Alena Ledeneva

Blat and Guanxi : Informal Practices in Russia and China

This paper compares informal practices used to obtain goods and services in short supply and to circumvent formal procedures in Russia and China, and assesses their changes and continuities during the market reforms. I divide my presentation into four parts. The first tackles similarities between blat and guanxi under socialism: language games and idioms that referred to these practices; similar pressures of the shortage economy that forced individuals to satisfy their needs through informal exchanges; and the contradictory role of informal practices—they supported but also subverted the socialist systems. In the second part I shift my focus to the differences between blat and guanxi that stem from different cultural traditions in the two societies. These traditions determine the moral force of reciprocity, the degree of codification of informal practices, and their legitimacy. The third part illustrates differences in market reforms in China and in Russia. Finally, I compare blat and guanxi practices as responses to these reforms and discuss both intriguing similarities and significant differences in the new forms of guanxi and blat . Thus, the post-Soviet reforms have changed informal practices so much that blat has almost lost its relevance as a term that describes the corrupt use of personal networks in contemporary Russia. In contemporary Chinese society, by contrast, guanxi has deeper roots in kinship structures and traditions, and both the term and guanxi practices continue to be important. 1 The partial nature of reforms in China and the persistence of communist rule may account for some of this difference, but we must also consider a range of historical and cultural factors that shape and help reproduce informal practices.

Open Secrets and Knowing Smiles

Given the importance of informal ways of getting things done in postsocialist societies, research into the field of unwritten rules and informal practices has been slow to develop. In studying such rules and practices, the researcher often encounters skepticism or hostility stemming from the ways in which people relate to tacit agreements, or else she or he is greeted by an ambivalent smile of complicity—a knowing smile. This article draws a connection between knowing smiles and open secrets and argues that these notions illuminate a great deal about how the “grey areas” of social life function. It also suggests that such seemingly trivial aspects of everyday life can reveal profound features of social institutions and point in the direction of innovative research.

Corruption in Postcommunist Societies in Europe: A Re-examination

Abstract Anti-corruption drives and a new ‘corruption paradigm’ have figured prominently in the reconstitution of political order in Europes postcommunist states, under strong pressure from the international financial institutions and the European Union. Now that data on corruption are systematically collected, measured and monitored, it is both possible and essential to step back and assess what these data reveal, conceal or omit. This paper articulates and provides a critique of the assumptions, preconceptions and methodology implicit in the prevailing ‘corruption paradigm’. The critique is organized around the cultural and historical neutrality of the definition of corruption (assumption 1); problems with the measurement of corruption (assumption 2); and the implications for policy-making (assumption 3). The paper argues that the ‘disaggregation’ of the corruption paradigm in the postcommunist states is essential, both for an adequate assessment of the postcommunist experience and for determining the validity of the paradigm.

How to Mitigate Corruption in Emerging Markets: The Case of Russia

Russian CEOs are arguably the most experienced managers in the world when it comes to working in corrupt environments. For our analysis, we gathered data from the CEOs and owners of 111 local and international companies operating in Russia. We asked them to assess their experiences with informal practices, including the extent to which their businesses are dependent on informal deals and the strategies they deploy to mitigate business corruption. The list of specific practices and strategies assembled in the pilot interviews and media content analysis has been cross-checked with the existing typologies of corruption in post-communist societies and verified through in-depth interviews. This study presents the outcomes of our analysis, one of which is that companies tend to blame officials for corrupt activities while hiding their own internal corruption from public view. Both are dependent on the industry in which they operate, however. The paper also includes the approach we developed to understand the less reprehensible but more widespread forms of corruption such as collusion, conflict of interest, cronyism and nepotism, fraud, gifts and hospitality, lobbying, abuse of power or office, and influence peddling.

Reflective Leadership vs. Endemic Corruption in Emerging Markets

Despite decades-long efforts to eradicate it, corruption remains a major risk for doing business in emerging markets. Our study of 111 CEOs and owners of companies operating in Russia showed the ineffectiveness of universalistic top-down anti-corruption strategies at the firm level and tested a practical, bottom-up approach. We argue that strategies targeting specific business practices can mitigate corruption even in endemically corrupt environments such as Russia. The critical factor for the effectiveness of corporate anti-corruption policies is reflective leadership. We propose and describe an instrument for such leadership. We slice firm corruption into recognizable and manageable practices and offer an inventory of methods that reach out through hierarchical and network channels.

Underground Financing in Russia

According to Russian common opinion “Nothing is as strong or as weak in Russia as it seems.” This includes the financial system. Few claim to understand fully either the origins of the August 1998 financial crisis or the postcrisis recovery. Post-1998 analyses suggested that reforms did not work as expected because the institutional environment required by market democracies was not in place.This in turn was explained by sociohistorical and cultural factors responsible for the lack of civil society, civic responsibility, and business ethics.As The Economist put it, a healthy banking system requires honest administrators backed by determined politicians, a legal system in which loans make sense and a financial climate in which people want to lend. All the above are missing in Russia. This is why a whole year since August 1998, not a single significant bank pushed into insolvency has been properly wound up. The World Bank estimated that at the top 18 banks alone, liabilities exceed assets by

List of interviews

9.8 billion. Of the few banks that have lost their licences in 1999, most were those trying to deal honestly with their creditors … Strangest of all, there has been no official censure of the widespread asset-stripping and book-fiddling which followed the August crisis

Russia's Economy of Favours: Blat, Networking and Informal Exchange

All individuals listed below consented to interviews about the sensitive topic of state–business relations. Given the nature of the topic, I withhold names when citing interviews in the text and refer instead to the position (official, business leader, politician, party leader, etc.) of the individual being quoted. In a few instances I have attributed comments to individuals with their permission.