Continuity and change : institutions and transition in the Russian forest sector

This thesis analyses the relation between institutions and the emergence of markets in the context of the Russian transition since the beginning of the 1990s. Introducing democracy and market economic relations in Russia are goals that require profound changes in the institutional framework inherited from the Soviet Union. Institutions are "rules-in-use" governing interactions in the socio-economic system. Institutions tend to change slowly, either spontaneously in response to changes in the environment in which the system is embedded, or as a result of collective decisions by citizens or their representatives. The topics discussed in this thesis can be framed through the following questions: What is the general role of institutions in the ongoing changes in Russian society? Are there institutions that hamper the transition process towards democracy and a market economy? If so, how do they hamper this process? How can such institutions be changed to better serve the needs of the emerging market system? To what extent must new institutions be substituted for old in order to improve the situation? The studies reported in the thesis address these questions from different but related perspectives. Based on analyses of previous research, official statistical data, and a series of case studies of forest enterprises in eight Russian regions it is shown (in article I) that a specific and, in a market economic perspective, utterly peculiar institutional set-up, the virtual economy, came to govern forest enterprises' behaviour in the early phase of the Russian transition. For reasons having to do with the special resource allocation model of the Soviet command economy a large share of the enterprises that Russia inherited after the disintegration of the Soviet Union was miserably unfit to meet market competition. If forced to meet global market competition many (if not most) of them would have been threatened with bankruptcy. Since there was no institutional infrastructure that could mitigate such massive disruptive events and reallocate resources into new profitable production activities, the consequences would likely have been devastating for the whole Russian society. In this situation, to avoid bankruptcy and stay alive, many enterprises "insulated" themselves from market competition by entering the virtual economy and engaging in non-monetary transactions with other enterprises in a similar predicament. While the first article (I) identifies pertinent characteristics of the institutional set-up defining the virtual economy in the context of the Russian regional forest sector, the second article (II) addresses the issue of how to introduce institutional changes through a collectively chosen design process. Policy exercises were used as a tool for conducting this systemic intervention with the purpose of initiating participatory policy formulating processes in four of the previous case study regions. It was found that, in principle, policy exercises could be an efficient vehicle for a participatory elaboration of policy proposals in Russia. However, in the current political context stakeholders' insufficient trust in public procedures and the weakness of civic organisations hampered a successful participatory Russian forest policy formulation. In the third article (III) one of the previous case study regions (Arkhangelsk Oblast) was revisited and a second round of interviews was made with forest enterprises that took part in the previous study (I). The purpose of the study was to see if the behaviour typical of the virtual economy was giving way to a more market efficient behaviour. The analysis indicated that this was indeed the case, a result that was further corroborated by an analysis of statistical data pertaining to the development in all of Russia. The thesis is based on the assumptions that the process of designing and introducing new or modified institutions to govern actors' behaviour, and to do this in a way that ensures the legitimacy of the resulting policy proposals, is greatly facilitated and improved by the existence of functioning democratic procedures. The last article (IV) discusses the functioning of Russian democracy using a conceptual model for assessing the efficiency of the Russian political market. It is argued that such a model must embrace both the structure and agency characteristics of the political market. To illustrate the approach, a survey was made of recent institutional changes affecting the structure of the Russian political market. The analysis indicated that several reforms introduced in the last few years have improved the structural prerequisites for democracy and more efficiently functioning political market behaviour in Russia. The thesis is believed to contribute to our understanding of the role of institutions in building democracy and market economies in transition countries.<p>Godkänd; 2008; 20080602 (ysko)