Ethics and Business – ‘Eastern Europe’ after the Revolutions

I was invited this week to present some ideas on business ethics to the committee that provides guidance to a London-based fund whose investments are guided by ethical principles. They were interested particularly in the way business ethics are perceived in former ‘Eastern Europe’, parts of which, including the Czech Republic (where I live), are now better known as ‘Central Europe’. It was in Prague, in the Czech Republic, that I started LLP Group in 1992.

business ethics

I have to admit that I was initially sceptical about the idea of an ethical fund (it can sound like that much derided concept of an ‘ethical foreign policy’, derided because impractical), but that was before I looked more carefully at the fund’s website, where its clarifying principles are published. I studied philosophy at university and have enjoyed a life of puzzled uncertainty about almost everything ever since, and I tend to see a hundred sides to every issue, at least when I come at things from a distance and with incomplete knowledge. You would often find me sitting comfortably on the fence when it comes to complex ethical issues. And so I couldn’t see how one could apply ethics consistently to investment decisions.

But, as published, the fund’s principles are reasonably pragmatic. They’re carefully defined in terms of where the fund might invest, and where it definitely won’t. The fund wisely avoids the perils of simply saying it will invest in businesses that are good, and not in those that are bad. I had previously wondered how it could calculate the ethical value of one form of business over another in the real, complex, interconnected world, but in fact they’ve made it simpler than that.

But even so, calling a fund an ‘ethical’ fund, even with careful qualification, still lays it open to embarrassment if it finds itself invested in a company whose practices are dubious for reasons other than those the fund lists.

Ethics should be a day-to-day consideration for businesses of all kinds. Businesses should be measured by ethical balance sheets, as well as by financial ones. Of course, when you’re actively involved in a business, as I am, it’s much easier to know right from wrong. My and my business partners’ decisions about the company are made in nearly full knowledge and understanding of the choices we have before us, and in our case they’re usually small choices made in the context of a medium-sized, privately held business whose whole history and complexity I and my partners and colleagues know completely. In any case business software is rarely morally contentious. But judging large businesses from the outside is altogether a different and more difficult matter.

All human institutions operate in both a legal and a moral framework. Neither framework can be precisely defined, nor are they ever complete. We’ve seen in recent months how tax law has been strained by the changing, digital nature of ‘sales’ and ‘service delivery’, and as for moral principles, these are personal, cultural, ideological, political, religious, or national, and will never be uniform. LLP Group’s business history lies largely in former socialist Central and Eastern Europe (let’s call it Eastern Europe for the sake of brevity), where business history itself began, or began again, only following the fall of communism in 1989. I’ve seen legal and moral frameworks struggling to emerge, and I’ve been acutely aware that for many in the region, there was no ready-made framework after 1989. For some, ethics were entirely irrelevant and, for all, the law was too loosely defined, and only sometimes a limitation.

I want to focus on two areas – the acceptability of corruption and the distinction between the legal and the ethical, a distinction that even twenty-five years after the end of Communism still isn’t fully appreciated in Eastern Europe.

I often say that I grew up in Hungary albeit in my early 30s. In 1987 I was sent by my employer into the professional and social isolation of a world where the spoken language was more remote from English than Hindi, where just about everything from hemlines to computer technology was old-fashioned and second hand, and where everyone I met was my Cold War enemy.

The Hungarian Socialist People’s Republic was initially a shock, in all kinds of ways. I’d been brought up, as most of us were, to imagine socialist Eastern Europe as uniform, monolithic, bureaucratic, ideologically hostile to the West, ardently socialist, strenuously equal, socially liberal, and determined to demonstrate that socialist values could triumph over capitalist materialism. I had read Tony Benn’s admiring but naïve accounts of life behind the Iron Curtain.

What I found was ideological apathy. The vast majority of people were impotently acquiescent in the life that had been prescribed for them by the Party. The few who sought power and responsibility had the Party ladder to climb. They were mildly ambitious, sometimes talented, more or less tolerated by the acquiescent majority and generally forgiven for the nonsense they had to spout. Someone had to do the job. Rather them than us. The Party wasn’t quite the monster it had once been. It wasn’t murdering its enemies anymore. As Janos Kadar said after the Soviet invasion, ‘Those who are not against us are with us.’ This reversal of Lenin’s view of seventy years earlier captured the tone of the last years of communist rule.

Cynicism, though, was a feature of everyone’s life. Impotent acquiescence wasn’t a particularly unpleasant condition, as long as there was enough food, drink and the occasional Cuban banana at Christmas. For the majority what mattered most was the private sphere, the personal life of family and friends, hobbies, and sometimes religion. Greed was completely pointless and envy had nothing much to work with. Everyone had more or less the same. Material reward wasn’t what stoked ambition, either inside the Party or outside it. If you worked hard in your profession it was only because you took some pride in it.

On the other hand, and to my very great surprise, I found racial prejudice, nationalism, homophobia and sexism wherever I looked, coexisting with the enforced state socialist ideology that didn’t in theory allow them. I sometimes say I became racist in Hungary too, if only inasmuch as I was made to feel conscious of race wherever I went. It was always, ‘Watch out, he’s a gypsy, she’s a gypsy.’ And once it was, ‘I know it was terrible that the Germans killed the Jews, but you know we never really liked them.’ Society seemed to have been frozen in the late 1940s when the socialist revolutions came. It was no surprise to me that, as in former Yugoslavia a few years later, these evils re-emerged once the Party straitjacket had been removed.

Petty corruption was a ubiquitous feature of daily life. If you wanted good hospital treatment you made a small gift to your doctor and your nurses (a little cash, a bunch of flowers, a jar of homemade pickles, or a bottle of palinka). Waiting lists and queues were long, and you often needed to bribe a little to get to the top or to the front.

I looked for the ardent ideologists, with whom I could discuss socialist ideology, but I found none, nor any hostility towards me as a representative of the decadent capitalist world. Indeed, if you were from the West you enjoyed a spurious (almost corrupting) celebrity, and I found that in the technical areas I worked in as a programmer, whatever I said was taken as Gospel. It was as if the locals accepted they’d been left behind, and that the socialist experiment had failed.

Public life prior to the failure of Communism was, in theory, governed by the ethical-political principles of socialism. Private life (including religion) was more or less a matter for the individual, and private endeavour in the public sphere was impossible. ‘Business,’ therefore was impossible. Because of that, ethics applied only in the private sphere. In the public sphere ideology and morality were generally discredited.

This was the world that collapsed into the arms of Western capitalism in 1989. And when socialist ideological control of public life failed there were no rules left to operate outside the private sphere. Few had ever believed in the public rules, but there hadn’t been much opportunity to break them. Whatever new rules now emerged as a divided multi-party democracy came into being, weren’t impressively framed. They were generally based on the principles of Roman law, and where they were inexact, mischief flourished. They were easy enough to break or circumvent. Little now limited private endeavour in the public sphere and there were plenty of spoils for all to seize. The petty corruption that was endemic to the socialist system bloomed into opportunism and organised crime.

Another, rather unexpected, thing happened, unexpected for those intellectuals who’d publicly dissented from one-party ideology (though if they’d read Animal Farm more carefully they might have seen it coming). Whilst the topmost dogs in the Party apparatus lost all their credibility and power, the vast ranks of ambitious, pragmatic and cynical apparatchiks, those who’d made the socialist system more or less work, quickly learned how to dance to the new capitalist tune, as nimbly as Orwell’s pigs stood on their two hind legs. They understood the technicalities of power, they had the connections. They even possessed a few management skills (which, sadly, you don’t learn as a dissident intellectual driving a taxi or stoking a boiler). For those who thought their time had finally come, this was bitterly disappointing, even more so when the West went to these turncoats for advice and assistance. For these incumbent bureaucrats things were suddenly even better than they’d ever been before. Now there were no rules, no d ideology to which they must pay lip service.

I’ll write more in a day or two about what happened next!

6 thoughts on “Ethics and Business – ‘Eastern Europe’ after the Revolutions

  1. I am Hungarian, and in the late 80’s I was around 10 years old, so I have seen this world from below, and the post is coming from outside. For us this was the “normal” world, and we never expected, that in a few years everything will turn around.
    Still it is very interesting to read about how did an Englishman see our world.
    Thank Adam! 🙂


    • Thanks for your comment, Gabor. It’s only to strangers, I suppose, that anything seem strange. To children everything will always seem normal – perhaps even in North Korea!


  2. Business Ethics in ‘Eastern Europe’ -Everyday Misdemeanours – Adam Bager

  3. Business Ethics in ‘Eastern Europe’ – Further Opportunities for Mischief – Adam Bager

  4. Business Ethics in ‘Eastern Europe’ – Tax Evasion and Other Ills – Adam Bager

  5. Business Ethics in ‘Eastern Europe’ – Concluding Thoughts – Adam Bager

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