State University – Higher School of Economics

Seminar ‘Sociology of Markets’, October 31, 18-15

 

Endre Sik: Network Dependent Path Dependence

 

Abstract

 

In sociology path dependence is "the consequence of small events and chance circumstances (which) determine solutions that, once prevail, lead to a particular path". (North 1990 p. 94). In the literature of transitology the emphasis is on the legacy of communism. My addition to this approach is the following: I assume that communism in general and the mature phase of it in particular was (partly due to structural reasons, partly due to historical coincidence) a network dense society (Sik 1994). Partly since post-communism unavoidably used the brickolage of communist institutions (Stark 1995), partly since networks by definitions are high-inertia institutions the post communist path was cobbled with network-fragments (from the size of pebbles to huge marble pieces). 

 

The network-dependent path of the transformation of the communist economy was further strengthened (the more intensive the traffic on this path is, the more likely the path widens into a highway due to the mutually re-inforcing interests of and consequently of the long-term investments of all actors on the road) by the temporary weakening of alternative institutions (such as the state, the internal market, etc.). But what was really important in strengthening the network dependent nature of the transformation process, there were certain transformation-specific processes, which by their immanent characteristics were network-dependent. Such processes were the privatisation, the restitution, the emergence of the multitude of new entrepreneurships, the appearance of multinational business, the opening of the border and last but not least the increasing risks of various economic actors in the course of “transformation crisis” (such as unemployment and decreasing real wages for the average households, the total collapse of the economic viability for certain ethnic groups and regions, the increasing rate of criminality, etc.).

 

The ultimate question is whether a corruptive country can or cannot leave its path? Can deeply socialised corruption-prone networking pratices abandoned? Economic actors which have vested interests in maintaing corruptive networks encouraged to disclaim these assets? Institutions embedded into a network-intensive culture disembed from it? My tentative answer is no,no,no, and no, respectively. The explanation follows the convincing arguments of Gerschenkron (1962) on institution specific nature of economic backwardness. I assume that just as the state substituted the colonial wealth and the banking system in the process of “original accumulation of capital” in backward economies, the network capital plays the same role in post-communist tranformation. This is the only resource these economies have in plenty consequently they cannot afford to use it. And since it is very unlikely that they ever reach the stage of economic development they could afford to rely less on network capital, and even if it were to happen they could not undo their path dependent network capital and the institutional environment it creates for itself – the network dependent path survives.

 

References

 

Gerschenkron, Alexander (1962): “Economic Backwardness in Historical Perspective”, The Belknap Press of Harvard University Press, Cambridge.

 

North, C. Douglas. (1990): "Institutions, Institutional Change and Economic Performance." Cambridge University Press:Cambridge.

 

Sik Endre (1994) Network Capital in Capitalist, Communist, and Post-communist Societies, International Contributions to Labor Studies, Vol. 4, pp. 73-93.

 

Stark, David. (1995): "Not by design: The Myth of Designer Capitalism in Eastern Europe." In Hausner, Jerzy, Bob Jessop, Klaus Nielsen (eds.) "Strategic Choice and Path-dependency in Post-Socialism," Edward Elgar:Aldershot, pp. 67-83.