The Crisis of Ethics under the Post-Communist Transition: The Case of Political Economy of Azerbaijan

2003
The Crisis of Ethics under the Post-Communist Transition: The Case of Political Economy of Azerbaijan

Introduction
Since gaining its independence in 1991 Azerbaijan started to implement the market-oriented reform policies. A transition to the new economic-political order has not been smooth and calm, but accompanied by the political cataclysms and military conflicts. Like all transitional countries Azerbaijan also based its reform package to a variable degree on the implications of a mainstream political economy, advocated and proposed by the international financial institutions.
The experience of the post-Soviet Caucasus does not correspond to the expectations of the occidental political economy for several reasons. First, it contradicts the “exchange theory” and the approach to interests as required by the notion of “homo economicus”. In the post-Soviet space political-economic processes are framed by the factors of cultural, ethnic and religious nature, thus dealing more with values. Another factor is that “rational egoism” of post-Soviet individuals, seeking individual interests, is in conflict with the “collective notions” such as group interests, national interests, national goals and priorities, civilizational, socio-cultural and confessional identities (Panarin 2001, Kara-Murza 2002). A huge trade-off between economic efficiency and social justice in these countries can also be seen (Choudhury 1994).
The nations of Caucasus in transition are among the lagging ones, and implications of the mainstream political economy did not work in these countries. As a result we have mainly authoritarian, corrupted political regimes with the underdeveloped institutions of a market economy (World Bank 2002, EBRD 1998, etc).
The problem of the approach by present reformers, inspired by the ideas and credits coming from the West, is of the methodological nature. The matter is that the neo-classical assumptions of bounded economic rationality still remain intrinsic in it while ethics treated as exogenous variable (although considered important by many authors, e.g. Weber, Durkheim, Sen, Rawls, Nozick and others).
This paper will argue that ethics is endogenous in the systems of socio-politico-economic relations and that application of a reform package depends on a priori reframing the ethico-economic relations between polity and market as a result of new knowledge flows. The main ethico-economic problems for transition in the case of Azerbaijan will be highlighted and some hypothetical ways for their solutions based on religion and tradition as main sources of ethics will be defined.

“Protestant Ethics” and Capitalism
“Protestant Ethics” is a term by Max Weber who tried to explain the emergence of capitalism in Europe and role of Protestantism in coming to light of “capitalistic spirit”. Weber opposed Marx in his image of a median Western capitalist giving him some cultural-religious features. Weber could also have nationalistic German objective: prove Germany’s superiority in formation of modern Europe. So main message is that capitalism comes from protestant ascetics and this is not something foreign for capitalism but its basics. Lutheran and Calvinist socio-cultural type cause entrepreneurship since they consider irresponsible consumption and wasting to be sinful and emanating from our natural sinfulness. Since Luther declared the institution of Catholic church incapable to guarantee salvation, it turned out that every one is by himself and should live according to the covenants of Protestant doctrine and work a lot being active in everyday issues to gain salvation and ticket to heaven.
According to Weber that the basis of social wealth is not Marxian “exploitation of proletariat”, but puritan self-abstention by protestant petty bourgeois.
Weber ignores the existence of pre-reformation capitalism based on usurious Diaspora, having no motherland, living mainly in unfriendly surrounding and irresponsibly breaking local population. Russian political scientist Panarin (2001) claims that Protestant capitalism not only contributed to the “nationalization of religion” as well as nationalizing of business estate. Thus Weber wanted to make the “invisible hand” become visible stressing the piousness of enterprise motivation, based not on usury and money-making, but on quest for spiritual salvation. Another goal was to separate German Protestant burgher from Jewish usurer.
The role of speculative usurious and asocial capital is undervalued by Weber, but not by Georg Zimmel who considers quest for money is the only motivation of people and such ethics is the only “natural human” strategy. He explains the conflict between society and newborn class of capitalist by the envy of former to the latter. Capitalists had to survive in such unfriendly environment by monetary operations and financial speculations paying no attention to the social issues. This can be explained by the fact that Zimmel was Jew and came from these groups of discriminated minority, despised by the majority.
According to Moskovichi, Zimmel’s innovation is that he distributes monetary relations to the whole society without any religious or moral constraints (Panarin 2000). Money decide everything and they know better to whom belong.

From Communist to Transitional Ethics
Present crisis of ethics has its roots in the Soviet past. Then the communistic ethics, based on the Marxist theory, dominated. Pre-reform ethics are important because this is ex ante situation to be transformed ex post. A «Communist ethic» is based on Marx’s theory, and has the same epistemological premises as other theories. It is based on equal distribution of wealth according to people’s labor contribution in social production.
One of the explanations of the collapse can be observed in ethical dimension too. In fact, starting from late 60s the local elites and nomenclature started to appear and develop. In fact, a new bourgeois caste emerged and their behavior and lifestyles were far from ideals of classics and constructors of the System. Nomenclature made use of state guarantees and soft budget constraints and was absolutely unaccountable. This situation reached its peak during the Perestroika and set the conditions for the establishment of new business class.
Although Communist was an atheistic ideology it contained strong moral principles and ideas taken from religion: equality, honesty, hard-working, social justice, etc. Party members were under the strong control and censorship and their ethical behavior was being tested all the time. However these ethical constraints started to loosen when development of the new elite within Party was given a momentum.
Collapse of the party censorship set free nomenclature from any civil and moral responsibility. Tops got rid of the “ethic of duty”, bottoms got tempted by the declared permissiveness. Thus we can say that “protestant ethics” could not substitute a communist one.
The fact is that rational “Homo soveticus” searching for optimal way of gaining profits prefers rent seeking to the legal business activity, as the former is easier and faster.
Data shows the worst results for main political and economic indicators of the post-Soviet Muslim nations (The World Bank 2002). In fact, all so-called Muslim nations in transition are among the lagging ones, and implications of the mainstream political economy did not work in these countries. As a result we have mainly centralized political regimes with the underdeveloped institutions of a market economy.
The lack of political and business culture and not appropriate behavior of the main actors are of high importance. This is a Western system based on Western values in some ways alien to local population and moreover not accompanied by appropriate Western institutions.
At the same time these nations are not Muslim enough when it comes to business activity and political decision-making. Let’s have some facts. According to Motika 4% to 6% of the population may be called ”active” believers, which means that they obey the various Islamic regulations of behavior; 87% to 92% do consider themselves as Muslims, but comply with only a (quite often little) part of the religious regulations.

Islamic Political Economy as Alternative to Market Fundamentalism
The principle of ethics endogeneity based on Muslim philosophy is proposed by in Islamic Political Economy could be derived from the following verse of Qur’an: “Verily, Allah does not change a people’s condition until they change what is in their inner selves”. Crane interprets this verse as follows: “political and social panaceas are ideological delusions, because true transformation of the world is possible only on an individual basis” (Crane 2001: p. 2). Thus the classical Islamic idea of a “perfect man” (contrary to the Christian notion of an “original sin” and its effects on the modern occidental social science) is a key to understanding IPE’s approach to socio-economic processes and relations.
As new epistomilogical basis ethics endogeneity was first in the modern social science formulated proposed by Masudul Alam Choudhury - the contemporary pioneer in the field of Islamic Political Economy. Choudhury argues that Islamic socio-economic analysis must be premised on an altogether new epistemology (1992, 1995, 1999, etc).
The theoretical foundation of IPE emanates from the complete replacement of neo-classical idea of substitution and its later variations by the Principle of Universal Complementarity (Choudhury 1994). In IPE there is no conflict and trade-off between economic growth and social justice.
Choudhury defines the polity of the Islamic socio-economic order as Shura, which consists of decision-makers who are experts on specific political, socio-economic and scientific issues as well as Shariah. Decisions are made on the collective basis by voting (complete or partial social consensus).
Three main principles of IPE: 1) Tawhid; 2) the principle of social justice; 3) the principle of entitlement (or property rights). In fact, these economic principles already were implemented in the framework of so-called “Tawhid Economy” in post-revolutinary Iran by Abolhossein Banisadr, economic advisor of ayatollah Khomeini and the first President of IRI.
The principal instruments for IPE: 1) abolition of usury (Riba), 2) institutions of Mudarabah (profit-sharing with cooperation) and Musharakah (equity participation); 3) the institution of wealth tax (Zakat); and 4) elimination of waste (Israf). On top of these other secondary instruments can be built.
This approach differs from that of classical, neoclassical, Marxist, institutionalist and others. The reason for this difference in terminology is that IPE is essentially a study of the endogenous role of ethico-economic relationships between polity and deep ecological system with the market as its grand subsystem. An Islamic market is neither severed from the social and socio-political system, nor is under pressure of institutional policing. The independence of market process is respected but its moral standing is necessitated by IPE (1992).
Thus positive aim of IPE is developing integration through interactions between the Shura and the market system in accordance with the percept of Qur’an and Sunnah – fundamental sources of knowledge. According to Choudhury the power of these sources of knowledge in IPE is based on the belief that human reason must comprehend naturally the inevitability and perpetuation of truth in God’s Oneness in the order of things (Tawhid) – the foundation of Shariah. According to Yezdi (1996) Tawhid is the root of all Islamic ideology and the system of values. God’s Oneness is the cause and effect of the interactively integrated process of the universe and is expressed both in the realm of comprehension and in the order of cognitive reality. As a result, in the epistemology of Tawhid the difference between Kantian a priori and a posteriori does not exist, and the ontological difference between form and reality is also inessential (Choudhury 1993, Kant 1964).
Tawhid is supposed to guide Shura in deriving its knowledge from the premise of Shariah and developing necessary policy prescription on specific issues (Ahkam). The concept of Shura as consultation leading to integration (social consensus) is a universal premise of systems and processes (Choudhury 1995).
Following Choudhury we can define IPE’s methodology, which consists of Qur’an, Sunnah (traditions of the Prophet (saw) (plus Imams (as) for Shiite doctrine), Ijma (consensus through discursions on specific issues) and Ijtehad (interpretation of Qur’an and Sunnah as a result of Ijma on a certain issue). Ijma and Ijtehad are not static but dynamic and consensus is sought as discursions continue. Thus Qur’anic verses and interpretations of the Prophet’s traditions are not dogmatic (if it comes to details) but the main source of knowledge from which new knowledge can be derived. In Qur’an it is said: “He is in work everyday” (55:29) or “The hands of Allah are open” (5:64).

Conclusion and Recommendations
Thus if we accept that ethics is endogenous in the systems of socio-politico-economic relations then it is clear for us that systemic crisis of transition is based on ethical crisis. In sociology these processes are called “reframing” – when old frames are getting substituted by new ones. However, new frame is not in place yet. Moreover, the processes of “wild capitalism as a result of the policies based on “market fundamentalism” let us speak about the negative trends.
Transition is historically unique, and despite the huge data available to compare this process in different countries, diverse initial conditions distort the compatibility. This has created a space for experiments during reforms. However, almost countries have chosen neo-liberalism based policies, proposed by the IMF (Aliyev 2002). As a result there are Western type policies not supported by Western type institutions.
Ethical crisis is obvious and this is a real problem and obstacle for democratization of polity and development of market economy in Azerbaijan. For the solution of any social-economic problem (including the crisis of ethics) we propose simultaneous impact of “three Is”: ideologies, institutions and interests.
Ideology sets the ethico-cultural basis for a new system, institutions cerate the system itself, and interests keep this system developing since actors are interested in it and not in any other system. The combination of “three Is” lead to emergence, strengthening and development of a new ethical paradigm, which, in turn, influences on them.
Islamic ideology could be of help for moral transformation of the post-Soviet Azerbaijani society (Aliyev 2003). However, as already was argues, Islam as a system of values has not become a national ideology and could not fill ideological vacuum, which appeared after the collapse of the Communist ideology. As a result transitional Azerbaijani society could not make use of embedded in Islam moral advantages and avoid ethical problems. The role of clergy in this failure is very significant and should the topic of a special research.
The ideology and institutes are interconnected. According to theory institutes may be good or bad. Among the good institutes are market institutes (markets, competition, free entrepreneurship etc.), institute of the government and efficient control, rule of law, strong municipalities, division of authorities, public control and so forth. Institutionally strong state may resist corruption, and as a result influences formation of the appropriate ethics. Colliding in daily life with right institutions and living under advocacy of the ideology based on universal values and morals, each citizen will be learning how to behave herself and know good things from bad ones.
On the other hand, it is necessary to remember that interests are one of the main incentive motives in lives of people and their communities. In a society the consensus - a certain public contract between all interested groups (political, ethnic, regional, religious and professional) is necessary. Such a consensus can be officilized through the Constitution or any substituting document (Bruszt 2001). A state, in turn, should watch that all parts of the contract observe its regulations, enforcing if needed as well as to protect their rights. Thus, successful symbiosis of a stick with a carrot, when marginal utility of honesty is higher than marginal utility of corruption and improper behavior, is necessary.
Any economic policy besides direct influence has also indirect effect of informational-educational character. Political actions bring certain knowledge flows, which signal about the changes in directions of the policy and what is required from target groups. Implementing consecutive actions in the framework of a certain policy we deal with the field of ideology, institutes and interests. Thus, we train a society and form the appropriate ethical paradigm.







Literature and sources

Bruszt, L. (2001) “Market Making as a State Making: Constitutions and Economic Development in Post-Communist Eastern Europe” Unpublished Paper, Central European University
Choudhury, M. (1994) “The Muslim Republics of the Commonwealth of Independent States: Their Political Economy under Communism, Capitalism and Islam”, International Journal of Social Economics, Vol. 21 Nos. 5/6 1994. MCB University Press.
Choudhury, M (1995) “Islamic Socio-Scientific Order and World-System”, 1995. Secretariat for Islamic Philosophy and Science, Universiti Sains Malaysia, Pinang, Malaysia
Choudhury, M. (1998) “Reforming the Muslim World”, 1998. London, Eng.: Kegan Paul International
Choudhury, M. “The Epistemologies of Ghazzali, Kant and the Alternative: Formalism in Unification of Knowledge Applied to the Concepts of Markets and Sustainability”, in O’Brien, J.C. ed.
Choudhury, M. (1999) “The Structure of Islamic Economics: A Comparative Perspective on Markets, Ethics and Economics” Consumption, Markets and Culture, Vol. 3 No. 1 1999
Choudhury, M. (2002) “Economic Regulations in the Islamic Political Economy”, Journal of King Abdulaziz University: Islamic Economics, Vol. 12, No.1, 2002
Crane, R. (2000) “The Ecumenical Challenge of Transcendent Law: A Traditionalist Perspective” Journal of Transcendent Law 2000
Kant, I. (1964) “Groundwork of the Metaphysic of Morals” (trans. Paton H.J.), Harper Torchbooks, New York
Kara-Murza, S. (2002) “Eurocentrism – Oedipus’ Complex of Intelligentsia” (in Russian), Algorythm Moscow
Mamedova, N. (2001) “Islamic economy and globalization (case of Iran)” (in Russian) in Islam and Politics Moscow, Kraft - RAS
Motika, R. (2001) “Islam in Post-Soviet Azerbaijan” ARCHIVES DE SCIENCES SOCIALES DES RELIGIONS: http://www.ehess.fr/centres/ceifr/assr/Sommaire_115.htm accessed in March 2002
Panarin, A. (2001) “Politology” (in Russian), Prospect, Moscow
Panarin, A. (2000) “Temptation of Globalism” (in Russian) Russian National Foundation, Moscow
Yezdi, M. (1996), “Tawhid in Islamic Ideology and the System of Values” (in Azeri), Al-Hoda, Tehran
WB Report (2002). “Transition. First Ten Years: Analysis and Lessons for Eastern Europe and Former Soviet Union”, Washington D.C.