Introduction
As spelled out in the preface, the overriding objective of the present book is to shed new empirical and theoretical light on the nature and most salient features of the emerging post-communist capitalism in Central and Eastern Europe (CEE) against the broader backdrop of Western-type models of capitalism co-existing in the European Union, with a view to better understand the peculiarities of institutional development in the CEE economies. In our approach, we subscribe to the research tradition dubbed âcomparative capitalismâ or âcomparative political economyâ. In particular, in terms of its conceptual and methodological framework, the book draws considerably from two major contributions to the field: the trailblazing works on the diversity of contemporary capitalism in the Western Hemisphere by Bruno Amable (2003) and â to a lesser extent â Peter Hall and David Soskice (2001), respectively. Simultaneously, as the studies on comparative capitalism represent a broad, multidisciplinary perspective and are deeply rooted in the major currents of social sciences, in more general terms we also refer to most relevant theories in this scholarly area.
As a starting premise in our research, we discard the presumption regarding the incomparability of developed capitalist political economies in Western Europe and post-communist capitalism emerging in Central and Eastern Europe â a presumption which was popular in the early 1990s. Instead, we will argue that notwithstanding substantial dissimilarities in the institutional endowment between the former and the latter, the standard analytical frameworks developed in the West can be applied â though with some important extensions and amendments â to former socialist countries in Central and Eastern Europe, even more so with the fast economic and institutional catching-up process underway in CEE countries. At the same time, we will endeavor to highlight the most salient peculiarities of the evolving capitalism in the CEE region as a new research category. These peculiarities provide a strong premise for singling out a new, distinct type of European capitalism and justify the term âpatchwork capitalismâ1 as the most adequate descriptor in our view of the essence of post-communist political economies that have evolved in Central and Eastern Europe since the outset of systemic transformation.
The specificity of the rebirth process of capitalism in the countries of Central and Eastern Europe and the multiplicity of institutional orders co-existing in the European Union requires conducting both economic analyses constituting the core reference framework of our research (new institutional economics) and sociological, anthropological and cultural studies (new economic sociology and related disciplines). Economic sociology can be roughly divided into the sociology of rational choice (James Coleman, Gary Becker) and humanistic-oriented sociology (Mark Granovetter). In our research, we will capitalize mostly on the latter trend, with sociological concepts playing (generally) a significant yet auxiliary role.
In essence, the study of comparative capitalism constitutes an important thread in a broad and heterogeneous research stream in contemporary social sciences. The key idea underlying the comparative capitalism approach is that different capitalist countries can survive and thrive with somewhat different sets of social arrangements or institutions aimed at coordinating production in particular and decisions made by social, economic and political agents in general. It highlights the co-existence of various models of capitalism or diverse forms of institutional architecture in particular countries or their groups. However, it should be emphasized that the institutional divergence or diversity of capitalism approach has faced opposition from the âconvergence schoolâ, typical for the orthodox economic theory, which assumes the existence of one optimal pattern of institutional arrangements for a given historical period. At different times such convergence benchmarks were believed to be the institutional systems of the United States, Japan or Germany. Currently in the EU, the German institutional order serves as a reference model for the policymaking by the European Commission, which seems to be a challenge for the study of the multiplicity of capitalism (Johnston and Regan, 2018).
The research perspective emphasizing the diversity of capitalism has gained increasing popularity in social sciences in the last 50 years, especially since the (re)emergence of new institutional economics (NIE) in the United States (North, Williamson, Coase)2 and new economic sociology (NES) and related disciplines of social sciences (Swedberg and Granovetter, 1992). NIE draws substantially from the scholarship of game theory and rational choice theory as well as cognitive psychology, while contemporary sociological sciences derive their inspiration from diverse sources that include the legacy of classical sociology: Durkheimâs theory (he defined sociology as the science of institutions), Max Weberâs Wirtschaftssoziologie tradition, the embeddedness idea of Karl Polanyi and the current lines of research such as interpretative sociology and constructivism developed by Berger and Luckman. The basic methodological premise of new institutionalists is that âinstitutions matterâ as a key explanatory variable of socio-economic development and human behavior in a society. Over time this assumption has proliferated and started to become widely accepted and incorporated into the research agenda of a growing number of social science disciplines, including in particular economic sociology, political sciences, social psychology, organizational theory, management science, public choice theory, international relations, law and economics and cultural anthropology (Jasiecki, 2013).
The difference between old institutionalism (OI) and new institutionalism (NI) can be described as follows. The former is represented primarily by the American economic institutionalism of the late 19th and early 20th centuries, but the interest in institutionalism also arose in other disciplines of social sciences: âtherefore, old and new institutionalism are different orientations and appearing in social sciences for the good 120 years. As part of almost every discipline (e.g. economics, political science or sociology), different variants of OI and NI can be distinguishedâ (Chmielewski, 2011). OI corresponds to the classical phase in the development of economic sociology (Marx, Durkheim, Weber, Sombart). Despite the differences regarding the role of individuals and institutions, the OI concepts emphasized the dependence of social activities on principles, norms, traditions, and institutional and cultural structure. Compared with neoclassical economics, the importance of intentional actions in the name of pursuing individual interests decreased while the interest in institutional and cultural factors increased. A separate mention should be devoted to Max Weber, whose oeuvre enjoyed a special status in this current and who developed his own concept of historical factors as well as his own version of âmethodological individualismâ (for a more comprehensive discussion, see Section 1.2).
In the first half of the 20th century, institutionalism almost completely vanished from the social sciences (the only exception being sociology) and was replaced by a non-institutional behavioral paradigm. The new paradigm was in essence reductionist (as it demanded to perceive social phenomena as outcomes of individual social activities, and only to a lesser extent as a result of institutional and cultural influences); utilitarian (postulating the interpretation of human actions as an effect of focusing on individual benefits rather than social obligations); instrumentalist (putting emphasis on the allocation of resources in the name of interest, ignoring the influence of symbols, rituals and ceremonies); and functionalist (focused on the study of social phenomena in terms of moving toward their equilibrium positions and assuming a single optimum) (March and Olsen, 1989).
The end of the 1970s and the 1980s witnessed a renaissance of institutionalism in many fields of social sciences, most often however not in the form of OI, but rather as a blend integrating OI with some important elements of non-institutional trend and neoclassical economics. OI downsized the role of âmethodological individualismâ, which is a key factor for the mainstream or orthodox economic theory. The new institutionalism accepted this assumption, which enabled the application of the rational choice theory, building formal models, the use of game theory and combining institutional constraints (rules of the game) with the interests of players (Chmielewski, 2011). Williamson pointed out that in the mainstream economics, the new institutionalism should be seen as complementary and not substituting the traditional economic analysis (Williamson, 1975, p. 1; Swedberg and Granovetter, 1992, p. 14). Still, not all the directions of new institutionalism amalgamated the OI with the economic methodology. These include, among others, Granovetterâs economic sociology (1985), Etzioniâs socio-economics (1988) and Hodgsonâs evolutionary economics (1988), distancing themselves to some degree from the sociology of rational choice of James Coleman or Gary Becker.
As the research on comparative capitalism has been deeply embedded in the new institutional economics paradigm, the core element of its conceptual and methodological framework is the notion of âinstitutionsâ. Hence, before outlining the theoretical background of contemporary research on comparative capitalism, we will first embark on a brief discussion of key concepts and definitions which are inextricably linked to the very institutionalist approach.
1.1 Key concepts and definitions
The rebirth and development of new institutional economics, as part of new institutionalism (NI), may be to some extent interpreted as a response to the revival of market fundamentalism and the neoclassical orthodoxy with their unrealistic assumptions regarding the operation of private markets and human behavior, after the first oil shock in 1973.3
NIE abandons the standard neoclassical assumption that individuals have perfect information and unbounded rationality and that transactions are costless and instantaneous. Instead, it assumes that individuals have incomplete information and limited mental capacity;4 because of this they face uncertainty about unforeseen events and outcomes and incur transaction costs to acquire missing information. With a view to reduce risk and transaction costs, members of society create formal and informal institutions: constitutions, laws, contracts and regulations as well as norms of conduct, beliefs and habits of thought and behavior (MĂ©nard and Shirley, 2005).
On the other hand, however, unlike âoldâ institutional (or OI) economics (Veblen, Commons, Mitchell), NIE does not completely abandon the neoclassical economic theory. While the new institutionalists reject the neoclassical belief in perfect information and instrumental rationality, they simultaneously accept the orthodox assumptions of scarcity and competition (Arrow, 1987; Williamson, 2000).
However, what gives NIE a distinct identity and rising intellectual recognition is the fact that it tries to raise and answer questions which neoclassical economics has never addressed. In particular, as indicated by North (2004), neoclassical economics was not created to explain the process of economic change, let alone the political and social change. New institutionalists in contrast aim to understand change through understanding human incentives and intentions as well as the beliefs, norms and rules they create in pursuit of their goals.
Notwithstanding the heterogeneity of the research program and diversity of approaches inherent to NIE institutional economists share a number of key assumptions and methodological premises or a fundamental set of statements about the world and the research program concerned. Following the Lakatosian definition, these may be interpreted as the âhard coreâ, âpositive heuristicâ and âprotective beltâ (Lakatos, 1978) of new institutional economics. The most salient shared beliefs in NIE encompass in particular the following:
- Institutions have important effects on economic performance.
- Institutions may be analyzed using the same tools which have been developed in neoclassical tradition supported by additional research methods, such as case studies and experiments.
- An important methodological premise of any NIE research program is the interrelatedness of theory and empirical studies.
- The scope of NIE research programs ought to be interdisciplinary drawing from the scholarship of many disciplines of social and natural science (including history, cognitive science, law, psychology, sociology, political science, anthropology and evolutionary biology).
- While studying the role of institutions in economic performance, focus should be placed on long-term dynamic considerations of change, with special emphasis on the key role of innovation.
- Another important trait of the NIE approach is a specific understanding of the core building block of new institutional economics â the very notion of institutions. Unlike in the management science or mainstream economics where institutions are often understood as constructs synonymous to organizations, NIE conceives this term in a different manner (see the subsequent part of this section).
Apart from the key paradigm adopted in this study, which is NIE, we also make use of the humanistic paradigm of the new economic sociology (NES). Notwithstanding the differences, both paradigms are part of the new institutionalism (NI) and â seen from the angle of our research â are complementary. The differences involved boil down to a large extent, though not exclusively, to the scope of using the rational choice theory research apparatus. Anticipating the empirical results of our study presented in Chapters 4 through 10, we can hint at this stage that NIE allowed to build a tentative typology of political economies in Central and E...
