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Informal Economic Relations and Organisations:
Everyday organisational life in Soviet and post-Soviet economies
Yochanan Altman and Claudio Morrison
Structured Abstract
Purpose This paper aims to identify the role of informal economic relations in the day-to-day
working of organisations, thereby opening a way to theorising and informed practice. We will
present and discuss the manifestation of informality in ‘everyday’ reality of Soviet and
transformation economies. Informed by Cultural Theory and in particular the work of Gerald Mars,
we are taking account ontologically and methodologically of Labour Process theory
Methodology Through presentation of ethnographic data of detailed accounts and case vignettes in
production and retail in the Soviet period of the late 1970s and 1980s and from the construction
sector in contemporary Russia, with a focus on the labour process, we inform and discuss key
processes in the informal working of organisations.
Findings In the Soviet system the informal economy co-existed in symbiosis with the formal
command economy, implicitly adopting a ‘live and let live’ attitude. In addition, informal relations
were essential to the working of work organisations, sustaining workers’ ‘negative control’ and
bargaining power. Contemporary Russian capitalism, while embracing informal economic
activities, a legacy of the Soviet period, advocates an ‘each to his own’ approach which retains the
flexibility but not the bargaining space for employees. That facilitates exploitation, particularly of
the most vulnerable workers, with dire consequences for the work process.
Implications The paper provides a platform for theorizing about the role and place of informal
economic relations in organisations. Of importance to managerial practice, the paper informs on
those aspects of the work routine that remain hidden from view and are often excluded from
academic discourse. The social implications are profound, shedding light on central issues such as
recruitment, income distribution, health & safety and ’deregulated forms of employment.
Originality The paper examines economic behaviour under different economic-political regimes
demonstrating continuities and changes during a fundamental social-economic reorientation of an
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important regional economy, through close observation at the micro and meso-level of,
respectively, the workplace, organisations and industry, outlining theoretical, practical and social
implications.
Key words Soviet Union, Russia, Informal Economy, Corruption, Cultural Theory, Labour Process,
informal economic relations
Acknowledgments We wish to express our appreciation and thanks to Prof. Perri 6 and Dr. David
Clark for their helpful guidance and constructive comments on an earlier version of this paper and
to three anonymous reviewers of the Social Issues in Management AoM division. We would also
like to thank Dr. Devi Sacchetto and PhD candidate Olga Cretu for their essential contribution to
research in the Russian construction sector.
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Introduction and aims
Traditionally a domain for economists, sociologists and political scientists, the informal economy
has reached the attention of business and management scholars. It featured as the theme for the
2012 annual meeting of the influential Academy of Management and continues to attract deserved
attention with the unfolding of the financial and economic crises experienced globally since 2007.
Here we wish to position economic informality as a critical feature of organisations - a key
aspect that is both ubiquitous and relevant but by and large has eluded scholarly scrutiny. We
will do so by demonstrating the centrality of informal economic relations in the daily lives of
organisations, showing the way they intermesh with organisational structures, processes and
routines.
The article analyses findings from the authors’ research on informal practices in Soviet and post-
Soviet economies. Informality has loomed large in explanations of both Soviet and transformation
economies and these in turn contribute to high-context theorising of organisational change. In this
paper we focus on the labour process within bounded organisations, employing an anthropological
lens. Labour process theory originated from Braveman’s ground-breaking critique of capitalist
management: ‘labour process analysis carries through inequality from market relations into capital-
labour relations in the workplace, and suggests that the dynamic of this unequal social relationship
both limit, condition and drive the structuring of work’ (Smith, 2008: 2). Its key tenet of relevance
here concerns the ‘indeterminacy of labour’: employers buy from labour a mere capacity to work
which then must be managed by managers through a combination of consent and control. We
employ the construct of labour process here both in its original sense as well as deployed by post-
Bravermaians, such as Burawoy (1979).
Evidence from Soviet and contemporary Russia will show both continuity and change of
informal practice in organisations across time and economic regulatory environments. As
extreme examples of change in (informal) economic activities, these cases throw into sharp relief
phenomena that can be distilled almost anywhere, but with less clarity. As such, our underlying
aim in this paper is to problematise organisational processes, demonstrating the critical role and
place of informal economic relations in the daily working of organisations.
In line with the disciplinary orientation and methodological approach of this paper, we take
recourse to anthropologist Mary Douglas Grid/Group conceptualisation (1978) also known as
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‘Cultural Theory’ (Thompson, et al., 1990) as our referent frame in this paper. Cultural Theory’s
emphasis on the structuring of social relationships in a bounded context and insistence on the key
role of informal institutions as generic elementary forms of social organisation (6, this issue) are
highly relevant to our concern here.
Institutional and individual informal economy activities have been frequently debated in the
popular, practitioner and academic literature, usually under the term 'corruption' (Akbar and Vujic,
2014; North et al., 2007; Rogov 2010). However, little has been written about organisational
processes and the informal economic relations that sustain them: these are as yet underdeveloped
and under-researched aspects among organisational theory, organisational behaviour and human
resource management scholars. In this paper we wish to redress this neglect.
In essence, we argue the following: to fully understand the working of an organisation we have
to take into account its informal economy; specifically, informal economic relations [thereafter:
IER] as manifested in the workplace. We refer to ongoing normative conduct that becomes
enshrined in practice, not one-offs. These relate to gainful transactions, whether by mutual
consent or enforced, that are not formalised, are not regulated or cannot be monitored - whether
by the state, the law, a regulating authority or the organisation itself; and/or are in contravention
of established formal practice. We refer to activities such as unreported wages or perks, fiddling
of goods, of materials and of expenses, exploitative employment conditions, knowingly using
faulty materials or producing faulty products or substandard workmanship, violation of health &
safety regulations for financial gain, to name the common ones.
We postulate that the informal relations are a normal feature of organised productive activity in
any economic sector (Schneider, et al., 2010). The issue is not whether the informal economy
exists but rather a) what kind of economic regime does it sustain; and b) what are its social and
institutional outcomes. In line with anthropologist Larissa Adler Lomnitz (1977, 1988; Lomnitz
and Sheinbaum, 2004) we position the informal economy as a societal phenomenon and as a
variant of economic behaviour in a given environment: "informality... [is] an intrinsic element of
'formality' insofar as it is a response to the inadequacies of formalization. It is an adaptive
mechanism that, simultaneously and in a vicious cycle, reinforces the shortcomings of the formal
system." (Lomnitz, 1988:43). Throughout the paper we refer to anthropologist Gerald Mars
seminal study of workplace everyday crime (Mars, 1982) that has withstood the test of time
(Thornthwaite and McGraw, 2012). Mars depicts the petty crimes and informal rewards of a
workplace, building on Douglas four fundamental ’ways of life’. We will not repeat here the
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principles governing the Douglasian approach - these are amply described in the three other
papers of this issue. For the reader’s convenience Fig. 1 below outlines in brief these four
rationalities, or ‘ways of life’. For a detailed comparative outline of the theory see Patel’s paper
in this issue.
----------------------
Fig. 1 about here
----------------------
Mars draws from these four fundamental ’ways of life’ four essential occupational solidarity
fields
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. Mars labels them: individual entrepreneuriality, or ‘hawks’ [Group A], isolated
subordination, or ‘donkeys’ [B], tight work-groups, or ‘wolves’ [C] and loose work-groups, or
‘vultures’ [D]. Mars demonstrates through detailed accounts and minutiae analysis the IER of
blue-collar occupations: the supermarket cashier, the car repairman, the shop salesman, the van
delivery service; as well as white-collar occupations: the bank manager, the management
consultant, the lawyer. Their IER are not a result of criminal propensity or personality
orientation, but a structural consequence of the impositions and opportunities embedded in their
jobs. Thus ‘hawks’ will take risks, “sailing close to the wind” (as the English expression goes) in
any economic environment (Altman, 1992; Webb et al., 2009), whereas ‘wolves’ will be careful
to adhere to the unwritten rules in their solidarity as to what may pass as allowable without
upstaging their grade, irrespective to the environment in which they operate.
It may be a mistake to construe prevalent IER as purely a ‘transition’ economic phenomenon – a
condition that purportedly institutionally deficient Eastern/Central European countries are
plagued with (Morris and Polese, 2013) embedded in perennial corruption (Scheppele, 1999).
Nevertheless, IER are evidently more manifest in Eastern/Central Europe than in other parts of
the world. While historically a hallmark of Socialist economies under communism, evidence
suggests that IER continue to be an essential aspect of economic behaviour in the region, now a
by-product of the new capitalist market economies.
The article is structured as follow: after presenting our methods, evidence is provided by the first
and second author respectively. The empirical sections are followed by a discussion and
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Solidarity field = a bundle of constraints comprising norms, formal regulations and
informal conventions which subject persons to ongoing evaluation, sanction and rewards;
establishing a stable, if dynamic social context (Patel, 2007; 6 and Mars, 2008).
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conclusions. The first empirical section reports on lived experiences of employees, managers,
suppliers and consumers in the Soviet command economy. In the Soviet Union IER encompassed
all and every aspects of life, having become enmeshed into the way organisations operated as an
adaptive response to an ’economy of shortage’, a central feature of its command economy (Nove,
1980; Grossman and Tremel; 1987; Kornai, 1992). Our evidence for this period derives from the
southern republics of the USSR: Georgian SSR, Tajikistan SSR and Uzbekistan SSR, where IER
were particularly extensive and deeply engrained (Altman, 1983; Grossman and Tremel, 1987). By
the 1980s, end of the Brezhnev period in power (‘the era of stagnation’), the southern republics
were enshrined with a wide-spread informal economy running in parallel to the formal command
economy. The implications this had on the labour process throughout the economic sphere - in
planning, design, production, distribution, as well as investment, profit sharing and rewards, were
profound.
The second empirical section presents evidence from the construction industry in Russia in the
2010s demonstrating changes to the labour process induced by marketization of the economy,
transnational labour markets and labour mobility. We will show how, in contemporary Russia, the
informal deployment of Russian and former Soviet migrants, has become an essential aspect of the
Moscow construction scene, further intensifying the informalization of key aspects of the industry,
from recruitment to remuneration to health & safety regulations; with unavoidable consequences to
the standards of workmanship and ultimately the quality of the end product.
A final point to reiterate before unfolding our evidence. We wish to problematize the way
organisations are presented, analysed, theorised and derived practice elucidated, by demonstrating
that IER are inherently embedded in organisational processes. As evidence we bring historical data
from the Soviet Union and from contemporary Russia. We do so because these were and are good
examples for developed organisational IER. However, they are far from unique. The same
processes may be discerned in similar sectors and industries all over the world.
Methodology
We follow established anthropological protocol and ethnographic methods. Taking a longitudinal
approach, including participant observation - episodic and over time, the collection of life histories,
the documentation of case vignettes, in-depth interviews with key informants, the examination of
material evidence; we recount, analyse and discuss events within particular contexts. The first
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author studied IER of economically active agents and of bounded organisational entities, operating
in the USSR in the late 1970s, specifically the Soviet Republic of Georgia and thereafter Central
Asia (the Soviet Republics of Uzbekistan and Tajikistan) over a period of four years (1980-1985)
with opportunistic follow-ups, until the disintegration of the Soviet Union. The build up of cases
followed the protocol developed by Mead and her colleagues to study cultures at a distance (Mead
and Metraux, 1953) and applied to the Soviet Union by Inkeles and Bauer (1959). For a detailed
methodology and mode of data analysis see Altman (1983,1989).
The second author has been studying contemporary post-Soviet IER, first, as part of his research
on enterprise restructuring and the labour process (Morrison 2007) and lately studying the impact
of labour mobility on employment relations and workers’ subjectivities in the construction sector
(Morrison and Sacchetto 2014; Morrison et al. 2014). Principles guiding fieldwork are less about
representativeness of samples than reconstruction of social processes beyond the realm of
surface empirical observation (Burawoy 1998, 26; Easton, 2010). Data collection and parallel
theoretical elaboration has developed in an iterative fashion. Return visits to sites, constant
contacts with informants and discussion of early findings among researchers and with selected
scholars have guided further accumulation of material. Analysis of transcripts has been arranged
around initial themes and further refined and integrated, responding to inputs from these multiple
‘dialogues’ (Burawoy, 1998). Text analysis adheres to a Bourdieu’s ‘realist construction’,
seeking to read individual trajectories and contextual structures in terms of (socially necessary)
objective relations (Bourdieu 2002, 617-621; Fleetwood and Ackroyd, 2004). The analysis
follows a materialist labour process approach (Cox, 2013; Elger, 2005; Thompson and Smith,
2001) that search for systemic contradictions in the Marxist tradition and specifically the role
that antagonistic relations (between managers and employees or property and labour) play in the
emergence, maintenance and modification of organisational structures and processes.
We wish to note that we do not pass any judgment - moral, legal, ideological or otherwise, on IER,
nor its agents, and neither on the organisations in which they have been operating. For obvious
reasons, none could be identified from the data presented here.
The Soviet economic model and the problematics of fulfilling the Plan
Gregory Grossman, a noted observer of the USSR economy, posited the dual economic system that
prevailed under the Soviet regime, as follows: “The standard Western image of the Soviet
‘command economy’ is one of a state-owned, hierarchically organized, centrally planned and
managed, price-controlled and otherwise regimented system, rigidly geared to the goals and
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priorities of the Soviet leadership, and operating in compliance with a myriad of state-imposed
laws, regulations, and directives. However valid this image might be…there is another, very
significant side to Soviet economic reality, where production and exchange often take place for
direct private gain and just as often violate state law in some non-trivial respect. This is the so-
called ’second economy’” (Grossman, 1977). The ‘conflicted soul of the Soviet economy’ (Ericson,
2006) was burdened with practically all consumer goods and services being either in short supply or
of inadequate quality, or indeed both - which gave rise to a hierarchy in which producer was ‘king'
(Nove, 1978) and hence supplier was prince, while the end-point customer has been but a poor
relation. Though in reality each and everyone (with the exception of the elite nomenclature who had
privileged access to special shops) were end-point consumers who developed into scarce goods
hunters. A Sovetskaya kul'tura article from 1989 (during Gorbachev’s glasnost) laments:
”.. [W]e have turned into a nation of thieves of epidemic proportions. There is scarcely a single one
of us who doesn't steal something. We steal from our plants and factories: sugar, coffee, tea, candy,
screws, boards, transistors, paper. And from the enterprises where we work, we steal time—we
arrive at work late, we leave early, and in the middle of the working day we take time off to run our
own personal errands.” (in Gaddy, 1991: 42).
At the other end of this vicious cycle of frustrated consumers were the same people, this time as
labourers in the factories, farms and offices, enacting ‘negative control’ (Arnot 1988; Filtzer 1986).
Workers had no decision-making powers over what should be produced, but had to determine how
to achieve planned targets. Their collective rights were severely curtailed, yet managers were
equally constrained in terms of control tools and had strong incentives to collude with workers.
Foremen and shop managers played a key role in managing production and facilitated workplace
functioning while resisting outside pressures. This form of workplace organisation was managed
through individualised forms of bargaining, accommodation and resistance. Management struggled
to match scarce supplies to production targets and tried to achieve them by eliciting workers’ effort.
Conversely, managers had neither time nor incentive to intervene in the organisation of production,
opening space for workers’ agency. The primary tools for controlling workers were the individual
piece-rate, assorted bonuses, and the discretionary use of material benefits which constituted the
bulk of state welfare provision. In response, workers resorted to individual and collective informal
bargaining, indiscipline and turnover (Morrison, 2003; Polese, 2010). Benefits availability and
scope for bargaining and resistance were highly differentiated within and among enterprises on the
basis of gender, profession and economic sector. This generated high levels of social fragmentation
and cemented sectional divides that prevented solidarity beyond small groups. Workers’ alienation
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was reflected in the outcomes of their labour, which assumed the familiar character of poor quality
goods and inefficient services.
Soviet type IER
In a series of articles, Altman (1989, 1990) and Mars and Altman (1983a,b, 1986, 1987a,b, 2008)
outlined the day-to-day of organisational lives in the Soviet Republic of Georgia and of Soviet
Central Asia (1986); which were highly representative of the Soviet System as a whole
(Shlapentokh, 1984).
Altman (1989: 61) recounts the tale of a vet in a Soviet Kolkhoz that posits the common
predicament operators in the Soviet system found themselves. “Like all others on the kolkhoz, I had
my Plan. It was measured, among other things, by the rate of mortality - irrespective of the reasons.
In the case of hens, for instance, if the nestling hatchery is broken and as result many freeze to
death, although this is not my fault, my Plan will necessarily suffer”. One direct result was the
criminalization of everyday life, fundamental to Soviet type command economies (Altman et al.,
2014). Mars and Altman (1987a: 216) bring testimony of a production manager in a small-scale
biscuit factory: “You cannot afford to be innocent. Different people expect you to pay them and if
you don’t they either see you’re removed from your job - that is, if you don’t take their advice and
resign. Or, they’ll incriminate you. This last possibility isn’t too difficult. Everyone makes a
mistake from time to time, only in Georgia it’s assumed that there are no genuine mistakes, and any
incident - anything at all - can be used as a pretext against you”.
Another direct result was the institutionalization of the tolkach - “a breed of unofficial supply agent
whose job is to agitate, nag, borrow, sometimes bribe, so that the necessary materials, components
and equipment arrive” (Nove, 1980: 103). The tolkach became an essential cog in the Soviet
economic machinery and was to be found in any Soviet enterprise, big or small (bigger enterprises
would have employed several tolkachi); that is, except in the southern republics. Altman (1989: 62)
notes: “There is no equivalent in the Georgian language to the concept of the tolkach and I was
unable to detect any such role among my Georgian informants.” The explanation is that in Georgia
this role has become normative. Cultural Theory would argue that in a social context that drives
entrepreneurship, risk taking and bravura, as was the case in Soviet Georgia, competitive
individualism [A] thrives. Hence, there was no need to name a role that one would assume as a
matter of course. On the other hand, in a social context where hierarchy [C] dominates, it would be
in line of both the spirit and practice of such a ‘way of life’ to constitute a clearly designated role,
with a title (even an informal one!) attached to it.
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The paradox of the Soviet organisation in Douglasian terms is that while in theory it was based on
an idea of a hierarchy within a framework of communality; aspiring to an ideal-type Weberian
bureaucracy (Mars and Altman, 1983a) as expressed in its central planning agencies, notably
Gosplan[C: hierarchy] the rigidities of the formal system drove it to the very opposite direction, to
individualism [A: competitive individualism] supported by a support network of ever shifting
alliances, which made friendship [D: community] - not the family, the epicentre of Soviet era
solidarity (Shlapentokh, 1984). Facing the reality of a permanency of scarce goods and deficient
services, the average Soviet citizen had to find ways to make a living, literally.
Altman (1990) charts the (non)hypothetical movement of goods within a bounded community [D].
Citizen Petrushka desires a pair of shoes of import quality. He has the funds to pay for them, but as
they are in short supply, he is expected to add an ‘extra’. Since he has a small plot at his rural
residence (these small artisan plots were common in the countryside and essential to food
production throughout the USSR), he provides the shop attendant with four pounds of bacon from
his ‘informal’ (unregistered) pigsty; he similarly gifts a friend, an owner of a van, for lending his
vehicle for the day, so as to fetch supplies for his unaccounted pigs. On the way he stops at a
grocery in the nearby town, where he previously found a jar of Nescafe, only to be disappointed,
since all stock was dispersed in barter against other desirable goods or services: a seat on an
airplane to a popular route, spare parts for the kid’s bike, a courtesy gift to the medical practitioner,
and jumping the queue for a book in great demand at the public library. Through IER, the Soviet
system inadvertently turned its citizenship into budding entrepreneurs, constantly on the look out
for a barter opportunity. In Georgia everyone was a ‘hawk’ [A: individualism], or at least aspired to
be one; and since, without a personal support network, one was practically and figuratively a non-
person (Mars and Altman, 1983a; Altman, 1990) you would have been hard pressed to find in
Soviet Georgia anybody resigned to a ‘donkey’ role [B: fatalism]. For an ‘honour and shame’
society as was Soviet Georgia, that would equate with social death.
Here is a vignette about someone without adequate personal support, manoeuvring such a situation,
as recounted by a general store manager in rural Georgia. One day he was approached by his old
school master with the following friendly advice: “you were my pupil and that is why I warn you:
when I buy a box of Prima cigarettes
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I expect to get one kopek change from a coin of 15” (Altman,
1983: 287). The protagonist in this tale manoeuvres himself from hapless ‘donkey’ position [B:
fatalism] (“can’t even afford a pack of cigarettes”) to ‘vulture’ solidarity [D: community] (“we are
2
A popular Russian brand
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bonded; I am your old school teacher, so don’t dare take advantage of me”) or possibly ‘hawk’-by-
default standing [A: individualism] (“I may not have much in disposable funds, but my reputation
and integrity make me powerful, so beware”).
The symbiotic co-existence of the formal and informal economies
With the command economy adhering to its rigid five year plans, articulating meticulously detailed
targets that could never be met without the support of the informal economy, both became
inseparable in practice from each other, enmeshed in a symbiotic embrace, which dictated a kind of
‘live and let live’ attitude. Thus, Mars and Altman (1987a, 2008) present the case of a biscuit
factory that ran two parallel lines of the same product: one formal, the other informal, practically
indistinguishable. That required surplus labour, or labour ‘hoarding’ (Berliner, 1957; Arnot, 1988)
which was necessary in any case to meet the plant’s official output targets, so as to compensate for
common delays due to machinery breakdowns and late supply of raw materials, resulting in the
universal Soviet phenomenon of ‘storming’: intensive productivity towards the end of the monthly
or annual plan cycle. The supply of labour however was limited and any incentive had to be outside
the official pay, which was controlled by the appropriate state agency. The managers (of the formal
plant), who were also the partners (of the same, informal plant) had to allow regularly time off,
provide produce (biscuits) and raw materials (sugar, eggs, flour) as incentives; as well as
demonstrate special consideration in gifting employees on their birthdays or helping them out when
the need arose (e.g. provide transport, access to specialist medical care). That was the
‘psychological contract’ of employees in Soviet times.
This reality transposed into recruitment practice, for example, whereby a job’s person specification
in the biscuit factory included formal qualifications (e.g. professional skills) alongside informal
criteria (e.g. strong personal support network). Or, for example, a regularized relationship with law
enforcing agencies was required to enable steady production and protected distribution. Hence the
managers (partners) of the biscuit factory paid monthly ‘salaries’ (as these payments were known)
to different functionaries, graded by the potential harm they could inflict and their seniority. All in
all, the prevailing attitude has been one of ‘live and let live’. Thus, tolkachi [A: individualism] were
usually employed officially by the organisation they worked for [C: hierarchy], their role to aid the
attainment of the organisation’s formal goals through informal means. Employees in an
organisation [C: hierarchy], turned a blind eye to IER since they were implicated in them too [D:
community].
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A ‘live and let live’ attitude is a tacit acknowledgement of each other’s solidarity through symbiotic
co-habitation. The downfall of the Soviet economic system was attributed to factors as diverse as
the long term crippling costs of the arms race with the US and NATO in the context of a stagnating
economy; the episodic shortfall in grains production, requiring expensive imports at a time of
collapse in oil prices and dwindling hard currency reserves (Gaidar, 2007); to the anecdotal chronic
lack of photocopiers (Castells, 1996) that may have curtailed samizdat publications, but also stalled
innovation and the development of information networks. The false reporting of statistical data, a
widespread malaise (Grossman & Tremel, 1987) made it impossible for central planners to get a
grip on the declining economy, while Gorbachev’s desperate bid at reforms, introducing elements
of the free market in an attempt to disentangle the symbiotic embrace of the formal and informal
economies (in effect, a clumsy solution: Verwiej et al., 2006), led to the collapse of the USSR.
The new Russian economy and its construction sector: a case study in post-Soviet IER
Russia’s ‘descent into capitalism’ (Burawoy 1997) has been first celebrated as a successful case of
transition to capitalism, yet with the model of market democracy appearing increasingly at odds
with reality, has been debated as a more complex and nuanced case of evolutionary transformation
(Stark and Bruszt, 1998). Teleological views of Transition (Åslund, 2004) have blamed the failure
of reforms on enterprise management dubbed as ‘bastions of irrational conservatism’ (Grancelli,
2012). Path-dependency approaches have stressed the explanatory role of post-socialist legacies at
institutional level (Schwartz and McCann, 2007), while enterprise-level case study research has
shown the structural significance of workplace informal relations in retaining Soviet organisational
features (Clarke, 2007). In recent years a reassertion of the ‘Russian spetsifica’ (Dixon, Day and
Brewster, 2014) has been noted, in tandem with official paternalist and autocratic governance
3
.
Meardi (2012) and Sommers and Woolfson (2014) among others, have linked neo-liberal reforms,
migration and a trend towards informalisation processes of work with degradation of labour in the
Baltics and other EU countries Here we explore how IER affect all levels of the work organisation
in post-Soviet Russia..
Before the crash of 2008, the construction sector in Russia had boomed with rates of activities and
investment almost tripled (Rosstat, 2010). Public intervention has sheltered the industry from the
worst effects of the crisis. Moscow has occupied a key part in this trend, not surprisingly given the
combination of huge public budgets and a high concentration of top foreign and national businesses.
3
This is not to say that Russia has reversed the ‘reform’ process of liberalisation,
privatisation and de-regulation inspired by anglophile market economies of the 1990s
(Intriligator, Wedel and Lee, 2006). Despite appearances, the fundamentals of cuts to
welfare, flat income tax, free capital circulation and anti-union policies continue unabated.
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For twenty years the unchallenged political leader in the city, Mayor Yury Luzhkov, has been the
driving force behind this development, guiding Moscow’s transformation from Communist capital
to glittering centre of new wealth. This transformation has had a major negative impact on
Moscow’s architectural heritage and natural resources, with the parallel growth in corruption
(Vasilyeva, 2009). The removal of Luzhkov in 2010, amidst scandals surrounding the colossal
failure of the transport system, his pharaonic building plans and Mrs. Luzhkovska’s dealings in
dubious investments, are in part recognition of this heavy price (Sputniknews, 2011).
The cases discussed in this part show how the subsumption of Soviet informal practices into
contemporary Russian capitalism reproduces a labour process, which sustains informality, breeds
corruption and produces defective goods and services. The construction sector in large Russian
cities is a perfect example of this migration of practice: it presents features such as a multiplicity of
private-public relations around development, permits, financing, procurement and safety
inspections, as well as reliance on cheap migrant labour, which are widespread in the sector
globally; at the same time, a highly decentralized organisation and fragmented production cycle
favour the retaining of the traditional Soviet management practices based on the brigade system
4
,
common to the organisation of production under Soviet rule. .
Widespread corruption in contemporary Russia is widely recognised by political analysts and public
opinion alike (Rogov, 2010). Yet, both popular and learned discourse often remain on the high
ground of institutional and governance mechanisms, contrasting the opacity prevailing in the East
with the transparency of Western market democracies and pointing at socialist legacies as root
causes (North et al., 2007). Less often attention is directed towards the very places where IER
occur, i.e. the workplace and the organisation, to probe into the continuation of Soviet informal
practices, including the extension of relations with corporate governance and the new Russian
institutional framework.
IER are not confined to the high organisational grounds, in the clubs and restaurants where
developers, financiers and public officials seal their deals; they are deeply engrained into the very
fabric of economic activities, engulfing employment relations and work organisation. Russian
analysts point their finger at the ubiquitous practice of off-the-books employment, made particularly
pernicious in construction for the widespread use of migrant labour (Anonymous, Russian Academy
4
The brigade is a semi-autonomous work group that undertakes, as a unit, a given
assignment, contractually or informally, supplied (at least in theory) with the means to attain
it.
14
of Sciences, 2010). Reliance on long chains of intermediaries for recruitment and on gang leaders
for work organisation, are blamed for inhibiting the build-up of management capacity in the
workplace (see Morrison et al., 2014).
Practices such as the use of informal recruitment and employment, dangerous working conditions
that stimulate high turnover, poor discipline and failure of skills development affect the quality of
production, as well as generating the grey areas where corruption proliferates. The consolidation of
the brigade system with gang leaders and foremen presiding over recruitment networks and work
organisation; and the expansion of equally opaque agency recruitment from areas like Central Asia,
have sheltered employers and workers alike from the unclear and volatile regulations of the formal
economy; but thus made certain that most areas of work organisations’ activity remain entrenched
in IER (ILO/Ebert, 2013)
From limitchiki to migrant labour
In 2008 the construction sector in Russia employed 5.5 million; with a 3.5 growth relative to 2004,
more than 17% of these, approximately one million, were migrant workers, but including illegal
migrants the figure is thought to be 2 to 3 times higher. This is the sector with the highest
percentage of immigrant workforce; about four times the overall average (Zayonchkovskay et al.,
2009: 34; Tyuryukanova 2009: 155). Two thirds of the latter, or 74%, are CIS
5
citizens taking
advantage of the visa-free regime and short-stay work permit system set up in 2007 to facilitate
temporary work migration (Voronina, 2006). Despite liberalization only about 45% of them are
fully regularised while the majority remain in a grey area of informal employment or illegal
residence. Employers do not see any obligation to employ migrants officially (Human Rights Watch
2009: 29) and/or anyone else for that matter when circumstances permit them to do so: “in other
words, an absolutely legal migrant, who has met all formal requirements, may nonetheless become
an illegal worker” (Zayonchkovskaya et al., 2009: 58). Of course sourcing cheap labour from
abroad (or from other ‘low-wage’ national areas) is not uncommon to the construction trade
universally, making it into the ultimate ‘ethnic niche’ industry (Fellini et al., 2003) and the
umbilical cord between casual labour and ethnicity has been documented elsewhere (Stymeist,
1979). Indeed, the heavy reliance on migrants as well as the developing of ambiguous policies and
populist discourses signals a convergence with ‘fortress Europe’. A difference, however, is
represented by the persistence of local authorities in enforcing compulsory residence (propiska),
introduced by Stalin in the 1930s to prevent mass outflows towards large urban centres. The system
5
CIS = Commonwealth of Independent States. Comprising all former Soviet republics
with the exception of the Baltic states.
15
did not prevent migration, fuelled by the prospects of better lives in the cities and their chronic
shortage of labour in less attractive jobs, but it put migrant workers at a disadvantage. They became
known as limitchiki
6
and Moscow authorities, first Yeltsin then Luzhkov have strongly defended
this system, the latter taking this stance further into populist anti-migrant campaigns. As a result
both internal migrants and foreign workers lacking permanent residency are excluded from social
security and full job contracts and at constant risk of deportation.
Dyma, aged 30, on the scaffolding since he was sixteen, points out: “I do not think that a passport
makes a difference: Russians too work informally – the firm has no interest having many
[employees] formally employed”. Viktor, a Russian from the Volga region who worked for one the
‘safest’ employers in Moscow (a protégée of the former mayor with a steady procurement portfolio)
voiced equally sceptical remarks: “I am officially employed, yes, but it’s a fraud! We never get
holidays and as for sick leave they only allow it in serious cases, which are normally their fault
anyway” (Viktor, Moscow 2010).
Such irregularities have lent employers a way to casualise labour but also forced them into collusion
with authorities to avoid hefty fines against the employment of irregular migrants. Interviewees
confirmed the need for protection to avoid migration police raids: “When we worked for the
administration, they [police] did not bother us . . . the management would complain to the
governor” (Roman). Experts refer to the ‘Moscow system’ as an arrangement whereby large
shipments of Asian workers are organised by agencies circumventing quota restrictions for
businesses with considerable political clout. Outside Moscow the prohibition to employ foreign
workers is strictly enforced despite widespread illegalities in other areas (Factory Director, Ivanovo
2012).
The informal management of the employment relationship: intermediaries, ethnic networks and
gang leaders
A crucial role in deciding migrants’ employment is played by intermediaries. Gang leaders and site
managers preside over long chains of recruitment matched by chains of subcontracting on the
employer‘s side.
“To work in another sector you need contacts: everything goes through intermediaries. . . . This is
the way it works: there is a brigadir who has long worked in the field. And people know that if you
6
Limitchiki = after the English cognate limit which stands for workers individual
allocations (Filtzer, 1994 pp. 27-30)
16
turn to him there’s a job awaiting you. It is up to his intelligence and his ability to bargain, whether
people go to work with him or not. Wages are also his responsibility” (Victorio, Kishinev 2012) -
universally reported as being paid informally in cash.
Trades are segregated and there is an understanding that different jobs belong to specific
nationalities.
[At the construction site of a Volkswagen factory in central Russia] “Uzbeks, Turkmens,
Khokhli [derogative for Ukrainians], Moldovans and Byelorussians work there; few Russians.
Our brigade is made up of Moldovans from Transdnistria. People know each other: the brigadier
recruits his owns. Site superintendents are Russians, the managing director too, the president is
Swiss”. (Slavik, Zolotiefka 2010)
Pay and employment terms are differentiated according to citizenship, nationality and place of
residence. Respondents often report how Russians would enjoy a privileged position including
higher pay, formal employment, holidays and welfare entitlements: “The Russians I work with get
higher wages; they are specialists with seniority records” (Fedor, Cainari 2012). Slavic migrants
will have to do with piece-rate pay and normally struggle to gain formal employment and therefore
are always exposed to the threat of non-payments and summary dismissal. “Qualified workers leave
– why is that? Wage arrears: you can’t even get what you earned!” (Slavik, Moscow 2011). Asian
workers are reported earning a fraction of the standard wage as their job is paid in bulk to their
foreman: “Asians work with Asians. I saw it myself that elsewhere, they are paid less. They work
less effectively. Sometimes they lack no skills, just documents. It is their own compatriots that
cheat them” (Vitja, Moscow 2010).
Nevertheless, jobs in construction are not uniformly illegal, dangerous or badly paid. That is highly
dependent on the size, reputation and financial position of a company. Neither are networks
personnel conveyer belts barring individual choice. Personal strategies can aim at either advancing
towards better employers or progressing in the recruitment chain. The prevalent strategy though
seems to exit the industry, possibly retire to one’s regions of origin, to less haphazard jobs, resulting
in the industry experiencing a high turnover, depletion of skills and ultimately productivity loss.
The informal workplace: post-socialist traditions and casualisation
The prevalence of individualised relations extends to work organisation. The brigade leader
represents a trait d'union between the business organisation and the worker’s collective. In this
fashion, managing and organising retain typical Soviet characteristics such as on the job training,
17
relative worker’s autonomy and paternalistic control. A full description of the organisational
structure at a construction site provided by Vitya is strongly indicative of this tendency:
“The brigade leader is on site but the site manager is on another job. The construction firm
has its own manager and (down the hierarchy) a superintendent, a foreman. They have their
own functions: The foreman checks the work and reports back to the brigade leader about
the whole site. The foreman (also) orders supplies – I tell him if something is needed. The
superintendent deals with the supply of concrete, he checks the quality of the concrete. The
brigade leader seeks work (for team members). In each brigade there are several teams. I
answer for the casing. We have like communism or socialism: we come together and decide
everything collectively. . . . The brigade leader pays off wages. The enterprise
documentation shows something else.”
The organisation at these sites reflects the tendency of enterprises relying on state procurement
contracts to retain old Soviet practices (Kozals and Izyumov, 2011). Accounts from another
business confirms the widespread nature of this style of management based on casual supervision,
workers’ autonomy, a strong pressure to meet deadlines as well as direct bargaining over pay and
benefits:
“The job is always the same, there is nothing to control. They come and check once a week.
The brigade leader is one of us [Moldovan] the superintendent is local. The brigade leader
organises the work, he is not too strict but he pressures us. If we fall behind with the plan he
shouts: “faster! Let’s finish this month!” We do not get paid holidays, it’s the fault of the
brigade leader – he could do much more for his brigade”. (Andrei, Zolotievka 2010)
With the worsening economic crisis and the deepening of IER practice, pay and working conditions
have deteriorated even in the best enterprises. The involution of Soviet habits is also identified in
other areas. In Soviet times, pressure to achieve targets with poor materials and faulty equipment to
strict deadlines encouraged managers and workers to violate technological discipline leading to
poor workmanship and hazardous work. Lengthy shifts and disregard for health and safety are still
universally reported by respondents.
“Yes, it is heavy and dangerous work, when we work at height. [Safety equipment]
gets in the way of working . . . there were [fatal incidents], people fell off . . . here
they do not check; you have drunks at work . . . in 4 years 2 died: a guy just arrived, no
18
induction, fell and crashed to the ground. Minor injuries are more frequent”. (Viktor,
Ivanovo 2010)
The fragmentation of the building cycle and workforce segregation has worsened this predicament.
If Russian internal migrants with formal contracts are admittedly subjected to hazardous work,
other groups may fare even worse.
“Tajiks and Kirgiz, not Moldovans . . . work as slaves in Moscow. They work
twelve/thirteen hours a day – we could not keep up with them despite the equipment and
they had just shovels.” (Gregory, Cainari 2010)
The condition of limitchiki proves this is not entirely a new phenomenon. The casualisation of
employment, however, has extended it and made it more difficult to overcome, as in the past,
through informal bargaining and formal integration. Violation of rules that was once justified by the
need for meeting state plans, is now ascribable to the search for maximum profit and tolerated by
corrupted inspectors and political clout. Misappropriation of public resources was commonplace
under socialism, indeed a daily necessity, benefiting the many. The marketization of the economy
though has cemented these resources into a bond between a selective private ownership class and
public powers. Informality has expanded in order to inject efficiency – i.e. increase speed of
execution and cut costs. Not surprisingly, workers display little appetite for poorly paid and
increasingly dangerous work. They also insist, whenever possible, on obtaining the welfare enjoyed
in the past (“Russians are either managers or average workers but have greater demands in terms of
welfare package and working hours. They don’t care so much about work and want welfare”:
Moscow employer, 2012). A dependable workforce of ‘migrants’ has therefore proved essential to
overcome these constraints. Networks and brigade collectives act as informal mechanism of
selection and control, managing an otherwise disorganised labour process. The informalisation of
employment relations has provided private owners with a new way of profit maximization without
risking open social conflict or even more dangerous confrontations with the state. The political
elite, holding the tap on lucrative development contracts and informal labour supplies, has built
them into powerful tools for engaging with businesses. The outcome of these processes is a
defective labour process that puts workers as well as the final users of their work at risk.
19
Discussion and Conclusion
We wished to highlight the place, role and dynamics of the informal economy in everyday
organisational lives - hitherto a neglected aspect in organisational theory and largely ignored in
managerial practice classrooms.
Ontological paradigms create their own biases. Insisting on a meta political-economic view of the
Soviet system - the common trend at the time, has helped avoid a ‘view from below’ at the micro
and meso levels of analysis (Kornai, 2013) thus ignoring the role played by IER in organisational
reality, even though these were glaringly apparent. Similarly, methodological individualism has
vitiated scholarship on informality in post-Soviet economies. By positing actors’ agency in the
informal economy as external or opposed to organised contexts, not only the role of structures as
both inhibitors and enablers of their actions is overlooked, but also the relational dimension as
constitutive of the social subject is hindered (Grancelli, 2012; Morris and Polese, 2013). As our
analysis suggests, informality can be seen as the locus where new relations are forged resulting
from and in changes of the labour process. The ‘Moscow system’ of contemporary construction has
taken this fiddle prone
7
industry down a new path. Whereas traditionally the triadic relationships in
the trade saw collusion between employer and employee at the expense of the client, here it is the
worker (who normally is not legally an employee) that is disadvantaged. There are hardly any core
employees in the way the system operates; nearly all are temporary peripherals, with little
employment rights (if any). In some ways, workers fare worse now than in Soviet times. Whereas
under socialism the right to employment was universal and the welfare safety net, though thin,
protected against the vagaries of hunger and ill health; in contemporary Russia existence for a
growing number of construction workers has become precarious.
Cultural Theory and the labour process
Cultural theory may help us discern the changes that have taken place in terms of the feedback
dynamics between the ‘ways of life’ during Soviet times and in contemporary Russia. In Soviet
times, with employment being both a right and a duty, workers were necessarily operating in an
institutional framework, typically a hierarchy, that was nevertheless embedded within an ideology
of an egalitarian community (Mars and Altman, 1983a). IER followed a descending order of access
to opportunities and privileges akin to a ‘wolves pack’ (Mars, 1982). In contemporary Russia, many
7
Fiddle prone: “any work context where a propensity exists for a job to offer regular
material rewards that are excluded from formal accounts or which are included under
ambiguous or deceptive headings” (Mars, 1994: 137).
20
of the construction workers documented in this paper are marginalised: unregistered, lacking the
correct papers, at a constant threat of prison and deportation; and if accidentally injured, without
recourse to health and rehabilitation services, or the law: amounting to an archetypal description of
fatalist solidarity [B]. Finding themselves in that unenviable position, it is of little surprise
therefore that in order to mitigate their frail bargaining options, workers preferential mode of
engagement harks back to the work organisation of Soviet times. Similar practices and actions – the
work collective and the entrepreneurial agent – keys to Soviet IER, now sustain a different system.
In Cultural Theory terms, during Soviet times the labour process was enshrined in a hierarchy [C]
embedded in an ideology of egalitarian community [D]. These were the dominant ‘ways of life’, or
in social-economic terms, the system’s propensities (Kornai, 2013). IER added the entrepreneurial
flair of competitive individualism [A] necessary to enable the working of the formal economy. In
some sectors of the economy, such as heavy industry and defence, competitive individualism
enlisted for private gain was marginal. In other sectors, notably consumer goods, it was pivotal and
sometimes undistinguishable from the formal side of the economy, as demonstrated here in the case
of the biscuit factory.
In Contemporary Russia, within a framework of a market economy, the labour process dominant
‘ways of life’ (propensities) are competitive individualism [A] in tandem with hierarchy [C] but
echoes of the egalitarian community [D] are still to be heard. Thus, like in olden times, the brigade
leader is required to show ‘entrepreneurial’ flair [A] not only by gaining the commission in the first
instance, but also in negotiating extra benefits for his comrades, so as to attract and retain good
team members - as indeed would be expected of a wolves’ pack alpha male [C]. Like in the Soviet
system, the collective [D] is an important hub for team consolidation and solidarity, acting as an
allocation centre for work assignments and as a distribution mechanism for formal benefits as well
as filtering access to fiddle opportunities.
What has changed since Soviet times is the relationship among agents: workers, entrepreneurs,
company owners, local government and state officials, effecting different social outcomes. The
prevailing attitude of ‘live and let live’ under socialism which fostered a universal culture of
fiddling state resources with horizontal and vertical interdependencies, has been replaced by an
attitude of ‘each to his own’ and the appropriation of state resources by the selected few (Intriligator
et al.,2006) – giving rise in some sectors, like the construction sector documented here, to
atomisation, reconstitute control and vertical isolation. As in Soviet times, IER at the workplace
21
proliferate; but whereas before the benefits of IER at work were the privilege of the many,
increasingly benefits are now reaped by the few.
The globalization of IER
The shift in workers informal status from full partnership in the informal economy to becoming
casual participants may not be confined to the construction sector, or to Russia, or indeed to other
transition economies. With the increase of precarious work in developed economies: 0-hours
contracts, enforced self-employment, longer working hours and ‘sweatshop-like’ work conditions
(Ahmad, 2008; Ghezzi, 2010) and the swaths of unregistered and unaccounted (literally) businesses
in the developing world (ILO, 2013) the changes documented here may bear witness to a wider and
longer-term trend.
In globalization, what happens in Moscow may well have begun to siphon off to the seemingly
protected shores of the developed economies. IER concern “a large and growing proportion of the
global workforce” (Wilson, 2014: 1); while increased reliance on migrant labour - a large
proportion of which finds itself working in the informal economy, has been fathomed a “global
economic restructuring which seeks to expand the supply of cheap labour both in the less
developed, but also in the more ‘advanced economies’” (Likic-Brboric et al.,: 678). It has been a
long time since the informal side of organisations was considered but a poor relation of its formal
side (Santos, 1979). Nevertheless, informal economic relations have as yet to find their way into
organisational behaviour textbooks and classroom curricula. We hope that our paper will have
contributed to these prospects.
22
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Fig. 1 Culture Theory four ‘ways of life’ (adapted from Patel, 2015)
C
Hierarchical: high group-high grid
This culture emerges when people attribute great
importance to having strong bonds with one another
and expect a two-way accountability. They prefer to
follow rules and regulations and attribute great
importance to standardized ways of working. They
willingly sacrifice opportunities in favor of stability
and security. Inequality in roles and status is also
observed. Those with lower status show respect and
deference to those who are their seniors.
A
Competitive-individualist: Low group-low grid,
A free market culture. Since members attribute
little importance to the group, they do not hold
themselves accountable to group members, nor do
they expect other members to account to them.
Little importance is accorded to the past, and
individuals prefer spatial and social mobility.
Since all boundaries are provisional and transitory
this culture allows maximum freedom for
negotiating contracts or choosing allies.
Pragmatism and competitiveness are core
cognitions. The ‘bottom-line’ is what counts
rather than processes, rules and roles.
D
Egalitarian community: high group, low grid
Well-illustrated by Mars’s (1988) study of Israeli
Kibbutzim, members of this culture are closely-
bonded, share common values, engage in frequent
face-to-face interactions, and enjoy many-sided
relationships. They prefer collaborative decision-
making and reciprocal exchanges. Voluntarism and
care for others in the group are valued principles, as is
equality of status, rights and obligations within the
group. There is a tight boundary between the inside
and the outside world, encouraging a worldview of
‘us’ and ‘them’.
B
Fatalistic: Low group-high grid
In this culture, individual behavior is highly
constrained by socially-assigned classifications.
People have little freedom regarding whom they
interact with or how they choose to live their lives
One enjoys little group support, which leads to a
sense of isolation and a belief one has little
control over their fate.
G
R
I
D
31
low high
GROUP
