Markets Versus Hierarchies

Markets Versus Hierarchies

A Political Economy of Russia from the 10th Century to 2008

The Locke Institute series

Ekaterina Brancato

This unique book uses a transaction cost perspective to illustrate how hierarchies influenced the structure of markets and behaviour of individual businesses and cartels in pre-revolutionary, Soviet and present-day Russia.

Chapter 3: The Dominant Role of the State in Governing Economic and Political Affairs

Ekaterina Brancato

Subjects: economics and finance, political economy, politics and public policy, political economy


Part II of this book examines the rise of vertical networks throughout the pre-revolutionary period, weakness of civic institutions and resulting relative economic backwardness of Russia. The dominant role of the state in the economy, social attitudes within Russia and the peculiar social and economic position of the merchants resulted in hierarchies being more important than market mechanisms in the allocation of resources. The timing of the rise of the Tsarist state and the dominant role it played thereafter in governing economic and political affairs were the two principal reasons why the institutions of civil society never grew out of infancy while hierarchical networks became the ultimately powerful tool in official and informal relations during the pre-revolutionary period. Why did the state become and stay strong and the civil institutions weak? Geographical factors are usually treated as leading candidates to present an explanation. Patterns of migration and exogenous factors, such as invasions and neighbouring cultures, are next.1 However, it is undeniable there is some role of chance that combines all these factors at a crucial point in a people’s history in such a way that a path is set for the future. THE ORIGIN OF THE SLAVIC STATE, THE ROTA AND APPANAGE SYSTEMS IN KIEV RUS’, THE TATAR-MONGOL YOKE AND THE RISE OF THE MUSCOVITE STATE The review of literature leaves many details of this period unclear, but it is not my purpose here to solve the historical debate; it may never be solved. For instance, there is disagreement about...

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