Trust, Social Networks and the Informal Economy: A Comparative Analysis

Abstract

In this study we will attempt to show that trust is a cultural concept that should be ethnographically described, as its meaning varies according to the culture of each society and in every particular situation. Trust is a central component of social solidarity and the cement used to produce cohesion within the social networks composing the structure of society. Social networks based on trust might allow individuals to cope with the imperfections of a given socioeconomic system (state or market dominated), but they might also serve to erode the institutional framework of states by facilitating less desirable transactions (corruption). Hence, social networks may have positive connotations for those who benefit from having social networks or negative consequences both for individuals that lack such networks and for the formal institutions of society. To understand the complex variations in the construction and political impact of these social networks we analyze its role in the informal economy of three different socioeconomic systems. Following our previous studies, (Lomnitz 1971; 1988) we will discuss the importance of social networks based on trust and loyalty for the economic and social survival of the middle class in Chile. We will compare it to the informal economy in the former Soviet Union and, finally, drawing from literature on post-socialist societies, we will discuss the role of social networks in the transition to a market economy. In Latin America social networks have become the means on which informal activities take place allowing the poor to survive physically and the middle and upper classes to maintain their social status and privileges. In communism, the use of personal connections (social networks) has been recognized as a central strategy to satisfy shortages derived from the inefficiencies of the system, and as an important legacy with tremendous consequences for the post-socialist regimes that followed. In this article, we attempt to show the universality and persistence of trust-based networks as well as its socio-cultural embeddedness and the ambivalent consequences they have on state and society.