Embedded Politics by McDermott Gerald Andrew;

Author:McDermott, Gerald Andrew;
Language: eng
Format: epub
Publisher: University of Michigan Press

Reappraising the Czech Transformation

I have argued that postcommunist political economies, as in the Czech Republic, are composed of distinct sociopolitical networks that tied together core groups of firms with regional and district councils and state bank branches in different ways under communism. By providing members with a definition of associationalism, a set of political and economic resources, channels of communication, and an authority structure, a network shapes the restructuring strategies firms as well as mediates between state and society. The strict continuity of the past industrial networks, however, is broken, not simply from new economic shocks or incentives, but more so from alterations in the political architecture that buttressed the distinct groups of firms, that is, for the Czechs, the system of territorial-party councils. To identify, then, the factors of continuity and change and, in turn, the conditions for institutional renewal, I have further argued that the interaction between the macropolitics of implanting state designs and the micropolitics of intranet-work struggles over asset control can alter state policy, the formation of institutional rules, and the reorganization of networks in two ways. Because the new rules of governance were defined at the same time that asset value was being created, cooperation between members of former VHJ networks required negotiated solutions. These solutions were more likely to occur when public institutional actors became both financial partners and conflict mediators to the particular network. The specific tasks of the public actors are not necessarily permanent, but represent the initiation of experiments to build public-private institutions that we now take for granted in advanced industrialized nations, such as those facilitating multiparty workouts, risk sharing, and investment into complex assets and start-ups. Moreover, the patterns of intranetwork struggles over asset control shaped the conditions of negotiations and thus the variation in the ways institutional rules were rewritten and resources redistributed.

These arguments were developed incrementally. In chapter 2, I showed that despite its relatively advanced industrial development and communist orthodoxy, communist Czechoslovakia (CSSR) did not resemble the standard view of a communist political economy as a Taylorist mass-production system, in which atomized individuals or firms were vertically commanded by the Party-state through a strict hierarchy. Rather, the CSSR Party-state attempted to maintain control and increase industrial growth by creating and strengthening middle-level institutions, such as industrial associations (VHJs), state bank branches, and regional and district party councils. This policy had two unintended consequences. First, VHJ managers attempted to adapt to the shortage environment by increasing their self-sufficiency and broadening their production scopes. Second, VHJ managers built direct, horizontal channels with state bank branches and party councils. These relationships enabled managers to share political and financial risk and to maintain an authority structure for the governance of their VHJs. The channels spread financial risk by helping VHJs access funds to support their autarky and internal production bargaining without soliciting aid continually from central ministries. They spread political risk by enabling VHJ managers, bank branches, and councils to combine their authority, limit central intervention, and create informal rules for economic coordination and conflict resolution.

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