NEW SYSTEMIC INSTITUTIONAL APPROACH

FOR COMPARATIVE
POLITICAL AND ECONOMIC ANALYSIS
Svetlana Kirdina
Institute of Economics,
Russian Academy of Sciences,
Moscow

URPE at ASSA
January 4-6, 2013
San Diego, California
 Outline
2

 Attempts to rethink global market capitalism

 Systemic paradigm and institutional analysis
in modern economic theory
 Systemic and institutional ideas to develop the
Marxian approach
 Institutional Matrix Theory, or X- and Y-Theory
as a new systemic institutional approach for
comparative studies
 Conclusion

URPE, San Diego, USA, January 2013

 Some attempts to rethink market capitalism: not one but two (by at) types of
economies

 1853 – Karl Marx (Germany) about two paths of

development: European one (see “Das Kapital”) and “Asiatic
mode of production without private ownership of land”
 1939 – Walter Eucken (Germany) about “exchange
economies” and “centrally planned economies”
 1953 – Karl Polanyi (Hungary-Austria-Canada) about market
(exchange) and redistribution in the economy
 1990-th – Russian scholars Natalia Drozdova, Nadezhda
Lebedeva and Olga Bessonova with their separate
institutional concepts about non-market historical path of
Russia’s economy
 2002 – Steven Rosefielde (USA, North Carolina) about market
self-regulating category A economies and culture-regulated
category B economies

URPE, San Diego, USA, January 2013

 Systemic paradigm in
economic theory-1
4

 The systemic approach deals not just with

the individual (mereological) details of an
economy but with the social system as a
whole, and not just with the economy but
also with the political, ideological, and other
dimensions. It pays special heed to the
interactions between spheres. The most
general features of the system paradigm that
appear in economic research are described
in the well-known study by J. Kornai (1998).

URPE, San Diego, USA, January 2013

 Systemic paradigm in
economic theory-2
5

 Interrelations between the whole and its parts are the primary
subject of social systems analysis;
 Research focuses on the institutions that define the framework
and flows of specific processes. Institutions are understood in a
broad sense as structures formed historically and developed
“evolutionary”;
 There is a close connection in understanding the current social
order in economies alongside of the historical process in which
it appeared;
 Primary attention is paid to major changes and deep
transformations, rather than to small and constant changes;
 System “dysfunctions” are inherently built into any system,
which may be compensated for but not eliminated since their
self-reproducibility is deeply rooted in the system itself.

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 Main research program with
institutional approach in
6 comparative studies are

 Comparison of Economic
Systems (CES),
 Comparative Institutional

Analysis (CIA),
 Ordoliberalism by W. Eucken

 Regulation Theory of French

School
URPE, San Diego, USA, January 2013
 Methodological principles in the
analysis of economic systems
7

 Development of an universal and ideologically neutral language

to describe different economic systems;
 Definition of economic system as an institutional structure;
 Holistic approach focused on the economic system as a whole
not on the economic agents’ behavior;
 Institutional approach and the construction of the underlying
structure of institutions (the morphology, a term by W. Eucken),
forming the basement of economic systems;
 Comparative and typological analysis, based on the underlying
structure of institutions;
 Hermeneutic methodology, which results in elaborating
“ordoliberal orders” (W. Eucken) or “modes of regulation”
(according to Regulation theory) and understanding real-life
economic systems as special cases of these orders or modes.

URPE, San Diego, USA, January 2013

 Marxian approach and
Institutional Matrix Theory
8 (IMT), or X- and Y-Theory
 While Marx investigated in details only one type of society and
did not analyze societies with so-called Asiatic mode of
production, IMT deals with all kind of societies.
 IMT, or X- and Y-theory, rejects Marxian economic determinism in

favor of a more open-minded approach to social and political

causality and the creation of history.
 We follow Marxian historical materialism but admit that thought

processes initiate human historical activity and praxis (Cox,

1996). So institutions are objectively (materialistic and
historically) determined and also ‘human–made,’ which involves
subjective and teleological features.
 After Marx, we are regarding society as a structured whole with

three main spheres – economy, politics and ideology.

Aggregations of interrelated basic economic, political and
ideological institutions are defined as institutional matrices.

URPE, San Diego, USA, January 2013

 Main assumptions of
Institutional Matrices Theory
9 (or X- and Y- Theory)
 Each sphere (economy, politics and
ideology) is regulated or guided by a
particular set of basic institutions made-in-
a-society’s image (i.e. reflexively).
 Economic, political and ideological
institutions represent the “institutional
matrix” of human societies and as such can
be studied by political economists,
economic sociologists and other scholars.
 Two main types of institutional matrices can
be identified: the X-matrix and the Y-matrix.

URPE, San Diego, USA, January 2013

 X- and Y-matrices
Redistributive economy

In
div
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ca
Un polit X

it i

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du
gy an

de o l
ita ica

a
or e p
olo ari

lis
ry- l o

tic
ide unit

tiv
ce rde

ide
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nt

Y
mm

de
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liz

Fe
Co
e

y
d

Market economy
* Redistributive economy with the Center * Market
(exchange) mediating economic transactions
economy
* Centralized political order *
Federative political order
(top-down model) (bottom-up model)
* Communitarian ideology *
10
Individualistic ideology (We over
 Institutions of X- and Y-matrices
11
in the economy and their functions
Functions of institutions X-institutions Y-institutions
1. Regulating access to Supreme conditional Private ownership
goods (property rights ownership
system)
2. Transfer of goods Redistribution Exchange
(accumulation- (buying-selling)
coordination-
distribution)
3. Interactions between Cooperation Competition
economic agents
4. Labor system Employed (unlimited Hired (short and
term) labor medium term) labor
5. Feed-back loops Cost limitation Profit maximization
(effectiveness indexes) (Х-efficiency) (Y-efficiency)

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 Institutions of X- and Y-matrices in
politics and their functions
12
Functions of institutions
1.Territorial administrative
organization of the state
2. Governance system
(decision making)
3.Type of interaction in the
order of decision making
4. Access to governing
positions
5. Feed-back loops
X-institutions Y-institutions
Administrative system Federative structure
(unitarity) (federation)
Vertical hierarchical Self-government and
authority with Centre on subsidiarity
the top
General assembly and Multi-party system and
the rule of unanimity the rule of democratic
majority
Appointment Election
Appeals to higher levels Legal suits
of hierarchical authority

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 Institutions of X- and Y-matrices in
13
ideology and their functions
Functions of institutions X-institutions of Y-institutions of
communitarian ideology individualistic
ideology
1. Core principle of social Collectivism Individualism
action
2. Normative understanding Egalitarianism Stratification
of social structure
3. Prevailing social values Order Freedom

4. Labor attitudes Well-being-oriented Pecuniary-oriented

5. Principles of common Generalization- Specialization-

thinking Integralism/Holism Atomization/Mereism

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 Combinations of X- and Y-matrices
14

Y
Y
X X

Russia, China, India, Europe and Western

most Asian, Middle Eastern, Offshoots: the USA,
Latin American as well as Canada, Australia,
some other countries and New Zealand

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 Why do X- or Y-matrix institutions
prevail?
15

 The material and technological

environment of a society is a key
determinant for the prevalence of either X-
or Y- matrices.
 The environment can be a communal,
indivisible system, under which the removal of
some elements can lead to the disintegration of
the entire system, OR
 The environment can be non-communal, that is,
with opportunities for technological division and
possibilities for separate individual usage.
 In a communal environment the X-matrix
institutions are dominant and the Y-matrix
institutions are complementary. In a non-
communal environment it 2013
URPE, San Diego, USA, January is the opposite.
 Institutional matrices’ lock-in
16

 The IMT/X&Y-Theory approach accepts two models

as suitable for a nation’s characteristics. It
contends that attempts to impose an institutional
framework (‘lock-in’) on a society that does not
have the same institutional parameters will lead
to unsuccessful and potentially damaging results;
 IMT/X&YT suggests that even if the ‘wrong’
institutional structures are artificially or externally
constructed in a nation-state, in the long-run
these institutions will fail (or will be superseded
by the predominant institutional matrix).
“The economies of scope, complementarities, and
network externalities of an institutional matrix
make institutional changes overwhelmingly
incremental and path dependent.” – Douglass
North
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Diego, USA, January 2013
 Preservation of the leading position of one or the
other matrix in the history of nation-states
17

 Historical research shows that the prevalence of

one or the other matrices has a steady character.
Even if, by virtue of external pressures or under
influence of distorted internal reasons, attempts
are made to replace one dominant matrix (X- or
Y-) with the other subordinant matrix (Y- or X-),
such a situation of outright reversal is, as a rule,
short-lived (in historical time). For example,
attempts at systematic institutional change in
Eastern Europe under influence of the USSR or
the countries of Latin America under pressure of
the USA.
URPE, San Diego, USA, January 2013
 Proportion of GDP produced by countries with a prevailing X- and Y-matrix, 1820-
2010 (Maddison Data Base, sample of 34 nations~75% of World GDP)
18
X-matrix countries: China, India, Japan, Brazil and former USSR countries.
Y-matrix countries: Western Europe including Austria, Belgium, Denmark, Finland, France,
Germany, Italy, the Netherlands, Norway, Sweden, Switzerland and United Kingdom, and
Western Offshoots including the United States, Canada, Australia, New Zealand.

70%
Percentage in global GDP

60%

50%

40% X-GDP
30% Y-GDP

20%

10%

0%
1890 2010

URPE, San Diego, USA, January 2013

 Conclusion
19

 We do not reject outright “capitalistic (marketization)

economic doctrines” but recognize the failure of these
doctrines to understand “everything and everywhere” in
political-economic life.
 We develop a Marxian-based new systemic institutional

approach in order to deal with actual situations in a wide

range of nations in modern world.
 Institutional Matrix Theory, or X- and Y- Theory allows us to

distinguish two types of institutional complexes (so called X-

and Y-matrices) that interact complementarily within each
country.
 This theory puts forward some new arguments to explain

‘grassroots resistance’ to the capitalistic marketization in

many societies and answers the question “why capitalism
triumphs in the West and fails everywhere else” (Soto, 2000).
URPE, San Diego, USA, January 2013
20

Thank you for

your attention!
kirdina@bk.ru
www.kirdina.ru

Thanks Dr. Gregory Sandstrom (the Social and Political

Sciences Department of the European Humanities
University, Lithuania) for both his significant comments and
careful work editing this translated text and making
constructive suggestions in the English language.
URPE, San Diego, USA, January 2013