia-Poland-Hungary, followed by a subgroup Czech Republic-Bulgaria-Romania-Lithuania.22 How can the ceecs overcome the gap between the pre-modern and modern economic values among national cultures in Europe? Experi- ence shows that the transition states do not have a sufficient amount of inner energy for a democratic cultivation, while the elites in power often show little interest in it. The help needed can be achieved with an ac- celerated integration of ceecs into Euro-Atlantic integration, which will have a benign influence on a faster implementation of democratic polit- ical and economic values, thus firmly guaranteeing a stable, democratic and peaceful Europe, able to express itself as a specific cultural entity in the world in the political-cultural and economic sense. Notes 1. This paper has been written a few months before the enlargement of the eu took place. 2. Central and Eastern European Countries. 3. The transition process in ceecs has been quicker due to desired mem- bership of the eu. 4. No culture is superior or inferior to another. We are accepting In- glehart's concept of modernization, which means that cultural values change from pre-modern (distinctive for transition countries), mod- ern to post-modern. These changes are never linear. 5. evs (European Values Survey) provides an opportunity to learn about the attitudes of citizens of different nations towards selected issues. In the research model of culture we selected issues we believed to be accepted in the economic culture of the eu as politically democratic and modern from the socio-economic point of view. The symptoms of economic culture are therefore expressed in the degree of the accep- tance of democracy, acceptance of market economy, of free initiative, and no justification of tax evasion and self-responsibility. 6. The first to base the term of political culture was Gabriel A. Almond (1956). In the 60's he and Sidney Verba empirically based the notion of political culture on a comparative international opinion poll (Almond and Verba 1965). They confirmed a close relation between democratic political culture and democratic political systems. 7. Professor Berger previously taught at the New School for Social Re- search, at Rutgers University, and at Boston College. We are taking the concept of economic culture from his book The capitalist revolution: Fifty prepositions about prosperity, equality and liberty (Berger 1986). 8. isec was founded at Boston University in 1985. Its purpose was to do research on the relations between socio-economic change and culture, the latter term understood in its usual social-scientific sense - that is, as the belief, values and lifestyles of different human groups. Essen- tially, the idea of establishing the isec was very simple: Economists do not like to deal with culture, because it does not easily lend itself to their methods; when they do deal with it, they do so by apply- ing concepts that tend to distort it. Those in the human sciences who do deal with culture, on the other hand, shy away from the economic issues, because economics appears to be a forbiddingly difficult discipline. Consequently, there is a certain lacuna when it comes to our understanding of this particular relationship. Yet it is an important one. Thus, to take a very important example, it has become amply clear that the successful establishment of a mar- ket economy has certain cultural perquisites, without which even the most sophisticated economic strategies are likely to falter (see http://www.bu.edu/cura/about/introduction.html). 9. According to Hofstede culture is the 'software of mind', which orients human behavior, is acquired by socialization, and has the following essential qualities: it is shared, collective and allows group distinction (1997, 411). 10. Trompenaars and Hampden-Turner, who created a highly useful model of intercultural researches, distinguish three levels of cultural manifestation: the highest is related to the national scale, the mid- dle one refers to the sense for corporation and organization, and the lowest one to professional culture (1993). 11. For more than twenty years Ronald Inglehart has been studying cul- tural, economic and political changes in 43 states worlwide, which have been developing in the sense of modernism or postmodernism (1997). He extended the evs project to other parts of the world (wvs). In exchange for providing the data from interviews with a repre- sentative national sample of at least 1,000 people in their own so- ciety, each participating group gains immediate access to the data from all of other participating societies. Thus, they are able to com- pare the basic values and beliefs of the people of their own society with those of more than 60 other societies. In addition, they are invited to international meetings at which they can compare find- ings and interpretations with other members of the wvs network. This deals with interdependence of cultural, economic and politi- cal subsystems, which develop together and in a coherent way (see http://wvs.isr.umich.edu/ringlehart/research.html) 12. See http://wvs.isr.umich.edu/index.html. 13. In the broadest sociological sense culture can be understood as a com- plex of material, institutional and spiritual organisms (Giddens 1998, 582). 14. The possible answers were 'agree strongly', 'agree', 'neither agree nor disagree', and 'disagree' that the democracy has a bad influence on the economy; to be able to compare eds index to the other ones, we had to find a way to make them compatible. The percentages of the answer 'agree strongly' were multiplied by 10, 'agree' by 8, 'agree nor disagree' by 5 and 'disagree' by 1. The sum of these was divided by 100, in order to get the average value. 15. The two extremes were: 1 - 'private ownership of business and industry should be increased', and 10 - 'government ownership of business and industry should be increased'; the percentage of the chosen answer was multiplied by the grade of the choice, and their sum was divided by 100, in order to get an average value. 16. The terms refer to a popular Slovene story (novel) figure who smug- gled English salt around the Austrian Empire. In nowadays terms, he evaded taxes. 17. The same procedure as sta. 18. The same procedure as sta. 19. The same procedure as sta. 20. France, uk, Germany, Austria, Italy, Spain, Portugal, Netherlands, Bel- gium, Denmark, Sweden, Iceland, Northern Ireland, Ireland, Estonia, Latvia, Lithuania, Poland, Czech republic, Slovakia, Hungary, Roma- nia, Bulgaria, Croatia, Greece, Russia, Malta, Luxembourg, Slovenia, Belarus. 21. We should bear in mind the limits of the results achieved. If a larger number of states and variables were included, economic cultural dis- tribution of 5 types would be much more valid. So let us stress once more, that this research aimed in the first place at the demonstration of a research model. 22. The exceptions are Estonia and Slovenia, which together with Latvia- Slovakia-Poland-Hungary form the first sub-cluster of the ceecs. References Almond, G. A. 1956. Comparing political systems. The Journal of Politics 18 (2): 391-409. Almond, G. A., and S. Verba. 1965. The civic culture: Political attitudes and democracy in five nations; An analytic study. Boston: Little, Brown. Berger, P. L. 1986. The capitalist revolution: Fifty propositions about prosper- ity, equality and liberty. New York: Basic Books. Giddens, A. 1998. Sociology. 3rd ed. Cambridge: Polity Press. Hofstede, G. 1997. Cultures and organizations: Software of the mind. New York: McGraw-Hill. Inglehart, R. 1997. Modernization and post modernization: Cultural, eco- nomic, and political change in 43 societies. New Jersey: Princeton Uni- versity Press. Trompenaars, F., and C. Hampden-Turner. 1993. Riding the waves of cul- ture: Understanding cultural diversity in business. London: Nicolas Brealey. Welfare State Retrenchment in Central and Eastern Europe: the Case of Pension Reforms in Poland and Slovenia Igor Guardiancich This paper endeavours to shed some light on the mechanisms that led to the divergence of welfare state arrangements across Central and East- ern Europe (cee). In particular, pension system reforms displayed a great deal of variance, which surprised both institutionalists and con- vergence theorists. The Polish and Slovenian cases are thus presented and compared in a political economy perspective. Theories of retrench- ment, recent studies on the dynamics of cee pension reforms and con- sultations with some of the relevant actors, were employed in order to account for the divergence of reform outcomes in the two countries. The study focused on three main explanations: partisan competition, the interaction between relevant external (World Bank) and internal actors (Minister of Labour and Minister of Finance) and the trade-off between power concentration and accountability concentration. The latter yielded the best explanation. While Polish reformers managed to internalise most veto actors' reservations, Slovenian politicians ex- cluded from consultation the country's main trade union. Its opposi- tion determined the rejection of radical reforms recommended by the World Bank. Introduction After the collapse of Communism in 1989, most cee countries embraced the neo-liberal strategy of stabilisation, liberalisation and privatisation. Although the inherited socialist premature welfare state was intellectu- ally bankrupt, mismatched with the objectives and principles of a mar- ket economy and illegitimate in the eyes of the public (Rueschemeyer 1999,15), its reform was not seen as a priority, and it was postponed until the second wave of reforms. Local politicians were afraid of social un- rest, were still convinced that the socialist system could cope with the fis- cal pressures, and they used social security to mitigate the worst strains Igor Guardiancich is graduate alumnus of the European Institute, London School of Economics and Political Science, United Kingdom. engendered by the transition. Price liberalisation (ending the implicit subsidies), privatisation of firms (establishing hard budget constraints and shifting the responsibility for welfare provision from the firm to the state), rising unemployment, increasing absolute poverty and the output decline, which entailed a collapse in state revenues, made social security reforms unavoidable from both the social and fiscal standpoints (Wa- gener 2002,156-7). Most institutionalists expected from cee countries the creation of a corporatist-conservative (Esping-Andersen 1990, 26-9) welfare arrange- ment, because the socialist and pre-war systems were employment-based and because continental Western Europe was seen as s powerful in- fluencing factor. However, they overlooked the persisting instability of cee institutions and the fact that both the European Agreements and the acquis communautaire say precious little in the welfare state realm, since the details of social policy are delegated to single Member States (Wagener 2002, 153-4). In contrast, neoclassical convergence theorists predicted that cee countries would heed the World Bank's (wb) rec- ommendations and end up with a liberal welfare state, forgetting that path-dependence plays a crucial role where policy feedback and high fixed costs, determined by large, inherited Pay-As-You-Go Defined Ben- efit (payg-db) schemes, prevent radical policy shifts (Myles and Pierson 2000, 312). The comparison of pension reforms in Poland and Slovenia proves that both camps were wrong.1 If fundamental reform of the pen- sion system means its (partial) privatisation, which is what the wb rec- ommends, then Poland introduced radical changes, while Slovenia ended up with patching-up measures (Chion et al. 1999, 6; Müller 1999,37). While this essay will employ the literature on retrenchment in post- communist cee, it will not directly address its dynamics.2 Instead it will try to explain, through a comparison of the political economy of reforms in Poland and Slovenia, the factors accounting for the divergence of their pension systems and to discuss the problems associated with passing a politically and economically unattractive reform, such as a radical de- parture from the Bismarckian-Beveridgean paradigm (Müller 1999,107) in old age security. This study will be structured as follows. In the first part, Pension reforms in premature welfare states, the problems associated with the privatisation of cee pension systems will be addressed. In the second, Pension reforms in Poland and Slovenia, a brief political economy account on the evolution of the socialist pension system up to the present schemes will be presented. The last section, Hypotheses on divergence, will analyse the institutional and political factors accounting for the lack of convergence between the two countries' reform paths. Pension Reform in Premature Welfare States the socialist pension system The socialist welfare state roughly matched the continental European Bismarckian system. In fact, benefits were a worker's privilege and not a social citizenship right. The difference was not straightforward since so- cialism maximised labour participation, and unemployment was practi- cally absent (Wagener 2002,154). Most socialist countries had a unified pension scheme, which was included into the state budget, thereby cross- subsidising other expenditure items. Employees' contributions were largely abolished, leaving employers' contributions as the only source of financing. The coverage was expanded to the majority of the popula- tion. Therefore the system guaranteed horizontal equity, but could not prevent vertical efficiency problems, i. e. leakages in targeting, and ris- ing expenditures (Barr 2001, 245-52). The low pensionable age was seen as a victory for socialism. The scheme was managed by trade unions. The contribution-benefit link was weak, as benefits were usually based on best-earnings formulae (cfr. Myles and Pierson 2000, 324). Benefits were low and hardly differentiated, but universalism was breached by the privileges granted to employees who held risky or unhealthy jobs, classified as important for the advancement of socialism. Unsystematic indexation produced trans-generational inequity, since older pensions were continuously losing purchasing power (cfr. Müller 1999, 94-6). During the early transition these problems degenerated. The access to benefits became even easier after the relaxation of early retirement and disability criteria, intended to alleviate the pressure on the overstrained labour markets by pushing the unemployed out of the labour force alto- gether, and to buy social peace by granting privileges to the most endan- gered groups (miners, heavy industry workers etc.; Gomulka 2000,1-2). The falling revenues associated with the output decline, tax evasion and the informalisation of the economy rendered the pension systems fiscally unaffordable and in need of deep reforms. In Table 1 the main indicators of the Polish and Slovenian pension systems are presented. Barr (2001, 252-3) uses ebrd data to calculate the ratio between sys- tem dependency and age dependency. The results (175 for Poland, 186 for Slovenia) show that the leakages (people below the retirement age re- ceiving a pension, compared to those above the age) are respectively 75% Table 1: Pension system selected indicators Poland Slovenia System dependency ratio (1996) 61.2% 60.6% Age dependency ratio* 22.33%-23.77% 16.1%-20.3% Replacement rate (1995-1996) 65% 75-8% Social contributions 19.52% 15.85%- 24.35% 13.65% (old-age and non old-age) 23.57% 1990 1996 1991 1996 Public pension spending 8.6% 15.2% 10.9% 14.5% State budget transfers 0.0% 4.1% -1.8% 3.3% Implicit debt 220-251% 200-260% No reform scenario 2050 2044 Public pension spending 27.1-34.5% 27.3% Contribution rate needed in 2050 54-93 n. a. * Poland: old-age population/working population in 1990-2000 (Security 1997, 24); Slovenia: 64+/15-64 in 1991-2001 (Stanovnik 2002, 30). f As percentage of gdp. Sources: Gomulka 2000; Hausner 2001; Lindeman et al. 2000; Orenstein 2000; Security 1997; Stanovnik 2002. and 86%, among highest in the world. This similarity, and the fact that after the failed early attempts at stabilisation both countries increased payroll taxes to cover the soaring expenditures, makes the two systems well suited for a comparison focused on institutional and political, rather than on structural or economic factors.3 the world bank's privatisation recipe The wb became a major external actor in post-communist social pol- icy reorganisation (Orenstein 2000,13) after it included specific pension reforms into the neoliberal 'Washington Consensus' package, following the positive developments in Chile and Argentina (Müller 1999,25). wb's 1994 publication 'Averting the Old Age Crisis' supported the introduc- tion of private elements into existing payg schemes. According to the Bank, these not only render the schemes fiscally sustainable when con- fronted with mounting demographic problems, but also promote growth through the expansion of capital markets, savings and investments. In this framework the state retains a residual role of poverty alleviation and pension fund supervision, mainly because state-run payg systems had Table 2: The three wb pillars4 Redistributive plus Savings plus Savings plus Objectives coinsurance coinsurance coinsurance Means-tested, minimum pension guarantee, or flat Personal savings plan or occupational plan Personal savings plan or occupational plan Form Tax-financed Regulated fully funded Fully funded Financing Mandatory publicly managed (1st) pillar Mandatory privately managed (2nd) pillar Voluntary(3rd) pillar Source: World Bank 1994,15 financially spun out of control in middle- and high-income countries, becoming neither efficient, nor equitable, nor sustainable (wb 1994, 1, 13-4). 'Averting the Old Age Crisis' became a catalyst for intellectual con- frontation, which generated a global social policy debate between var- ious international organisations (cfr. Deacon 1997, 91-152), and it even triggered a wide diversification of views within the wb (Stanovnik 2002, 64). wb's approach was termed by Lo Vuolo the 'new pension orthodoxy' (Müller 1999, 26) and it is schematically summarised in Table 2. This paper's main assumption is that the introduction of a privately managed mandatory fully funded second pillar might be politically feasi- ble, but it is economically hardly desirable in cee. In fact the institutional prerequisites of private pension funds are more demanding than those of public systems, because they call for developed financial markets, regula- tory capacity and political stability to function effectively. These are often missing in cee. In addition, the only available financial assets might be high risk and low yield (Barr 2001,103). Finally, and more convincingly, the transition costs are gigantic, due to the implicit debts inherited from the socialist era.5 The set up of even a modest wb inspired second pillar renders part of the implicit debt explicit, which causes the double pay- ment problem. Myles and Pierson (2000,312-20) make a clear distinction between mature payg systems and latecomers, claiming that the former cannot heed the wb's recommendation and should instead opt for a ra- tionalisation (i. e. parametric reform) of the existing payg arrangement. cee schemes can be assimilated with these. Fixing a payg is probably less costly than resorting to funding. Following this wave of disapproval, the wb conceded that an uncritical acceptance of its recommendations should be avoided. In fact Von Gers- dorff, a wb official, recently admitted that too heavy a load had been placed on cee pension systems, in terms of using them to simultane- ously promote savings, capital markets, economic growth and address social problems (Report 2003). Pension reforms in Poland and Slovenia the existing literature In contrast to the political economy of retrenchment, authors who ex- plicitly deal with pension reforms in cee are relatively few. The account of the political economy of pension reforms in Poland and Slovenia will be based upon the research by Müller (1999) and Orenstein (2000) for Poland and by Stanovnik (2002) for Slovenia. Orenstein's framework will be used. It is based on Weir and Skocpol's (cfr. Orenstein 2000, 9-10) seminal work, which laid the foundations for the new institutionalism, stressing the importance of both the state as an autonomous actor and policy feedback leading to path-dependence. Orenstein adds the international organisations (especially the wb and imf), which influence decision making through: • contributions to the global social policy discourse, conferences and publications which constrain national policy, and • direct intervention, which includes all forms of technical assistance (sending of missions, financial assistance, the secondment of wb employees; Orenstein 2000,11-4). wb conditionalities are used as blame avoidance mechanisms for un- popular policy measures by radical reformers, whose commitment to reforms is a signalling mechanism, which is highly appreciated by fi- nancial markets (Müller 2002,130). Specifically for pension reforms, the wb exerted its influence through the agenda setting role in local debates (Müller 1999, 54) and by spreading intellectual innovations within the global social policy discourse. Despite this focus on institutions and international actors, both Müller and Orenstein (Stanovnik follows his logic) emphasise the interaction between domestic actors, thereby taking on a more pluralistic approach. Since negotiated reform of the welfare state is the norm, as compared to governmental unilateralism (cfr. Rhodes 2000,165-94), these interac- tions are present in both actor-centred (Müller 1999,49-52) and rational choice institutionalism. In the former the constellation of available actors is given by the institutional setting. The actors display determined pref- o o Figure i: Modified Weir and Skocpol's Model of Policy Reform6 erences and their interaction decides the final policy outcomes (Müller 1999, 49-52). The latter interprets the institutional setting as a constraint for the available policy options (especially the size of the implicit debt, i. e. the maturity of a pension system), but it also focuses on the power concentration of the executive (veto actors and veto points, cfr. Tsebelis 1995), which enhances its ability to pass unpopular legislation. The description of the four phases of pension reforms in Poland and Slovenia will follow Orenstein's (2000,16-9) timeline. From socialism to transition economics describes the inherited system and the initial re- forms. Commitment-building starts when political actors become aware that reform is necessary (usually following the advice of external actors, cfr. Cashu 2003, 5) and ends with the government's adoption of a single reform programme. During coalition-building final legislation is passed and reformers try to prevent anti-reform mobilisation. Implementation instead poses new problems and introduces new actors (private pension funds). The outcomes can be eventually evaluated. Since relevant actors were not excluded from earlier reform phases in Poland and Slovenia, probably only further fine-tuning measures are to be expected (Oren- stein 2000,19-20; Stanovnik 2002, 66-7). poland From Socialism to Transition Economics During the interwar period two unified Bismarckian pension schemes covered white- and blue-collar workers. In 1954 a payg-db system with Soviet features replaced the fully funded schemes. It continued to be managed by the Social Insurance Institute (zus) (Müller 1999, 93-4). Pensions were financed by employers' contributions and benefits were relatively high, but the 'old pension portfolio' problem, stemming from unsystematic indexation, implied that older pensions were losing pur- chasing power. Therefore 40% of those who reached their pensionable age continued to be employed (Müller 1999,94-6). After 1989 high unemployment and relaxation of retirement and dis- ability requirements brought the system into open crisis.7 Stabilisation was attempted through ad hoc measures (Orenstein 2000,46) which, de- spite their excessive support of benefit adequacy, were fiercely opposed by the 'grey lobby' (Müller 1999,103). The latter was eventually responsible for post-Solidarity's electoral defeat against the Democratic Left Alliance (sld) and Polish Peasant Party coalition in 1993 (Chion et al. 1999,11). Commitment-Building Even before the sld-psl coalition stepped into office the debate around pension reforms was heated. There were three camps: 'rationalisers', re- formers and non-reformers (Chion et al. 1999, 11). The non-reformers enacted the early ad hoc measures, which were stopped by the Constitu- tional Tribunal in 1995. The reformers proposed different radical plans. The Ministry of Finance (mof) under Koiodko published 'Strategy for Poland' in June 1994 and suggested the introduction of a mandatory sec- ond pillar. Solidarity advocated a similar arrangement. The Minister of Labour and Social Affairs (mol) Miller was a 'rationaliser'. He supported voluntary savings and a parametric reform of the first pillar, but the pub- lic found his plan too timid (Hausner 2001, 216). The stalemate which ensued between Koiodko and Miller was broken only by the appoint- ment of a new mol, Baczkowski, who was an independent and a former Solidarity activist. From 1994 he was chairman of the Tripartite Com- mission for Socio-Economic Affairs. He managed to create a link with the opposing Solidarity Electoral Action (aws) and established the Of- fice of the Plenipotentiary for Social Security Reform (ops) in April 1996 (Orenstein 2000, 47-8). The wb reinforced its position by financing the creation of the ops and by letting the Polish w b official Rutkowski advise it (Müller 1999,107). Coalition-Building mol Baczkowski died in November 1996, putting the whole reform at risk. Hausner became the plenipotentiary and he won independence from the new mol Zielmski, who opposed radical reforms. (Orenstein 2000, 49). 'Security through Diversity' was approved in April 1997 and advocated a multi-pillar system, including a Notional Defined Contri- bution (ndc) payg first, a mandatory funded private second8 and a pri- vate voluntary funded third pillar. The Tripartite Commission approved the proposal in April 1997 without opposition from the social partners, and the government supported the proposal with a massive information campaign (Chion 2002, 160). The Sejm approved the easy laws (espe- cially the regulation of the second and third pillars) swiftly and with high cross-parliamentary support (Orenstein 2000,51) in September 1997, be- cause these introduced new elements into the system, leaving unchanged the existing ones (Chion et al. 1999,14). The aws-uw coalition won the 1997 general elections. The second phase of coalition-building started. Although rare in Polish politics, a cross-coalition consensus was reached (Müller 1999, 112). The newly appointed plenipotentiary Lewicka, a senior Solidarity pension expert, wholeheartedly embraced the reforms (Chion et al. 1999,14). The Free- dom Union (uw) did not oppose 'Security through Diversity' as it was involved in its preparation, but aws was sceptical. After the govern- ment's formal approval of reforms in April 1998, aws and uw entered a stalemate (resolved with the support of sld) in the all-parliament Ex- traordinary Commission. Solidarity and opzz raised a number of issues, but they preferred to reach an agreement, rather than mobilise against reforms (Orenstein 2000, 53). The whole debate took much longer, be- cause the laws (the reform of the first pillar and the reorganisation of zus) remodelled the existing schemes (Chion et al. 1999,16). In Decem- ber 1998 both laws were adopted. Implementation The hasty approval was achieved at the expense of many details, whose determination was postponed (the law on annuities) (Chion 2002,120). The krus (the farmers' fund) and disability pensions were left un- touched. The Polish reform achieved a double individualisation through the mandatory second pillar and the first payg-ndc scheme, thereby granting more transparency, fiscal stability and less redistribution. Lower indexation will eventually lead to a surplus after 2025. These savings, along with explicit debt and privatisation revenues will be used to finance the transition. According to Chion (2002, 122-4), ops's forecasts are overoptimistic (cfr. Security 1997,9-10,85). Falling replacement rates will give rise to benefit adequacy and poverty alleviation concerns (Geroldi and Merano 2001,14). Implementation was extremely problematic: the participation rate in the mandatory scheme exceeded all expectations (Chion 2000, 34-6; Fultz 2002, 18-9), the zus was technically unpre- pared and fraud coupled with high administration costs, determined negative rates of return for all the funds. Not surprisingly, the public be- came increasingly disillusioned with the enacted reforms (Chion 2002, 183-91). slovenia From Socialism to Transition Economics The Bismarckian welfare state inherited from the Austro-Hungarian em- pire (Müller 2002, 114) was perpetuated during the Yugoslav kingdom (Stanovnik 2002, 19-20). After wwii the pension funds were nation- alised and a Soviet payg system was introduced. The Yugoslav-Soviet rift put the system in flux (Müller 2002, 114), and not until Kardelj's 1974 Constitution did federalisation and contribution financing become definitive. Thereafter guidelines were set at federal level, while at lower levels 'self-managed communities of interest' had extensive regulatory rights (Stanovnik 2002, 21). The pension system preserved some in- tegrity, since the organisation of the Institute for Pension and Disability Insurance (ipdi) was never broken down to sub-republic levels (Böhm 2003). The 1983 Slovene Pension and Disability Insurance Act (pdia) included farmers and the self-employed into the scheme. Pensioning cri- teria were generous and early retirement was only temporarily penalised (Stanovnik 2002,22-4). Due to insufficient indexation, benefits were an- chored to wage growth in 1986, instantly worsening the looming crisis. The Yugoslav recession hit Slovenia, but the pension system resisted and the population was sufficiently satisfied with it (Böhm 2003). Af- ter independence the system became unsustainable due to the relaxation of eligibility criteria, unfavourable demographic prospects (Geroldi and Marano 2001, 2) and structural unemployment. The 1992 pdia was a timid attempt to tighten eligibility criteria and a simple adaptation of the 1983 pdia. Stabilisation failed and the ipdi became dependent on state budget transfers (Stanovnik 2002,25-9). Reforms became unavoidable. Commitment-Building The imf and wb were active in Slovenia and suggested a two-stage multi- pillar reform plan. The 1995 imf-wb report influenced all subsequent re- form drafts (Stanovnik 2002, 41-3). The new Minister of Labour, Family and Social Affairs (mol) Rop was appointed after zlsd (United League of Social Democrats) exited the LDs-led (Liberal Democrats) govern- ment coalition. Rop invested his entire political career in the pension reform (Böhm 2003), and (almost) unilaterally published the 'Starting Points for the Reform of the Pension and Disability System of Slove- nia', which advocated the introduction of a wb inspired second pillar. A phare team criticised the 'Starting Points', asserting that the transition costs would be unbearable. In 1996 the general elections produced a new coalition between lds, Desus (Pensioners' Party) and sls (Slovenian People's Party). Desus and sls were included into the team preparing the 'White Paper on the Reform of the Pension and Disability Insurance in Slovenia' (wp) and subsequently neutralised. The wp was published in November 1997. It envisaged many parametric reforms to the first pillar, the introduction of a mandatory funded privately managed second pil- lar and the expansion of the (nonexistent) voluntary private third pillar (cfr. Stanovnik 2002, 39-46). The wp was the only official reform pro- posal, because all potential opponents were deliberately excluded, espe- cially the Association of Free Trade Unions of Slovenia (ftus). Coalition-Building Due to the concertation character of Slovenian decision-making (Geroldi and Marano 2001,15) this phase started with the appointment of the tri- partite negotiating working group for pension reform, which included the mol, the trade unions (and thus the previously excluded ftus) and the business associations. The ftus opposed the wp and was backed up by the opposition party zlsd. It protracted negotiations from January 1998 until April 1999 (Stanovnik 2002, 47, 64) and started a counter- information campaign in favour of rationalisation (Böhm 2003). In March 1998 it organised the largest protest march ever in independent Slovenia, claiming that the second pillar would undermine the inter- generational solidarity and create poverty among pensioners. During commitment-building mof Gaspari delegated the design of reforms to Rop, but now he opposed the mandatory funded pillar on fiscal grounds. The combined action of the ftus, a critical evaluation of the wp by the economist Bole in a paper commissioned by the wb and the negative opinion of influential economists determined the quiet demise of the second pillar in April 1998 and the final wb's forfeit. The government acknowledged ftus's veto role, and gave Rop a full mandate in order to overcome the persisting stalemate (Stanovnik 2002, 49). The 1999 pdia contained deep amendments to the first pillar and very generous tax treatments for the voluntary funded privately-managed third pillar. The new pdia was approved in Parliament in June 1999. Implementation The ilo praised the Slovenian parametric reform for cutting 25% of fu- ture benefits, without introducing a second pillar (Fultz and Ruck 2001, 40), thereby enabling the use of public pillar savings for other social se- curity purposes. The wb instead calculated that high replacement rates and (quasi) wage indexation would still engender fiscal unsustainability (Geroldi and Marano 2001, 8-11), forgetting to include the newly intro- duced trans-generational solidarity indexation element, which reduces the yearly adjustments of the stock of pensions in function of the eli- gibility and accrual criteria of new pensioners (Kidric 2002, 4-6). This index yielded encouraging results: both the replacement rate and over- all pension spending fell. In addition, the recent agreement on public employee collective schemes is transforming the third pillar into a quasi- mandatory private pillar of considerable proportions (Stanovnik 2003), and there is still some leeway for further parametric reforms. Hypotheses on Divergence Summing up, both Slovenia and Poland achieved significant retrench- ment in their pension schemes through parametric reforms, but they chose a fundamentally different stance towards redistribution and risk. The structural factors which could account for this divergence are the inherited socialist pension system, the economic crisis in early transition and the demographic prospects. The latter two hinge on the 'benefit of crisis' argument, which holds that radical reforms are feasible under critical conditions, when the op- posing interest groups can easily be broken (Müller 1999,46). In contrast Pierson (1996,156) contends that while retrenchment might be feasible, radical reforms would still meet with considerable resistance. Other au- thors (Orenstein 2000, 11; Brooks and James 2001, 140-6) suggest that faced with high implicit debts reformers tend to be more moderate and retain larger public payg pillars. Neither fiscal nor demographic crises can alone explain the final out- comes. In fact the large implicit debts, the early measures cushioning the labour market and the use of higher contributions to match the ex- penditures were common to both countries. The lags in tax collection (the Olivera-Tanzi effect) also played a significant role (Kidric 2003). The demographic prospects were worse in Slovenia (cfr. Stanovnik 2002, 30; Geroldi and Marano 2001,3-4; Chion 2002,96-100), but its reforms were milder. With regard to the inherited systems, it is renowned that Bismarck- ian schemes are resistant to changes, due to the powerful networks of social support generated by welfare state expansion (Müller 1999, 41-2; Pierson 1996, 150-1). In fact early reforms were a clear reflection of the existing systems in both countries. The subsequent developments can be (partially) attributed to the fact that Poland had just earnings-related benefits, while in Slovenia both contributions and benefits were individ- ualised already during the 1970s (employers' contributions reflected the wages of individual employees). Therefore, the Slovenian system was not perceived as unfair by the population. Fiscal sustainability became the major concern. In Poland pensions were seen as opaque and discrimina- tory, thus both fiscal sustainability and individualisation were required. Therefore the introduction of a new instrument, such as a mandatory private funded scheme, would have proved more difficult in Slovenia and necessitated a better-designed governmental strategy (Kidric 2003). Since structural factors are not sufficient to explain the divergence, the paper will try to apply three (overlapping) political economy theories of retrenchment. partisan competition According to Kitschelt (2000, 265-6) the dynamics of party competition directly affect retrenchment policies. If the median voter opposes unpop- ular policies, the rational ruling party will not enact them. Thus even large but weakly organised groups, such as pensioners, gain much elec- toral power. Nonetheless multiparty politics offer other options, among which the policy appeal of an alternative government coalition is worth emphasizing. Some authors (Müller 1999, 41; Pierson 1996, 150-1) include social- democratic parties among the potential opponents to radical pension reforms, due to their commitment to existing welfare states. Kitschelt (2000,281-2) instead argues that it is not the strength of labour or social- democratic parties per se, which impedes retrenchment, but a partisan alignment of government and opposition parties, where competition is based on socio-cultural issues and all parties claim to be defenders of the welfare state. Similarly, Ross (1997,188-9) emphasises the electoral strat- egy of the left as a means of covering the policy ground of the right: the 'Nixon in China' argument permits retrenchment, the refusal of neolib- eralism retains the state in charge, i. e. pension cutbacks without privati- sation. Ross' and Kitschelt's approaches are maybe only partially suited for post-communist politics. Various authors (cfr. Innes 2001) stress the instability of cee party systems, especially the lack of programmatic alternatives on the economic front (dictated by external constraints). Notwithstanding, former national-accommodative communist regimes (cfr. Kitschelt et al. 1999,1-92) such as Slovenia and Poland have the best chances to develop party competition not exclusively focused on valence issues. Until then the locus of alternative economic views should maybe be sought outside the party system. In Poland the sdRP (Social-democracy of the Republic of Poland), a communist successor party with a social-liberal, secular inclination, represented the sld-psl coalition's core and had to compete against aws (national, religious and anti-communist) and uw (radical, pro free-market, secular). Party competition developed over radical reforms (treated as valence issues, due to the conformity of views) with cultural values (religion) at the core and was probably conducive to a pre-emptive move by sld in old age security, because no alternative or credible party was defending the welfare state's status quo (cfr. Kitschelt 2000). Simi- larly, in Slovenia the parties identified themselves through cultural values and agreed on the direction of economic reforms, transforming them into valence issues (Ionita 1997, 36, 56). The lds (civic-liberal) almost never lost power during the country's brief history, opting for vari- ous coalition arrangements. The reformed communists, zlsd (mildly social-democratic), exited the government in January 1996, because they opposed outright retrenchment, and remained until 2000 in quasi- opposition. When lds proposed a radical reform no alternative party could have blocked its policies, which were staunchly opposed only by the ftus, probably the only credible supporter of social-democracy in Slovenia.9 Thus, while eliticisation of politics attributable to the weakness of non-political actors is representative of Polish decision-making (Ion- ima 1997, 28-9), Slovenia displays a stronger civil society - party system interaction, which contrasts with the 'associational wasteland' scenario supported by authors like Offe and Bönker. interaction and preferences of external and internal actors The mol, mof and wb play crucial roles in cee pension reforms. Dur- ing the second wave of reforms 'extraordinary politics' had already given way to 'politics as usual' (cfr. Balcerowicz 1994,176-7). Müller (1999,52- 3) goes very far in that she claims that the mol and mof display diverging preferences, in order to benefit their constituencies. The former favours a parametric reform within the Beveridge-Bismarckian paradigm and the latter advocates radical reforms for fiscal stability. Thus the mof and wb usually agree, but again, according to Müller (1999, 53-4) their very pres- ence is contingent on structural factors: fiscal imbalances of the pension system for the mof, external indebtedness for the wb. Their mutual in- volvement should guarantee privatisation. Orenstein (2000,14) is more cautious and only argues that greater exposure to the wb translates it- self into more fundamental pension reforms. All of these conjectures are either theoretically or empirically (within this comparison) at least par- tially unfounded. Although mol Miller was staunchly opposed to radical reforms, the opposite must be said about mol Rop in Slovenia. While Miller was substituted by B^czkowski, in order to diminish the distance between veto actors (Orenstein 2000,12), Rop was given, right after the departure of zlsd from government, an exclusive mandate in order to enact the needed reforms after years of immobility and stalemate. This same im- mobility probably dictated his preference for radical reforms. The other governmental actor, the mof, may also have an ambiguous stance to- wards radical reforms, since he faces various trade-offs. The implicit debt puts reforms on the agenda, but may render the mof ambivalent towards privatisation. With high explicit debt, the mof prefers reforms, which re- duce future fiscal obligations, but the implicit debt conversion may be- come impossible. Underdeveloped capital markets make reforms which increase savings very palatable, but they also give rise to concerns about the funds' performance (Brooks and James 2001, 138-42; Müller 2002, 137). In Poland mof Koiodko was consistently pro reform. In Slovenia mof Gaspari was not. At first he was absent, due to the decision-making procedures in Slovenia (the exclusive delegation of reforms to the rele- vant Ministry); subsequently he became passive, as he did not participate in the drafting of the wp and he de facto delegated the responsibility of transition financing to Rop. Gaspari intervened only when the stalemate between Rop and ftus was harshest, and opposed the second pillar only after Bole's publication (Stanovnik 2002, 49, 58-60). Thus the standard roles of the mof and mol, as they are envisaged by Müller, were in Slove- nia inverted. Since the wb was not operating in a political vacuum it had to use both direct and indirect interventions to overcome opposition (Oren- stein 2000, 73). In both countries the wb was active and it influenced the political debate from the beginning. Interestingly, its proposals were at first met with greater reservations in Poland than in Slovenia (Goli- nowska 1999, 181), and both countries homogenised their views on the funded element with the establishment of a single governmental special office (the ops in Poland) or working group (for the wp in Slovenia). However, the outcomes were different: 'Security through Diversity' was better designed than the White Paper. Nonetheless, it cannot be a pri- ori said that the wb had less leverage in Slovenia than in Poland. While direct assistance was greater in the latter, the wb sponsored trips and conferences, allocated funds and relied on Milan Vodopivec, a former wb official, for advising mol Rop (Stanovnik 2002, 42). The reaction to Bole's paper (which claimed that transition costs would be unsus- tainable) demonstrates the wb's consistent pursuance of a specific plan for Slovenia. The Bank's 'top brass' was aghast and ceased sponsoring the country's pension reforms from the very moment the paper was presented, refusing even to publish it (Stanovnik 2002, 62-4; Stanovnik 2003). power concentration and accountability concentration Retrenchment policies are essentially unpopular, resulting in a politi- cal exercise in blame avoidance (Müller 1999, 40-1), since their advo- cates face a trade-off between their policy preferences and electoral am- bitions (Pierson 1996, 146). Therefore pension reforms must minimise anti-reform mobilisation from concentrated interest groups (Orenstein 2000, 60) using obfuscation, division and compensation tactics (Pierson 1996,147; Brooks and James 2001,159-61). In order to spread the blame, as many veto actors as possible have to be included in the reforms' de- sign, otherwise their exclusion from an early phase may result in harsher opposition at a later stage (Orenstein 2000, 72-5). In this respect some authors (Bonoli 2000, 239; Orenstein 2000, 12-3) contend that fewer veto points are equalled with more radical reforms and retrenchment. The number of veto points depends on institutional factors, electoral re- sults and the strength of the pro-welfare coalition (Bonoli 2000, 240-1). Thus minority governments and grand coalitions will have to accommo- date more demands than bare majority governments, and the strength of trade unions will diminish the executive's room for manoeuvre. On the other hand power concentration poses accountability problems: compet- itive political systems, electoral rules and the political cycle all play a role (Bonoli 2000, 244-5). In fact Ross (1997, 192) demonstrates that grand coalitions, where blame is spread among the coalition partners, were in the 1980s more conducive to retrenchment than less diffuse executives. The task is now to explain why Slovenia did reject radical reforms de- spite the fact that its institutions and politics constantly produced fewer veto points than the Polish counterparts. In addition to institutional fac- tors, such as a quasi-unicameral parliamentary system in Slovenia and a semi-presidential bicameral one in Poland, Slovenia had even greater power concentration, because Rop was given a full mandate for the re- form of pensions (which is a distinctive feature of Slovenian decision- making). On the other hand the strength of the pro-welfare coalition was much underestimated in Slovenia. The analysis of cee pro-welfare coalitions shows that pensioners were considered unanimous voters, while trade unions appeared too frag- mented to be threatening (Böhm 2003; Chion 2002,110). Radical reforms have therefore an advantage over rationalisation, in that they can be de- signed to minimise the resistance of pensioners by excluding them from structural changes (Nelson 2001,246). In Poland the new system was pre- cluded to the population older than 50 and in both countries pensioner parties were effectively neutralised. However, exclusionary compensation is not sufficient to win trade unions over. Rop made a double faux pas in that he excluded the ftus from both a stage of reforms (commitment-building) and a deliberative forum (the working group for the White Paper). In addition, he proba- bly did not believe the ftus could reverse the large public support built around the wp. In any case Poland had an easier task than Slovenia. Pol- ish unions are weak and divided along ideological lines, while union den- sity and collective agreements' coverage is in Slovenia the highest among cee countries. In addition ftus was constantly affiliated to the oppo- sition party zlsd and has considerable institutional power over legisla- tion on labour relations in the Economic and Social Council of Slove- nia (Stanovnik 2002, 64). Therefore the ftus could effectively act as a veto actor by threatening the government with social conflict. ftus's un- compromising opposition against the mandatory second pillar can be at- tributed to its conviction that the government pursued a 'hidden agenda' (Müller 1999,28), which implied the slashing of first pillar benefits, when the transition costs would become unsustainable. Rop understood that further pursuance of partial privatisation would have put his whole po- litical career at risk and therefore the proposal was quietly withdrawn. This confirms that concentration of accountability may outweigh con- centration of power effects. After presenting the three approaches, it is now clear that the most important actors in both reforms were the wb, mof, mol and the trade unions. Their systematic comparison shows evidently the veto Table 3: Comparison of Polish and Slovenian actors and policy legacies!0 Poland Slovenia Policy Only benefits were individualised. legacies Need for further individualisation and for fiscal stability. World Great leverage due to external Bank indebtedness. Both direct and indirect intervention. mol Miller - rationaliser. B^czkowski - appointed to diminish the distance between veto actors. ops - pro-reform, independent. mof Kolodko and his successors - consistently pro-reform. Trade Solidarity and opzz - numerically unions weak, ideologically divided, little institutional power. Either pro- reform or accepted side-payments. Both benefits and contributions were individualised under socialism. Fiscal stability was paramount. General political and public acceptance of the 'new pension orthodoxy'. More indirect than direct intervention. Rop - consistently pro-reform. Gaspari - first absent due to the delegation of responsibility to Rop. Not participating in or opposing reforms until Bole's paper. ftus - numerically strong, ideologically committed to zlsd, great institutional power. Consistently against reforms and did not accept side-payments. role played by ftus, as compared to Solidarity or opzz. Additionally ftus's role was crucially reinforced by the policy legacies, which pre- vented Slovenian decision-makers from acting unilaterally. Conclusions This paper demonstrates how politics and institutions affected pension reforms in Poland and Slovenia and clearly points out that the divergence of cee welfare states is contingent on a multitude of factors, among which the trade-off between power concentration and accountability concentration is paramount. However it is worth stressing that, after substantial accommodation of special interest groups' demands, high cross-parliamentary consensus was reached on the reform programmes in both Poland and Slovenia (Böhm 2003; Orenstein 2000, 51). This con- firms that while there was overall agreement on the need for retrench- ment the inclusion of neoliberal prescriptions was animatedly debated. Therefore the actor-centred institutionalist framework is very suitable for studying cee welfare state retrenchment. Both reforms that have been analysed display path-dependent elements, while the political ac- tors' leeway is testified by the fact that both radical and incremental re- form possibilities have been carefully taken into account. Despite this indisputable general framework, the rest of Müller's early theories can- not be systematically applied to Slovenia. Both the wb's approach and the ambiguous stance of mof Gaspari are telling of the 'small n' problem which affects Müller's research. On the other hand Orenstein's skilful adaptation of Tsebelis' veto ac- tors methodology is fully applicable to the Polish and Slovenian cases. Nonetheless its limitations are straightforward. The dependent variable in Tsebelis' work is the capacity for policy change (in this study the adop- tion of a mandatory fully-funded second pillar). Due to the dichotomous nature of this variable, its use is somehow restricted to the comparisons of cases when the executive struggles for the adoption or rejection of a specific policy. In this respect the approach does not explain much of the complex exchange and interaction between the involved actors, such as the government and the social partners, which characterised all cee welfare state reforms. In order to fill in these lacunae, a whole new the- ory should be developed. A good basis to start from could be the recent research on the reform of Bismarckian pension systems carried out by Natali and Rhodes (2003). Poland and Slovenia show enough similarities in order not to exclude its applicability. However, even the most sophis- ticated approaches developed for Western Europe have to be adjusted in order to account for the patronage, which has been exerted by interna- tional organisations on cee politics. Notes 1. Pension reforms in the Czech Republic and Hungary confirm the lack of convergence. The former retained its payg scheme, the latter intro- duced a fairly large privately managed fully funded second pillar. 2. Pierson (2001, 422-55) mentions three types of retrenchment. Pri- vatisation falls under recommodification, rationalisation under re- calibration and other cutbacks under cost containment. He associates each type of retrenchment with one of Esping-Andresen's three worlds of welfare capitalism (liberal, corporatist-conservative and social- democratic). In contrast, Natali and Rhodes (2003, 5-6) contend that a mix of the three is used in any reform of Bismarckian welfare states. 3. The trilateral comparison featured in Orenstein (2000) cannot count on such striking similarities. 4. The wb terminology will be used throughout the paper. 5. See Table 1. Poland and Slovenia display greater implicit debts than most oecd countries, excepted Italy. 6. Weir and Skocpol's approach differs from the previous ones in that it stresses the two dimensions generating the state's autonomy and in- fluence: a) the autonomy of its bureaucrats; b) its organisational con- figuration, which influences all other societal aspects - the interaction of political actors, the demands of interest groups and the inclusion of intellectual innovations in national policies. 7. See Table 1. 8. The second pillar was gradually phased-in for implicit debt and tacti- cal sequencing concerns. 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Teaching and Globalization Pasi Sahlberg Globalization is typically understood as an economic, political and cul- tural process that is reshaping the role of many nation-states in rela- tion to global markets, agreements, and traditions. Recently it has be- come frequently analyzed in the context of education. However, there is surprisingly little work done on the pedagogical implications of glob- alization on teaching and learning other than shifting the emphasis from traditional subjects to information and communication technol- ogy and English as a foreign language. This article argues that globaliza- tion is having an effect on teaching and learning in three ways: educa- tional development is often based on a global unified agenda, standard- ized teaching and learning are being used as vehicles to improvement of quality, and emphasis on competition is increasingly evident among in- dividuals and schools. The article concludes that recent development of standardization and competition-based education will become increas- ingly counter-productive to preparing students for meaningful lives for and beyond knowledge economy. Furthermore, as a response to glob- alization, educators need to rethink the ways teaching and learning are organized in schools, promote appropriate flexibility at school level, creativity in classrooms and risk-taking among students and teachers as part of their daily work in school. Education Systems in the Global Context Globalization has typically been interpreted using economic, political and cultural terms. Depending on the perspective, it has been seen as a transition from a Fordist workplace orientation to internationalized trade and consumption. Globalization is also leading to a diminish- ing role of nation-states, loss of their sovereignty, and the emergence of global hegemony of transnational media and entertainment corpo- rations. As a consequence, standardization in economies, policies and culture has become a new norm for competitive corporations, ideas, and media. As Burbules and Torres (2000) write, changes in global culture Dr Pasi Sahlberg is Senior Education Specialist in the World Bank, Washington, dc, usa. The views are those of the author alone and do not necessarily represent those of the World Bank or any of its affiliated institutions. deeply affect educational policies, practices, and institutions. From re- cent attempts to analyze and understand the multiple and complex ef- fects of globalization on education it is obvious that there is no single straightforward view of the consequences of the globalization process on teaching and learning in schools and other education institutions (Carnoy 1999; Burbules and Torres 2000; oecd 2001; Stromquist 2002; Hargreaves 2003; World Bank 2003). Although globalization has also cre- ated new opportunities to transform education, this article focuses on some counterproductive implications that are becoming evident in re- cent education reforms. Globalization has two macro-level paradoxical effects on our daily lives. First, it simultaneously both integrates and segregates. It integrates world cultures through the global communication networks and less re- stricted movement of individuals. At the same time it creates a tension between those who are benefiting more and those who may be marginal- ized by the market values and consumer cultures that are typical to many societies, especially in the areas that suffer from poverty or slower de- velopment. The challenge for future public education is to give prior- ity to teaching ethics and a sense of global responsibility that go be- yond the bounds of the knowledge economy. Second, globalization pro- motes competition although strategic alliances between competing par- ties are becoming a condition of success. Economic markets have become more open and flexible because of diminishing barriers of trade and low- ering of labor and trade regulations. The mobility of goods, services, money and intellectual capital has increased due to sub-regional and global agreements. Competition to expand markets, promote innova- tions, and develop highly skilled workforces is shifting the focus of work from quantities to qualities and from mastery of facts to professional flexibility and continuous renewal of personal capacities. Globalization increases competition because productivity and efficiency have become key descriptors of successful economies. Corporations and service or- ganizations are regularly using quality assurance policies and commit- ting themselves to management strategies that are based on assessment of performance of both staff and managers. As a consequence, similar doctrines have emerged in education. Stan- dards, testing and alternative forms of financing have come to challenge conventional public education in many countries. In the name of ac- countability and transparency, schools, teachers and students are more often than before measured, tested and asked to perform under the ob- serving eyes of external inspectors. Even ministers of education today compete to determine whose students can perform the best in inter- national student assessment programs. Indeed, introduction of interna- tional test comparisons, such as pisa (Program for International Student Assessment) and timss (Trends in International Mathematics and Sci- ence Study), has been one of the strongest pretexts for school reforms in many countries including many of the transition economies (Harg- reaves 2003). The emerging perception seems to be that making schools, teachers and students compete will itself improve the quality of educa- tion, as it has vitalized corporations in market economies. Various forms of educational standards have been created to help these competitions to become fairer and more comparable. Education systems are reacting differently to the changes in the world's new economic, political and cultural orders. Globalization has become an influence in nation-states' social reforms as education sectors adjust to the new global environments that are characterized by flexibility, di- versity, increased competition and unpredictable change. Understand- ing the effects of globalization on teaching and learning is essential for any policy maker, reform designer and educational leader. According to Carnoy (1999), the approach which governments take in reforming their education sector and its responses to globalization depends on three key factors: • the government's objective financial situation, • its interpretation of that situation, • its political-ideological position regarding the public sector in edu- cation. These three factors are normally spelled out in the macro-economic structural adjustment policies and related large-scale education reform strategies through which countries adjust not only their economies but also their education systems to the new realities. The key purpose of structural adjustment policies in the education sector has been a transition towards 'global educational standards'. This is often done by benchmarking the entire systems of less-developed countries to those of economically more advanced ones. Unfortunately, governments often think that there is one correct approach to adjust- ment of education and that certain 'global education standards' need to be met if the system is to perform in an internationally competitive way. Research on education reforms and experiences on structural adjust- ment suggest that governments need to realize that there is more than one way of proceeding on the way to improvement. The major condition for sustainable evolution of public education and cultivation of demo- cratically functioning nation-states is the kind of reform that is based on the principle of development rather than creation. In creation, according to Sarason (2002), new externally designed solutions are being intro- duced to solve the existing local problems. In development, on the other hand, the key questions are: • What is the past of the system? • What kind of institutions do we want the schools to become? • What capabilities do individuals and the system need to implement the expected reform? This tension between development and creation is visible in most ed- ucation system reforms in Europe and Central Asia region today. More specifically, there are three education policy directions within the more general structural adjustment of state economy and public service that are typical of today's large-scale education reforms. Each of these policies is often implemented in the spirit of creation rather than development in developing and transition countries. Moreover, the following policies are often used to promote market-based reforms and hence character- ize the essence of globalization of education: decentralization, privatiza- tion, and increasing efficiency of education. Decentralization is based on an assumption that stronger self-management allows schools to find op- timal ways of responding to local needs and becoming more account- able for outcomes. A recent analysis of decentralization in Central and Eastern Europe show how complicated the concept of delegating power can be in practice (World Bank 2000). Decentralization per se can nei- ther improve the quality of education nor increase the productivity of schooling. Evidence shows that for example school autonomy alone, as a form of decentralized education management, has produced no signif- icant gains in student achievement (Hannaway and Carnoy 1993). In- deed, the rationale for decentralizing education is not to increase the autonomy of municipalities or schools, but to reduce the central gov- ernment's responsibility for financing of compulsory education and to aggregate the responsibility of financing of education to local taxpay- ers and governments. Similarly, the cost-efficiency, competition and im- pact of private schools have been constant topics of debate among edu- cators. Evidence from the research literature is, however, controversial (Riddell 1993; Lockheed and Jimenez 1996; Ladd and Fiske 2003). Al- though cost-effectiveness in private schools maybe greater than in public schools, private provision of education through vouchers does not itself improve student learning. For example, data from recent education re- forms in Chile show that a large-scale and systematic privatization of public school management has not made a significant contribution to school improvement in general (Carnoy 1997; Mizala et al. 2002; Hsieh and Urquiola 2003). Furthermore, research evidence from New Zealand, Chile and even United States indicate that the common belief that in- creased competition among schools due to parental choice and related financing structures leads to improved teaching and learning is either unclear, or is simply not true (Belfield and Levin 2002; Ladd and Fiske 2003). A Tentative Typology of Global Education Reforms Countries in transition often redesign their policies to align education systems to what they believe to be current international practice. De- mand for technological literacy, flexibility of knowledge and skills, and ability to adjust to new labor market needs require teachers to teach new things in new ways. Globalization is hence catalyzing education re- forms around the world. However, the thinking behind these reforms varies greatly from one system to another. First and foremost, there is no one common denominator for these reforms, but a closer analysis identifies some typical trends. Looking at the basic values, assumptions, and purposes of various education reforms, four different reform cat- egories can be identified. They constitute a tentative typology of edu- cation reforms during the process of globalization that I have designed based on recent thinking on education reforms (see for example Carnoy 1999; Sahlberg 2002; Fullan 2003). Some aspects of types of reforms may overlap and this categorization is not necessarily comprehensive. The four education reform categories are (see Table 1): equity-oriented re- forms, restructuring-oriented reforms, financing-oriented reforms, and standardization-oriented reforms. The main intention of equity-oriented education reforms that were typical in the 1960s and 1970s is to promote social equity and increase economic opportunity. In most countries educational attainment deter- mines individuals' social status as well as their capital earnings, which makes the equalizing of access to good education an important factor in closing the gap between the socio-economic groups in society (Carnoy Table i: Tentative typology of education reforms Type of reform Purposes Focus of change Elements a 3 <3 0 o* w a 1 3 Equity. Reforming to strengthen education's political role in building democratic and social mobility, social equalization, and equal opportunity. Increase equity of economic and social opportunities by focusing on equal access for all students at least to good basic education. Shifting public spending from higher to lower levels of education. Expanding the conception of quality of education beyond the knowledge and skills in core subjects. Moving towards integrated curriculum. Emphasizing teacher professionalism. Extending high-quality basic education to the lowest-income groups, including youth and adults who do not have the basic knowledge and skills. Reaching girls and rural populations, children with special needs, at-risk children, marginalized groups and refugees. Restructuring. Reforming education as a globally normalized social and political system based on internationally shared core values and assumptions. Improve education service delivery by adjusting current system's structures to the requirements of global economic standards and socio-political climate. Decentralizing education management by providing schools with more decision-making authority. Privatizing education management through private schools, vouchers and other solutions. Realigning the length of compulsory education and secondary education to international norms. Reforming curricula to reflect changes in society (mainly ict and foreign languages) and establish new agencies for quality assurance and control. Financing. Reforming education system to adjust to public sector budget cuts and reducing resources available for financing education. Increase educational cost-effectiveness by reducing public spending on education and improve the efficiency of resource use and the quality of education. Reforming education through increasing pupil-teacher ratio, optimizing the school network and rationalizing education management. Decentralization of education management, increasing school choice and privately managed education provision through vouchers and charters. Introducing local level accountability structures to improve cost-effectiveness. Standardization. Reforming education by setting unified standards for teaching and learning and conducting related external monitoring and testing to justify the achievement of these standards. Improve the quality of education through setting higher standards and closer standardized monitoring and evaluation of student achievement, and teacher performance. Reforming education through tightening inspection, performance-related pay, pre determined performance standards and publicly made test results. Creating performance standards for students and teachers and indicators that help to assess the achievement of these standards. Closely scripted curricula and regular testing of students often characterize the outcomes of this reform category. 1999). Equity-oriented reforms often emphasize strengthening the po- litical role of education in building democratic justice, social mobility and equal opportunities for all citizens. These reforms typically focus on shifting public spending from higher to lower levels of education, rural/urban balance, gender issues, broadening the conception of edu- cational quality beyond knowledge and skills in core subjects and mov- ing towards a more integrated curriculum and inclusive organization of teaching. Consequently, the popularity of equity-oriented education reforms has decreased recently because of the perceptions that invest- ing in equity may not show an increase in test scores and, hence, may not give sufficient attention to economic growth. Instead, market-based solutions have often been seen as potential alternatives to conventional public education in improving the quality and cost-effectiveness of ed- ucational provision. Some fear, among them many teachers, that in this race for higher standards only the fastest and strongest will succeed while the weak either fail or lose their hope when being left behind. Restructuring-oriented education reforms that emerged in 1980s are based on structural alignments that aim to 'normalize' the current sys- tem with international practice. The basic assumption of such reforms is that all education systems that function effectively and produce high quality learning should share the same core values, assumptions and op- erational principles. The most typical indicators of economically and ad- ministratively adjusted education systems are pupil-teacher ratio, class- size, school-size, time allocation per subject, education expenditure per capita and length of compulsory education. Recently, as a consequence of restructuring reforms especially in transition economies, several institu- tional rearrangements have occurred, such as the emergence of indepen- dent assessment and examination centers, privately managed education institutions and accreditation agencies. Financing-oriented education reforms typically aim at reducing the share of public financing of education by looking for ways of users to pay for their education. As globalization increases competition among nations, national economies have to adjust themselves to the new global economic structural reality. In practice, since education is a signifi- cant proportion of public sector spending, reducing public spending inevitably means also shrinking education budgets financed from pub- lic funding. This, in turn, leads governments to seek financing outside public budgets or to reduce the unit costs within the education sector, or both of these. Financing-oriented reforms have had three direct implica- tions for education. First, shifting public funding from higher to lower levels of education. Higher education is typically high-cost, and basic ed- ucation is relatively low cost in terms of student expenditures. The shift of spending from higher to basic education would therefore enhance opportunities for large numbers of primary students at the expense of subsidizing a relatively elite group of families who could bear the costs of university education privately anyway (Carnoy 1999). Second, this leads to privatization of secondary and higher education. Many governments in the Central and Eastern European regions increase privately financed education in order to overcome the problems of low education financing portfolios in the State budgets. Third, reduction of the cost per student is most often done by increases in class-sizes at all levels of education. According to the economists' estimates, countries that have fewer than 45 students in a class could save significant public resources by increasing class sizes over time (World Bank 1995). In the New Independent States, for example, the pupil-teacher ratio is typically around 10: 1, whereas the oecd average is 15: 1. Standardization-oriented reforms that have appeared since the 1990s are based on the assumption that in the competitive economic and so- cial contexts the quality of education and productivity of labor can best be improved by setting high performance standards for teaching and learning and then measuring whether these standards have been met. Standardization-driven reforms were a catalyst for the introduction of international test comparisons. Students' test scores in timss and pisa have raised public interest in the performance of education systems globally. A consequence is that the complex interconnections between educational achievement and economic success are oversimplified. In competition-intensive global markets, schools have been urged to reach higher standards. This has led to focusing on education reforms that are based on greater standardization and related micro-management of teaching and learning. As Hargreaves (2003) has argued, the most com- monly used reform strategy is: • a closely scripted curriculum with predetermined attainment tar- gets or learning standards, • aligned testing mechanisms that measure the extent to which these standards have been achieved, • tightened external inspection to control teachers' and schools' per- formance, • performance-related compensation among other reward-sanction structures. The types of education reforms described in Table 1 rarely occur in- dependently from each other. The internal logic of that typology indi- cates increased market-orientation of education reform as one moves top-down in Table 1. Therefore, it is normal that two or more of these reforms are implemented simultaneously in large-scale, system-wide ef- forts to align education to new economic or political situations and thereby improve the quality of education and increase the productivity of labor. Moreover, similar changes may occur within each of these reform categories but for different reasons. For example, changing the curricu- lum has been almost a fit-for-all cure in education reforms of any type, teacher in-service training is proposed as a means in most reforms, and resource implications of reforms have often impacted on the financial arrangements of education. Has globalization catalyzed one or some of these education reforms more than others? A Canadian research team presented a synthesis of ef- forts to reform education systems during the era of globalization. They refer to 'a new official orthodoxy of educational reform' occurring pri- marily in predominantly Anglo-Saxon countries (Hargeraves et al. 2001). This strategy is rapidly being adopted also in developing parts of the world due to development aid offered by industrialized countries. In many cases, especially in the Europe and Central Asian region, policy, strategies and models of educational reforms created in developed coun- tries are exported to the less-developed transition countries. The new educational orthodoxy is to a large extent a market-based offspring of globalization and, according to Hargreaves et al. (2001), has the follow- ing major components: • Higher standards of learning for all students, except for those who have the most severe mental or physical dysfunctions. • Deeper learning, which shifts the focus of teaching away from a presentation-recitation mode of instruction towards teaching for conceptual understanding, problem solving, and shared intelligence that are all essential for successful participation in the knowledge society or knowledge economy. • Centralized curricula that ensure common and consistent coverage of what every student should know and be able to do, often in the form of standards or pre-scripted attainment targets. • Literacy and numeracy as prime targets of reform and which also de- termine the success or failure of pupils, teachers, schools, and entire education systems. • Indicators and attainment targets of student achievement and cur- riculum planning that enable teachers and others to be clear whe- ther these standards have been reached or not. • Aligned assessments that are tightly linked to the prescribed curricu- lum, learning standards, and indicators making sure that teachers focus on high learning achievements for all students. • Consequential accountability where the school performance and es- pecially raising the quality of education, are closely tied to the pro- cesses of accreditation, promotion, inspection and ultimately fund- ing and rewarding (or punishing). This educational reform ideology has been widely accepted, both po- litically and professionally. In principle these elements of education re- form, when implemented successfully, promise significant progress of education, especially in improved quality of education and better op- portunities for all students to learn in school. In many cases, as a con- sequence of this new global education reform movement, the introduc- tion of various educational standards has become common in modern education development. What has followed is an emergence of learning standards for students, teaching standards for teachers, assessment and curriculum standards for educators, with related indicators, criteria and attainment targets. Although some early gains have been recorded, the standardization movement in schools has not-welcomed backwash ef- fects as well that are discussed in the next paragraphs (Fullan 2003). Globalization as Standardization A clear impact of globalization is increased competition, not only in economy and trade, but also in other sectors, including education. The fundamental assumption is that boundless business opportunities and the free movement of labor are promoting efficiency and effectiveness in private production as well as among basic public services. Previous edu- cation policies have adopted values, principles and management models of market economy, for example, curriculum models in the early 20th century based on scientific management by Frederick W. Taylor. Today again, as a response to the economic, political and cultural globaliza- tion process, education systems are seeking governance and operational models from the business world. As a result, the number of privately managed education institutions has increased, school choice within pub- lic education has been made possible, local management and decision making are becoming common due to decentralization, and schools and teachers have been made accountable for teaching and learning. In some instances these neo-liberal and sometimes even market fundamentalist education policies have created what could be described as 'schooling apartheid' in which good schools get better and poor schools get worse or are even abolished due to their failure to perform according to exter- nally set standards. Many good schools have gained their reputation by having a better intake of students and by simple raw student test result data that have been used in comparing schools in the media in the name of accountability. Focusing on higher economic productivity in national economies is one cause of increased competitiveness in our societies. In the environ- ment where results matter the most, standards are commonly used to determine the quality of these results. Outcomes-based education re- form became popular in the 1980s, followed by standards-based educa- tion policies in the 1990s first in Anglo-Saxon countries. These reforms shifted the focus of attention from educational inputs, i. e. regulation of teaching, to educational outcomes, i. e. monitoring of learning. As a result, a widely accepted belief among policy-makers and education reformers is that by emphasizing competition among schools and set- ting clear and high enough performance standards for schools, teachers and students will improve the quality of education, and hence students' learning outcomes. Enforcement of external testing systems to assess how these standards have been achieved has resulted from standards-oriented education reforms. Since the late 1980s, as Hargreaves (2003) writes, 'cen- trally prescribed curricula, with detailed and pressing performance tar- gets, aligned assessments, and high stake accountability have defined a "new orthodoxy" of educational reform worldwide, providing standard- ized solutions at low cost for a voting public keen on accountability'. It is easy to see the linkages between what has happened in global economies, politics and societies in general and the mainstream market-based edu- cation reform agendas mentioned above. Efforts to enhance quality, increase productivity and improve cost- effectiveness, have brought standardization in various forms to the world of education. The financing and standardization-oriented education re- forms mentioned in Table 1 have dominated education policy discourses and reform agendas more than have equity- and restructuring-oriented educational development during the last two decades. Schools and teach- ers have been asked to improve the quality of teaching and learning at a time of increased requirements to spend their time on non-teaching ac- tivities in their schools, shrinking education budgets and restricted access to necessary resources. Students' test scores in standardized academic achievement tests have been used as a sole justification for personal suc- cess or failure. Student assessment has become a global business in ed- ucation as schools and local education authorities are forced to spend considerable shares of their education budgets on testing students. What is even more worrying is the shift of teachers' and students' attention from teaching and learning for understanding towards being successful in high stake tests and exams. Recent research on large-scale standards-driven education reforms seems to suggest that there is a need for a change of course (Fullan 2000). In England and Wales, New Zealand, some provinces of Aus- tralia, Japan, Singapore, and even in the United States there are growing concerns about the appropriateness of standardized reform and its real contributions to educate for citizenship and prepare youth for demo- cratic societies and knowledge economies (Oakes et al. 2000; Cuban 2001; Popham 2002; Fullan 2003; Hargreaves 2003). There are indica- tions that over-standardization while resources (both time and money) remain the same are leading to de-professionalization of teachers' work and narrowing curriculum and learning to basic skills in core academic subjects. If that is true, then our standardized schools are not likely to be of much help in developing information societies and helping young people in learning the necessary knowledge, skills and habits of mind that they need in knowledge economies. Knowledge societies are based on the capacities to share information, build knowledge and create innovations, in other words, to learn. The development of knowledge economies depends on how flexibly the so- ciety is able to react to unpredictable changes. Economies that are based on rigid structures and inert minds are not able to succeed and grow. However, many school systems and particularly their secondary schools have become rational, factory-type institutions that impose standard- ized knowledge on students rather than promote curiosity, creativity and self-actualization. Hargreaves (2003) says that 'the rightful pursuit of higher standards has degenerated into a counter-productive obsession with soulless standardization'. Instead of extending the space for innova- tive teaching and creative learning in schools, the opportunities for flex- ibility and risk-taking that are essential in a knowledge economy have been taken away from teachers and students. Education reforms in many countries go under the label 'the way to a knowledge society' but what students, teachers and schools are forced to do often creates new prob- lems rather than solves existing ones. Education is paramount in helping young people to learn to live to- gether in a secure globalized world. But what kind of education? The Organization for Economic Cooperation and Development (oecd) has envisaged six possible scenarios for the future public education in the knowledge society (oecd 2001). Two 'Status Quo' scenarios of these pos- sible futures of public education presume a strengthening of current ar- rangements that will result in either more entrenched bureaucracy in school systems or a growing emphasis on market and choice-based mod- els as students and their parents become more dissatisfied with public education. Two other scenarios termed 'De-Schooling' scenarios pre- sume that public schooling will simply diminish because of the lack of enough good teachers, and that the proliferation of innovations will cre- ate panic and 'meltdown' in education policies. Alternative solutions, such as non-formal education, distance education and e-learning will gradually replace formal public schooling. Only two scenarios labeled as 'Re-Schooling' assume that public education can be saved and im- proved. One scenario sees schools developing as learning organizations that will focus on learning and development for the knowledge society. The other scenario sees the school as an activity center in its community that networks with other human development entities, promotes the de- velopment of social capital and learning for a good life as well as for productivity in the knowledge society. Teaching and the Knowledge Society Two decades of education reforms, as Hargreaves (2003) observes, have led to rigid standardization, commercialized teaching, learning for tests and external control that has casualized teachers in many countries rather than empowered them to teach better. How can our schools then become learning organizations and caring communities? One potential way is to re-think teaching and learning by challenging conventional beliefs of what the knowledge society and knowledge economy require from schools. This re-thinking could constitute three dimensions: • teaching in the knowledge society, • teaching for the knowledge society, • teaching beyond the knowledge society. As teaching in the knowledge society (or economy) is self-evident, let us look at the dimensions of teaching for and beyond it. Teaching for the knowledge economy is concerned primarily with cog- nitive learning and is based on three necessary elements. First, schools need to step back to becoming flexible institutions where carpe diem is the guiding principle of teaching and learning. Knowledge economies need individuals who can use knowledge, know how to adapt to new sit- uations and be ready to explore the unknown. Second, a creative atmo- sphere in classroom is a key condition for the emergence of innovations and new ideas during the teaching and learning process. The knowledge economy as a learning system is dependent on innovations. Innovations require creativity and there is no creativity without risk-taking. Across the curriculum, students should learn to develop attitudes and skills that are necessary in social interaction, problem-solving and continuous self- development and learning. Third, individuals should be encouraged to develop collective intelligence and ingenuity. Rarely can only one person master all the knowledge and skills that are required. Successful corpo- rations and communities build on shared knowledge and competences, not only individual mastery. Teaching beyond the knowledge economy means teaching ethics, dispo- sitions and a sense of global responsibility. It is based on four elements that go beyond the bounds of the knowledge economy. First, schools should help young people to develop values and emotions as part of their character development. Second, teaching in school should focus on learning the principles of democracy. Thirdly, students should be guided to commit themselves to group life and become active members of vari- ous communities instead of only learning to cope with short-term team- work. And fourthly, as Giddens (2000) proposes, teaching should culti- vate a cosmopolitan identity that means genuine interest in and under- standing of other cultures, humanitarian responsibility of self and others and caring for excluded groups within and beyond one's own society. Teaching in the era of globalization is a challenge to teachers and to education systems. I argue that public education will play an even more important role in social and economic development in the coming years. Reactions to these challenges have remained so far ineffective. Education vouchers, standardizing teaching and learning, intensifying testing, and making schools more accountable to the public, have not raised the qual- ity of education as expected. If governments want to narrow the learning gap between the more advanced and those who lag behind, to expand ed- ucational opportunities for all people and to improve student learning in general, systemic efforts that are backed up by coherent education poli- cies are required. At the time of globalization this means stronger role of education, more public spending on education as well as more effective use of resources allocated for schooling. The evidence shows that those education systems that have strong public education are likely to be more successful in terms of efficiency and quality (Carnoy 1999; oecd 2002). Concluding Discussion The need for new thinking about educational reforms and school im- provement is worldwide. The rhythm of change remains fast and un- predictable. Insecurity and uncertainty, that are typical by-products of globalization, create new challenges for schools to prepare pupils for new world realities such as sustainable ecologies or knowledge economies. Schools, when governed and managed well, may provide hope for better security and well being for many more than they do now. As described above, schools have faced the following global phenomena: Increased standardization of teaching and learning. The new global ed- ucational orthodoxy together with competition-based education poli- cies has led to over-standardization of teaching and learning (Hargreaves 2003). Standardization-oriented reforms that set unified and predeter- mined expectations in the form of performance standards underestimate the complexity and dynamics of knowledge economies. Standards are by definition static. Testing and measurement systems that are integral elements of standardized education systems diminish the curriculum and limit teaching to cover the core subjects and specific content areas that are tested (Popham 2002). As experience from highly standardized school systems suggests, teaching becomes technical implementation of predetermined sequences and learning a game of memorizing what was taught until it is externally tested. Public resources for education are not likely to increase. Globalization in- creases international economic competition, which automatically puts pressure on decreasing public spending in state budgets (oecd 2003). As a consequence, education ministries have been forced to look for more efficient and cost-saving arrangements for delivering mandatory edu- cational services. Teachers' salaries remain lower than salaries of simi- larly educated professionals in society. Class-sizes and school-sizes are increasing and financing of teacher professional development is shifting from public authorities to schools and teachers. At the same time, the de- velopment of modern teaching and learning tools requires larger budgets than before. Finally, cultural diversity in schools and the widening spec- trum of children with various special needs call for intensified human development and appropriate provision of support to these individuals. Demoralization among teachers and decreasing motivation for schooling among pupils. According to recent studies, teacher burn-out, dissatisfac- tion with work, lower morale and increasing early retirements have been consequences of tightening central control over teachers' work, expand- ing competitiveness within and among schools and weakening teacher autonomy (Perie et al. 1997). It may not be fair to blame globalization for all these illnesses in the teaching profession but, as a consequence of the adopted educational reform models - especially 'the new educa- tional orthodoxy' and thus increased competition among schools - de- professionalization of teaching has become an increasingly global illness in education systems that will have serious future effects in medium and long term perspectives (Hargreaves 2003; Law 2003). In order to cope with these impacts of globalization on schools, alter- native directions are needed. Often inconsistent education reforms are due to the misinterpretation of the essence of globalization and its im- pact on education. Some of the proposed educational responses to glob- alization, such as standardization of teaching and learning, privatization through alternative education provision mechanisms and promotion of open competition between schools, have only recently been more widely questioned. Education policies and reform designers need to pay closer attention to the issues that have been suggested by many of the leading thinkers of educational development (Cuban 2001; Sarason 2002; Harg- reaves 2003; Fullan 2003). There are three different dimensions that schools have to consider when planning their roles in the globalizing world. Schools need to find the most effective ways to teach their pupils in the knowledge society. Then they have to design their curricula and pedagogical arrangements to help pupils to learn for the knowledge society. Finally, school should help young people to protect themselves from the negative side of glob- alization, such as marginalization and inequality between rich and poor, by educating them beyond the knowledge society. This entails develop- ing the values and emotions of young people's character, building under- standing and commitments to families, communities and group life and cultivating a cosmopolitan identity. Furthermore, school improvement should make better use of teachers' professional communities. Instead of standardizing teaching by creat- ing more barriers to teachers' genuine creativity, emotional involvement in their students' development and collegial professionalism, teachers should be helped by providing them with time and resources to learn, plan and reflect together about their work in school. Some governments are now shifting the focus of their policies and education reforms from standardization of teaching and learning towards developing profes- sional learning communities of teachers and towards emancipating the professional potential of teachers and principals who are able to find new solutions to maintaining the quality of learning. Promotion of such professional communities is based on four elements (Hargreaves 2003): • collaborative work and discussion among the teachers and princi- pals in school; • focus on teaching and learning within that professional collegiality; • collecting data from classrooms and schools to evaluate the progress and challenges in the educational process; • rearranging time in schools. It is obvious that globalization provides new opportunities to solve world-wide problems and at the same time it creates new challenges that needs to recognized. One visible trend within education is homogeniza- tion of the content of teaching and standardization of the expected learn- ing in schools. Many governments are currently searching for optimal ways to respond to these challenges. According to the experts the future scenarios are not promising. It seems that public education is still the most powerful means to secure the development of democratic civil so- cieties, productive knowledge economy and sustainable global security. Each of these national and global educational goals can be achieved only when education truly serves the public good and provides learning op- portunities for all students. Teaching and learning that are based on the values of democracy, common good and equal opportunities can cul- tivate these features of our societies. The evidence from large-scale ed- ucation reforms suggests that improving student learning or expanding opportunities to good education requires systematic efforts and coherent policies by the public sector. According to these experiences, to do that means not only bigger but also more effective public education spend- ing. To do this successfully, flexibility, creativity and risk-taking will be the key qualities of both institutions and their individuals. References Belfield, C., and H. Levin. 2002. The effects of competition on educational outcomes: A review of the United States evidence. Review of Educa- tional Research 27:279-41. Burbules, N., and C. A. Torres. 2000. Globalization and education: Critical perspective. New York: Routledge. Carnoy, M. 1997. Is privatization through education vouchers really the answer? A comment to West. The World Bank Research Observer 12 (1): 105-16. Carnoy, M. 1999. Globalization and educational reform: What planners need to know? 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Becoming good American schools: The struggle for civic virtue in education reform. San Francisco: Jossey-Bass. oecd. 2001. What schools for the future? Paris: oecd. oecd. 2002. pisa 2000. Technical report. Paris: oecd. oecd. 2003. Education at a glance. Paris: oecd. Popham, J. 2002. The truth about testing: An educator's call for action. Alexandria, va: ascd. Riddell, A. 1993. The evidence of public/private educational tradeoffs in developing countries. International Journal of Educational Develop- ment 13 (4): 333-86. Sahlberg, P. 2002. Educational reform. In Encyclopedia of education. 2nd edition. New York: MacMillan Library Reference. Sarason, S. 2002. Education reform: A self-scrutinizing memoir. New York: Teachers College. Stromquist, N. 2002. Education in a globalized world: The connectivity of power, technology, and knowledge. Lanham, md: Rowman & Littlefield. World Bank 1995. Strategies for education. Washington, dc: World Bank. World Bank 2000. Decentralizing education in transition societies: Case studies from Central and Eastern Europe. Washington, dc: World Bank. World Bank 2003. Lifelong learning in the global knowledge economy: Chal- lenges for Developing Countries. Washington, dc: World Bank. £ Intellectual Capital ^ and Knowledge Management 5th International Conference ^ of the Faculty of Management Koper, University of Primorska 18-20 November 2004 Congress Centre Bernardin Portorož, Slovenia The Faculty of Management Koper invites researchers from academic institutions and experts coming from organisations in the field of economy, law, business, management, education and informatics to present their papers at the conference. Chairman of the Programme Board Dr Zvone Vodovnik, University of Primorska, Faculty of Management Koper, Slovenia Conference Subject Areas • Processes of creating and applying in- tellectual capital • Knowledge and people management • Measuring intellectual capital and its economic effects • Intellectual capital and informatics Conference Aims • To discuss the role and importance of education, as well as its impact on cre- ating the intellectual capital of individ- uals and the society • To analyse different approaches to man- aging intellectual capital (of the society, undertakings and individuals) • To analyse models for measuring intel- lectual capital and to discuss the eco- nomic effects of intellectual capital • To analyse diverse aspects of intellectual capital and informatics Submissions • Submission of abstracts: 30 June 2004. To submit your proposal, please use the on-line registration form. The notifica- tion of acceptance will be sent to au- thors by 20 July 2004. • Final papers must be submitted by 15 September 2004 to e-mail: conference@fm-kp.si. The papers presented at the conference will be published in the Conference Pro- ceedings with isbn number. Papers will be peer reviewed. Selected papers from the conference will be considered for publication in the international research journal Managing Global Transitions. Registration To register, please use the on-line registra- tion form. University ofPrimorska Faculty of Management Koper Cankarjeva 5, 6104 Koper, Slovenia Phone: ++386 (0) 5 610 2007 Fax: ++386 (0) 5 610 2015 E-mail: conference@fm-kp.si www.fm-kp.si _ Managing Global Transitions International Research Journal AIMS AND SCOPE The journal Managing Global Transitions is aimed at providing a forum for disseminating scholarship focused on transitions. The journal seeks to publish ground breaking work in management research that will provide integrated and diverse perspectives on the processes of change and evolution in a broad range of disparate fields, including systems theory, leadership development, economics, education, sociology, informatics, technology, decision-making theory, and action learning. To further the understanding of transition environments internationally the journal aspires to enhance the availability of case studies and analysis of data from different cultural environments in public, non-profit, and corporate contexts. INFORMATION FOR AUTHORS Manuscripts should be prepared following the style of The Chicago Manual of Style (University of Chicago Press 2003). Manuscript Style • Papers may be submitted electronically via e-mail. Manual submission (one hard copy plus one on ibm format disk) is also required. • Papers should be between 4000 and 5000 words in length, accompanied by a 100-150-word abstract and about five key words on a separate sheet. Book reviews should be between 1000 and 2000 words in length. • The title page must list full title, author(s) address, phone, fax, and e-mail. • Manuscripts must be printed on one side of A4 (or letter size) paper with double spacing and 25 mm (1 in) margins. Italics should be used for emphasis and bold for headings, which must be numbered (e.g. 1,1.1,1.2, etc.) and written using uppercase and lowercase letters. • Illustrations and tables must be printed on separate sheets. • We accept files created with all major word processing packages, but prefer MS Word and IATgX. Figures should be saved as separate files in tiff or eps format, and source files should be included. Author name should be used as file name (e.g. smith.doc for the main file and smith1.eps, smith2.eps, etc. for figures). Reference Style The author should make sure that there is a strict one-to-one correspondence between the names and years in the text and those on the list. The list of references should appear at the end of the main text. It should be listed in alphabetical order by author's name. References should appear as follows: Beech, M. H. 1982. The domestic realm in the lives of Hindu women in Calcutta. In Separate worlds: Studies of purdah in South Asia, ed. H. Papanek and G. Minault, 110-38. Delhi: Chanakya. Jackson, R. 1979. Running down the up-escalator: Regional inequality in Papua New Guinea. Australian Geographer 14 (May): 175-84. Lynd, R., and H. Lynd. 1929. Middletown: A study in American culture. New York: Harcourt, Brace and World. University of Chicago Press. 2003. The Chicago manual ofstyle. 15th ed. Chicago and London: University of Chicago Press. Articles are double-blind peer reviewed. COPYRIGHT NOTICE Copyright for all articles published in Managing Global Transitions is held by individual authors. subscriptions Annual subscription (two numbers): individual rate 9.600 sit (euro 40); institutional rate 14.400 sit (euro 60). Prices include postage. Managing Global Transitions International Research Journal volume 2 ■ number 1 • spring 2004 ■ issn I581-63II 5 The Mediating Role of Corporate Entrepreneurship in the Organizational Support-Performance Relationship: An Empirical Examination Boštjan Antončič Otmar Zorn 15 The Philosophy of Supply Chain Management in the New Economy: Net Readiness in the Net Supply Chain Zbigniew Pastuszak 31 Is There a Gap in Economic Culture Between eu Countries and the Transition Economies? Milan Zver Tjaša Živko Vito Bobek 41 Welfare State Retrenchment in Central and Eastern Europe: the Case of Pension Reforms in Poland and Slovenia Igor Guardiancich 65 Teaching and Globalization Pasi Sahlberg VA FAKULTETA ZA | FACOLTÄ DI | FACULTY OF MANAGEMENT