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THE CAUCASUS & GLOBALIZATION
Abdurakhman HUSEYNOV
Ph.D. (Econ.), Professor, Leading Research Fellow, Regional Center of Ethnopolitical Studies, Daghestan Scientific Center, Russian Academy of Sciences (Republic of Daghestan, the Russian Federation).
RESEARCH METHODOLOGY OF THE CONFLICT POTENTIAL OF CONTEMPORARY SOCIAL INSTITUTIONS (A NORTH CAUCASIAN CASE STUDY)
Abstract
The author investigates the methodological (institutional, systemic, and neo-functional) aspects of the conflict potential of social institutions in the Northern Caucasus and formulates the main princi-
ples of the neoinstitutional approach in sociology as applied to the regional institutional specifics of the Northern Caucasus and the conflict potential of social institutions in a polyethnic region.
Introduction
The causes and mechanisms of conflicts in contemporary society cannot be correctly identified without a profound analysis of their institutional component. Indeed, today the specifics of all sorts of regional conflicts point to an easily identifiable institutional origin. Social institutions can be described as a "potential conflict testing ground" on which potential threats to social integrity and stability are unfolding.
Back in the early 1990s, the academic community realized that the entire range of conflict-prone problems had developed into a threat. This became especially obvious in the Northern Caucasus. On the one hand, the causes and mechanisms of social conflicts should be identified; while on the other, the role and place of social institutions in the emergence and settlement of conflicts and conflict-prone situations should be determined. This should be done to avoid subjective approaches to the analysis of conflict-prone factors; moreover, academic interest will intensify the possibility of generalizing the objective determinants of social conflicts during analysis. Indeed, studies in conflict potential are impossible without an in-depth investigation of the institutional structure of contemporary society.
In the context of the neoinstitutional approach to social institutions as organized sociocultural entities that generate, reproduce, and lower transaction costs, the institutional complex of the whole of society and an individual region can be described as a conflict-prone and conflict-regulating factor of social development.
The still inadequately studied institutional determination of social conflicts in social sciences calls for its sociological determination and interpretation. This will increase the volume of our theoretical and empirical knowledge of contemporary social changes, including social conflicts.
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Institutional, Systemic, and Neofunctional Approaches to Social Institutions
The conflict potential of social institutions in contemporary society cannot be properly studied without methodological delimitations and interpretations of the main descriptions of social changes as structure-action; for the same reason, the prerequisites and the gist of the discourse on correlations of predetermined macro and micro changes should be taken into account. Here I will dwell on a reflexive analysis, interpretation, and verification of the main provisions of the neoinstitutional theory as part of a wide range of contemporary and reliable theories of social changes in sociology and adjacent disciplines.
The institutional, systemic, and neofunctional approaches in sociology are methodologically very close to the complementary neoinstitutional approach born within economics. The neoinstitu-tional approach obviously complements the systemic approach; the same is true of the particular nature of neoinstitutionalism and the generalized and holistic constructs of the systems theory ranging from the classical general theory of systems to cybernetics of the second order (H. Maturana, F. Varela, and N. Luhmann).
The systemic approach and systemic analysis are two generally recognized and rapidly developing scientific trends that go deep into the natural sciences, technology, and the humanities. Systemic comprehension of the investigated objects (social institutions), however, is methodologically specified within the institutional and functional approaches in sociology and their contemporary revision in neoinstitutionalism and neofunctionalism.
The specifics of the development of the neofunctional approach in sociology created its obvious advantages when studying the conflict potential of social institutions. In the political context, neo-functionalism, which was developed by a group of American academics headed by Ernst Haas, became one of the basic theories of European integration. It was generally recognized that the trend toward governable integration at the regional level is the strong side of neofunctionalism. According to Haas, the integration mechanisms of a polyethnic expanse rest on functional reducibility and functional supplementarity and in many respects are identical to the Monnet method of integration, that is, integration through economic relations leading to political integration.
Jeffrey Alexander is convinced that today Western neofunctionalists (S. Eisenstadt, P. Colomy, J. Alexander, L. May, and N. Smelser) "move beyond purely systemic and evolutionary explanations of differentiation toward accounts that stress contingency, concrete groups, conflict, and social movements and collective behavior;"1 the very foundations of the paradigm of neofunctionalism, however, have not avoided a certain amount of ideologization, or "party bias" (to borrow a Soviet formula). The neofunctional approach bases the mechanisms of social integration on neoliberal interpretations hardly verifiable in different social realities of non-Western, a-typical societies.
It seems that the neofunctional integration model of the West European Community can hardly be applied to Russia's North Caucasian region: there is no more or less similar system of economic relations; the local economies depend on donations from the Center; the ethnocultural and ethnopo-litical landscape is much more varied; political institutions are highly vulnerable; the social and demographic structures are very different from Europe; traditional societies and traditional culture are much more persistent, etc. This means that the "economy first, politics later" integration pattern might become a disintegrating factor. Economic contacts at the regional and interregional level add to the integration potential; federal donations, on the other hand, "inflate" the regional economies by in-
1 J. Alexander, P. Colomy, "Neofunctionalism Today: Reconstructing a Theoretical Tradition," in: Frontiers of Social Theory: The New Syntheses, ed. by G. Ritzer, Columbia University Press, New York, 1990, p. 53, available at [http:// ccs.research.yale.edu//alexander/articles/1990/alexcolomy_neof2dy.pdf].
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creasing corruption, transaction costs, and social inequality; they fan social discontent and tension and may, therefore, become a factor of disintegration. Integration in the Northern Caucasus cannot be achieved through economic mechanisms: there the neoinstitutionalist maxim "institutions matter" is more applicable than anywhere else.
Neoinstitutionalism was born in the 1960s-1970s as an economic trend. The founding fathers who studied the institutional structure of production realized that their economic theory needed concepts such as transaction costs, property rights, contract relations, etc. Classical institutionalism in economic theory is associated with the names of Thorstein Veblen and John Commons; later it was supplemented with categories borrowed from the social sciences and humanities (particularly from sociology and psychology).
Neoinstitutionalism is a natural product of expansion of the social and personalized to the mac-roeconomic (in their essence) constructs of institutional economics. The unfolding world economic crises caught the majority of economic theorists unawares; it cast doubt on the efficiency of legitimate economic methods and mechanisms of forecasting, simulation, and management of economic and social processes. It seems that the world economic crisis threw into bolder relief the relevance and advantages of the neoinstitutional approach.
Neoinstitutionalism, on the other hand, is not free from methodological limitations caused by its close genetic ties to economic theory. It proceeds from two general premises:
(1) Social institutions matter;
(2) Social institutions can be analyzed with the help of concepts and methods created by economic science.
While sociologists treat the former as an axiom and even banality, the latter is absolutely unacceptable: while applying the neoinstitutional approach to sociological studies we should forget the latter premise; this means that we should rely on certain sociological analogies and interpretations.
The "methodological individualism" that dominates in neoinstitutionalism refuses to treat social groups and social organizations as subjects. The behavior of collective communities is explained within purpose-oriented individual behavior.
The frequently naïve (from the viewpoint of sociology) attempts of theoreticians of economics to join the discourse of those who represent the paradigms of social action inevitably orientates them toward the sociological theories of practical rationality and rational choice.
Neoinstitutionalists have introduced the concepts of limited rationality (Herbert Simon) and opportunistic behavior (Oliver Williamson) to explain social action and economic behavior.
As distinct from the neoclassical economic theory, which looks at man as an absolutely rational creature not alien to mechanistic systemic rationality, neoinstitutionalism points out that economic agents are rational within certain limits created by the far from complete information accessible to them and their intellectual narrowness. Opportunistic behavior is interpreted as "self-interest seeking with guile," which includes the possibility and influence of all kinds of lies, swindle, and corruption interests. According to neoinstitutionalists, social institutions should minimize the negative effects of limited rationality and opportunistic behavior. This thesis has found its way into the main idea of neoinstitutionalism—institutions are social entities designed to lower the costs of transacting.
It should be said that this idea is anything but novel and that it is obvious to sociologists and other social and humanitarian scholars. This thesis is not exhaustive and is, in fact, a product of the theory of social structure and social exchange that develop within sociological and socio-anthropo-logical knowledge. In sociology, classical political economy, social and, in particular, political and economic anthropology, as well as in the symbiotic branches of social-humanitarian knowledge and natural science, the discourse on the specifics of social structures and social exchange is of fundamental importance. For example, the development of French ethnology and anthropology is genetically associated with the study of social exchange (started by Marcel Mauss in his Essai sur le don) and social structures (the structural anthropology of Claude Lévi-Strauss). Study of the social structures
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and systems of exchange in living systems—traditional societies and animal populations—allowed scholars to extrapolate the results to industrial and post-industrial societies as much more complicated community types.
A comparative analysis of the above approaches and the neoinstitutionalist approach to economic theory suggests the following provisions of the neoinstitutionalist approach to sociology:
(1) Social institutions matter irrespective of the methodological diversity of their interpretation ranging from extreme objectivist to extreme subjectivist.
(2) An analysis of social institutions based on the concepts and methods elaborated exclusively by economic science is ineffective, while the complementary nature of the branches of scientific knowledge and the dominating paradigm is obvious in the case of their institutional analysis.
(3) Social structure is a structure of production, distribution, and redistribution of resources within a social system.
(4) Social institutions are the organizational mechanisms of production, distribution, and redistribution.
(5) Production, distribution, and redistribution of resources in a social system are implicitly associated with costs ("transaction costs" within neoinstitutionalism) of unequal consumption, social inequality, inefficiency of social institutions, redistributive nature of the economy, etc.
(6) Lowering transaction costs is not the only function of social institutions—they are responsible for their production and reproduction (even in the form of exclusive production of costs with convincing imitation of their functional activity and transaction inefficiency). Therefore, the neoinstitutionalist approach to an analysis of economic activity of the social institutions in the North Caucasian regions (as lowering the costs) will end in a methodological and scientific-practical impasse.
(7) We should contemplate not only the vertical non-equivalent systems and practices of social exchange, but also horizontal, reciprocal exchange.
(8) Limited rationality and opportunistic behavior introduced to explain social action and economic behavior proved not to be exhaustive. They will inevitably be revised or replaced with much more complicated sociological theories of social action.
According to the neoinstitutionalists, normative analysis should proceed in a comparative institutional context—the functions of institutions should be compared not with imaginary constructs but with realizable alternatives. (In sociology this approach is represented by Robert Merton's conception of functional alternatives and functional replacement.) If accepted, this thesis will raise the question of the correlation and mutual influence of the "sustainability" and "effectiveness" of social institutions. Scientific discussion waged within the neoinstitutional theory points to the complicated nature of interpretation of the efficiency of the institutions as applied to the interpretation of their sustainability.
At first the amount of institutional costs served as the criterion of the efficiency of social institutions in neoinstitutionalism. Thrainn Eggertsson formulated a general version of Coase's Theorem: "The economic growth and development of a country are basically unaffected by the type of government it has, if the costs of transacting in both the political and economic spheres are zero."2 Later Douglass North refuted this "optimistic" model of institutional efficiency and the idea that inefficient institutions will be inevitably replaced with efficient, which will lower the transaction costs. He dem-
T. Eggertsson, Economic Behavior and Institutions, Cambridge, Cambridge University Press, 1990, p. 248.
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onstrated that it was inapplicable to the situation of economic growth of West European civilization in the Modern and Recent times.3
Neoinstitutionalism treats the problem of the sources of social change and their sustainability in a very special way. According to North, there are two sources of institutional changes:
A. Changes in the structure of relative prices. Social changes make some of the forms of organizational and institutional interaction unprofitable, which forces economic agents to try new forms.
B. Ideology. By ideology North understands subjective models through which people perceive the world around them.
From the viewpoint of the neoinstitutional approach, the absence of institutional changes means that none of the actors is ready to revise the functioning social institutions and institutional practices (because of the costs such changes would have incurred), therefore social deprivation, social discontent, and tension do not automatically generate social changes. Protest potential and protest activity are growing, but only accumulated protest potential leads to a revision of the conventional institutions and practices, that is, when the costs of their continued existence exceed the possible cost of the changes.
Neoinstitutionalism treats the stability problem in a simplified mechanistic way.
Everything known so far about the sources of extremism and terrorism in the Northern Caucasus and in other countries, for that matter, does not point to this simplified mechanistic pattern of social changes. This pattern ignores the socio-cultural dimension of social inequality and social discontent, such as the different social, economic, and political positions of communities, population groups and categories; this accounts for the different perceptions of the social situation and social changes, as well as for the different degrees of their desirability.
According to Douglass North, the effects and interaction of the factors of prolongation and conservation of inefficient social institutions stabilizes the institutional system irrespective of its efficiency. On the one hand, the institutional path-dependent development of any specific society determined by a combination of efficient and inefficient institutions is responsible for the rigidity and predetermined behavior of people amid social changes. While on the other, a set of efficient and inefficient institutions and their correlations determine, in the final analysis, institutional path-dependent social development.
The ideas formulated by Douglass North correlate in many respects with what Svetlana Kirdina writes about the rigid "institutional matrices" that predetermine the development of each specific society. An institutional matrix is a stable system of basic social institutions, a product of the past development that predetermined the first states and the development of all the following institutional structures, which, in turn, predetermine the reproduction of the primary model that has preserved its essence. There are two types of matrices—the western and the eastern, each with a specific set of basic and auxiliary institutions.4
The Concept of "Institution" as Treated by Neoinstitutional Theory
It seems that before going further we should look at how neoinstitutionalists interpret the concept "institution:" it is impossible to operate with similar concepts and arrive at common methodolog-
3 See: D. North, R. Thomas, The Rise of Western World: A New Economic History, Cambridge University Press, 1973; D. North, Institutions, Institutional Change and Economic Performance, Cambridge, 1990.
4 S.G. Kirdina, Institutsionalnye matritsy i razvitie Rossii, TEIS, Moscow, 2000, pp. 11, 23-24.
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ical and interpretative ground without achieving a clear idea of how the neoinstitutionalists treat the institution concept in economic theory and sociology. The question is: Do neoinstitutionalists understand by "institution" a social unit analogous to the "social institutions" in sociology? Douglass North has identified the following components:
(1) Informal constraints (traditions, customs, and social conventions), in short, everything which sociology describes as "informal norms" together with customs, traditions, etc.
(2) Formal rules (constitutions, laws, judicial precedents, and administrative acts). Formal regulations in sociology.
(3) Enforcement mechanisms to ensure observance of rules (courts, the police, etc.). Social sanctions: positive and negative in sociology together with institutions and agents of social control.
This means that there is a certain methodological and conceptual similarity in the interpretation of social institutions in sociology and North's neoinstitutionalism. It should be said that interpretation of social institutions in neoinstitutionalism as a system of rules is similar to Anthony Giddens' interpretation of social structures, including institutions, which regulate all possible variants of social action.5
Transaction Costs as an Efficiency Criterion of Social Institutions
The transaction cost theory is a methodological innovation of neoinstitutionalism. It is an attempt to translate the reproduction costs of a social structure and social exchange (an axiom within sociological knowledge) into the language of economic theory.
The level of transaction costs is a criterion of efficiency/inefficiency of a social institution at the macro level of the society's institutional morphology and even path dependence. The level of cost minimization can be described as a criterion of an institution's efficiency.
In his monograph, Andrey Shastitko points out that transaction costs within the neoinstitutional approach are interpreted as "the cost of resources (money, time, etc.) needed to plan, adapt, and control how the individuals fulfill the obligations assumed in the course of alienation and appropriation of the rights of ownership and freedoms recognized by society."6
The neoinstitutionalists identify the following types of transaction costs:
(1) costs of information search;
(2) costs of measurement;
(3) costs of talks and contract signing;
(4) costs of specification and protection of the rights of ownership;
(5) costs of opportunistic behavior.
These types of costs are intercrossing and mutually complementary. Transaction costs are divided into "pre-contract," "contract," and post-contract," as well as into "real" (which interfere with certain types of interaction) and "virtual" (the cost of overcoming interference).
5 See: A. Giddens, "Structuration and the Practical Routines of Social Life," in: A. Elliott, Contemporary Social Theory: An Introduction, Routledge, London, New York, 2009, pp. 124-140.
6 A.E. Shastitko, Neoinstitutsionalnaia ekonomicheskaia teoria, Moscow, 1999, p. 158.
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From the viewpoint of social-humanitarian and, in particular, sociological knowledge, transaction costs are divided into the following types:
(1) Costs of reproduction and changing the social structure as a whole and its individual social-structural components in any specific society.
(2) Costs of reproduction of social institutions and institutional changes.
(3) Costs of reproduction of social organizations and organizational changes.
(4) Costs of reproduction of social groups and changes in group dynamics.
(5) Costs of interpersonal social interaction.
(6) Costs incurred by the actors' personal specifics.
The transaction cost theory in sociological, auxiliary interpretation makes it possible to analyze and assess the activities of social institutions within the regional context and to identify their efficiency. As applied to an analysis of the North Caucasian institutional agreements and institutional environment, the theory offers obvious heuristic possibilities.
From the neoinstitutional position, the following institutional specifics can be identified in the North Caucasian region and the Republic of Daghestan as its part:
(1) The great role and stability of informal rules and constraints.
(2) The low authority of formal rules and constraints.
(3) A negative attitude toward the formal enforcement mechanisms, formal sanctions, informal institutions, and agents of social control.
(4) The higher authority of the informal enforcement mechanisms, informal sanctions, institutions, and agents of social control.
(5) A much more informal nature of institutional agreements and institutional environment.
(6) A relatively higher (sometimes high) inefficiency level of social institutions.
(7) The inefficiency of social institutions is largely supported by various population groups and categories (part of the local ruling regional elites and ethnocratic national and family elite groups, etc.).
(8) A relatively higher level of transaction costs.
The Neoinstitutional Approach to Conflict Potential in a Polyethnic Region
A comparative analysis of the neoinstitutional approach to the economic theory and the conceptions of social structure, social exchange, and institutional analysis in other spheres of social-humanitarian and, in particular, sociological knowledge provided the following provisions of the neoinstitutional approach in sociology used to analyze the conflict potential of social structures in a polyethnic region:
(1) Ineffective institutions can be much more stable than effective ones, which means that there are different types and models of social institutions ranged according to the stability/efficiency criteria: stable and inefficient; stable and efficient; unstable and inefficient; unstable yet efficient. Any level and any degree of stability and efficiency should be discussed both diachronically and synchronically, ad hoc and permanently.
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(2) The inconsistency of the general version of Coase's Theorem. Few historical analogues confirm the premise that in the course of institutional changes inefficient institutions are replaced with efficient ones, that is, ensure low-cost transacting.
(3) According to Douglass North, the main factors of prolongation and conservation of inefficient social institutions and their functioning are the following:
(a) The state might be interested in preserving inefficient institutions if they contribute to maximizing the gap between budget incomes and spending. In the post-Soviet period, inefficient social institutions were preserved to avoid costly modernization and transformation. This is true of the social sphere and the budget sphere in the economy: the state caught in the momentum of minimizing modernization costs accepted the huge transaction costs in the form of corruption and inefficient spending of budget money. On the other hand, when the balance between preservation of the vast and initially cheap set of social perks and state obligations (with a very limited budget) and their possible monetization shifted in favor of the latter, the state became resolved to minimize the cost. While fully aware that many of the social institutions in the Northern Caucasus are inefficient, the federal Center has to support them since the cost of their modernization and transformation might produce repercussions going far beyond the limits of the economy as such.
(b) Various population groups and categories may be interested in inefficient social institutions. The social structural diversity of post-Soviet Russia abounds in relevant examples: there are elites with their own interests; recipients of social privileges to whom monetization should be explained; and representatives of various power structures who have grown accustomed to "transaction costs" in the form of bribes of all sorts. In postSoviet states, as well as in the Northern Caucasus, the national and local elites generate transaction costs, which preserves the inefficiency of the social institutions. When analyzing, from the neoinstitutional position, the causes of extremism and terrorism in the Northern Caucasus, we should not ignore the activities of very specific "interest groups" determined to preserve inefficient social institutions and inefficient institutional methods for combating these phenomena.
(c) The evolution of any society is directly related to the chosen institutional path dependence in which new and/or more or less efficient institutional "rules of the game" might remain ignored for the simple reason that their introduction calls for considerable initial spending, while it is much cheaper to preserve the long established social institutions. (This means that to reduce the conflict potential of social institutions in the Northern Caucasus it is necessary to radically change their path dependence; within the present path dependence, the efficiency of the struggle against extremism and terrorism very often depends on inefficient social institutions and institutional methods which merely reproduce the negative social phenomena.)
(4) Seen from the neoinstitutional position, the absence of institutional changes means that none of the actors is resolved to change the functioning social institutions and institutional practices in view of the costs this would incur. For this reason social deprivation, social discontent, and tension do not automatically generate social changes. Despite the growing protest potential and protest activities, changes only begin when negative sentiments have accumulated to the extent when it becomes cheaper to revise the conventional institutions and practices rather than prolong their existence. It should be said that neoinstitutionalism treats the stability problem in a much simpler mechanistic way. An analysis of the sources of extremism and terrorism in the Northern Caucasus and elsewhere in the world does not confirm this oversimplified mechanistic scheme of social changes.
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(5) From the position of social-humanitarian and, in particular, sociological knowledge, transaction costs can be divided into the following types:
—Costs of reproduction and changing the social structure as a whole and its individual social-structural components in any specific society;
—Costs of reproduction of social institutions and institutional changes;
—Costs of reproduction of social organizations and organizational changes;
—Costs of reproduction of social groups and changes in group dynamics;
—Costs of interpersonal social interaction;
—Costs incurred by the actors' personal specifics.
The transaction costs theory in the sociological context makes it possible to analyze and assess the activities of social institutions in the regional aspect and identify the degree of their efficiency. As applied to the analysis of institutional agreements and institutional environment in the Northern Caucasus, this theory offers obvious heuristic possibilities.
Conclusion
A comparative analysis of the neoinstitutional approach in economic theory and the conceptions of social structure, social exchange, and institutional analysis in other spheres of social-humanitarian and, in particular, sociological knowledge provided several provisions of a neoinstitutional approach in sociology used to analyze the conflict potential of social structures in a polyethnic region.
The approaches to the study of conflict potential in the Northern Caucasus formulated above are conducive to an analysis and expert recommendations about the functioning of the social institutions in the region and reveal the degree of their efficiency related to conflict prevention and conflict settlement.
