new systemic institutional approach for comparative political and economic analysis

1. new systemic institutional approach for comparative political and economic analysis Svetlana Kirdina Institute of Economics, Russian Academy of Sciences, Moscow URPE at ASSA January 4-6, 2013San Diego, California

2. Outline • Attempts to rethink globalmarket capitalism • Systemic paradigm and institutional analysis in modern economic theory • Systemic and institutional ideas to develop the Marxian approach • Institutional Matrix Theory, or X- and Y-Theory as a new systemic institutional approach for comparative studies • Conclusion URPE, San Diego, USA, January 2013

3. Some attempts to rethink market capitalism: not one but two (by at) types of economies • 1853 – Karl Marx (Germany) about two paths of development: European one (see “Das Kapital”) and “Asiatic mode of production without private ownership of land” • 1939 – Walter Eucken (Germany) about “exchange economies” and “centrally planned economies” • 1953 – Karl Polanyi (Hungary-Austria-Canada) about market (exchange) and redistribution in the economy • 1990-th – Russian scholars Natalia Drozdova, NadezhdaLebedeva and Olga Bessonova with their separate institutional concepts about non-market historical path of Russia’s economy • 2002 – Steven Rosefielde (USA, North Carolina) about market self-regulating category A economies and culture-regulated category B economies URPE, San Diego, USA, January 2013

4. Systemic paradigm in economic theory-1 • The systemic approach deals not just with the individual (mereological) details of an economy but with the social system as a whole, and not just with the economy but also with the political, ideological, and other dimensions. It pays special heed to the interactions between spheres. The most general features of the system paradigm that appear in economic research are described in the well-known study by J. Kornai (1998). URPE, San Diego, USA, January 2013

5. Systemic paradigm in economic theory-2 • Interrelations between the whole and its parts are the primary subject of social systems analysis; • Research focuses on the institutions that define the framework and flows of specific processes. Institutions are understood in a broad sense as structures formed historically and developed “evolutionary”; • There is a close connection in understanding the current social order in economies alongside of the historical process in which it appeared; • Primary attention is paid to major changes and deep transformations, rather than to small and constant changes; • System “dysfunctions” are inherently built into any system, which may be compensated for but not eliminated since their self-reproducibility is deeply rooted in the system itself. URPE, San Diego, USA, January 2013

6. Main research program with institutional approach in comparative studies are • Comparison of Economic Systems (CES), • Comparative Institutional Analysis (CIA), • Ordoliberalism by W. Eucken • Regulation Theory of French School URPE, San Diego, USA, January 2013

7. Methodological principles in the analysis of economic systems • Development of an universal and ideologically neutral language to describe different economic systems; • Definition of economic system as an institutional structure; • Holistic approach focused on the economic system as a whole not on the economic agents’ behavior; • Institutional approach and the construction of the underlying structure of institutions (the morphology, a term by W. Eucken), forming the basement of economic systems; • Comparative and typological analysis, based on the underlying structure of institutions; • Hermeneutic methodology, which results in elaborating “ordoliberal orders” (W. Eucken) or “modes of regulation” (according to Regulation theory) and understanding real-life economic systems as special cases of these orders or modes. URPE, San Diego, USA, January 2013

8. Marxian approach and Institutional Matrix Theory (IMT), or X- and Y-Theory • While Marx investigated in details only one type of society and did not analyze societies with so-called Asiatic mode of production, IMT deals with all kind of societies. • IMT, or X- and Y-theory, rejects Marxian economic determinism in favor of a more open-minded approach to social and political causality and the creation of history. • We follow Marxian historical materialism but admit that thought processes initiate human historical activity and praxis (Cox, 1996). So institutions are objectively (materialistic and historically) determined and also ‘human–made,’ which involves subjective and teleological features. • After Marx, we are regarding society as a structured whole with three main spheres – economy, politics and ideology. Aggregations of interrelated basic economic, political and ideological institutions are defined as institutional matrices. URPE, San Diego, USA, January 2013

9. Main assumptions of Institutional Matrices Theory (or X- and Y- Theory) • Each sphere (economy, politics and ideology) is regulated or guided by a particular set of basic institutions made-in-a-society’s image (i.e. reflexively). • Economic, political and ideological institutions represent the “institutional matrix” of human societies and as such can be studied by political economists, economic sociologists and other scholars. • Two main types of institutional matrices can be identified: the X-matrix and the Y-matrix. URPE, San Diego, USA, January 2013

10. Redistributive economy X Y Federative political order Individualistic ideology Unitary-centralizedpolitical order Communitarianideology Market economy X- and Y-matrices * Redistributive economy with the Center * Market (exchange) mediating economic transactions economy * Centralized political order * Federative political order (top-down model) (bottom-up model) * Communitarian ideology * Individualistic ideology (We over Me) (I over We)

11. Institutions of X- and Y-matrices in theeconomyand their functions URPE, San Diego, USA, January 2013

12. Institutions of X- and Y-matrices in politics and their functions URPE, San Diego, USA, January 2013

13. Institutions of X- and Y-matrices in ideology and their functions URPE, San Diego, USA, January 2013

14. Combinations of X- and Y-matrices Y Y X X Russia, China, India, Europe and Western most Asian, Middle Eastern, Offshoots: the USA, Latin American as well as Canada, Australia, some other countries and New Zealand URPE, San Diego, USA, January 2013

15. Why doX- or Y-matrix institutions prevail? • The material and technological environment of a society is a key determinant for the prevalence of either X- or Y- matrices. • The environment can be a communal, indivisible system, under which the removal of some elements can lead to the disintegration of the entire system, OR • The environment can be non-communal, that is, with opportunities for technological division and possibilities for separate individual usage. • In a communal environment the X-matrix institutions are dominant and the Y-matrix institutions are complementary. In a non-communal environment it is the opposite. URPE, San Diego, USA, January 2013

16. Institutional matrices’ lock-in • The IMT/X&Y-Theory approach accepts two models as suitable for a nation’s characteristics. It contends that attempts to impose an institutional framework (‘lock-in’) on a society that does not have the same institutional parameters will lead to unsuccessful and potentially damaging results; • IMT/X&YT suggests that even if the ‘wrong’ institutional structures are artificially or externally constructed in a nation-state, in the long-run these institutions will fail (or will be superseded by the predominant institutional matrix). “The economies of scope, complementarities, and network externalities of an institutional matrix make institutional changes overwhelmingly incremental and path dependent.” – Douglass North (1993) URPE, San Diego, USA, January 2013

17. Preservation of the leading position of one or the other matrix in the history of nation-states • Historical research shows that the prevalence of one or the other matrices has a steady character. Even if, by virtue of external pressures or under influence of distorted internal reasons, attempts are made to replace one dominant matrix (X- or Y-) with the other subordinant matrix (Y- or X-), such a situation of outright reversal is, as a rule, short-lived (in historical time). For example, attempts at systematic institutional change in Eastern Europe under influence of the USSR or the countries of Latin America under pressure of the USA. URPE, San Diego, USA, January 2013

18. Proportion of GDP produced by countries with a prevailing X- and Y-matrix, 1820-2010 (Maddison Data Base, sample of 34 nations~75% of World GDP) X-matrix countries: China, India, Japan, Brazil and former USSR countries.Y-matrix countries: Western Europe including Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Sweden, Switzerland and United Kingdom, and Western Offshoots including the United States, Canada, Australia, New Zealand. URPE, San Diego, USA, January 2013

19. Conclusion • We do not reject outright “capitalistic (marketization)economic doctrines” but recognize the failure of these doctrines to understand “everything and everywhere” in political-economic life. • We develop a Marxian-based new systemic institutional approach in order to deal with actual situations in a wide range of nations in modern world. • Institutional Matrix Theory, or X- and Y- Theory allows us to distinguish two types of institutional complexes (so called X- and Y-matrices) that interact complementarily within each country. • This theory puts forward some new arguments to explain ‘grassroots resistance’ to the capitalistic marketization in many societies and answers the question “why capitalism triumphs in the West and fails everywhere else” (Soto, 2000). URPE, San Diego, USA, January 2013

20. kirdina@bk.ru www.kirdina.ru Thanks Dr. Gregory Sandstrom (the Social and Political Sciences Department of the European Humanities University, Lithuania) for both his significant comments and careful work editing this translated text and making constructive suggestions in the English language. Thank you for your attention! URPE, San Diego, USA, January 2013