Business Orders under Disordered Bureaucracies: Firms, Associations and the Post-Communist State

The dissertation analyzes the behavior of post-communist firms and business associations, and explores how business interests and organization are affected by the types of states that firms confront. Focusing on the countries of the former Soviet Union, the project seeks to further our understanding of post-communist political economy and enrich extant theory on business-state relations. I challenge conventional explanations for why business organizes, and why some firms join formal business associations, while others do not. Existing theories draw primarily from the experience of advanced industrial democracies, and thus fail to capture the dynamics of organization when business confronts a corrupt, and frequently predatory, state. Drawing on fieldwork in Russia and Ukraine, and aggregate analysis covering other transition economies, the project identifies the conditions that restructure incentives for firms to participate in business associations, and impede associations from developing as political intermediaries that facilitate interaction between public and private actors. It locates these conditions in the character and structure of the state which differentiates some post-communist states not only from their peers in the region, but also from the advanced industrial states on whose experience conventional theories are built. The presence of incapacitated and highly corrupt bureaucracies cardinally alters the traditional incentives for firms to organize collectively. When firms can expect little of the civil service with respect to public goods provision and policy continuity, but can instead expect public servants to work for private gain, they develop strong incentives to turn to private arrangements in order to lessen the uncertainty and threats bred in the absence of strong state institutions. The structure and character of the state bureaucracy also affects the opportunities for, and constraints on, engagement between business associations and public officials. Corruption within the bureaucracy is most commonly viewed as an opportunity that business can exploit. Instead, I show that the prevalence of corruption hinders the ability of business associations to obtain influence over government agencies. Precisely because corruption enables direct contacts by individual corporate giants with government agencies, it undermines the collective efforts of smaller firms that make up the majority of the private sector. There is, however, an ironic twist to the story. Under some conditions, corruption within the bureaucracy can impel political authorities to empower external, private business groups in order to divest themselves of an ineffective tool of policy implementation. This “divesture rationale” adds an additional consideration to existing arguments about how, when, and for what purposes collective, membership-based organizations emerge in the private sector.

Government