[OPE] Putin and the problem of production

Prime Minister Vladimir Putin has signed off on a program to help the Russian economy battle the global financial crisis as part of a promised shift of focus from the banking sector and stock exchanges to the country's real economic sector. The plan, published Friday, includes placing Central Bank representatives within the management of the country's biggest banks to ensure that state money reaches its intended targets and will see state-controlled corporations investing more rigorously in the economy. (...) Yelena Matrosova, macroeconomic research director at the consulting firm BDO Unicon, praised the call on state corporations to drive domestic demand. "Who else has money?" Matrosova said. "Only them." http://www.themoscowtimes.com/article/600/42/372215.htm

What a situation... If the private sector doesn't invest in job-creating production, the state has to do it, but when the state does it, the capital often doesn't reach the intended target either, so then you need overseers to make sure that it does, and hope for the best. It's a bit reminiscent of the days when the CPSU appointed special snoops at plant level to check and inform the party hierarchy about whether the management was actually doing what it was supposed to do, in line with political policy.

An academic friend in Russia wrote to me once, that he thought that Russian society operates often more like a "clan" society, where the distribution of resources occurs within and between clans, in a way which defies conventional Western economic thinking about business practice, or Marxist class doctrines - how well you succeed in your trading, then depends a lot on your position in the clan, and your relationship with other clans. I am not able to judge presently how valid this sociological insight is, but there may be something in it.

Of course, the normal meaning of a "clan" is a group united by kinship ties or lineage, a sort of tribe or subtribe, but these "clans" are sociologically more simply a group of people collectively in control of a resource that people want (a source of income, products, services, personnel, or assets of some sort), with overlapping but discrete formal and informal interactions. In such an economic model, little remains of "free trade", since the ability to trade at all, is strongly conditional on social ties and power relationships. Obviously this would impact on the very formation of human characters, since in order to make such a system work for you, you need a specific package of social skills and social supports to succeed - simply put, it might be rather irrelevant who technically "owns" something, or exactly what your buying power is, the central issue being of how you can negotiate your way into getting "access" to it.

I''ve often thought that, to the extent that commercial markets disintegrate, that kind of system might in future become predominant in many places (insofar as that isn't the case already), rather than an ancillary or artistic consideration in "ordinary" trading practices. Normally we think of economic exchange as occurring between at least two autonomous trading parties freely choosing if, when and how to trade, cooperating on this basis (conventional price theory presumes this process will naturally happen, and doesn't discuss it any further, beyong ideological rhetorics about market freedom), but in a system such as the clan system, the process is influenced by all sorts of factors which have nothing directly to do with the object of trade itself, and go beyond the immediate interests of the parties directly involved in the trade. There are "insiders" and "outsiders" for practically everything you do, and limiting what you can do - it's all about "what you know about who you know".

Karl Polanyi talked somewhat simplistically about allocative methods and the "social construction of markets" in terms of principles of either reciprocation, or redistribution or market trade, but in this case everything depends on how exactly those kinds of processes are interrelated, and markets per se are no longer an undifferentiated, general category, partly because the existence of a certain magnitude of demand or supply is itself conditional on many non-commercial factors, for the understanding of which formal ownership rights may not be any good guide, since in reality they will not guarantee either an effective supply or demand in themselves. This obviously implies that ultimately only brute force, or the threat of force, can ensure that trade occurs at all - but even brute force may not be able to achieve this, except for those resources which people absolutely need to survive.

Jurriaan

I met a devil woman,
she took my heart away
She said I had it comin' to me,
but I wanted it that way
I think that any love is good lovin'
And so I took what I could get,
She looked at me with big brown eyes
And said
You ain't seen nothin' yet
Baby, you just ain't seen nothin' yet
Here's something that you never gonna forget
Baby, you just ain't seen nothin' yet

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Received on Mon Nov 10 15:02:07 2008