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 7: Social Networks and Cultural Atavism

Ekaterina Brancato

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


WHY NETWORKS PROSPERED OR WHAT CONSTITUTED CULTURAL ATAVISM IN RUSSIA Particular features of the Russian-Soviet culture, such as retrospective and fatalistic attitudes, collectivism, passivity, negligence, disrespect for law and private property were prompted among others by the economic and political circumstances. Uncertainty produced fatalism, high cost of market transactions combined with the arbitrary power produced disrespect for law and negligence. Absolutism produced political passivity, and strong pressure of the totalitarian regime had a positive effect on the growth of personal networks during the Soviet period. There was a particular social dualism present in Russian life before the revolution – the cultural pattern of the peasantry was especially backward (Shanin, 1972, p. 26). The other sectors of Russian society were more progressive both in technological and social organization, but the revolution destroyed that progressive element. Although the Soviet Union created its own intelligentsia,1 it was not an overnight event and values of this group were even more distant from laissez-faire than values of the pre-revolutionary upper classes. The Soviet intelligentsia’s values were undoubtedly corrupted by the survival strategies forced upon them by the regime. The formal regulatory institutions imposed by the Soviet government prescribed honesty, egalitarianism in everyday life and transparency of business relations. These stipulations were inconsistent not only with what economic circumstances demanded but also with centuries of informal practices. Given that the regime apparently could not be toppled, the only plausible outcome was for people to find a way to adapt to the new economic and political circumstances...

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