The article considers the questions of legitimacy of social institutions, which are analyzed not only by means of methodology of the traditional institutional economic theory, but also on the basis of the principles of social equity. It is necessary to reformulate the doctrine of social equity, which could be the basis for institutional policy and state regulation. The purpose of the article consists in definition of the typology of four alternative regimes of legitimacy of institutions, based on a combination of legality and standards of social equity. The stated goal is achieved by justification of the concept of legitimacy, which expands the range of classical research approaches and allows overcoming one-sidedness of views of economists, sociologists and jurists on this issue. It is proved that insufficient state funding of expenses on productive employment, education, health care and social security, growth of rent incomes of certain players of the market lead to emergence of excessive inequality and poverty. The values of Gini coefficient, decile R/P 10% wage ratio and Keitz coefficient prove that. On the basis of the conducted studies, the authors drew a conclusion on a specific Russian type of illegitimacy, when legal institutions do not get support of the majority due to deviations from requirements of social equity. It is accompanied by dysfunctions of institutions and effects of setting institutional traps because of preservation of inefficient standards due to access to the state resources of self-support.
Keywords: Institutional regimelegitimacylegalitysocial equityinequalityinformal employment
The notion "legitimacy" applied to human institutions is used in scientific literature on economy, law and sociology. The Russian politicians also speak about legitimacy of institutions. However, it turns out that the notion takes various meanings in each case. Most often legitimacy is used as a synonym for legality, when we talk about the norms, established in laws, and legal contracts. At the same time the notion of legitimacy of human institutions is limited to the legal component, based on the dilemma: legal – illegal. However, legitimacy has also another side, which is connected with collective recognition. What defines collective recognition? Some difficulties arise in this question, because it is required to break the tether of a subject of the traditional economic theory and to pass to value judgments of moral and political economy.
However, market is not a simple tool, and ideas that the economy is a science, free from value judgments, always seemed doubtful (Koslowski, 1985; Koslowski, 1998; Basu, 2011). In our opinion, an answer to the question - what defines collective recognition- is directly connected with the point whether social institutions are equal or not? The relevance of the problem of legitimacy of institutions for modern Russia is explained by this fact. According to the results of sociological studies, the dream of living in equal society is among three most widespread variants of dreaming "for yourself" in life of Russians (33%) (Mareeva, 2013).
Russian economists Abalkin (2005), Bogomolov (2007), Lvov, Makarov, & Kleiner (2000) and Glazyev (2007) pointed to violation of requirements of social equity while transition to the market. An attempt to set the tasks for new Russia from the position of social equity was made in the article of the Prime Minister V.V. Putin "Building justice. Social policy for Russia". It appeared in three months prior to his election as the President of the country for the third term (Putin, 2012). The article described the problems, which were not solved within the doctrine of the social state, and the tasks, "which should become the agenda of the following stage of Russian development. These ideas were fixed by adoption of so-called "May" Decrees of the President, in which the certain tasks, set in the article, were formalized by criteria and terms: "On State Economic Policy in the Long-term", "On Measures for Implementation of State Social Policy", "On Improvement of Public Health Policy", "On Measures for Implementation of State Policy in Education and Science" and others, all in all eleven. At the present time, not all provisions of the Decrees are complied in due measure and time because of inadequate funding. The main disadvantage is that the doctrine of social equity, which could be the basis for institutional policy and state regulation, is still not formed in the society. In our opinion, lack of the complex view on the question of the nature of legitimacy of institutions (in Russia, in particular) does not allow identifying the reasons of problems, growing in the society, and developing effective ways of their solution.
The purpose of the article consists in justification of the concept of legitimacy of social institutions, based on a combination of legality and standards of social equity. This allows overcoming one-sidedness of views on this issue. The theoretical concept of legitimacy, supplemented with statistical and sociological information on the current state of the Russian institutions, actualizes the question about restoration of social equity. It is proved that institutions are legitimate only when formal standards are collectively recognized, and they comply with the principles of social equity.
As institutions act as the main and primary subject of social equity, it shifts focus in the research of social equity from purely moral aspects of interpersonal communication, investigated within ethics and psychology, to the institutional ones. The concept of legitimacy of social institutions is considered in the article with the use of methodology of the traditional institutional economic theory. It allows revealing the features of the national Russian economy and arising qualitative restrictions. It describes formal and informal standards and rules, which, on the one hand, are fixed in legal acts and business contracts, and on the other, they should be relevant to the principles of social equity.
The theoretical conclusions, presented in the article, are based on processing of practical data, which are contained in forms of federal statistical observation and received by means of observations, sociological studies of the Russian research centres in recent years. These conclusions are premised on studying regulatory legal acts, controlling legal relationships in the socioeconomic sphere, adopted and implemented in the Russian Federation.
We believe that in the question of legitimacy of social institutions, it is not appropriate to be limited only to statement of the fact of their "legality", which is expressed in fixing of standards and provisions in legal acts of the general or local levels. The important role in recognition of social institutions as legitimate belongs to collective recognition, because formal norms should be not only accepted in accordance with the established procedure, but also approved by the majority. That is why it would be wrong to be limited to one component (Bobkov, Vahtina, & Simonova, 2016). In our opinion, the concept of legitimacy of institutions is based on a combination of legality (or illegality) and collective recognition (or non-recognition), based on compliance of institutions with the principles of equity.
Collective recognition of institutions (recognition of institutions by the majority) is provided with their ethical legitimization and moral support. That is why it directly depends on the fact, whether standards, rules and the organizations supporting them, are equal. In this regard, J. Rawls wrote that force of formal requirements should be complemented by their compliance with the principles of social equity. He defined the above-mentioned compliance as "the main virtue of social institutions" (Rawls, 2010). If different kinds of organizational difficulties are not taken into account, then the problem of practical implementation of adopted regulatory legal acts is caused by lack of informal recognition from the majority of people. It mostly depends on the features of national culture (Nureev, 2009). Getting into the depths of human consciousness and will, institutions generate an ethical element, which is the basis for emphasizing and choosing those, which serve for equity (Stiglitz, 2012; Piff, 2012).
Purpose of the Study
The purpose of the article consists in definition of the typology of four alternative regimes of legitimacy of institutions, based on a combination of legality and standards of social equity. In our opinion, both sides of legitimacy are closely related to each other. Existence of obvious and implicit agreements between people concerning collective recognition of formally established standards and rules gives to institutions completeness and "the highest justification". However, collective recognition is not sufficient. Formal recognition of the rights, which is expressed in legal confirmation of norms in laws or business contracts, is required. There are interrelations between legality and informal collective recognition, based on compliance of standards with the principles of social equity. These interconnections generate different types of "regimes" of legitimacy, each with specific characteristics.
If formal institutions, enshrined in laws or business contracts, are collectively recognized and accepted, then it is possible to talk about achievement of the regime of "full" legitimacy. If standards are not formally established, and the majority of people consider them unequal, then it is possible to call such regime illegitimate. In case of a diverse combination of "legality" and "collective recognition", it is necessary to refer to the "transitional" regime of legitimacy. Characteristics of the transitional regimes differ depending on their components. If there is the official status, but the status function is not collectively accepted and recognized, or, on the contrary, the standards, corresponding to the beliefs of people about equity, are not formally legalized, then the state of "full" legitimacy is not reached.
Various alternative combinations of the above-mentioned characteristics generate the alternative institutional regimes of legitimacy, which are presented in the table
In case of "full legitimacy", institutions are formally authorized in legal acts or business contracts and comply with the principles of social equity. This institutional regime differs in coordination, stability and economic efficiency as participants of the process distinguish and accept formal standards "as their own". In this case, there are voluntary obligations of subjects for implementation of rules, which form the basis for lawful expectations that others will do likewise.
The regime of "full illegitimacy" is opposite to the previous one as it is characterized by lack of formally enshrined standards and informal support by the majority. This institutional regime remains mostly theoretical, but not practical design.
The transitional regimes are of greater interest: the regime of "partial informal legitimacy" and the regime of "partial formal legitimacy". In the first case, institutions are recognized as equal by the majority, but they are not legislatively (formally) established. In the second case - the majority does not formally recognize established (legal) standards as equal. This means that or the available formal rights don't gain collective recognition in both cases, or collective recognition isn't supported with the formal rights therefore competences which subjects have are truncated in comparison with their optimum state. On the one hand, it leads to decrease in degree of implementation of accepted standards, on the other hand - the standards, demanded by people, and corresponding to their beliefs about equity, are not enshrined in laws and business contracts. Both regimes of partial legitimacy are accompanied by deformations of institutions.
The question of what features distinguish a modern Russian institutional regime is of practical interest. On the one hand, state institutions become stronger in the country. The number of annually adopted legal acts remains one of the highest in the world. In five years, 1817 draft bills were passed and 6012 were introduced during the period of operation of the State Duma of the seventh Federal Assembly of the Russian Federation. Those, who are affected by them, learn about important acts in the last turn. Only since 2002 consideration of certain draft bills, which have "the high public importance", in "zero" reading - preliminary public expert evaluation- becomes customary for legislation. The offer that all bills, affecting economic and social interests of citizens and also determining guarantees of their constitutional rights and freedoms, should pass a stage of preliminary discussion, still has not received legislative confirmation.
The level of effectiveness of existing in the country mechanisms of ensuring "collective recognition" of formally established legal standards can be estimated by the results of public opinion surveys and also by dynamics of a number of key tendencies in the field of employment, inequality and poverty.
According to official estimates, informal employment (a share of the informal sector in the total employment) accounted for 20,5% in 2015. Requirements of social equity are not implemented in this sector as workers are deprived of labor and social rights. In the documents of the International Labor Organization (ILO) these processes are characterized as unstable, vulnerable employment. Its considerable part is concentrated in the informal sector of the economy. For the purpose of its reduction, in 2014 the Government put forward the task of legalization of informal employment, but the emphasis was placed on the need of increase in fiscal performance and insurance fees. It goes without saying that this problem is very important for the state. However, workers and entrepreneurs will not begin to come out VOLUNTARILY of “the shadow” in the formal economy and employment until the priorities, which were put forward by the state, are detached from the interests of employees and employers; until the problems of impairment of labor and social rights of workers won’t be placed in the forefront and won’t begin to be solved as well as the problem of creation of favorable environment for legal business dealing. No wonder that the changes in the Russian Legislation, which have actually forbidden agency labor (The Federal Law of the Russian Federation of 05.05.2014 № 116-FZ), strengthened administrative responsibility for conclusion of civil law contract instead of work contract (The Federal Law of the Russian Federation of 28.12.2013 № 412-FZ), determining the features of regulation of labor of remote workers (The Federal Law of the Russian Federation of 05.04.2013 № 60 – FZ) and some other changes did not lead to considerable reduction of informal employment in 2014-2016. In these acts the emphasis is placed on compulsory methods of legalization of employment, or a number of essential conditions of its practical introduction into the legal field is not established in them. For example, according to the official statistics, in 2016 the share of employees, performing remote work, was 0,09% of the total number of employed at the main work. It is known that remote work has actually larger scales, but its major part stays beyond the scope of formal employment, especially with due regard for secondary employment (Rosstat. Investigation of Labor Force, 2016).
Some legal acts, aimed at arrangement of conditions for legalization of employment, will come into force in 2017. They are devoted to working conditions at microenterprises and tax holidays for a number of categories of self-employed citizens (The Federal Law of the Russian Federation of 03.07.2016 № 348-FZ; Regulation of RF Government of 27 August, 2016 № 858) and also raise a number of questions, calling into doubt recognition of their legitimacy in public consciousness.
According to studies, equity occupies one of the leading places among the most significant values for Russians. Even in the environment of wealthy groups of the population, the desire for justice was expressed by 38% (Analytical Report, 2014). The share of those, who believe that the modern Russian society is arranged inequitably, is more than 60% (other 27% were at a loss for an answer) (Justice in the Russian Society, 2011). However, the majority of Russians do not believe any more in the opportunity to live in equal and reasonably arranged society. The gap in the confidence level between the lower (poor) and the upper strata (wealthy) reaches an eightfold point (7% and 55%). By calculations of the Institute of Sociology of RAS the share of low and average income is 80 %, in this environment 36% of people for equity (Gorshkov, 2011). On this background, there is some kind of "legal nihilism" as, judging by public opinion surveys, the ratio between equity and legality in public consciousness is solved in favor of equity. Specifically, only 40% of Russians declare the priority of equity over the law. They agree with the statement "it is not so important if something is in conformity with the law or not – the main thing is that it should be equal. Only 34% of respondents talk about the priority of the law, while 24% were at a loss for an answer (Analytical Report, 2014).
What disturbs Russians to the fullest extent? The important part is assigned to ensuring equality of all people before the law, overcoming of an excessive gap in the level and quality of living between the rich and the poor. 53% of people consider it an intolerant problem (Dobrynina, 2014). More than 50% perceive unfair inequalities in getting education and high-quality medical services especially painfully, and that defies the principle of equal starting opportunities (Analytical Report, 2014). According to "The main directions of budgetary policy for 2015 and the planning period of 2016 and 2017", the public expenditures on health care in Russia account for 3,6% of GDP, on education – 4,3% of GDP, social policy – 12,7% of GDP. It is much lower than it is required for financing of these spheres of activity and for assuring of high quality of living of the population. Insufficient state funding of expenses on creation of new highly effective workplaces, health care and education limits the availability of socially significant benefits for each person, leads to the growth of commercial services and decrease in their quality.
The Federal State Statistics Service reports that in 2015 the level of in Russia was 13,4%. In a year the population with incomes below the subsistence minimum increased by 3,1 million people and reached an indicator of 19,2 million people. Nominally in 2015 the average income and average salary increased, however, in real terms their decrease is estimated in comparison with the previous year by 4% and 9,5% respectively (The Socio-Economic Situation in Russia, 2015; Russia in Figures: Statistical Handbook, 2015).
More expanded characteristic of the unfavourable social structure of the Russian society by the level of material wealth is presented in the studies of the All-Russian Centre of Living Standards. In 2015 the group of the population with the lowest level of material wealth, which unites those, whose financial income per capita and/or living conditions do not meet the requirements of the regulatory benchmark, characterizing the lowest level of material security (subsistence minimum and poor housing conditions) accounts for 38% in the socioeconomic structure of the Russian society. At the same time, it is the largest group among those, which are allocated on the basis of regulatory benchmark of income and housing security.
Groups with low and below the average levels of material security accounted respectively 25,4 and 33,4%. Groups with average and high levels of material security had the lowest representation in the socioeconomic structure of the Russian society. Together they accounted only 3,2% (Bobkov & Odintsova, 2016).
According to the polls of the Public Opinion Foundation (POF), when assessing by Russians the current material situation and expectations regarding its dynamics, 41% of respondents report that their income is at best sufficient for food. At the same time, the majority of Russians do not expect any changes in their material situation in the coming year (The Changes in the Material Situation of Russians, 2016). According to the survey, conducted by POF in October, 2015, in the past six months 46% of the population began to save more on food products (only 9% do not save), 51% - on nonfood items (clothes, footwear, household appliances, etc.) and services (6% do not save) (The Standard of Living: Changes in a Crisis, 2015).
Modern Russia has excessively high level of income inequality. According to Rosstat (Rosstat. Investigation of Labor Force., 2016), the Gini coefficient is between 0,40 and 0,42 in recent years. The size of decile R/P 10% ratio (the ratio of income of the richest 10% to the poorest 10%) exceeds 16 times. At the same time, when calculating both indicators, shadow and corruption incomes are not taken into account, and that increases differentiation significantly. According to the polls of the All-Russian Public Opinion Research Center (VCIOM), the majority of Russians -77 % - consider distribution of income in the society as unequal (as well as a quarter of the century ago). Even among respondents with high income, there are 69% of such people, and among youth – 73%. If in 1990, 69% of Russians told that there are many poor in the country, then now there is already 82%. However, Russians tolerate inequalities connected with overall performance, qualification of workers, education level (under equal starting opportunities of its receiving for all). People recognize inequalities of this type as necessary and effective. The bar, reflecting excess of income of a highly qualified specialist or a chief over the average income for the country, is subjectively established by Russians at the level of 4,7 rubles (in 2006 - 4,9 rubles) (Analytical Report, 2014).
Russia remains one of the striking examples of receiving a rent by certain players at the expense of the society. The antimonopoly legislation and authorities are not sufficient enough to prevent abuses of economic entities of their dominant position. One of the reasons of development of "the fourth antimonopoly package" and amendments to the article 178 of the Criminal code of the Russian Federation was the need for reduction of the number of small inquires and cases in relation to enterprises, which are not possessing the essential market power as this tendency began to prevail in work of the Federal Antimonopoly Service (FAS) of Russia in recent years. In the report of FAS "On the State of Competition in the Russian Federation" (2015), it is noted that among the subjects, imposing disadvantageous conditions of contracts, the essential share belongs to natural monopolies (Report on the State of Competition in the Russian Federation, 2015).
In conditions of domination of exclusive producers, investment of small and medium business in the Russian economy is 3-4 times lower, than in economically developed countries. According to the Federal State Statistics Service, in 2013 the ratio of number of large enterprises and enterprises of small and medium business was 99% to 1%, and by the quantity of employed – 75% to 25%. At the same time, from the period 2012 - 2015 the number of individual entrepreneurs in the country declined by more than 10%.
These facts demonstrate that the Russian institutional system deviates from the requirements of social equity. It finds expression in violation of equal rights for access to the market and excessive differentiation of income of the population. Judging by the results of polls and procedures of ensuring public support at the stage of elaboration of bills, formally established standards do not get support of the majority. In this regard, we believe that the modern Russian institutional regime can be referred to the category of "partial formal legitimacy".
In conditions of the "partial formal legitimacy", which is typical for modern Russia, there is a deformation of the institutions, which are not distinguished and accepted by the majority. If we use the classification of dysfunctions, given by Polterovich (2001), then it is necessary to talk about an atrophy and re-emergence, activization of alternative institutions and refusal of newly created. However, in case with the institutional regime of "partial formal legitimacy", essential features appear. It lies in the fact that unequal standards, supported by participation of the state, become more sustainable and long-term, than in other institutional regimes. It is explained by emergence of additional opportunities for "preservation" of ineffective standards due to access to the state resources of self-support.
This conclusion is confirmed by the Russian economic practice, which differs in strengthening of ties between business and power in various forms, formation of closed business networks with participation of the state, formation and strengthening of the state corporations. The public-private structures are aimed at control over resources and joint protection against competition. In its turn, it maintains monopolism, promotes growth of corruption and shadow economy (Belokrylova & Vakhtina, 2014).
Increase in the state participation in the Russian economy can be judged by the data, presented in the table
As it is noted in the program, the growth of state participation substantially takes place due to the unequal competition, based on combination of state functions (possession of state assets under favourable conditions, licensing, control) and functions of the participant of the market. There is a shift of priorities in development of branches of the economy towards those, which bring fast profit (in particular, raw), the effective movement of material, financial and labour resources disrupts between the branches and regions. It counteracts the structural reforms. The fact that raw dependence of Russia grows every year testifies these tendencies. The share of export of energy resources has increased by 1,8 times since 1995. The share of oil and gas income accounts for 51,3% of fiscal revenues in 2014. The main stream of investments in the country (more than 60%) goes to production and export of raw materials. At the same time, the profitability in the sector of mining is more than 14%. It exceeds the average profitability across the Russian Federation (3,5%) (World economic outlook, 2016).
Consequently, legitimacy of social institutions depends on not only their formal establishment, but also on the level of their correspondence with the principles of social equity. The institutions, which meet the requirements for social equity, should provide equal conditions for all in order to achieve the purposes. This condition promotes decrease in risk of excessive inequalities and poverty. Collective recognition and adoption of standards, rules and organizations, supporting them "as their own", gives them full institutional completeness. If both components – legality and collective recognition – are available, then this institutional regime can be considered as legitimate.
The institutional system of modern Russia has properties of "partial formal legitimacy", when formally established standards are not accepted by the majority of people as equal. This is because of the fact that many contradictions, connected with deviation from requirements for social equity, accumulated in the Russian society. The official statistics demonstrates violation of the effective competition, exclusive advantages and rent-seeking behaviour of certain market players, gaining rent incomes at the expense of the whole society. Informal employment, level of income inequality of the population as well as the number of the poor, also among employed people, have considerably grown for the period of transition to the market in Russia.
A complete concept of social equity is still not formed in the Russian society, though the ideal of equal society remains a priority. Surveying of public opinions shows that the majority of Russians consider the existing institutional system unequal. Accumulation of contradictions, connected with violation of the principles of social equality, generates legal nihilism, reduces the level of credibility to social institutions.
The regime of "partial formal legitimacy", existing in Russia, is characterized by institutional deformations, which possess relative stability due to formation of the state resources of self-support. Their sources are rent incomes. The need for institutional transformations, aimed at restoration of social equity, appeared in the modern Russian society. These transformations will promote increase in the level of legitimacy of institutions, acceptance by the majority of the population. This is a necessary condition for emergence of voluntary obligations for execution of the rules. In order to increase efficiency of the economy and people’s life quality, it is necessary to maintain constant balance between legal standards and the level of social equality.
The authors thank the Russian Science Foundation (RSF: the grant - "Unstable employment in the Russian Federation: state and tendencies of decrease, No. 16-18-10140") for support of this publication.
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Bobkov, V., Simonova*, M., & Vakhtina, M. (2019). On What Depends The Legitimacy Of Social Institutions In Modern Russia. In & V. Mantulenko (Ed.), Global Challenges and Prospects of the Modern Economic Development, vol 57. European Proceedings of Social and Behavioural Sciences (pp. 826-836). Future Academy. https://doi.org/10.15405/epsbs.2019.03.81