Investing in Social Capital: The Case of
Small-Scale, Cross-Border Traders in PostCommunist Central Europe*
CLAIRE WALLACE IN ASSOCIATION WITH OKSANA SHMULYAR AND
VASIL BEDZIR
According to latter-day followers of Polányi and proponents of the ‘new economic
sociology’, market activity needs to be understood in terms of the way in which economic
relations are socially embedded (Granovetter, 1985; 1995; Evers and Schrader, 1994;
Portes, 1995; 1994). Market relations are not only driven by economic forces, but require
particular social conditions. In this paper we consider the issue of small-scale trading in
post-communist societies as an example of the way in which economic relationships are
socially mediated. Private trade and exchange cannot take place effectively when there is
too much state control — as was the case under the previous communist regimes where
state-controlled distribution and production was designed to replace the free play of
market forces. However, effective trade and exchange cannot take place either when there
is no regulation to protect parties in the exchange — under these circumstances nobody
could avoid being continually cheated and robbed. In mature capitalist societies, market
exchanges are regulated by law, by civil society (that is, regulatory organizations) or by
convention, but in many post-communist countries the unleashing of capitalist market
forces has meant that they have run well ahead of cumbersome attempts to regulate and
control them. Small-scale traders in post-communist countries are faced with a lack of
formal regulation to guarantee or protect their activity and they therefore run high risks of
being cheated or robbed. In this paper we shall try to show how people try to minimize the
risks associated with exchange and trade through various forms of informal social control
by investing in social capital through networks and alliances.
Understanding the moral economy of trade
Trading involves a moral as well as a financial economy and one of its currencies is social
capital. The idea of a moral economy of trade originates in the work of Polányi (1944;
Polányi et al., 1957), together with the idea that the ‘great transformation’ from
* I would like to thank the following organizations for sponsorship: International Organization for Migration;
Central European University; Austrian National Bank; Institut für Höhere Studien. I would also like to thank
all the people who collected interviews for me and made this research possible. Christian Haerpfer gave his
usual patient support. I am especially grateful to Markus Kaiser for discussions about trading and for pointing
me towards the debates referred to in this paper. This paper was first presented to the Sociology of
Development seminar of Bielefeld University. I am grateful to Hans-Dieter Evers, Heiko Schrader and Endre
Sik for their comments and also to the anonymous reviewer.
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752
Claire Wallace in association with Oksana Shmulyar and Vasil Bedzir
traditional to modern society involved the disembedding of economic transactions from
social relationships and their transformation into market transactions based upon
universal norms of exchange. However, later contributors to this body of literature tended
to stress the fact that even in developed capitalist economies like the USA, market
relationships are also re-embedded in various social ties (Granovetter, 1985). The way in
which this embedding takes place is through the use of social relationships, such as ethnic
ties (Portes and Sensenbrenner, 1993), family ties (Phizaklea and Ram, 1996; Sanders and
Nee, 1996), or simply informal social networks (Uzzi, 1996). Using terminology drawn
from a different debate we could say that business actors invest in ‘social capital’ by
developing these various kinds of social relationship which they can later cash in through
other kinds of assistance and solidarity. We are seeing social capital, therefore, in the
sense of a strategy used by individuals for securing economic returns rather than in the
more general sense used by Coleman (1988), Bourdieu (1983), or Putnam (1986) (see
Tardos, 1998). Social capital is an element in the success of many different kinds of
enterprise in developed capitalist economies. However, this has also been a traditional
method for securing economic advantages in communist societies (Szelenyi and Szelenyi,
1995).
Portes and Sensenbrenner (1993) argue that these kinds of social relationships are
particularly important in relation to immigrant ethnic groups in the USA. In this context,
they identify four different kinds of social capital which can have positive effects: ‘value
introjection’ which ‘prompts people to behave in ways other than naked greed’(1993:
1323); ‘reciprocity transactions’; ‘bounded solidarity’ whereby groups define their social
responsibilities; and ‘enforceable trust’ where moral pressures are brought to bear upon
economic transactions. However, they also identify negative consequences of too much
social solidarity which can sap profits and inhibit market-competitive activity.
This theme is further elaborated by Evers and Schrader (1994) who argue that too much
reliance on social solidarity can also suffocate small-scale trading. Using the example of
South East Asia, they argue that the tension between social embeddedness and rational
capitalist accumulation inherent in a situation where these traders are part of a regional or
even global economy results in a ‘trader’s dilemma’: either to accumulate wealth in
accordance with the logic of capitalist enterprise, or to disburse profits amongst the
community in which they are embedded and which may make a variety of claims upon
them — e.g. social obligation, the need to maintain prestige and good standing and so on:
Being subjugated to the norms of village society, which usually implies a strong emphasis on
solidarity, traders will find it potentially difficult to demand repayment of debts or to refuse
credit to needy relatives or neighbours. They would therefore have to choose between losing
either cash or social esteem. In either case they stand to lose, i.e. they are in a dilemma in the
strict sense of the word. Under these conditions it is difficult to accumulate capital in the form
of goods and cash unless ties of solidarity with the surrounding society are cut (Schrader, 1994:
8).
What emerges from this literature is that small-scale economic activity which may
have a partially formal or informal character, or may even be wholly illegal (Portes,
1995), is highly risky. Small-scale operators, using their own labour and that of their
nearest friends and kin, often have to raise and risk their own capital. Profit can easily
turn to loss. The business environment can be unpredictable and outside of the control of
small operators. Creating bounded solidarities through kin, ethnic or other social
networks is a way of reducing such risk. It is a way of creating some predictability and
order in a chaotic and alarming world full of potential rivals and enemies. Investing in
social capital is thus a way of reducing potential ‘transaction costs’ (see Sik and Czako,
this volume) as well as reducing anxiety. As we shall argue, the situation of small-scale
traders in eastern and Central Europe is particularly acute in terms of high risks and
accompanying anxiety.
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Bounded solidarities and enforceable trust can be achieved through using the
resources of ethnic groups and families. However, much of the literature takes the
categories of ‘ethnic group’ or ‘family’ as self evident. What is less clear is how such
groups are constructed or reconstructed in the course of carrying out particular economic
activities. In this research we have considered the processes by which different kinds of
solidarity are constructed as part of a dynamically changing set of relationships.
According to this perspective, even family obligations are actively constructed and
reconstructed in the course of managing social relations rather than taken as given (Finch,
1989). Thus, we can ask: how are these social, ethnic and family ties invoked in the
course of managing small-scale informal trading? This is not just a speculative
sociological question. The extent of moral obligation or the kind of moral ties which are
developed during the turbulent post-communist period can affect the kind of capitalism
which develops there.
There is thus a tension emerging in the literature from the way in which capitalism is
embedded and this can be summarized as two hypotheses:
•
•
Hypothesis 1: that in order to operate successfully, small-scale traders have to use
‘social capital’ as a way of securing trust and this can be done through resorting to
family networks, ethnic solidarity or friendship;
Hypothesis 2: that too much solidarity can act as a damper on small-scale trading by
distributing profits among a wider group to which the trader is obligated (the trader’s
dilemma).
We can ask in relation to our own research therefore, what are the sources of risk and how
do small-scale traders attempt to limit this risk? What is the relative importance of social
capital invested in ethnic, family and social ties in doing so? First, however, we should
consider the situation of trading in post-communist societies as one particular instance of
trading.
Small-scale trading in post-communist societies
In eastern Europe we have a new situation, since these are neither traditional economies
undergoing transformation from contact with the global capitalist economy (as in the
example from Evers and Schrader, 1994), nor are they capitalist industrial countries with
an established set of laws and regulations to ensure that exchanges are honoured (as in the
example of Portes and Sensenbrenner, 1993). Rather, they are developed industrial
economies where individual capitalist accumulation was deliberately suppressed or
driven underground in favour of state-controlled and centralized systems of exchange and
production. According to some, this means that their opening to capitalist markets will
result in the takeover of powerful and organized interests, or of foreign capital which the
weakened states will be unable to resist (Fligstein, 1996; Stark, 1996). Others emphasize
instead the role of ‘network capital’, and Sik (1994) argues that these well-established
forms of reciprocity and exchange, the result of a lack of transparency and distortions of
distribution in the communist system, prove very useful in times of uncertainty and rapid
social change. They can be used for ‘grabbing’ or spontaneously privatizing state
resources when a change in ownership and control become possible.
Communist regimes encouraged distrust of public institutions and a corresponding
trust in social networks and personal relations — in informal institutions (Rose et al.,
1998). Social capital could take the form of face-to-face relations which flourished under
the former regimes. It could also take the form of family solidarity which was used to gain
access to resources and could be more important than economic capital in the distribution
of desired goods (Mozny, 1994). However, Mozny hypothesized that the introduction of a
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Claire Wallace in association with Oksana Shmulyar and Vasil Bedzir
more transparent capitalist society would result in the breakdown of the importance of
social capital and in people resorting to individual self-advancement with more
opportunities to do so. Rose and colleagues argue the opposite; for them, social solidarity
has grown even more important in the post-communist context:
Far more people in post-communist societies rely on informal social capital than on formal
institutions of state and market resources to deal with their problems. When the 1996 New
Russia Barometer asked people on whose help they rely, only 7 per cent referred to formal
organizations, whether state or notionally non-state, such as trade unions, churches or charities.
When problems arise, more than half rely upon informal social capital, a network of friends and
relatives. Those without social capital rely principally upon themselves (Rose et al., 1997: 14–
15).
These differences in the interpretation of social life in post-communist societies, however,
may reflect less a difference in perspective, so much as emerging differences between
post-communist societies, with the Central European region and Baltic States becoming
increasingly integrated into the western European economic orbit and exhibiting the most
successfully transformed economies, whilst those to the East are slipping more and more
into a disordered economic situation where informal forms of regulation, including social
capital, have become a dominant principle of organization. In the absence of a transparent
market and a system of clear rules, laws and regulations appropriate to the emerging
context, other forms of organization can take over.
The post-communist period is a particularly interesting one in which to consider such
activities. The change from one regime to another and the differing fortunes of different
regions in this process has meant that whole societies have had to change their patterns of
economic activity and the values associated with them. Many people have had to find new
forms of survival and some have been very successful in exploiting an ambiguous
situation in which the regulations and values from the old regime are no longer valid, but
those of the new regime are not yet in place. The general circumstance of small-scale
trading in post-communist societies can be found in the chapter by Sik and Wallace (this
volume).
The situation of trading in post-communist countries is an extremely risky one.
Whereas trading had certainly always taken place, it was previously confined to a small
group of specialized speculators. Now it has become much more widespread — our
traders were drawn from all walks of life — but formal arrangements for the import
and export of goods do not work effectively. Traders are not protected by rational
regulations, especially if they are foreigners. Nor are the police particularly interested
in helping them. Rather they have to operate inside, outside and around the existing
regulations, either completely illegally or semi-illegally. Furthermore, traders have to
operate in an extremely uncertain climate, one subject to rapid changes. Changes in
exchange rates, in government, the break out of hostilities, the changing of borders,
inflation or indeed hyperinflation, can change the situation almost overnight. In such
circumstances new informal methods of regulating trade must develop, because buying
and selling implies a certain amount of social order and organization. The problem for
the trader is to minimize risk in an extremely risky environment. In the context of US
ethnic business the use of family, social or ethnic networks is important for limiting
transaction costs, but in the situation of post-communist societies, the potential risks
and transaction costs are far higher than in a more stable society. The situation is
particularly risky for the kinds of traders we are considering, who cross into another
country in order to carry out their business and are therefore even more vulnerable to
exploitation and to harassment by the police or by criminals, leading to the loss of their
efforts.
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The Central European region: a buffer zone between East and
West
This paper focuses upon the Central European belt of post-communist countries: Poland,
the Czech Republic, Slovakia and Hungary (see also Wallace et al., 1996). A total of 129
interviews with traders outside of their own countries were conducted between 1993 and
1996 in naturalistic settings in the relevant language.1 Unlike Czakó and Sik (this volume)
we concentrated solely on cross-border traders. The Central European region includes the
countries which border the European Union: Poland, Hungary, and the Czech and Slovak
Republics. They are now sandwiched between an affluent West (Germany and Austria)
and an increasingly less affluent East (Ukraine, Russia, Belarus). In the Central European
belt of countries new laws and regulations suitable for market economies have been
introduced along with new taxation systems, and although informal activity is still high,
this is now regarded as the shadowy side of a market economy rather than a particular
economic sector (Sik, 1993). There has been a stabilization of the different economies and
a range of reforms have been introduced. These countries have come increasingly into the
orbit of the European Union since 1989 and are examples of the ‘successful’ transition
from communism towards liberal market democracies (Wallace and Haerpfer, 1998).
However, the situation of Ukraine, Russia and Belarus, the main eastern neighbours,
is quite the reverse. Ukraine since 1989 has suffered a 57% decline in GDP and
hyperinflation since 1995 (WIIW, 1996). The government solution was not to pay wages
for some months, although wages had sunk below the level at which people could live on
them anyway. In Belarus, Russia and Ukraine reforms associated with marketization have
not yet been able to establish a stable, working system. Economically and politically they
are lagging well behind the Central European countries. The economic collapse means
that since very little is produced any more, nearly everything must be imported, much of
it through shuttle trading, and so the prices are very high. The lack of clear government
policies and tax rates of up to 100% mean that people operate businesses wholly or
partially illegally rather than as part of an institutionalized process. The result is that the
citizens of these countries manage as well as they can. According to a representative
sample survey carried out in 1996, only 12% of people in Ukraine earned enough money
from their main jobs to buy what they really needed, compared with 53% in the Czech
Republic, 41% in Poland, 37% in Hungary and 33% in Slovakia (Rose and Haerpfer,
1 The data were collected from traders themselves (supplemented with fieldwork and observation in markets
and focus groups) and we thus have their own subjective views of their situation. Altogether, 129 interviews
were conducted with foreign traders operating in Poland, the Czech Republic, Hungary and Slovakia.
Statistics cited here include 24 traders in Slovakia, 25 in Hungary and 26 in Poland. They do not include the
remaining traders from the Czech Republic because the data was not recorded as systematically for them,
being part of a different research project. Traders came from Ukraine, Russia, the Baltic States, Romania,
Hungary, Bosnia, Croatia, Federal Republic of Yugoslavia, Armenia, Georgia and other parts of the
Caucasus, China and Vietnam. Interviews were conducted in the language of the respondent in most cases,
by students of the Central European University or by members of the research team (see Chmouliar, 1996).
Detailed information was collected about how the trade was carried out and for what reasons, along with
how this connected with other aspects of the traders’ lives. As far as possible, respondents were encouraged
to ‘tell their own story’ in naturalistic settings such as bus trips across the border, train rides, standing in the
market or standing in queues waiting for a visa or a permit. Most were aware that the interviewer had a
professional interest in collecting the information, but sometimes the interviewer did not think it appropriate
to reveal his or her identity or only did so after the respondent had started speaking about their trading. This
was because the traders were often in an illegal or semi-legal situation and may have been unwilling to
speak if approached more formally. The interviews were transcribed into English and analysed using
methods of coding and annotation of the interviews along thematic lines, along with the construction of
informational charts putting together basic data about respondents. In addition, observation was carried out
in the Chinese market in Budapest, at markets in Odessa, Uzhgorod, in Prague and in Warsaw, and a
collection of photographs was built up documenting different markets and different traders in the four
countries under consideration.
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Claire Wallace in association with Oksana Shmulyar and Vasil Bedzir
1996). Ukrainians are also much more likely to have to resort to growing their own
produce, working in unregistered second jobs, often abroad, and earning money through
connections than are the people in the Central European belt (Rose, 1995; Wallace, 1998;
Wallace et al., 1998). To put it starkly: in the Central European belt things are getting
better, in Ukraine and Belarus they are getting worse. The same applies to many parts of
Russia and other former-Soviet states.
There are also contrasts between the Central European belt and countries to the south.
The war in the former Yugoslavia, along with the trade and cultural embargo against the
Federal Republic of Yugoslavia, resulted in high inflation and economic collapse there as
well, whilst the road to reform in Romania and Bulgaria has been likewise very uneven
(Haerpfer and Wallace, 1998).
The result of this is that in the early transition period, there was an influx of ‘tourists’
from Ukraine, Russia and Belarus selling goods in Poland in so-called ‘Russian markets’
(Iglicka, 1999; Sik and Wallace, this volume). They sold products which could be
obtained cheaply in those countries (often through theft from factories) such as tools,
toys, glassware, underwear, pins, clocks and watches. At that time, inefficient distribution
and lower prices in the former-Soviet Union meant that there were stockpiles of such
materials upon which to draw, whilst inflation caused prices to shoot up in Poland,
Hungary and, to a lesser extent, the Czech Republic and Slovakia. Products were cheap
and often low quality. Traders stayed for just a few days, arriving on buses, trains or in
organized groups before returning to their normal jobs. However, from 1992 onwards the
situation changed quite radically. From this time, the introduction of taxation systems in
the Central European countries of Poland, Hungary, Slovakia and the Czech Republic,
along with their attempts to join the European Union (and associated partner status),
resulted in a crackdown on small-scale trading. As retail outlets were privatized and
shopping was able to move indoors, so the local business people began to see street
trading as a threat to their commerce and put pressure on the government or local
authorities to suppress it. The streets were cleared of the clutter of small traders
displaying their wares. The eastern borders were increasingly controlled and there have
been attempts to concentrate traders into specific parts of town — often the sports
stadium — which are patrolled by the Economic Police. In these marketplaces it is
necessary to pay the market manager for a site by the day, week or month. Licenses were
introduced for trading and traders have to pay taxes.
Finally, immigration was controlled following fears about an influx of eastern
Europeans trying to storm the walls of fortress Europe. This made it more and more
difficult to get in or to stay, and foreigners were being stopped and asked to show their
documents on the streets or in the markets. Those without the right documents can be
fined and deported or have their passport stamped so that they cannot return.
During the period after 1992, hyperinflation in Russia and Ukraine meant that prices
were often much higher than in the Central European countries. Instead of coming to sell,
the Ukrainians, Russians and Belarusians were increasingly coming to buy. The stockpiles of goods had run out and the factories had ceased to produce. Nearly everybody was
forced to resort to other forms of income generation such as trading. This increased the
competition and made it even less profitable.
Whilst in Hungary, the Czech Republic and Slovakia the clampdown on foreigners
and illegal trading had helped to clear the streets, or at any rate drive the traders into more
and more remote corners, in Poland the markets continued to flourish on a grand scale,
creating turnovers which are estimated at billions of US dollars per annum. Indeed, it is
claimed that it is one of Poland’s biggest industries. According to official statistics in
Poland, foreigners bought 4.8% of all retail goods in Poland2 and this is estimated to
2 From a report, ‘Foreigners in Poland’, produced for the migration project derived from statistics collected by
the Ministry of the Interior and the Ministry of Labour.
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amount to about 10% of all exports. The spending of visitors from Belarus and Ukraine
climbed by 250% and 273% respectively between 1994 and 1995,3 although that of
Germans remains the highest. Thus, this border trade can be seen to be big business for
Poland.
Poland is the main ‘trading nation’ in the region. It was the Poles who pioneered this
cross-border trade, but it is not so much they that are travelling any longer, as others who
are travelling to Poland to buy goods. Polish entrepreneurs have responded by developing
production, for example of garments, specifically for this export trade to the East. In
1997–8, due to pressure from the European Union, Poland was forced to introduce visas
for people from the former-Soviet Union. This resulted in a popular outcry from those in
the border region who feared that their livelihoods would disappear.4
There are important differences between the countries in terms of who arrives as
traders and this depends upon geographical location as well as ethnic and linguistic ties.
In Poland many people came from the East — from the former Soviet countries — where
the language was similar and where many Poles have relatives. In Hungary it was more
common for people to come from Bulgaria, Romania and Serbia. People from Serbia
were especially reliant on small-scale trade during the economic embargo, whilst
Bulgaria emerged as the biggest producer of black-market CDs. Many were attracted to
the Chinese markets in Budapest, the product of the ethnic community which had settled
there in the 1980s, and in the 1990s the Chinese began to establish wholesale warehouses
in all the Central European countries (Nyiri, 1995). In the Czech Republic, about onethird of small-scale traders were Vietnamese5 or Chinese.
The war in Yugoslavia which was taking place at the time we carried out our
interviews in the Czech Republic brought a wave of migrants from that region who
were fleeing from war or trying to avoid military service and economic breakdown.
Many of these became street vendors selling tourist souvenirs or Russian army regalia.
Having no other means of support, the former-Yugoslavs resorted to small-scale
trading when they first arrived. Another group of small-scale traders and business
people came from further afield, from the Caucasian post-communist countries such as
Armenia, Georgia and Dagestan. Slovakia experienced a regular traffic of people from
the Ukraine and especially Transcarpathia, from where people smuggled cigarettes and
Vodka.
Whilst in the buffer zone the open markets were being increasingly replaced by more
‘normal’ retail trading, this was not the case in the former Soviet Union where they
became, if anything, more important. In the former Soviet Union, the COMECON trading
arrangements were not replaced by workable import and export arrangements. Under
these circumstances people took matters into their own hands. Small stalls began to
colonize the arcades, stairways and other corners of established retail shops. It was
estimated in one report that 15% of imports to Russia arrive via small-scale traders.6
Small-scale vendors working from the pavement are a common sight in all cities.
Meanwhile, open markets, where the majority of people shopped for consumer goods
such as clothes, shoes etc., flourished and also increased in number and diversity — one
3 Ibid.
4 Krystyna Iglicka (1999) has carried out a study of traders in Poland.
5 The Vietnamese came to the Czech Republic as guestworkers during the 1970s as part of a ‘fraternal
agreement’ between socialist countries. There were 37,000 of them in 1989. In 1992 their contracts were
terminated and there was an effort to send them ‘home’. At this point many of them turned to trading as an
alternative activity for staying in the Czech Republic. Now there are as many Vietnamese in the Czech
Republic as at the height of the socialist period (Wallace and Palyanitsya, 1995) and there is an agreed
immigration quota with the Vietnamese government. Many of these Vietnamese spoke Czech as a result of
their previous working experience and so were able to operate as traders.
6 From a presentation by Julia Zhdanova at the conference ‘Culture without Frontiers: Shopping Tourists and
Travelling Objects in Post-war Central Europe’, International Forschungszentrum Kulturwissenschaften,
Vienna, April 1997.
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Claire Wallace in association with Oksana Shmulyar and Vasil Bedzir
market in Odessa claimed to have between 30,000 and 50,000 visitors per day.7 Goods
were usually imported from Turkey or from Poland, but electrical goods might come from
the United Arab Emirates which is a free trade zone and a source of electrical appliances
from the Far East.
Whilst many kinds of trade were being carried out between these countries, we
concentrated only upon small-scale traders. That is, upon people who carried goods across
the borders themselves and bought or sold on the other side. This was an extremely common
type of trade at the time that the research was being carried out and accounted for a large
volume of border-crossing. People nearly always travelled by train or by bus (sometimes by
car) and bought and sold only small quantities of goods — as much as they could carry with
them. Even where a chain of people were involved (for example, in hiring ‘realizators’ to
sell the goods) we are talking of only a few people dividing the profits between them. It was
nearly always carried out to supplement falling household income. For example, some
traders would go only a couple of times per year during holidays or sick leave. In other cases
they were made redundant or on forced unpaid ‘holidays’ from their jobs. These we called
‘amateur traders’ as they were generally reluctant to take on this kind of extra activity but
were forced to do it. Only few were what we called ‘professional traders’ — that is, they saw
small-scale trading as a full-time profession and had a vocation for it. They organized their
trips and their contacts in a more self-conscious and businesslike way. There were only one
or two of these per country, but more than 50% in Poland, reflecting the fact that small-scale
trading was most important as a business activity in Poland.
The kinds of things they bought and sold were things which could be easily carried —
textiles, cigarettes, alcohol, videos, CDs, computer software, small kitchen and domestic
utensils (buttons, scissors, mirrors) and food. Cross-border trading merged into normal
shopping when small-scale traders would bring things to sell from the East and then use
the money to buy food to take back for their own consumption. Or they converted the
money into dollars and took them back with them.
Small-scale traders operated in the margins between legality and illegality. When
regulations were introduced they were easily manipulated. Thus small-scale traders might
cross the border legally but be selling goods illegally. Only 8% in Slovakia, 38% in
Poland and 13% in Hungary appeared to be wholly legal (‘appeared’ means that they
carried out most of their activities legally; however, some of their activities might still be
illegal). They might own a trade license, but not be paying tax in the country in which
they were selling the goods. They might smuggle goods across the border as their own
possessions in order not to pay tax on them. They might have a residence permit to stay in
Poland, Hungary or the Czech Republic but not a traders license. Or they might be staying
illegally without a residence permit (a residence permit was needed for longer term
residence and business activity). These regulations were themselves constantly changing
and were not always stringently enforced. Sometimes, however, they were stringently
enforced: during the time of the research the illegal selling of cigarettes and vodka in
Slovakia was virtually stamped out by frequent policing. A special branch of the police —
the Economic Police — had the task of regulating this kind of activity.
As the economy collapsed in countries like Ukraine, Russia and much of the Soviet
Union, many people were no longer paid in money but in goods — for example in
cooking pots, textiles or other products. In some cases these were things produced by their
workplaces but in other cases they were products acquired by the workplaces as part of a
barter system with other workplaces. Such goods were only any good to the recipient if
they could be sold for money or traded for food and other domestic requirements. Hence
they found their way across borders and into open air markets (OAMs).
Systematic information was collected only in Poland, Hungary and Slovakia — the
last part of our study — and this revealed that the average age of small-scale traders in
7 From field work carried out in markets in Odessa in 1995 and in Uzhgorod in 1996.
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each country was between 30 and 40. In Poland and Hungary only one-third were female
but in Slovakia this rose to 86%, reflecting the very marginal character of small-scale
trade in Slovakia.
Risks in small-scale trading
Small-scale traders have to deal with a number of risks: raising capital, financial losses,
changes in state policies and external controls such as customs, police, the Mafia and
ordinary robbers. Since they are operating at least partly illegally in most cases, they are
not protected by laws or regulatory bodies — in fact they are likely to be the victims of
regulatory bodies such as the police.
Raising capital
The majority of small-scale traders had very little capital. The banking system does not
operate to serve small-scale customers in the former-Soviet Union and although it may
operate more effectively in the Central European belt of countries, such services are not
usually available to foreigners. In Odessa we found an example of a group of businessmen
who pooled their money in order to provide loans for one another in a kind of informal
bank. Small-scale traders therefore had to raise money from friends and relatives or from
their own savings. Only US dollars were useful in this respect and to a lesser extent,
German marks. People in the former Soviet Union and in southern Europe had stashes of
small sums of dollars as their own currencies were unreliable and could not be used
outside of the country. Even inside the countries of eastern and southern post-communist
Europe transactions were often carried out in dollars, despite attempts by the state to
outlaw this, and each small trader in an OAM had one purse for dollars and one for the
local currency. Often the trading was carried out on a rather hand-to-mouth basis with
small-scale traders borrowing only enough to finance their trip and then repaying lenders
from the profits. The money which they earned had to be changed into dollars or marks
through illegal money changers (there is always a section of the market where these can
be found) and then brought back to the home country. In most countries, only nationals
are allowed to change money without showing receipts, so small-scale traders are forced
to resort to illegal money changers, with the consequent risks that that involves.
Profit and loss
Since small-scale traders are operating on a shoestring, profits are often very slender and
provide only enough income to eke out subsistance. Profit can easily be turned into loss.
Most small-scale traders simply borrow small sums of money for each trip which they
repay from the profits, or finance the trip from the profits of previous trips. With a larger
outlay (typical of the more ‘professional’ traders) there is also more chance of profit.
However, the majority of our small-scale traders were not so much concerned to
accumulate capital and set up businesses as to simply make enough money to get by until
they ran out again. Whilst the ‘professional traders’ might make frequent trips and stay
abroad for longer periods of time — perhaps twice per month — the ‘amateur’ traders
who formed the majority would only go abroad a couple of times per year and only for
short periods when they needed to.
About one-third of our small-scale traders were part-time — they had other full-time
jobs and activities and used trading only to supplement these jobs which perhaps did not
pay them enough to live on. Some were pensioners (4% in Poland, 13% in Slovakia and
8% in Hungary). However, many of those with jobs were on unpaid ‘holiday’ and others
who did work full time elsewhere found colleagues who would substitute for them or took
sick leave.
The introduction of regulations for economic activity in the Central European
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countries and at the borders introduced more risk rather than less for the small-scale
traders and drove some activities, such as cigarette trading, further underground. What
counted as a profit varied considerably. In Slovakia most of the women working as crossborder traders were happy to go home with US $8 in their pockets. In Poland, people
expected to make more and respondents mentioned US $500–800 profit for a trip,
although this would mean spending longer periods abroad and greater investment in the
goods. The very small outlays that most cross-border traders were able to come up with
meant that generally their profits were very small, more a way of supplementing declining
living standards.
Changing state regulations
One source of risk for our respondents was the changing state regulations in terms of
customs controls, import and export tariffs, the policing of trading, taxation and licensing
of traders. Any or all of these things could change the whole situation overnight and turn a
potential profit into a loss. In addition, state policies on exchange rates and monetary
policy could either create or destroy trading possibilities, as could wars, embargoes and
changes in foreign policies, including the opening or closing of borders. For the smallscale trader such policies are unpredictable and the state is not necessarily seen as
protecting the interests of traders — rather it is seen as imposing new hazards. Many of
the trends described in this paper were shaped by state policies, but often it was the
indirect consequences of state policies on informal economic activity which were most
important. Therefore, we have to consider not so much the direct impact of state
regulation, as its mediation by social networks and embedded economic activities. It is
this which created our next source of risk — that of official robbers.
Official robbers — customs and police
Since small-scale traders were partially or wholly illegal, they could always be picked up
by law enforcement officers. A typical situation would be to hold a legal trading license in
Ukraine, to declare part of one’s income as taxes but to buy goods as ‘tourists’ in Slovakia
and smuggle the goods across the border without paying import duty or having an import
license. Furthermore, the trade in cigarettes and alcohol was banned as duties were
imposed in the buffer zone, so small-scale traders resorted to accosting shoppers in the
market in whispers to offer these goods, or trading them furtively at bus stations where
they arrived.
Since traders were bringing with them more goods than was officially allowed, they
had to circumvent customs controls which have become more stringent on the western
side of the border as the buffer zone countries try to harmonize their regulations with
those of the European Union. On the eastern side of the border there were hefty import
taxes. This is one of the main challenges of cross-border trading and can make all the
difference between a profit or loss from the trip. Customs officers will generally accept a
‘tip’ which can be between US $3 and US $10 per person. However, this depends on how
much the person is carrying and also on the mood of the customs officer. For example,
when border controls were tightened from Bratislava, Slovak customs officers on the
Ukrainian border started to ask for a higher tip to compensate for their risk. In some cases
they were happy to be paid in kind, which suited the small-scale trader much better:
It totally depends on the situation at that moment. Sometimes the customs officers are in a good
mood, they just laugh at us and let us pass without any problems. Sometimes you have to
unpack your things, to show all of them, to explain a lot and for a long time. If they decide that
you are carrying something forbidden they can take it, as happened to me twice. You also have
to be prepared for bribery — if you have many things which are obviously expensive the
customs officers may ask you for DM 10–20. You must give it otherwise you will have
problems. So you are never safe (Serbian trader going to Hungary).
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The customs officers on both sides of the border were often involved in the business as
well and their own families would smuggle goods across whilst they were on duty.
Cross-border traders in Slovakia and Hungary were frequently inspected by the
Economic Police. They would then have to pay a fine for illegal trading if they had no
license (most of them did not have one) and were not paying taxes. They would negotiate
the fine with the police so that if they had fewer goods, it was lower. If they had a very
miserable selection, the police may ignore them:
Every day we are checked by the Economic Police. They come every day, but fortunately not
always with a fine. If you were fined yesterday, then today they may just warn you. Sometimes
it is enough to give them something, nothing very significant, a little present, then they do not
approach you for while. Or say, if you were fined a few days ago, then you won’t be required to
pay the fine again. I assume that police have a conventional agreement not to fine the same
people all the time. From the trader’s side, one also has to know how to behave with the police
(Ukrainian trader in Slovakia, emphasis added).
The point about these encounters with the official law enforcers is that they were
unpredictable. The customs officer or Economic Police may deport you with a stamp in
your passport, might fine you, confiscate your goods or do nothing at all. Such
situations were usually negotiable, but would nevertheless generate considerable stress
for the small-scale trader. Therefore, we could say that whilst regulations to control
trading were in force, they were somewhat arbitrarily imposed, making for an uncertain
climate for the small trader — not one where he or she was protected by the law, but
where he or she may be its victim and where the law (and its agents) were seen as
obstacles which could be negotiated around. We have emphasized the phrase ‘one has
to know how to behave with the police’ because this is important in understanding how
this arbitrary and risky environment can be controlled by small-scale traders —
something we discuss later.
Unofficial robbers: Mafia8 and thieves
Most people could give examples of Mafia activities. Certain markets and certain
activities are associated with organized crime, such as taking second-hand western cars
across the border, and in the case of the Serbian border, fuel and arms smuggling. For this
reason, our shuttle traders mostly avoided these activities and these places and stuck to
more ‘safely’ illegal forms of trading. Most people claimed that their activities and profits
were too small to excite the interest of organized criminals.
However, many small-scale traders are the victims of ordinary thieves and casual
extortionists. These thieves and extortionists are often foreigners themselves or even the
same nationality as their prey, who can identify traders and know that they must carry
their cash and belongings with them. Casual extortionists might wait at railway stations
and demand money from those getting off the train — the terrified travellers usually pay
up. This business was explained to us by one of our respondents who had been such an
extortionist.
Small-scale traders coming from abroad did not expect to get any help from the
police in the buffer zone if they ran into trouble — in fact they were afraid to go the
police for fear of being deported. Nor could they get any sympathy from their own
embassy, as this elderly woman who had been attacked, knocked out and robbed
explained:
Oh Sonny! I was there [at the Ukrainian Embassy]. I talked to four people there, one of them
was the advisor of the Consul. He told me that he needed some proof that I was telling the truth.
He said ‘Go to the police and bring some paper from them that you were attacked. And even in
8 Mafia was a term often used to describe all sorts of criminals, but here we take it to mean only more
organized groups sheltered by their connections with the authorities.
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this case, I am not sure that I can help you. It is the responsibility of each individual person to
take care of himself here. There are many people like you coming here and getting into trouble.’
What can we do? (female Ukrainian trader in Poland).
Anxiety
The considerable risks associated with trading, coupled with the fact that many people are
unwilling traders in the first place, and the fact that trading is a stigmatizing activity, lead
to very high levels of anxiety and stress. Many described selling as a stressful activity in
itself. Our respondents were mostly ‘amateurs’ drawn from all walks of life — architects,
teachers, factory workers, doctors, students — and were not necessarily ‘street wise’. A
number of respondents reported their terror every time they crossed the border that they
would be discovered, or their fear of being fined by the police. This is not mentioned in
accounts of trading from other countries, but was a recurring theme in the narratives of
our respondents, perhaps because of the living conditions in some post-communist
countries where economic and political futures are uncertain and where prices can double
overnight. For some this stress was compounded by family strife over trading. One
woman had a black eye from her husband when he beat her for losing their money in a
trading venture and some men were very unhappy about their wives going off on their
own abroad. Some of this stress is illustrated in the interview extract below. This trader
from Ukraine is standing in Bratislava market in the rain, looking miserable. She is
offering an assortment of goods from Turkey or Ukraine:
I think nobody comes to the market today. Only we, the traders are standing here... But I have to
work because we have run out of money. I could survive but look at my daughter and her
husband, so young and without any money. I cannot stand aside and watch them so that is why I
came here to trade today [her daughter and son-in-law live in the same flat but have not been
paid for months]... The most difficult thing is to sell the goods, not simply to sell, but with
profit. It is such hard work because everyone wants to earn money in this business. There are
fines from the Economic Police and presents for the Slovak customs at the border. If you do not
bribe them with something they may not let you across the border... My pension is
approximately US $20 per month. The money is hardly enough to buy bread for the whole
family for one month. I worked as a librarian 32 years and deserve from the state only this nil
income... I am not sure that I can bear it for much longer. Even now I get nervous and exhausted
at every single occasion of failure in trade or something like that. We lived a completely
different life some time ago. Now what kind of life is this? Where is our honour and our self
respect? (Ukrainian woman trading in Slovakia).
Controlling risk: using social capital
Small-scale trading is clearly a risky business and there are many hazards. The profits of
the trader depend upon their ability to reduce these hazards. One way of doing this is
through building up networks of relationships which can form the basis of the business.
The success or otherwise in doing this accounts for much of the difference between
successful and unsuccessful traders.
In such a situation there is the problem of trust (Kaiser, 1997). Small-scale traders
need to be able to trust their partners not to cheat or rob them and to trust their contacts to
treat them well. In the case of illegal black-market smuggling, formal institutions cannot
be trusted — the small trader is often working around formal institutions rather than
inside them. Furthermore, they are working in a situation where many formal institutions
of market regulation have not even been developed, at least for this level of trading. Or
alternatively, there are formal institutions (customs, police) but they are only operating in
a semi-formal way, keeping much of the money for themselves. The problem, then, is
whom to trust and how to enforce that trust?
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The increasing complexity involved in cross-border trading and widely flung
networks means that whilst much trading is still done on an individual and ad hoc basis, a
range of people may be involved. This means that relationships have to be established
with partners and since there are no laws governing such relationships, they are ones
which are socially or morally regulated. Some people hire ‘realizators’, mostly women,
who work on the market selling their goods for a commission. When times are hard they
sell the goods themselves. Some small-scale traders also find partners to invest in the
enterprise who put up part of the money on a regular basis, sometimes amounting to
thousands of dollars. Middlemen or women in each country are used to store goods or to
resell them. They are usually co-ethnics of the small-scale traders, but ones who have
married local people or who have legal residence permits and therefore a secure position.
However, traders are often cheated or robbed by these middlemen or women:
It has become more difficult than before. Some years ago I could sell cigarettes openly at any
Slovak market, now I have to find a middleman who can buy the cigarettes from me. We agreed
that I will bring an amount of US $96 worth of cigarettes [around 43 cartons — NB she has to
travel backwards and forwards many times to manage this]. He never paid me the full price of
my portion of the goods, only part of the price. The deal was that I would get all my money
when the other trader, who sells the cigarettes in Germany, pays this middleman. In order to
commute to Slovakia so many times I had to borrow the money from my friends. At the same
time I was very scared that this middleman might not pay me at all. There have been cases
where the middleman simply deceives the petty traders. I was worried about this money because
of my debt to the other people. To me it is more important to pay back this debt than to make a
profit (Ukrainian woman trading in Slovakia).
This division of labour requires the creation of relationships of trust and exchange. As we
have seen, much of this activity operates outside or alongside the law, so relationships of
what Portes and Sensenbrenner have called ‘enforceable trust’ have to be cemented by
‘bounded solidarities’. These networks need to share a common set of values in order to
operate and must have an agreed set of reciprocities. In order to explore the way in which
different kinds of social capital work we now look at the different ways in which social
ties and relationships can be better secured by looking at the significance of ethnic ties,
family ties and social networks.
Ethnic ties
Ethnic ties did turn out to be important, as those with Slovakian, Polish or Hungarian
relatives tried to use these links for their trading. Altogether, 73% of small traders in
Poland, 38% in Slovakia and 21% in Hungary mentioned using co-nationals in their
journeys across the border to trade. The historical ethnic ties which straddled the border
meant that contacts could be renewed once the borders opened (Wallace, 1999).
Ukrainians and Belarussians in Poland or in Slovakia could use these connections to
communicate and do business with new arrivals, especially if they did not know the
language or required a local business partner in order to be able to operate. Often a useful
contact was a compatriot who was married to someone from the host-country and these
often became middlemen or women.
Within each country, Armenians and Georgians and people from other more distant
countries often used the services of their own ethnic groups. There were some examples
of tightly knit ethnic groups where access was closed to us as well — Vietnamese and
Chinese fall into this category. Some ethnic groups are more close-knit than others. The
Vietnamese and Chinese would fit Portes and Sensenbrenner’s description of an ethnic
group which is stigmatized and very easily identifiable in terms of culture and
physiognomy. They operate in a very segregated way. However, others, such us
Hungarian Romanians in Hungary, could melt more easily into the local population and
this was also the case with Ukrainians in Poland or Slovakia. Their culture, history and
language are not very different from the host population and they do not generally operate
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Claire Wallace in association with Oksana Shmulyar and Vasil Bedzir
as a tightly knit ethnic group, although they may invoke ethnic connections where they
are useful. Indeed, the analysis of the interview material indicated that although people
often did gravitate towards their co-nationals in another country, this was less a form of
business organization than the fact that it coincided with family and friendship ties. It was
also often the result of acquaintances formed whilst on train and bus journeys. There were
no examples in our sample of migrant traders being forced to share their profits with other
members of their ethnic group on ethnic grounds alone, although from our limited
evidence, we think that this might be the case with traders from Vietnam or China (Nyiri,
1995). Furthermore, as we shall see later, one of the Armenian small traders avoided
going back to Armenia for this reason.
In the Czech Republic, people from the former Yugoslavia operated a very effective
grapevine which differentiated the different ethnic groups at war with one another. Their
situation of forced exile perhaps encouraged them to bond together. These people from
the former Yugoslavia were also in contact with a large diaspora of family members and
friends scattered around Europe and the world and these were useful sources of
information, assistance and social capital. The situation of Yugoslav exiles was different
because they were forced to remain abroad rather than travelling back and forth. The
Polish diaspora, spreading from the USA in the West to the Polish communities which
were the result of enforced exile in Kazakhstan or Siberia, but with very many also in
western Europe, offered a similar network of ‘weak ties’ which could be used by traders
for contacts and information.
We could hypothesize, therefore, that for non-refugee migrant groups the importance
of the ethnic community depends upon how far they have to travel and how
conspicuously ‘different’ they are from the host population. In the case of the refugee
groups, they were forced to cooperate more closely because their escape from the country
was cut off. Therefore, for these groups the ‘trader’s dilemma’ may be more relevant.
Ethnic ties are used to cement or organize commercial relationships but different ethnic
groups operate in different ways. Only the Vietnamese and Chinese formed tightly
morally bounded ethnic groups, whilst more loosely scattered diaspora were more typical
of the former Yugoslavians and the Poles. This diaspora proved, however, to be a very
useful source of various kinds of contacts and flows of information (upon which smallscale trading depends). It was an example of the ‘strength of weak ties’. Armenians and
Georgians with their strong family solidarities were somewhere in the middle. Ukrainians
and Transcarpathians did not form tightly bounded ethnic groups in the Central European
belt of countries so much as participate in common language and cultural groups which
could be found on both sides of the border region and had much in common with their
neighbouring nationalities. Here it was their similarities to rather than their differences
from the host population which was to their advantage.
Family networks
Family ties are important since relatives — even godparents — are invoked to secure
more favourable conditions, to store goods, to provide accommodation and so on. Family
connections amongst bus and train drivers or amongst customs officers were particularly
useful. Altogether, 50% of respondents in Slovakia, 21% in Hungary and 31% in Poland
mentioned using relatives as part of their trading activities.
However, here we have to be specific about what is meant by a family tie. There is a
primary obligation up the generations towards grandparents and down the generations
towards children and grandchildren (Wallace, 1995). Small traders often mentioned that
the reason they were trading was in order to support these relatives. The traditional lines
of obligation in these societies mean that grandparents are important sources of both
social and financial capital for supporting subsequent generations (Mozny, 1994). Many
parents and grandparents were therefore supplementing their incomes in order to provide
for children or grandchildren. A very common reason for small-scale trading was to put a
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son or daughter thorough university or help them to buy an apartment or build a house.
These were projects to which parents and grandparents contributed.
The risks involved in the divisions of labour in trading — and the consequent division
of profits — could be minimized by using family members as different links in the trading
chain. Very often when the man was abroad buying goods, it was the wife or other family
members who sold the goods at the market (Sidorenko, 1995). Alternatively, one member
of the family might be working abroad (bringing home dollars) whilst another would be
trading (spending the dollars) and others would be growing vegetables and attending to
animals to supplement the family budget. Cross-border trading should therefore be seen
as part of a family strategy, with the small-scale trader an integral part of the family
budget.
Wider kin, such as uncles, cousins or godparents were also mentioned if they were in
some useful position, and they could also be sources of loans. However, these kin links
were activated according to convenience and did not usually involve the open-ended
reciprocity typical of the immediate three-generational family unit.
Women often do the smaller kinds of trading to eke out the household budget — the
kinds of trading that many men were described by one respondent as being too proud to
do. Since in the traditional division of labour it is their job to put food on the table, they
were most concerned with finding food, sometimes by going abroad to find it or by
selling something. The reason that there were more women small traders among our
respondents in Slovakia is that trading is a more marginal and controlled activity there
than it is in Poland or Hungary, so only those desperate to earn a few dollars or buy
cheaper food would do it.
Therefore, it is certainly the case that family connections are used to organize
commercial ventures and minimize risk in an uncertain environment. However, we have
to also consider how the family is constructed and bounded and the way in which
obligations operate in gender and generational terms. We have to consider divisions
within the family in order to understand how the trader’s dilemma might apply. The
trader’s dilemma described by Evers and Schrader (1994) for South East Asia is not so
relevant in Central Europe because the boundaries of the family, and therefore the
obligation to share, is defined in a very limited way. Interestingly enough, one successful
Armenian trader in Slovakia mentioned that he did not go home often because all his
relatives expected money from him. This kind of strong moral obligation in the Armenian
family, a classic case of the trader’s dilemma, was in contrast to that displayed in most
Central European families which were of the smaller, more nuclear variety.
Most family ties were of a strong tie type if they were between the immediate threegeneration unit and this involved the kind of unquestioning loyalty and open-ended
support described by Evers and Schrader. However, more distant kin were mostly weak
ties (although still stronger than a casual acquaintance) and could be used for information,
raising capital or reducing risk.
Social networks
What emerged as very important ties were those of ‘friends’ or ‘contacts’ — what we
might call ‘weak ties’. The majority of respondents (73% in Poland, 58% in Slovakia and
79% in Hungary) used these kinds of ties. These contacts took different forms which
could be either reciprocal or unequal in nature. The first was a straightforward trade or
business relationship, for example buying goods stolen from a factory or storing goods for
someone. The economic terms of exchange were cemented by ties of friendship which
were believed to be some insurance against cheating or getting ripped off or reported to
the police. Some small-scale traders worked in teams so that there was then someone else
to help carry the baggage and to look out for thieves. This also helped to lower anxiety as
the following extract indicates:
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If I go, I do not go alone, I go as part of a team. The driver is a husband of one of the women
who goes with us. We all pay the customs officer for letting us go through the border, which is
usually five dollars from each of us. As for our side of the border, we manage it with just one
gift: a bottle of brandy. Because we only travel during the shift of my child’s godfather we go
when the darkness comes. My husband’s cousin lives in Humene (a town in Slovakia) so she
keeps the goods if we do not manage to sell them straight away. Besides we often stay with her.
We settle up with her, although it is not too much — for instance, with a bottle of vodka and a
carton of inexpensive cigarettes (female Ukrainian trader in Slovakia).
Small-scale traders prefer to have some predictability and human relationship in their
activity. This was more important even than maximizing profit — better to pay a regular
bribe to someone you know than to face a situation where you may pay nothing or you
may pay a lot.
A second strategy is to try to cash in on pre-established relationships. One Russian,
who was the wife of an Army officer and had previously been in a position to offer
patronage or favours, now tried to get support in turn. However, she complained of not
having much success in this respect.
A third strategy is to build patron-client relationships. Small-scale traders try to build
up ‘patron’ relationships with customs officers, with police, with customers and with
business partners. These are fundamentally unequal relationships in which the ‘client’
provides small presents and services in return for ‘protection’ when they cross the border
or sell their wares on the market. When the respondent tries to regularize this relationship
by always favouring the same customs officer or police officer, we can call it a ‘patronclient’ relationship. These are ways in which risks can be lowered and an uncertain
climate rendered more predictable. Small-scale traders would endeavour to establish
friendly relationships with authorities such as customs officers and police in order to pay
lower fines, but also simply in order to have a predictable border crossing and therefore
lessen anxiety. In the words of one respondent ‘Anything might happen, but we try to
avoid all unexpected things’:
Yes it [the customs control] is always quite strict. But it was much easier for me because I knew
the people at customs, I knew when to cross the border, the characters of the officers, what to
bring them for a favour and so on. After a while, they are no longer willing to keep you as their
‘client’ [they do not protect you from inspection]. Eventually, they let you know that they
definitely won’t cover for you because they are being observed by other officers in the way in
which they perform their job (Ukrainian woman trading in Slovakia).
These relationships provide these patrons with a source of power as well as regular
presents or sexual favours.
In the case of money changers it is important to know who to visit to get better rates
and in order not to be exploited. Obtaining licenses to trade, permission to stay and so on
is also achieved to a great extent by ‘connections’. Therefore, establishing relationships of
trust and friendship could make the difference between successful and unsuccessful
trading. There were also many examples of where these relationships had broken down,
and although the small-scale trader may feel a sense of betrayal, there was little they
could do about it formally because their business was not legally protected:
Last time I got definitely fed up with the cigarette business was when this happened. I borrowed
US $150 to invest in cigarettes and a friend of mine told me she had reliable clients in Slovakia.
The deal was to bring the cigarettes over the border by train and to throw them out of the
window during the night when the train stopped at Cerna nad Tisou. Somebody was supposed to
give us a sign with a light. As soon as we began throwing the cigarettes out of the window,
something in me began protesting: I knew we shouldn’t have done it. When we met the clients
to get paid for the deal, they told us that they had sent the light signals and then later, when
looking for the cigarettes, they did not find them. It was hard to believe, but it was stupid of us,
so nothing could be done about it (Ukrainian woman trading in Slovakia).
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In addition, small-scale traders often relied upon spontaneous sympathy and solidarity
from other passengers. A common occurrence was to ask some other traveller to take
some of the goods that a trader was carrying, just until they were across the border and
sometimes bus drivers would collude in this activity as well. This was how many of the
interviews were started.
Particularly useful contacts for small-scale traders were bus and lorry drivers, who
could be persuaded to hide goods or to deliver them somewhere on the other side of the
border as a kind of informal collection service, in return for some share. This involved a
considerable degree of trust if the trader did not travel along with them, because the driver
could simply take everything. The fragility of many of these arrangements is evidenced in
the fact that they frequently broke down.
Conclusions
In this paper we have considered trading in post-communist Central Europe in terms of
the strategies for making a risky and stressful environment more predictable and
manageable. This is achieved through various kinds of social obligation and reciprocity
developed through trading relationships in a situation where there is no shelter through
traditional conventions (most of our small-scale traders were relatively new to trading)
nor through legal protection and regulation. Small-scale traders develop their own forms
of protection and control. However, where such forms of protection and control are
developed too far, they can create a closed society outside the law, a Mafia-controlled
society which also stifles small-scale commercial activity — respondents from Armenia
and Georgia described how they were escaping precisely this kind of environment in
other countries. The other risk is that of the ‘trader’s dilemma’ that the obligations
outweigh the profits of trading.
This leads us back to the trader’s dilemma and our two hypotheses. The first
hypothesis, that economic activity is socially embedded in social, family and ethnic
networks turned out to be true in the case of small-scale cross-border trading. However,
we have to take into account the different kinds of embedding through these different
kinds of ties and the relative importance of strong and weak ties in this process. Strong
and weak ties themselves took various forms from straightforward reciprocity to
establishing relationships of a more patron-client type.
To return to our second hypothesis — that when social ties are too dense market
activity is inhibited by having to distribute profits amongst a wider group — we found
that this was not borne out. In this research we found that the extent of responsibility to
others was very limited and did not therefore operate in such a way as to drain trading
capital and resources. The societies we are considering are urbanized, industrialized
societies where affective solidarities are limited. Nevertheless, nuclear families which
include parents, grandparents and children were important, but ties of open-ended,
unquestioning obligation did not usually extend beyond that. However, as we have seen
from some of the interviews, there are very strong obligations for financial support within
this family group and the traditional ways in which grandparents and parents help out
children is supplemented now by trading. This bounded family group could be said to
consist of strong ties of obligation and reciprocity. It was clear that members of this group
could not refuse demands from each other. Within this group, social ties based upon trust
and mutual solidarity were the strongest.
Outside of the family group, there is a network of weak ties built up with lorry
drivers, with bus drivers, with customs officers, with customers and with sellers or
‘realizators’. These ties are based more upon reciprocity, mutual favours and in some
cases patronage. These social networks depend upon mutual self-interest and reciprocity
and although they are not as impersonal as monetary transactions, they are based upon
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Claire Wallace in association with Oksana Shmulyar and Vasil Bedzir
something closer to a calculable form of exchange than the primary loyalties of family.
This is why we might term this, in the tradition of Granovetter (1974), the ‘strength of
weak ties’. Their importance lies in rendering an unpredictable environment more
predictable and therefore reducing the stress and anxiety associated with small-scale
trading.
Kinship could be invoked to develop or secure social capital, as could ethnic
solidarity and friendship. In this way, obligations of loyalty, trust and protection were
imposed. However, kinship and ethnic ties were, for most small-scale traders, simply one
resource upon which they could draw to develop such contacts. Small-scale traders tried
to stabilize and secure a risky and uncertain environment by drawing upon or developing
these different kinds of connections. Ethnic and kinship ties could be used in different
ways in order to do this. Since most people were new to this activity and did not aim to do
it for long, ties were often not very extensive or established. However, they were all the
more important because of the semi-clandestine nature of much of this trade and the way
in which it involves crossing borders and working in an alien environment.
Thus, to return to the problem set out at the beginning, we would argue that economic
activity — even in capitalist market societies — is socially embedded. Without an
understanding of norms and behaviour, without friends and favours, it is difficult to
imagine such activity surviving. However, in societies such as post-communist ones
which have been subject to rapid social change and where small-scale traders are not fully
formally protected by a legal system either, a civil society consisting of organizations for
entrepreneurs and consumers, market relationships and exchanges are secured by
informal understandings. Since small-scale traders operate in a strange and risky
environment, they try to reduce risk and the anxiety which accompanies it, and to
augment profits by investing in social capital or by developing networks of contacts
reinforced through family and ethnic ties.
Claire Wallace (wallace@ihs.ac.at), Oksana Shmulyar (Oksana.Shmulvar@svi.vxu.se)
and Vasil Bedzir, Department of Sociology, Institute for Advanced Studies,
Stumpergrasse 56, 1060-Vienna, Austria.
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