When Past Holds the Future: The Retention of Market-Resistant Institutions
Published 04 May 2017
Societies can be differentiated on the basis of the extent of market penetration. The least modernized societies are not only economically disadvantaged but also suffers from the loss of growth potentials. Such societies are marked by their retention of structures and institutions which are not market friendly. The purpose of this essay is to examine the major reasons that make societies closed to establishing market friendly institutions and structures.
Resisting the Market
In non-market based economies, the information and energy flows between the four major functions such as adaptation, goal attainment, integration and pattern maintenance are extremely weak or minimal. The social subsystems of economy, culture and polity here are rigid and inflexible. It is always important to remember that economy is not separated from the society and political and cultural factors do play a decisive role in the (re)shaping of the economy. Still, advanced societies are marked by better differentiation of economy from polity and culture. In an embedded economy, economy is fully submerged in society as a whole. Here, social institutions are multifunctional and “economic relations are embedded in broader social relations” (Holton, 1995, p.18). In this context, an economic function such as commodity exchange has social, political and cultural meanings as well. In market-resistant societies, economic functions have larger influence in shaping social bonds and cultural features. On the contrary, in a market based economy, “the mechanisms of price determination and calculations of cost-benefit do not carry in any way direct cultural or political significance” (Holton, 1995, p.18). It certainly allows the economy to be more autonomous and self-regulating. The communal underpinnings of economic functions are the major bulwark against the free market exchange in market-resistant societies.
It has been argued that “the self-interest of the individuals and firms in a market economy with good economic policies and clearly delineated property rights is a major force for crime prevention, lawful behavior, and law enforcement” (Olson, 2000, p. 103). The idea is that the self-interested individuals in a market friendly society are not self-interested in maximising their profits but also in preventing the profit from being accumulated in illegitimate means. Smaller groups such as the primitive tribes are “normally voluntary groups and are typically governed by consensus. Many of the most primitive tribes are acephalous, so there often is not an individual in a position to coerce the others” (Olson, 2000, p. 91).
It is very much possible for societies in which free market solutions are fully evolved to have strong economic growth. However, there can be very serious problems in the long run. Olson has pointed out that “the economically most successful autocrats not only tend to have long planning horizons but also to resist or repress special-interest groups: they tend to have “hard” states that do not usually adapt their policies to organized interests in particular occupations or industries” (Olson, 2000, p.100). The resistance towards market in such societies cannot be overcome without modernising them with democratic and market friendly structures and institutions at all the realms of society.
To conclude, it is possible to argue that the market-resistant societies are trapped in their past and their inability to develop modern institutions prevent them from being market friendly.
- Holton, Robert, J. (1995). Economy and Society, Oxon: Routledge.
- Olson, Mancur. (2000) Power and prosperity: outgrowing communist and capitalist dictatorships, New York: Basic Books