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5. Meeting: Informal Sector and Informal Practices in Everyday Life The Informal Sector in Russia PowerPoint Presentation
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5. Meeting: Informal Sector and Informal Practices in Everyday Life The Informal Sector in Russia

5. Meeting: Informal Sector and Informal Practices in Everyday Life The Informal Sector in Russia

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5. Meeting: Informal Sector and Informal Practices in Everyday Life The Informal Sector in Russia

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  1. "Sociology of Everyday life. Lifestyles, образ жизни, Theoretical Approaches and Empirical Findings in Russia." • 5. Meeting: • Informal Sector and Informal Practices in Everyday Life • The Informal Sector in Russia

  2. The Informal Sector in Russia • Rosser and al. (2000) show that the size of the informal economy is positively correlated with income inequality • Foley (1997) and Kolev (1998) find evidence of higher wage rates in Russia of secondary jobs compared to wage rates of primary jobs • Kim (2002) emphasizes that in Russia working in the informal sector or having more than one job is a way to get well-paid and to make additional money c.f.: Beuran/Kalugina 2006: Social exclusion and the informal sector: the case of Russia

  3. The Informal Sector in Russia • Even though working in the informal sector presents some disadvantages (higher job insecurity, worse working conditions), informal activities provide individuals with an employment that enables them to fit their needs and increase their well-being • Foley (1997) and Kolev (1998) notice that in Russia individuals participate in informal activities because of the higher incomes available in this sector despite the higher risk • furthermore the informal sector provides more autonomy and flexibility for individual initiative and creativity than the formal sector (De Grazia, 1982; Renooy, 1990) c.f.: Beuran/Kalugina 2006: Social exclusion and the informal sector: the case of Russia

  4. The Informal Sector in Russia • following Goskomstat (2004), shadow economy comprises no more than 25% of the GDP and informal sector employs around 17% of the labor force • officials of the Ministry for Internal Affairs, executive agency responsible for tax enforcement, estimate the size of shadow economy by at least as much as 40% of the GDP • Maslova and Baranenkova (2003) conclude that informal employment amounts to 25 million people, or about 30% of the labor force • Schneider and Enste (2003) state even higher values of 35 million people (42% of labor force) in shadow employment • according to Ryvkina (2001), at least half of Russian population is employed informally • Eliseeva and Schirina (2003) state that in case of St.-Petersburg region, which officially comes very closely to the national average, shadow economy actually exceeds its official counterpart c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: CombiningDisadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh , p.1

  5. Set of survival strategies in the Informal Sector • (1) having another job; • (2) using a dacha or other plot of land to grow food; • (3) working as private taxi driver; • (4) renting out one’s apartment; • (5) business trips abroad (to purchase goods for resale), and • (6) renting out one’s garage (Johnson, Kaufmann, Ustenko 1997:185-6)

  6. The Informal Sector in Russia • worsening of formal employment conditions, reduction in real wages and quasi absence of social security • during the first decade of transformation a lot of households with working age member fall into poverty • "new” phenomenon of "working poor" has become wide-spread • facing negative economic conditions, Russian population has to change its behaviour on the labour market: selfemployment, moonlighting and informal activities have become a reality for many individuals (Kim, 2002) • since 1998 the number of persons working in the IS increased c.f.: Beuran/Kalugina 2006: Social exclusion and the informal sector: the case of Russia

  7. The structure of informal employment in Russia • among all types of informal employment the major input — over 50% — comes from the employees of informal sector • self-employed, multiple job holders and incompliant formal sector employees account respectively for 21, 13, and 15% • c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: CombiningDisadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh, p.6

  8. The structure of informal employment in Russia • age structure of informal employment by gender shows that the highest informal employment rates are observed among younger age groups c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: Combining Disadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh, p.7

  9. The structure of informal employment in Russia • Informal employment on average provides lower wage rates as well as lower monthly wage amounts c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: Combining Disadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh, p.8

  10. The structure of informal employment in Russia • the prevalence of formal employment — 90% — is observed in the organizations owned by different levels of government • 50% of the employees of private sector are employed on informal basis • 10% of municipal and 8% of federal and regional employees work informally c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: Combining Disadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh, p.9

  11. "Sociology of Everyday life. Lifestyles, образ жизни, Theoretical Approaches and Empirical Findings in Russia." • 6. Meeting: • The Meaning of Blat in the Soviet and Post-Soviet Period • Informal Networks in Russia

  12. The Informal Sector in Russia • Rosser and al. (2000) show that the size of the informal economy is positively correlated with income inequality • Foley (1997) and Kolev (1998) find evidence of higher wage rates in Russia of secondary jobs compared to wage rates of primary jobs • Kim (2002) emphasizes that in Russia working in the informal sector or having more than one job is a way to get well-paid and to make additional money c.f.: Beuran/Kalugina 2006: Social exclusion and the informal sector: the case of Russia

  13. The Informal Sector in Russia • Even though working in the informal sector presents some disadvantages (higher job insecurity, worse working conditions), informal activities provide individuals with an employment that enables them to fit their needs and increase their well-being • Foley (1997) and Kolev (1998) notice that in Russia individuals participate in informal activities because of the higher incomes available in this sector despite the higher risk • furthermore the informal sector provides more autonomy and flexibility for individual initiative and creativity than the formal sector (De Grazia, 1982; Renooy, 1990) c.f.: Beuran/Kalugina 2006: Social exclusion and the informal sector: the case of Russia

  14. The Informal Sector in Russia • following Goskomstat (2004), shadow economy comprises no more than 25% of the GDP and informal sector employs around 17% of the labor force • officials of the Ministry for Internal Affairs, executive agency responsible for tax enforcement, estimate the size of shadow economy by at least as much as 40% of the GDP • Maslova and Baranenkova (2003) conclude that informal employment amounts to 25 million people, or about 30% of the labor force • Schneider and Enste (2003) state even higher values of 35 million people (42% of labor force) in shadow employment • according to Ryvkina (2001), at least half of Russian population is employed informally • Eliseeva and Schirina (2003) state that in case of St.-Petersburg region, which officially comes very closely to the national average, shadow economy actually exceeds its official counterpart c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: CombiningDisadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh , p.1

  15. Set of survival strategies in the Informal Sector • (1) having another job; • (2) using a dacha or other plot of land to grow food; • (3) working as private taxi driver; • (4) renting out one’s apartment; • (5) business trips abroad (to purchase goods for resale), and • (6) renting out one’s garage (Johnson, Kaufmann, Ustenko 1997:185-6)

  16. The Informal Sector in Russia • worsening of formal employment conditions, reduction in real wages and quasi absence of social security • during the first decade of transformation a lot of households with working age member fall into poverty • "new” phenomenon of "working poor" has become wide-spread • facing negative economic conditions, Russian population has to change its behaviour on the labour market: selfemployment, moonlighting and informal activities have become a reality for many individuals (Kim, 2002) • since 1998 the number of persons working in the IS increased c.f.: Beuran/Kalugina 2006: Social exclusion and the informal sector: the case of Russia

  17. The structure of informal employment in Russia • among all types of informal employment the major input — over 50% — comes from the employees of informal sector • self-employed, multiple job holders and incompliant formal sector employees account respectively for 21, 13, and 15% • c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: CombiningDisadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh, p.6

  18. The structure of informal employment in Russia • age structure of informal employment by gender shows that the highest informal employment rates are observed among younger age groups c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: Combining Disadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh, p.7

  19. The structure of informal employment in Russia • Informal employment on average provides lower wage rates as well as lower monthly wage amounts c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: Combining Disadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh, p.8

  20. The structure of informal employment in Russia • the prevalence of formal employment — 90% — is observed in the organizations owned by different levels of government • 50% of the employees of private sector are employed on informal basis • 10% of municipal and 8% of federal and regional employees work informally c.f. Merkuryeva, Irina (2006): Informal Employment in Russia: Combining Disadvantages and Opportunities, Discussion Paper, CENTRE FOR ECONOMIC REFORM AND TRANSFORMATION, School of Management and Languages, Heriot-Watt University, Edinburgh, p.9

  21. Infomal Sector does not automatically mean Informal Practices!!!

  22. Informal Practices an Activities • formal institutions of the state socialism broke down relatively quickly • informal structures, practices and relation patterns are resources that the actors in the transformative process can make use of • How do these inherited informal structures and relation pattern influence the transformation process?

  23. Types of ‘hidden’ (unmeasured, untaxed and/or unregulated) activities • informal activities, which are undertaken ‘to meet basic needs’; • underground activities, which are deliberately concealed from public authorities to avoid either the payment of taxes or compliance with certain regulations; • iIllegal activities, which generate goods and services forbidden by the law or which are unlawful when carried out by unauthorised producers; and • household activities, which produce goods and services for own consumption and are outside the SNA production boundary c.f. System of National Accounts (SNA, 1993)

  24. What are “informal practices”? • people’s regular strategies to manipulate or exploit formal rules by enforcing informal norms and personal obligations in formal contexts • reflect changes in the balance between constraining and enabling qualities of the structure • functions move away from compensating for rigid constraints toward the active exploitation of weaknesses in the new systems • it does not mean that informal practices are simply responses to political and economic constraints; they are also shaped by historical and cultural factors (c.f. Ledeneva 2008:119) c.f. Ledeneva, Alena (2008): Blat and Guanxi: Informal Practices in Russia and China, Comparative Studies in Society and History;50(1):118–144

  25. Grossman’s five types of activities in the illegal second economy • Stealing from the state, which involved stealing anything from enterprise light bulbs and toilet rolls to output produced, was widespread. • Speculation • Illicit production • Underground enterprises or formal enterprises that were simultaneously involved in anything from small-scale ‘plan manipulation’ to large-scale illegal production • Corruption c.f. Grossman (1982:249)

  26. Grossman’s three types of corruption • the daily ‘petty bribing’ of Soviet authorities, and particularly of law enforcement officials • the tradition of prinosheniye, nowadayspodnosheniye, which involved the regular bringing of valuable gifts to one’s supervisors; and the purchase of lucrative official positions (Grossman 1982:251-2). • blat, or the use of personal influence to obtain favours to which a person or firm was lawfully entitled

  27. Bribery • a form of pecuniarycorruption (monetarycorruption) • an actimplyingmoneyorgiftgiventhat alters the behaviour of the recipient • constitutes a crime • definedbyBlack's Law Dictionaryas the offering, giving, receiving, or soliciting of any item of value to influence the actions of an officialorotherperson in discharge of a publicor legal duty • canbeanymoney, good, right in action, property, preferment, privilege, object of value, advantage, ormerely a promiseorundertaking to induceorinfluence the action, vote, orinfluence of a person in an officialorpubliccapacity

  28. Typology of Corrupt Acts • Level I: Everyday Interaction between Officials and Citizens • Bribery of public officials to bend rules • Obfuscation and over-regulation by officials • Misuse of licensing and inspection powers by officials • Level II: Interaction with Public Institutions • Self-serving use of public funds (bonuses and hidden salaries; overspending on luxury cars, travel, receptions, equipment; appropriating cars, apartments, dachas) • Profiteering from public resources (selling off environmental assets, leasing offices and equipment for personal gain; • using public employees for private work; quasi-privatization of state-owned enterprises and property) • 3. Malpractice and profiteering from privatization and public procurement (steering business and assets to self and • cronies; disregarding conflicts of interest; breaking rules of competitive bidding) • 4. Influence peddling, manipulation of personnel decisions (engaging in nepotism, clientelism, favoritism; • sabotaging personnel reform to preserve turf) • Level III: Influence over Political Institutions • “State Capture” (building of personal fiefdoms; exploiting public institutions for enrichment of self and network) • Forming secret power networks to collude in corrupt acts • Undermining elections and political competition (e.g. illicit campaign and party financing) • Misuse of legislative power (“selling” laws to private interest, blocking anti-corruption legislation) • Corruption of the judicial process (“selling” court decision, false and /or lack of prosecution) • Misuse of audits and investigatory powers • Using kompromat for political blackmails • Corruption in and of the media Karklins, Rasma (2005): The System Made Me Do It. Corruption in Post-Communist Societies, Armonk & London: M.E.Sharpe, p. 25

  29. Is Post-Communism more Corrupt? The Regime-Oriented Answer • Jakob Van Klaveren tried to distinguish between different forms of constitutional regimes in terms of their corruptibility • In Klaveren’s analysis there are two preconditions for corruption: first, an administration that allows its officials a wide margin of autonomy; and second, a moral code that does not impose any standard of probity on state functionaries (e.g. oligarchic republics) • By contrast, the triumph of democracy was expected to put an end to the schemes of corrupt officials • official discourse of communist governments also argued that corruption was embedded in capitalism but alien to socialism, but regime-oriented explanations seem false • The argument that communism by its nature is less corrupt than the post-communist regimes is a theoretical speculation c.f. Krastev, Ivan (2007): The Corruption Paradox. Why Post-Communism Is/Looks More Corrupt Than Communism, in: http://www.colbud.hu/honesty-trust/krastev/pub02.doc

  30. Is Post-Communism more Corrupt? The Regime-Oriented Answer • the argument was that being more repressive and stronger in enforcement, the authoritarian state is less inclined to be corrupt than democracies, which tend to be weak and liberal, is self-defeating • this argument already lost its popularity in the 1960s by two major considerations: • the communist system was rife with regulations and permissions; public officials had great margins for discretion: the ideal preconditions for corruption • In the late 1980s, governments and publics both perceived communism as corrupt; in the late 1980s, communism was far from a model of perfect authoritarianism, and the price of corruption was much lower than in the 1950s c.f. Krastev, Ivan (2007): The Corruption Paradox. Why Post-Communism Is/Looks More Corrupt Than Communism, in: http://www.colbud.hu/honesty-trust/krastev/pub02.doc

  31. Is Post-Communism more Corrupt?The Institution-Oriented Answer • following Baker’s “ Crime and Punishment” this school seeks to explain the “corruption paradox” in three major directions • weak state institutions combined with high uncertainty and a low standard of living create conditions in which taking bribes becomes a rational choice preference • privatization and the more general process of large-scale redistribution of public wealth create greater incentives for corruption, and are thus the major explanation for the “corruption choice” of many businessmen • communist-era corruption is more efficient than the post-communist corruption c.f. Krastev, Ivan (2007): The Corruption Paradox. Why Post-Communism Is/Looks More Corrupt Than Communism, in: http://www.colbud.hu/honesty-trust/krastev/pub02.doc

  32. Is Post-Communism more Corrupt? The Virtual Answer • in the communist period, corruption was swept under the carpet and the public was unaware of its scope • today, corruption has captured the imagination of the media and the overproduction of corruption stories has shaped public opinion, producing the feeling of the overwhelming presence of corruption in public life • the lack of freedom of the press in the communist period both suppressed and fueled the circulation of corruption stories c.f. Krastev, Ivan (2007): The Corruption Paradox. Why Post-Communism Is/Looks More Corrupt Than Communism, in: http://www.colbud.hu/honesty-trust/krastev/pub02.doc

  33. Is Post-Communism more Corrupt? The Social Capital Answer • understanding “blat” as social capital • blat was widespread in socialist period; the dominant form of corruption in the communist period • blat was an exchange of favors: even if gifts and money were sometimes part of blat relations, the driving force of the transaction was the exchange of favors, and not a bribe • Blat was totally conditioned by the existence of the economy of shortage c.f. Krastev, Ivan (2007): The Corruption Paradox. Why Post-Communism Is/Looks More Corrupt Than Communism, in: http://www.colbud.hu/honesty-trust/krastev/pub02.doc

  34. Personal Networking in Russian Post Soviet Life • Blat emerged in the early socialist state and is still highly relevant today • Blat was first observed by Sovietologists in 1950s (Crankshaw 1956, Berliner 1957) • a comprehensive sociological study (Ledeneva 1998) was undertaken in the middle of the 1990s • recent publications on Russian managerial culture have continued research into blat. c.f. Butler, B. & Purchase, S. (2004). Personal Networking in Russian Post Soviet Life, Research and Practice in Human Resource Management, 12(1), 34-60

  35. Definition and Origin of the Word Blat • There is no unified, agreed meaning of blat and the term cannot easily be translated into English (Michailova & Worm 2003) • for most Russians, however, it is an obvious word which does not need definition • blatfor Joseph Berliner (1957: 182), “...the term blat is one of the many flavoured words which are so intimate a part of a particular culture that they can be only awkwardly rendered in the language of another...” • There are working definitions of blat: • Blat is an exchange of ‘favours of access’ in conditions of shortages and a state system of privileges; ‘favours of access’ are provided at the public expense (Ledeneva 1998). • Blat exchange is often mediated and covered by the rhetoric of friendship or acquaintance: sharing, helping out, and friendly support, mutual care. Intertwined with personal networks blat provided access to public resources through personal channels (Ledeneva 1998). • Blat involves a “reliance for favours upon personal contacts with people in influential positions” (Kryshtanovskaia 1994: 9).

  36. previous research of blat derives from three main areas: • Sociology where blat was studied in a social context as an instrument of satisfying basic needs of common people in everyday life (Ledeneva 1998, Ledeneva, Lovell & Rogachevskii 2000). • Business ethics where blat was briefly mentioned as a peculiarity of the Russian business class (Blackwell 1991, Stojanov 1992, Puffer et al. 1997, Hendley et al. 2000, Hunter 2003). • Cross cultural analyses of Russian and Western managers that pointed out the different attitudes towards blat by Western and Russian managers (Puffer 1994, Puffer & McCarthy 1995). c.f. Butler, B. & Purchase, S. (2004). Personal Networking in Russian Post Soviet Life, Research and Practice in Human Resource Management, 12(1), 34-60

  37. Blat has two main meanings 1. refers to personal networking • the term blat came to Russia from the Polish blat, meaning ‘someone who provides an umbrella, a cover’ • this in turn is taken from Yiddish blat which means ‘close, familiar’, ‘one of us’, ‘one of our circle’. • This meaning of blat contributes to its human face: people give special treatment and help to those of their circle, but often this help is provided to meet the expenses of those who are out of their circle • alludes to insignificant criminal activity, such as minor theft • (criminal) meaning that explains the fact that most people either pretend to have nothing to do with blat or refer to it in other words • ‘I obtained it by blat’ one could say ‘I received it from an acquaintance’ • In a business context it is acceptable to say ‘I solved this problem using my connections’ rather than to say ‘I used blat’ c.f. Butler, B. & Purchase, S. (2004). Personal Networking in Russian Post Soviet Life, Research and Practice in Human Resource Management, 12(1), 34-60

  38. The Concept of Blat (Alena Ledeneva) • Ledeneva defines blat “as an exchange of ‘favours of access’ to public resources in conditions of shortages and a state system of privileges” (Ledeneva, 1998:37) • blat is the use of personal networks and informal contacts to obtain goods and services in short supply and to skirt formal procedures (Ledeneva 1998: 1) • “blat is a roundabout way of arranging things, circumventing the formal procedure by using personal contacts” (Ledeneva, 1996:26). • Through blatnetworks public resources were redirected to private uses and to the needs of personal consumption • These relations were often disguised by the rhetoric of friendship, such as ‘helping out’ a friend or an acquaintance • Typical of blatwas the misrecognition of the reciprocity of exchanges • blat was omnipresent and uses in all spheres of society to fulfil perceived needs and goods - or in other words: blat was normal

  39. The meaning of blat in the Soviet period • often disguised by the rhetoric of friendship or acquaintance, in terms of “helping out,” “friendly support,” and “mutual care,” (Ledeneva 1998: 37) • continue a tradition of give and take practices in Russia (Lovell, Ledeneva, and Rogatchevsii 2000) • moral obligations imposed by social relationships compel people to break formal rules, which results in the instrumental use of personal networks for achieving goals in other domains, often in a situation of acute need • blat gave people in socialist period access to state resources through personal channels and other redistributive mechanisms of goods and services in short supply c.f. Ledeneva, Alena (2008): Blat and Guanxi: Informal Practices in Russia and China, Comparative Studies in Society and History 2008;50(1):118–144

  40. The meaning of blat in the Soviet period “Blatmeisters” in the Russian context are people: • with certain talents to be successful blat transactors • characters who solve problems and arrange things for others, and are thus called “useful people” (nuzhnye liudi) • “brokers” with many contacts, not necessarily pleasant to everyone but energetic, jolly, and cheerful • were often employed in professions which delivered personal services—doctors, beauticians, or sauna workers—or which gave them special access to goods—shop assistants, or supply and storage employees c.f. Ledeneva, Alena (2008): Blat and Guanxi: Informal Practices in Russia and China, Comparative Studies in Society and History 2008;50(1):118–144

  41. Boren’s (2002) reasons why blat was not effectively counteracted by the Soviet authorities • a) The official economy would not have been able to function without it since it helped in direction the supply of goods and services to where they were demand. • b) Powerful persons were involved in the system and had no incentive to change it. • c) It directed people’s attention away from politics and towards consumption

  42. “The Ethics of Blat… …are the same as the Ethics of Friendship” • obligation to help—help your friends unselfishly and they will come to your aid • Do not expect gratitude but be grateful • Look to the future—long-term reciprocity • Keep within limits—ask within limits • Know the contexts in which the informal friendship code has priority over formal legal codes • Socially ostracize those who follow the letter of law c.f. Ledeneva, Alena (2008): Blat and Guanxi: Informal Practices in Russia and China, Comparative Studies in Society and History 2008;50(1):118–144

  43. Discussion in Sociology • The role of blat in contemporary’s Russia and its disappearance or continuing • The Give Me a Bribe Society • The Relevance of Blat-Relations

  44. The “Give Me a Bribe Society” • disappearance of blat is the key to understanding the post-communist reality • end of the economy of shortage and the emergence of real money changed the rules of the game • major process to be observed in all transition countries is the monetarization of blat relations and the replacement of blat by bribe • for the majority of people, the transition from communism to post-communism was one from a “do me a favor society” to a “give me a bribe society”. • bribery replaced blat as the dominant form of corruption • the major difference between blat and bribery is their respective functions in reproducing the social order • blat was a socially acceptable form of corruption that increased the social equality and the fairness of the communist society • in blat transactions participants understood their corrupt activities as “help” and covered them in the rhetoric of friendship c.f. Krastev, Ivan (2007): The Corruption Paradox. Why Post-Communism Is/Looks More Corrupt Than Communism, in: http://www.colbud.hu/honesty-trust/krastev/pub02.doc

  45. How Bribery Reinforces Inequality The social functions of bribery in post-communist reality differ from the functions of blat: • Bribery causes inflation of the social capital defined as blat • Bribery cannot be covered by the rhetoric of friendship, and this makes people feel morally uncomfortable • Bribery contributes to social stratification, making it easier for the rich to obtain everything they want • Blat transactions took form in the context of solidarity and friendship; bribery takes the form of competition • In a society suffering the rise of social inequality, bribery takes the form of a selective tax (it helps concentrate power in the hands of elites) c.f. Krastev, Ivan (2007): The Corruption Paradox. Why Post-Communism Is/Looks More Corrupt Than Communism, in: http://www.colbud.hu/honesty-trust/krastev/pub02.doc

  46. Blat as a Personal Network in Former Command Economy • One of the key meanings of blat iscommunication within one’s circle, or one’s personal network • according to Michailova and Worm (2003) the three main features of personal networking are: • Social resourcing • Continuity of relationship • Coexistence of trust and cooperation on the one hand and power and domination on the other. Butler, B. & Purchase, S. (2004). Personal Networking in Russian Post Soviet Life, Research and Practice in Human Resource Management, 12(1), 34-60

  47. Social Resourcing • As blat exists not only within one’s own network, but also between blat network members, the phenomenon has become termed ‘set blatnyih’ • Within ‘set blatnyih’, the members are involved in both double and multisided relationships ‘social resourcing’ or the ability to access various types of resources through one’s social connections • following example: Exchange is often facilitated by participants outside the double-sided relationship. Hence, obligations might stretch to people whom one does not know directly or will never meet. In such a network persons A, B and C have mutual commitments of exchanging favours. In spite of this, only A and B as well as B and C are involved in double-side relations. Thus, even without knowing each other, A and C are mutually committed through their involvement with B Butler, B. & Purchase, S. (2004). Personal Networking in Russian Post Soviet Life, Research and Practice in Human Resource Management, 12(1), 34-60

  48. Continuity of Relationships • Russians like to develop close long-term personal relationships which are a prerequisite for the existence of blat (Sedov 2004, Vandysheva & Gamov 2004) • Close long-term personal relationships are used to protect individual and group interests for personal gain,e.g. people maintain contacts with their school and university friends, with friends from military service, with former neighboursand others who can be trusted • People often support each other and grow together personally and professionally (Ryzhova 2004, Tchumanova 2004) Butler, B. & Purchase, S. (2004). Personal Networking in Russian Post Soviet Life, Research and Practice in Human Resource Management, 12(1), 34-60

  49. Continuity of Relationships • long-term personal relationships of former Komsomol (Young Communist League in the former Soviet Union) officials help them to survive and succeed in business and in maintaining opportunities to acquire greater wealth for people of their circle • When interviewed on 23 February 2004, one of our respondents in Russia indicated, most of the current ‘new Russians’ – wealthy Russian businessmen – are former Komsomol officials • Their ability to ‘go through’ various issues in business can often be explained not only by their excellent self-discipline and organisational skills gained in the Komsomol, but to a large extent by having everywhere a circle of former colleagues and acquaintances • They still have better access to government funds and permissions, bank loans, and resources