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Understanding the Institutional Hurdles in the Russian Forest Sector

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Understanding the Institutional Hurdles in the Russian Forest Sector : LICENTIATE T H E SI S MTAS-OLOV OLSSON B MTAS-OLOV Barriers to Change? arriers to Change? Understanding the Institutional Hurdles in the Russian Forest Sector – Understanding the Institutional Hurdles in the Russian Forest Mats-Olov Olsson Sector Luleå University of Technology Department of Business Administration and Social Sciences, Division of Political Science : Universitetstryckeriet, Luleå :|: -|: - -- ⁄ -- To the memory of Jan Åke Dellenbrant Preface The main part of the research reported in this thesis was performed in the period April 1997 through December 2001, when I was working in the Forestry Program of the International Institute for Applied Systems Analysis (IIASA) in Austria. In a study labeled Institutions and the Emergence of Markets – Transition in the Russian Forest Sector a series of case studies of the institutional embedding of the forest sector in eight Russian regions was performed by a small core team of IIASA researchers in collaboration with a number of Russian colleagues and PhD students enrolled in the institute’s Young Scientists Summer Program. The intense intellectual exchange in this research group has meant a lot for me and my work with this thesis and I would like to express my gratitude to everyone involved in the project. It is not possible to name all of these people here, but they can all be found in the study’s List of Publications (see Appendix). Several people should, however, be named for all the help and support they offered me during the work with this thesis. First of all I would like to thank my friend and thesis supervisor, Prof. Lars Carlsson, and his colleague, Prof. Nils-Gustav Lundgren, of Luleå University of Technology for their enthusiastic support and invaluable advice. I would also like to thank Prof. Sten Nilsson, vice director of IIASA and leader of the institute’s Forestry Program, without whose initiative and persistent support the “institutional framework” study would never have materialized. Over the years Sten has also promptly read my various drafts and responded to my questions with an exceptional punctuality and sense for expediency. Other colleagues at IIASA to whom I would like to express my deep gratitude include Prof. Anatoly Shvidenko, Dr. Michael Obersteiner, Dr. Soili Nysten-Haarala, Mr. Ian McCallum, Mrs. Cynthia Festin, Mrs. Shari Jandl, Dr. Mattias Jonas, and Dr. Vladimir Stolbovoi. Both before and after my stay at IIASA I have been working at the Centre for Re- gional Science (Cerum) of Umeå University. The current director of Cerum, Assoc. Prof. Lars Westin, has been of great help in finding solutions to the many intricate problems with regard to science as well as finance that repeatedly have threatened to put a premature end to my work with this thesis. I sincerely thank him for his efforts. Last but most importantly, I would like to thank my wife Marianne and my sons Tobias, Anton, and Peter, for putting up with me and being able to live a normal life despite my mostly very distracted and often disturbing presence in the house. Thank you ever so much for giving me your unwavering support despite the many difficulties that we have been forced to go through especially during this last year. What would I do without you? The study of which this dissertation is a part was mainly funded by the FRN – the Swedish Council for Planning and Coordination of Research and subsequently by Formas – the Swedish Research Council for Environment, Agricultural Sciences and Spatial Planning, the successor of FRN as the Swedish member organization of IIASA. The generous support from these two research councils is hereby gratefully acknowledged. The study also received financial support from the Swedish Academy of Sciences, the Kempe Foundations, and the Västerbotten County Administrative Board, as well as from IIASA itself and Cerum, Umeå University. Umeå, November 2004 Mats-Olov Olsson i ii Table of Contents Preface ............................................................................................................................i Table of Contents......................................................................................................... iii 1. INTRODUCTION................................................................................................1 1.1 Background........................................................................................................1 1.2 Organizational Setting and Purpose of the Study..............................................3 1.3 Structure of the Thesis.......................................................................................4 1.4 Assumptions Behind the Purpose of This Study ...............................................5 1.5 Analytical Approach..........................................................................................6 2. TRANSITION, INSTITUTIONAL CHANGE AND DEMOCRATIZATION IN RUSSIA – A NOTE ON THEORY ........................8 2.1 Setting the Stage ................................................................................................8 2.2 Transition the Russian Way.............................................................................11 2.3 Institutional Change in the Russian Context ...................................................14 2.4 Democracy, Democratization and Trust-building Policy-Making ..................17 3. PAPER SUMMARIES.......................................................................................21 I. Institutions and the Emergence of Markets, Transition in the Arkhangelsk Forest Sector...............................................................................21 II. The Russian Detour: Real Transition in a Virtual Economy? .........................25 III. Systemic Interventions to Promote Institutional Change in the Russian Forest Sector ......................................................................................29 4. STUDY RESULTS – IMPLICATONS FOR THEORY AND POLICY ..........32 4.1 Participation, Civil Society, Legitimacy and Trust .........................................35 5. TOPICS FOR CONTINUED STUDY...............................................................37 References....................................................................................................................38 Paper I. Carlsson, Lars, Nils-Gustav Lundgren, Mats-Olov Olsson and Mikhail Yu. Varakin. (1999). Institutions and the Emergence of Markets, Transi- tion in the Arkhangelsk Forest Sector. IIASA Interim Report (IR-99- 021). Laxenburg, Austria: International Institute for Applied Systems Analysis. Paper II. Carlsson, Lars, Nils-Gustav Lundgren, and Mats-Olov Olsson (2001). The Russian Detour: Real Transition in a Virtual Economy? Europe- Asia Studies, Vol. 53, No. 6, pp. 841–867. Paper III. Olsson, Mats-Olov (2004). Systemic Interventions to Promote Institu- tional Change in the Russian Forest Sector. Submitted. Appendix: List of Publications from IIASA’s Institutional Framework Study iii iv 1. INTRODUCTION 1.1 Background With Perestroika and, especially, with the disintegration of the Soviet Union in 1991, life in Russia – normal habits and ways of conducting business – suddenly and drasti- cally changed. Market economic features (like market set prices) started to emerge. However, the change was not smooth and uniform. It proceeded unevenly in time as well as in space. Since what happened to price formation affected the basic function- ing of the economy – producers started to react on “real” income-cost relations – its impact was profound and immediately noticeable. The “driving force” in the econ- omy was no longer the economic plan but rather the potential of making profits. The subsequent privatization only added further momentum to this fundamental transfor- mation process.1 However, it soon became evident that such a profound system change is no fast and easy venture. Most features characterizing the old system had to be radically changed or discarded altogether. In the years since the disintegration of the Soviet Union quite a lot has indeed happened. Radical reform measures have been heavily subsidized by the western world, notably led by the United States. But it is equally clear that much of the highly raised expectations of those directly or indirectly promoting and sup- porting these changes have not yet been met (see. e.g., Arrow, 2001). Still, a large number of the Russian business firms operate under rules that have little or nothing to do with conditions prevailing in a “normal” market environment. The question is why. Present-day Russian society, where radical market oriented reforms are a stated ob- jective, offers a kind of “laboratory” for studying the roots and causes of system changes. Here, social changes are currently more dramatic and they happen at a much faster pace than in most other parts of the industrialized world (and especially com- pared to Europe). Whatever the causes of this social change may be it is evident that institutions play a role, either in the sense that they are affected by the changes or in the sense that they influence them. Despite the obvious complexity of the task of reforming the entire economic system and the policy-making procedures in Russia and other transition countries, domestic reformers as well as many foreign advisors nevertheless assumed that the transition would somehow automatically, through the workings of the emerging market forces, lead to an economy characterized by a greater allocative efficiency and an increase in the population’s living standards
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