The Emergence of Organizations and Markets by Padgett John F. & Powell Walter W

Author:Padgett, John F. & Powell, Walter W. [Padgett, John F.]
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2012-10-14T00:00:00+00:00

Figure 9.5 Soviet dual hierarchy, including Gorbachev’s extension to soviets.

The primary economic side of this dual hierarchy of course was the central-command system, ruled by ministries. Ministries administratively set physical production targets for enterprises and managed the distribution of their products to other enterprises. As discussed in the section on Stalin, this did not work poorly in the heavy-industry and military sectors for which it was primarily intended. But agricultural and light-industry sectors were sucked dry, with shortages there rampant. This resource-extraction explanation does not deny the other problems with central command—information and soft budget constraints159—which also contributed to shortages.

As is well-known,160 the central-command system was not all that there was to the Soviet economy. Informal resource flows emerged around the margins of central command to deal with the shortages and bottlenecks produced by it. Blat was direct reciprocal barter between enterprises, using product inventories that they were not supposed to have had.161 Tolkach were third-party intermediaries who hunted around for supplies in other enterprises, in order to arrange blat. Sometimes tolkach intermediaries were employees or private entrepreneurs, but mostly they were party cadres. Local cadres did that when supplies were geographically close at hand, and provincial cadres did it when these were located farther afield. Most of the day-to-day time of provincial and district party secretaries was spent on the phone trying to arrange supplies for “their” enterprises, which theoretically they already had but actually did not. The hoarding necessary to engage successfully in blat and tolkach exacerbated the shortages that provoked them to begin with. In the dual-hierarchy structure, therefore, Gorbachev’s political need to manage perestroika through the party implied increased dependence of the Soviet economy on “corrupt” blat and tolkach, at least in the short run. New systems always emerge from the chrysalis of old, but in this case that implied building modern economic markets out of family circles.

This analysis makes Gorbachev’s task seem difficult, yet Kádár in Hungary had pulled off the trick. How? The political precondition of Kádár’s Alliance Policy has already been mentioned. This mobilized political and economic networks beyond the hermetically sealed Communist Party without relinquishing party control. But in addition, Kádár did something creative with his communist enterprises, which was analogous to what Deng had done in China with party cadres. Both leaders legalized entrepreneurial activity within the boundaries of communist organizations. Deng’s party-centered approach had been to do this through clientelism: namely, to let party cadres give out permits to other cadres in exchange for kickbacks, mostly corporate but sometimes personal. Kádár’s enterprise-centered approach—first with agricultural co-ops in 1968 and then with industrial enterprises in 1982—was to let employees set up partnerships within state-owned enterprises, to use state assets for private gain after hours and on weekends.162 In both of these organizational innovations, the economic and political interests of multifunctional party cadres and enterprise directors, respectively, were aligned. In both post-reform countries, one got ahead in politics through making money,163 and one made money by being in politics. By aligning interests

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