616 Book reviews / Scand. J. Mgmt.

18 (2002) 611618

Francesco Paolo Cerase

Faculty of Sociology, Department of Sociology,
University of Naples Federico II,
" 1, 80138 Napoli, Italy
Vico Monte della Pieta,
Email address: fpcerase@tiscalinet.it

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The economist who never came back

PRAGUEIn 1990, just as the Czechs were moving into their period of transition, I
spoke at an East meets West Congress in Prague (published in this journal, 1992:
335338), following an American and a West German, both of whom implored the
Eastern Europeans to hurry up and get on with free enterprise. I suggested that the
problem had nothing to do with the abstractions of economics, with gross national
product, labor, capital, investment, and all the other lovely terms they were throwing
about. It was all about a little hotel in Zvikov, a village in the southern part of Bohemia
that I had just visited. The hotel was owned by a distant cooperative conglomerate (an
excuse for state control, I imagined), and no one seemed to know what to do with it
leave it alone, make it into a true cooperative of its employees, sell it to the highest
bidder. If someone could gure out what to do with that one little hotel, I suggested,
then maybe they would know what to do with the entire Czech economy.
I did propose one specic idea. It has been said that an economist is someone who
never met a real person but once had one described to him or her. Why not, then,
take all those underemployed economists, all those planners ready to unplan, and
instead assign each to a single Hotel Zvikov, with instructions not to return to the
capital until he or she had gured out what to do with it. Most would probably never
have returned, I suggested, which could have been the real benet of the idea. Still,
some might have met a real person or two, on the ground, and learned something,
which they could have been carried back to the capital to convey to other people.
Gradually this kind of sharing might have led to a whole new way of doing things.
For some reason, that is not what happened. Instead, the Czechs got Vaclav
Klaus, an economist who never left the capital and who did not seem to learn much
about new ways either, even as Prime Minister of the Czech Republic. As he told
those assembled at the World Economic Forum in Davos in 2000: There are only
two ways in human society, and I belong to those who are convinced that the so-
called third way is an euphemistic and dangerously misleading name for the second
waysocialism. No shades of gray for Professor Klaus, who seems to think that
Tony Blair is a socialist. Only the black of closed government or the white of free
markets, which Professor Klaus equates with freedom.
I went back to Zvikov a short time ago, curious about what happed to that little
hotel. I was surprised to nd a spiffy little place, fully remodeled, looking a lot more
inviting than most of those fancy hotels I nd in the big cities. I was also surprised to
learn that Hotel Zvikov was still cooperatively owned, or perhaps I should say,
 Book reviews / Scand. J. Mgmt. 18 (2002) 611618 617

seriously cooperatively owned. But the biggest surprise came when I met the
Director. He is an economist!
Ing. Jindrich Zydek was teaching at the Economics University in Prague when the
events of 1968 forced him to leave. He found a job at Hotel Zvikov and spent years
working as a waiter, cook, maintenance man, etc., until he became Director in 1990
(probably shortly after I visited). In addition to managing the hotel, the economist
from Prague was Vice President of the Association of Cooks and Confectioners of
the Czech Republic.
Hotel Zvikov was, and remained, part of a large cooperative mostly in food
retailing. Under the previous regime, the Communist Party had to approve
nominations for positions on the board. Needless to say, the members were offered
choices of one. In other words, the organization was cooperative in name, but state
controlled in practice.
Such arrangements used to be common for third sector organizations all over the
world. In India, for example, the state was so heavy handed in controlling
cooperatives that today many people there take the word as synonymous with state
control. And in France, back in the 1970s, the central government created Le port
autonome de Marseilles, with a nicely representative board of directors. All very
autonomous, except that the chief executive was named by the government in
Pariswhich is all the power that matters.
As the Czech government loosened up after 1990, it passed control of this
cooperative back to its members. They got to choose their directors, in contested
elections. But soon power in the Czech Republic, as most everywhere else, passed
from government to business. We went from one way to the other, from
unconstrained collectivism to uncontrolled individuality. And so what Ing. Zydek
referred to as speculative capital found a means to buy into the membership of
some of the regions of the cooperative and take them over: they had this to deal with
instead of communism.
What next for Hotel Zvikov? It was not easy, Ing. Zydek said. With the changes of
the 1990s, the cooperative got rid of many of its hotels and restaurants. Some were
returned to their original owners and others were sold off. (Only Hotel Zvikov and one
other were kept.) The restaurants in particular were just not appropriate for this kind of
ownership, he said. Perhaps these need the quick moving dedication of a single owner.
In food retailing, in contrast, cooperative ownership has worked much better, he felt.
In fact, cooperative ownership of food retailing is very successful in many other
countries too, evenespeciallyin highly capitalistic Switzerland. But that should
come as no surprise: the social sector (in contrast to the political sector of
government and the economic sector of business) is prominent in most parts of the
world, even if it has been ignored in that great and tiresome debate between left and
right. Figures I have seen on membership in American cooperatives, for example, put
it at almost equivalent to half the population, and 70% of American hospitals are
trusts owned by no one, not governments nor private interests. The same is true of
the so-called private universities of America, including the University of Chicago,
where so many of those economists enamored of free enterprise choose to work. If
capitalism is so good for everyone else, how come it has never been good enough for
618 Book reviews / Scand. J. Mgmt. 18 (2002) 611618

these Chicago economists? Do they know something they are not telling usor
perhaps not telling themselves? Namely that markets are too crass and governments
are too crude for many of our most sensitive social services, such as health care and
education. In other words, these services require another way.
Hotel Zvikov was protable, Ing. Zydek said, particularly after he convinced the
board of the cooperative to invest in the renovations, and thereafter was gradually able
to reduce its staff by half. Still, being in a small place and dependent on a particular
tourist site (Zvikov Castle) as well as on whatever conference business it could get,
made things difcult. Perhaps the hotel would have to associate with an international
chain for reservations, etc., Ing. Zydek said. He seemed to understand his business
well, also the general issues of marketing and nancing. Still he wished to avoid what
he called hard capitalism and the associated potential conicts with the staff.
So, is there a third way? Hotel Zvikov remained a component of the third way,
being neither business nor government, as do so many organizations of almost every
countrynumerous indeed, if we count up all the cooperatives and non-owned
organizations of the world. The problems of Hotel Zvikov are not the problems of
ownership so much as those of small hotels in general. (Consider the bankruptcy rate
of small privately owned hotels and restaurants.)
Vaclav Klaus claimed there is no third way. But Vaclav Klaus never had to run a
hotel, let alone a school or a hospital. All he ever ran was a government, and that is a
kind of monopoly. We get only one government at a time, and the market has no
direct way to assess its performance (although the electors do, and did in the case of
ex-Prime Minister Klaus).
The story of Hotel Zvikov is the story of something else: of nuanced shades of
gray, of responding to the pressures of daily life, on the ground, of learning, and of
balance. A society dominated by private property and private ownership is no more
engaging than a society in which the state owns most everything. We need a sense of
balance among organizations that are privately owned, publicly owned, coopera-
tively owned, and owned by no one.
Hotel Zvikov is not the story of staying put within the connes of an economic
dogma learned long ago. In a society that prizes real democracy over democracy
of the proletariat, in a society that puts free people ahead of free enterprises, a
balance among the various ways of organizing is the only way.

Henry Mintzberg, Cleghorn Professor of Management Studies at McGill University,

spent much of the past two years in Prague preparing a book on Developing
Managers, not MBAs, and an electronic pamphlet entitled Getting Past Smith and
Marxytoward a Balanced Society.

Henry Mintzberg
Faculty of Management, McGill University,
1001 Sherborroke West, Montreal, PQ,
Canada H3A 1G5
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