The role of informal institutions in the transition: how households in Krasnodar, Russia are coping with change

Abstract

The events of 1989-91 began a period of transition in Russia that called for the overthrow of the Soviet model and adoption of a Western-style market system. To provide expertise on the events, policymakers recruited transition consultants sympathetic to the arguments of neoliberalism. This approach is predicated on the idea that instituting appropriate formal rules will be sufficient to create an environment supportive of competitive market development. However, the results of this approach have varied widely as to stabilization, growth, and efficiency. This non-uniform development challenges the neoliberal view of transition because the same formal rules did not produce the same results. A new research agenda has surfaced that is evolutionary-institutional in nature which seeks to resolve the anomaly of variegated performance and contribute to understanding socio-economic change in general. This agenda is founded on the view that changing the formal rules of the game, difficult as this may be, is not sufficient. The informal rules of the game, the customs and norms of the social order, interact with formal rules and are, therefore, critical to the operation of the economy. This study is focused on Russia, whose socio-cultural legacy suggests that informal rules significantly influence behavior and, in fact, may dominate formal rules in the decision-making environment. Therefore, transition analysis must consider Russia's informal institutions in order to render more complete explanations. In fact, the majority of analyses fail to consider these informal dimensions and the evolution of institutions within a socio-cultural context. This study seeks to address this limitation by contributing to the ethnographic information on Russia. Of course, comparative analyses of the nature and effects of informal institutions on the transition process is needed, but before this analysis can proceed careful compilation of data is required. To promote this, a qualitative interview study was conducted in Krasnodar, Russia which focused on the role of informal institutions in the transition. This research is significant as it applies and extends established research in the economics discipline. In addition, it contributes generally to identifying the interaction between formal and informal institutions as part of an ongoing effort at cultural mapping.