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SPP 206

Author: Richard Rose, CSPP
Description: Central and East Europeans secure their welfare through participation in a multiplicity of economies: i) Official economies (monetized, legal): Job in a state enterprise. Receipt of a pension of unemployment benefit; ii) Social economies (non-monetized, unrecorded but not illegal): Growing food. Exchanging help with friends and relatives. Doing favours for friends of friends. Queuing. iii) Uncivil economies (monetized, illegal): Job in the second economy. Taking, paying money for favours. Dealing in foreign curency. Sample surveys in Russia, Bulgaria and Czechoslovakia show the median household is active in at least four economies.<br /><br /> Maintaining an equilibrium between needs and resources is the first goal of a household. However, strategies rational at the individual level for survival or making money sometimes contradict macro-economic goals. In response to the immediate shock of transformation, more people retreat into the pre-modern economy than become involved in money-making enterprises. There is a risk of creating failure due to the contradiction between under-reporting of private sector activity, and misleading data about the official economy.<br /><br /> Although everyone in a country is subject to the same macro-economic policies, the responses of households vary with their situation, resulting in four different portfolios. The most common portfolio is defensive; combining a money income from the official economy and non-monetized social production. An enterprising portfolio emphasizes making money in both the official and uncivil economies. In Russia, a disproportionate number are vulnerable, for they rely solely upon the official economy. A limited number of households have a marginal portfolio, relying principally upon non-monetized economies. The choice of portfolios reflects household-specific situational factors, rather than social structural characteristics such as age, education or urban residence.

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