Cultural norms and informal institutions: Blat, the forgotten example from Soviet Russia

As of 2016, all the courses I have taken in development, political or environmental economics presented culture as a brand new, highly innovative and obscure frontier of research. However, nearly every person from a developing or politically and socially turbulent country I’ve discussed with, has pointed to mentality and culture as the source of most of society’s evils. The bulk of economic literature in the above-mentioned fields is nevertheless based on theoretical – and even empirical – models that possibly reach a realistic result while ignoring the underlying dynamics leading from causes to consequences. Yet those dynamics – psychological, sociological, cultural and across all the blurred lines among these – might potentially turn out to be much more relevant in terms of policy implications than the mere action on the more easily observable, direct causes.

For this reason, I would like to spend a few – very simple – words on some instances which highlight the importance of culture and psychology for economic and political outcomes. The first example is drawn from a nearly unknown page of modern economic history, a Soviet informal institution named blat.

What is Blat?

After the Russian Revolution of 1917, a cultural phenomenon known as blat saw its importance rising and its role reshaped as a cross-class response to the shortages provoked by command economy. In other words, a historical and political contingency – the advent of the Soviet Union – caused a pre-existing cultural factor to become crucial to people’s quality of life. It hence became pervasive and persistent in all strata and sides of society, to the point that blat still affects different aspects of Russian economy, although to a lesser degree.

Despite disagreements in the literature regarding its definition, blat can be factually identified as the exchange of information, goods, services and favours between individuals connected to each other through a horizontal personal relationship, usually by exploiting personal access to public resources for private scopes. In the form it assumed during the Soviet period, it involved virtually every aspect of citizens’ lives and did not necessarily imply a bilateral exchange: a granted favour could serve the mere purpose of cultivating personal relationships in the eventual – but not certain – circumstance of a future need.

An example of institutionalization: the tolkachi

As Ledeneva’s most notable study further points out, blat permitted to afford a good quality of life in absence of money – provided a large number of personal contacts –  yet, on the other hand, it was impossible to live out of money, without blat. If the widespread replacement of the word “buy” with the word “obtain” during the Soviet period is already a signal of the pervasiveness of blat, much more can be inferred when, among the items that could be acceded in good time exclusively through blat, we find: food supplies; clothes; health services – or even the degree of effort exerted by the doctor during a visit; medicines and drugs; housing; access to leisure activities; jobs and promotions; holidays; consumer products (especially in the 70s and 80s). Tendencies regarding the object of blat transactions have varied in time, for instance, following demand influences from the Western world as the Soviet Union supplies remained unchanged in time.

Moreover, the relation between blat and the Soviet system has also evolved in the years. If, initially, it was perceived as contrary to the State ideology, by the 50s it had been institutionalized with the introduction of tolkachi. The tolkachi were enterprise employees or third parties that were precisely in charge of entertaining blat-like relationships so to provide firms with the necessary supplies to comply with unreasonable and mostly unattainable output targets. Its figure was eventually fully institutionalized once recognized by the party as the solution to overcome the clear shortage of supplies (despite the apparent paradox brought by the fact that the command economy itself had caused such shortages).

The tolkachi example is indicative of how the entire Soviet system was informed and sustained by blat. It should not, however, look surprising: personal networks, in fact, though in a different form which cannot be exclusively identified as blat, played a predominant role in building institutions; they sustained a command economy that, otherwise, would not have survived its own rules. As Gerald Easter illustrates, just as blat overcame a clear lack-of-supply issue, ‘infrastructural weaknesses of the Postrevolutionary State were eventually overcome by the intersection of informal social structures and formal political organizations‘. Namely, formerly outlaw bolsheviks had created a strong underground network prior to the Revolution, which then allowed the Soviet State to resist the first decade’s absence of effectively centralized territorial administration.

Warning: no, it’s not like corruption. And no, not like black economy either.

Blat should not, however, be confused with other informal practices and institutions, such as corruption or black economy. With respect to the former, both corruption and blat involve the private appropriation of public resources. However, in corruption the two parties are vertically placed, and the aim of the transaction is to “elevate one’s economic status above that of others”, whereas blat involves a horizontal relationship based on personal ties. In the case of bribery, the main difference is the use of money, as blat is considered a particular form of barter. Black economies, on the other hand, are by definition in contrast with laws and operate through markets aimed at producing income; blat was neither considered a crime nor was it openly contrasting with any law, and it aims mainly at maintaining personal ties (the exchange is not necessarily immediately reciprocal, as mentioned above). Therefore, blat and the importance of personal networks in Soviet Union, given their pervasiveness in economic and political institutions and the underlying relationship’s nature, appear to be a potentially cultural factor.

Blat has evolved from being deliberately hidden to be considered an attribute of friendship relationships. Another aspect suggesting blat’s cultural nature is its persistence: as norms initially dictated by specific circumstances enter the broader sphere of culture, they tend to persist in time even when the original premises vanish, driven by the desire for conformity (Ray, 1998). Examples of current blat can be found in daily life instances such as accessing a surgery in good quality clinics, or, referring to labour, finding a job or obtaining promotions. In some cases, blat has been exploited by companies to hire only workers connected to employees by personal ties, so to improve productivity through exposure to reputational risk.

Why should we care?

The economic consequences of blat are ambiguous. In particular, in the ambit of labour markets, or in any instance in which it may be involved in productive activities (e.g. subcontracting), blat could have positive effects on the economy by establishing a natural, reputation-based net of control. On the other hand, it may be argued that blat leads to inefficient resources’ allocation. Nevertheless, resources might equally be held by the individuals valuing them the most, thus giving back to allocation a certain degree of efficiency. Namely, in a context in which blat is pervasive in every social class, the active effort posed in searching and maintaining personal networks can be considered as mirroring willingness to pay (albeit the obvious role played by luck), since blat barter does not involve money exchange. The absence of money also makes blat a potential cushion against shocks in the economy, by enabling agents to smooth consumption and income under any economic circumstance. Therefore, the final impact of blat on economic outcomes in formerly Soviet countries cannot be understood in absence of an empirical analysis. Certainly, however, blat represents a unique instance of how a cultural element can shape individuals’ behaviour and, in turn, institutions’ building and functioning through the course of history..

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