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The Vested Interests and Development in Russia, Brazil, and South Africa

Paper Session

Sunday, Jan. 8, 2017 3:15 PM – 5:15 PM

Swissotel Chicago, St Gallen 2
Hosted By: Association for Evolutionary Economics
  • Chair: Anna Klimina, University of Saskatchewan

Contextualizing Vested Interests in Soviet and Post-Soviet Economic History

Anna Klimina
,
University of Saskatchewan

Abstract

This paper applies Veblen’s concept of vested interests to the analysis of Soviet and post-Soviet history to explain the crucial role vested interests played in thwarting the democratic promise of socialism in post-1930 USSR and preventing the construction of social-democratic market in post-Soviet transition.
In the 1920s, Soviet socialist market economists envisioned the coexistence of multiform and multilevel structures of productive property, intended to prevent any development of vested interests typical of Western capitalism.
Stalin’s 1929 turn to totalitarianism and tyrannical command planning brought back the phenomenon of worker alienation and created conditions favorable to the re-emergence of vested interests, now in the form of a second economy rife with theft of public resources by enterprise directors and corrupt state bureaucrats. These vested interests obstructed all later attempts to democratize the command economy in the USSR.
During neoliberal transition, vested interests substantially increased their economic and political power through corrupt privatization of former state assets. Most became business tycoons who captured almost all non-Baltic states of former USSR and took advantage of neoliberal globalization’s enormous potential for profiteering through tax evasion and money-laundering. Small wonder vested interests have blocked all attempts to construct social-democratic market in post-Soviet space. The failed promise of Russia’s state capitalism serves as case in point.
Vested interests of business can be divested of economic power through instituting participatory democracy in business enterprise, and then establishing adequate citizens’ control over business. Educating and organizing the public to demand effective economic democracy must become the top priority.

The Solidarity Economy: Forgotten Social Innovation or Contemporary Institution to Counter the Power of Vested Interests

Svetlana Kirdina
,
Russian Academy of Sciences

Abstract

In 1997 in Lima, Peru, the term economia solidaria (solidarity economy) was introduced into the international scientific and political discourse as a way to define the type of economic relations that would be found in a non-capitalist mode of production built upon self-help organizations, co-operatives, and the like. The solidarity economy can be considered as a social innovation that “… prioritizes benefits for the many rather than few”. This inquiry considers the introduction and advancement of earlier ideas for self-help, mutual aid, and cooperation as found in selected works of two Russian scholars, namely, Peter Kropotkin (1842-1921) and Alexander Chayanov (1888-1937). Together they introduced understanding of the double value of cooperation and solidarity as anti-capitalistic and also anti-bureaucratic alternatives. In the modern world cooperation and the solidarity economy are considered as the contemporary institution to counter the power of vested interests as well. The attention to ideas of cooperation in economies is permanent but its level fluctuates from time to time. If the potential of predominant economic forms becomes exhausted (economic crises indicate this) and social inequality increases, the Renaissance of cooperation and solidarity ideas comes into being. It is clear that the global economy faces similar issues nowadays.

An Evaluation of Institutional Matrices Theory which was Designed to Illustrate Differences between Russian and Western Political Economies

F. Gregory Hayden
,
University of Nebraska-Lincoln

Abstract

This paper is devoted to the evaluation of institutional matrices theory (IMT), which was designed to illustrate the differences between Russian and Western political economic systems. IMT has no matrix, and it is an ideological declaration rather than a theory. It is a set of assertions and assumptions that are adopted without evidence and then hypostatized to be Russian and Western socioeconomic systems. IMT literature claims to utilize the reciprocity, redistribution, and exchange model of Karl Polanyi (1944 and 1957). However, IMT suffers a number of assumptive and methodological problems in its application; the first being that it completely excludes reciprocity institutions from consideration. The first section of the paper is an explanation of problems with IMT, and the second section demonstrates some particulars of the IMT problems with a real-world social fabric matrix from a Western nation.

Public Policy, Vested Interest, and Common People in Brazil in the 21st Century

Felipe Almeida
,
Federal University of Parana
Ivan Gambus
,
Federal University of Parana

Abstract

This paper offers an institutional approach to the issue of replacement of Brazilian entrepreneurs’ vested interests with common people policies in the Brazilian State agenda in recent years. It also highlights how the replacement relates to the recent political turmoil in Brazil. The main argument of this paper is that the establishment of industrial policy in Brazil during the 20thcentury generated a parental relationship between the State and the Brazilian entrepreneurs in the 21st century. This parental relationship strongly supported entrepreneurs’ vested interests in the Brazilian economy. The Great Depression caused Brazil to understand the fragilities of a coffee agro-export monoculture economy. After 1929, however, Brazilian industrialization was led by the State. During the 20th century, the Brazilian State, looking for a national industry, adopted the import substitution strategy, which promoted agrarian elites to industrial elites. By leading the industrialization process, the Brazilian government generated a paternal relationship with the Brazilian entrepreneurs. Consequently, during a crisis, when their privileges are threatened, entrepreneurs’ primary action involves complaining about the government or attempting to sabotage – practising obstruction, delay, or withdrawal to protect their vested interests. These complaints relate to the lack of, or the possibility of, ceasing governmental actions that sustain their pecuniary gains throughout the crisis. However, in the 2000s, Brazil began to consider policies focused on the common people. Today, two distinct forces host the Brazilian political turmoil: (1) a call for the State that protects vested interests; and (2) support for continuous enforcement of policies for the common people.

Rethinking the Links Between Human Relationships and Economic Efficiency Using the Local Micro Institutions

Camille Baulant
,
University of Angers

Abstract

As in days gone by, today we still observe a concentration of wealth for a few people and unhappiness for most of the other people (Veblen, 1920, Helliwel, Layard, Sachs, 2016). Moreover, extreme poverty has increased in every country world-wide and never before has the gap between the macro level of the country and the micro level of people’s lives been so big. For this reason, this paper presents the new role of “micro institutions” in order to put human development in the center of the actors’ objectives. The paper develops the new paradigm of the happiness economy based on different kinds of approaches in economics, psychology and management. The theoretical part deals with the theories of Stieglitz in “efficient wages” (1984) and the micro institutions (Deaton, 1989) and are actualized by the development about the happiness economy in positive psychology approaches (Kahneman, 2011).<br /><br />
First, the paper defines the concepts of “monetary” (GDP per head in PPP) and “human wealth” (Gallup index) for individuals and countries.<br /><br />
Second, the paper reveres the functioning of the standard economic theory by putting in the human being in the center of the analysis. Following Deaton, Kahneman and Stieglitz, emotion can be powerful enough to build a sustainable and equitable growth and reach a higher economic and social efficiency. <br /><br />
Third, I compare the human wealth and the monetary wealth for two emerging countries with the same standard of life and show the different degrees in happiness feelings in Brazil and in South Africa.
Discussant(s)
David Dequech
,
University of Campinas
JEL Classifications
  • O2 - Development Planning and Policy
  • O5 - Economywide Country Studies