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 10: Networks and Post-Soviet Culture

Ekaterina Brancato

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


In the transition period most people found themselves in an economic and social vacuum. Both new economic strategies and new social values emerged in the midst of the destruction of the Soviet legacy, the resurrection of the pre-revolutionary legacy and the introduction of Western norms. Different generations and different social strata adapted each in its own way to these changes, which determined the nature of their interaction in economic and social spheres, shaped the system of post-Soviet social networks and ultimately, defined the relationship between markets and hierarchies. MORES IN THE 1990S AND THE 2000S: A DISJOINT SOCIETY Russian society, held together by the informal networks and corruption, faced a shock in the 1990s. The presence of the state and, particularly bureaucracy, in everyday affairs remained overwhelming. The leadership legalized markets but provided no governance, which allowed opportunists and bureaucrats to make easy money. The formula ‘everything is possible’ transformed into ‘everything is permissible’.1 ‘Those with connections now not only have money, but also spend it without shame. And those that have money usually have influence – or the ability to bribe their way out of trouble’ (Jack, 2004, p. 28).2 Many in Russia still view free-for-all freedom, with no rules, as the only alternative to totalitarianism. It would appear that the presumption among Russians about the nature of humankind and about social contract is Hobbesian, not Lockeian. The belief is that the human being by nature is not a social animal, and that society cannot exist except by the...

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