Association for Studies in Public Economics

ANTI-MODERN AND MODERN EFFECTS OF SOCIAL CAPITAL

Professor RICHARD ROSE FBA

Director, Centre for the Study of Public Policy

U. of Strathclyde, Glasgow

email: prof_r_rose@yahoo.co.uk

GRADUATE SCHOOL OF MANAGEMENT

ST. PETERSBURG UNIVERSITY

11 November 2011

1

2

MODERN AND ANTI-MODERN ACTIVITIES COMPARED

Modern Anti-modern

Rule of law Yes, bureaucratic Arbitrary, political

Openness Transparent Opaque

Signals Prices, laws False accounts, bribes, personal contacts

Cause and effect Predictable Uncertain

Output Efficient Inefficient

3

SOCIAL CAPITAL DEFINED

Networks that produce goods and services in a society.

♦Networks are relational (James Coleman, Granovetter)

♦Networks can be informal, personal between individuals

♦Networks can be formal, organisational, bureaucratic

♦Can combine informal links within and between formal organisations

4

SOCIAL CAPITAL IS NOT

♦Attitudes of trust. Trust is a by product of interaction in social networks. So is distrust. Contra Putnam, interpersonal trust does not readily spill over into trust in formal organizations or political institutions.

♦Formal organisations. Significant--but only as one partner in a network

e.g. Between individual and government agency

e.g. Between public and private organisations providing financial services

♦BUT social capital networks are based on expectations and reputations of how others in a network will react

5

DIFFERENT USES OF SOCIAL CAPITAL

♦Exchanges can involve cash payments (bribe) or non-pecuniary forms of blat.

♦Outputs produced are observable, e.g. health care, University admission

♦National income accounts can include outputs from modern social capital networks but exclude outputs form anti-modern networks.

6DIFFERENT FORMS AND USES OF SOCIAL CAPITAL

Positive

MODERN ORGANIZATIONS WORK

Public sector allocates by law

Police will help protect house from burglary 43%

Social security office will pay entitlement if you claim 35%

Market allocates to paying customers

Buy a flat if it is needed 30%

Can borrow a week's wage from bank 16%

INFORMAL ALTERNATIVES

Non‑monetized production

Growing food 81%

Can borrow a week's wage from a friend 66%

PERSONALIZE

Beg or cajole officials controlling allocation

Keep demanding action at social security office to get paid 32%

Beg officials to admit person to hospital 22%

ANTI‑MODERN

Re‑allocate in contravention of the rules

Use connections to get a subsidized flat 24%

Pay cash toa doctor on the side 23%

PASSIVE, SOCIALLY EXCLUDED

Nothing I can do to:

Get into hospital quickly 16%

Gets pension paid on time (pensioners only) 24%

7

NETWORKING STRATEGIES IN DEALING WITH PUBLIC SERVICES

Q. What would you do if you had difficulty in getting a public service?

Bureaucratic: Write a letter of complaint, push officials to act

Market: Buy in the private sector

Anti-modern: Offer a bribe, use connections, make up a story

8

MODERN AND ANTI-MODERN WAYS TO GET HEALTH CARE

Getting treatment for a painful disease when hospital says one must wait for months

Strategy

Anti-modernconnections

Personal Market Passive

Russia 57 13 11 19

Ukraine 39 12 34 15

Czech Republic 24 31 31 14

Sources: Russia Social Capital Survey. New Europe Barometer Survey V.

9

SOCIAL CAPITAL AFFECTS INDIVIDUALS:

♦COPING with costs of system failure, transformation

e.g. growing food at dacha

♦SUPPLEMENT to goods and services obtained in official economy.

♦COST: Buying nominally free services

Effort, anxiety from storming, unpredictability of bureaucratic services

♦DETERIORATION in human capital from inefficiencies in health, education

10

MACRO EFFECTS OF ANTI-MODERN SOCIAL CAPITAL

♦INEFFICIENCY Raises transaction costs

♦ENCOURAGES PROFITS FROM TRADING (especially off the books)

♦DISCOURAGES FIXED DOMESTIC INVESTMENT

11

POTENTIAL RISKS OF ANTI-MODERN SOCIAL CAPITAL

♦EQUILIBRIUM TRAP. Persistence of current conditions

.Loss of potential output through inefficiency, under-investment

.Reduction in potential human capital

♦NEGATIVE DISEQUILIBRIA

.Oil prices and revenue fall below equilibrium point

.Social and political protests against unfairness,

inefficiencies, corruption

12

By Richard Rose

Understanding Post-Communist Transformation: A Bottom Up Approach. London: Routledge, paperback, 2009.

"Social Shocks, Social Confidence and Health". In Judyth Twigg and Kate Schecter, eds., Social Capital and Social Cohesion in Post-Soviet Russia. Armonk, NY: M.E. Sharpe, 2003, 98-117.

"Uses of Social Capital in Russia: Modern, Pre-Modern, and Anti-Modern", Post-Soviet Affairs, 16,1, 2000, 33-57.

"How Much Does Social Capital Add to Individual Health? A Survey Study of Russians", Social Science and Medicine, 51, 9, 2000, 1421-35.

"Getting Things Done in an Anti-Modern Society: Social Capital Networks in Russia". In Partha Dasgupta and Ismail Serageldin, eds., Social Capital: A Multifaceted Perspective. Washington, DC: The World Bank, 1999, 147-171.

plus

James S. Coleman 1990. Foundations of Social Theory. Cambridge, MA: Harvard University Press.