Business in Russia - Blat

Блат Business in Russia

Miguel Sanchez William Parra

Summary !   Definition of Blat

!   Origin of Blat

!   Types of needs

!   Imposed Reciprocity versus Voluntary Reciprocity

!   Ethical Principles

!   Post- Socialism : Implications for Informal Practices

!   Change and Continuity in Blat Practices

!   Conclusions

Definition of BLAT

Blat is the use of personal networks and informal contacts to obtain:

Goods and services to skirt formal procedures.

What is informal practices in the Russian context?

Regular strategies to manipulate or exploit formal rules.

Origin of BLAT: the Blatmeisters

Socialism System

Blatmeisters in the Russian context are people naturally endowed with certain talents to be successful blat transactors.

They solve problems and arrange things for others, and are thus called “useful people”.

In the socialism system: They were often employed in professions which delivered personal services or which gave them special access to goods:

! Doctors.

!   Sauna workers.

!   Shop assistants.

!   Storage employees.

Types of needs Blat was used in Soviet Russia for four different types of needs:

1.  Foodstuffs.

2.  Clothes.

3.  Household goods.

4.  Housework and hobby materials.

EXAMPLES: health resort stays, and travel tickets; life cycle needs such as birth clinics, kindergartens, schools, escape from compulsory military service, high schools, jobs, flats, hospitals, and funerals; and the needs of others.

Reciprocity or Voluntary

Although one knows one has to repay favors, reciprocity is often disguised by time delays (sometimes very long-term) and mediation by a third party.

To maintain a positive self-image, participants have to perceive a blat favor as “help” given altruistically, out of friendship rather than in expectation of a return, even if the “help” is given at the expense of public resources.

Ethical Principles

!   The obligation to help—help your friends unselfishly and they will come to your aid

!   Do not expect gratitude but be grateful

!   Look to the future—long-term reciprocity

!   Keep within limits—ask within limits

!   Know the contexts in which the informal friendship code has priority over formal legal codes

!   Socially ostracize those who follow the letter of law

Post- Socialism : Implications for Informal Practices

!   Once the Soviet formal political and economic framework

collapsed, informal practices spiraled out of control.

Policies of Liberalization

Privatization

Financial deregulation

Collapse of the local systems of socialist

guarantees

Change and Continuity in Blat Practices

!   Monetization

!   Means of Exchange

!   Change for personal consumption

!   $ 2.8 billion a year in bribes

!   Export licenses, quotas, custom duties, tax transfer

Conclusion

!   Social networks are a universal characteristic of human societies, and the questions of why social networks play such a central role in state centralized economies and serve as channels for exploitative practices should be answered with reference to the uniform features of these economies.

Thanks for your attention