The influence of various social institutions forms informal regulations in the business enabling environment. A society assigns acceptable roles and activities for individuals based on a combination of norms regarding their gender, race or ethnicity, religion and class. These assigned roles or activities greatly affect how individuals participate in a market system.
Gender
Gender refers to the socially constructed roles, behaviors, activities and attributes that a given society considers appropriate for men and women. Frequently gender-based social rules create or reinforce differences in power that get played out in markets, value chains and economic activities, restricting women’s access, options and bargaining power.
Gender as a social construct within different societies will have different effects on women and men operating in various value chains. The nature of the product, the season (surplus or scarcity), distance to reach consumer markets, and the size of the market are all factors affecting who does what and when. Susan Johnson’s study on the role of social regulation includes many examples from published literature of the role of gender relations in regulating labor markets, grain markets, credit markets and others (e.g., coir) as well as access to and control over land. Typically, these gender norms are expressed through informal (and formal) rules that lead to discriminatory property and inheritance laws, for example, different access to resources, and to restrictions on the tasks or places of work that women may occupy.
Access to Land
In Cameroon, women have restricted access to agricultural land because of customary laws derived from ethnic traditions which only give women rights to access the land through their husband or father’s lineage. Women are forbidden to plant permanent trees on both kinship and rented land which excludes them from marketing cash crops like coffee, cocoa, rubber and oil palm. Women who do trade in these crops are forced to pay bribes and face gender violence as a result of collusion between transport drivers, government officers and armed police at the numerous tax check points on main roads. Similarly, in the rice market in Guinea the activities which involve high levels of technology—such as husking and transport—are usually controlled by men because they have the money to purchase the equipment, and using equipment is considered to be a ‘man’s job.’ These activities are also remunerated with higher wages. The gender construct therefore contributes to the impoverishment of women who cannot access technology to participate in higher-value markets.
Mobility
Women are often concentrated in small-scale trading and petty retail operations with products that require a rapid turnover. In West Africa, women occupy particular markets that sell highly perishable vegetables and fruit, staple foods and cooked foods that can be prepared in the home. Women are confined to petty trading instead of moving into wholesaling because of their lack of mobility which restricts their ability to gather information about the market, make the required contacts and earn sufficient income to guarantee loans for further financing.
In many places, informal rules assign women responsibility for ensuring basic survival of household: for example, through the production of staple food crops and economic activities that generate small, reliable flows of income to ensure the day-to-day household needs are met. These (socially entrenched) responsibilities affect women’s mobility, limit their bargaining positions, and may make it impractical to attend to commercial activities as fully as they wish. In many agricultural societies there are norms regarding control of land by men or women, and in some places norms regarding women’s obligation to work for their husbands. These norms limit women’s incentives to do something different since such changes carry significant risk. More insidiously, in some cultures gender-based social norms are revealed in (self-enforcing) ideologies of subordination which discourage women from believing in their own capabilities or having ambitions as entrepreneurs.
Upgrading
Women in rural households can be instrumental in value chain upgrading. However, gendered patterns in generating, allocating, controlling, and spending household income makes it difficult for women to accumulate lump sums required for upgrading. Gendered patterns in money management also limit the benefits that accrue to women, and thus their incentives to upgrade. This in turn affects their access to and use of new technologies. Social norms further determine how women are able to build the social and commercial networks and relationships necessary to adapt to changing market conditions and/or new markets.
Race and Ethnicity
Ethnicity is a social construct that refers to the inclusion in a sub-cultural group on the basis of origin, language, religion, race or cultural traditions different from the dominant society. Ethnic group customs and traditions govern relationships in social networks and have a key influence on socio-economic life. In most labor markets, social networks—including those based on ethnicity—play a key role. Details about employers, employees and jobs usually flow through the social networks that people have for non-economic reasons. Prospective employers and employees can learn about opportunities through their personal contacts which they trust along ethnic lines. Using social contacts and networks already in place reduces the costs that can incur from searching for the right job or the right person for the job. Ethnicity provides a strong network advantage through connections that are familial and ancestral.
Distinct ethnic groups are found producing specific goods or involved in a specific trade or product. This then influences hiring practices along ethnic lines which maintains the traditional occupations. For example, in Indonesia close family and friendship networks are frequently used by MSEs to access additional labor. In some cases, MSE operators not only hire friends when there is more work than the MSE operator can handle, but even when there is not enough work, they feel obliged to hire their friends although this reduces their profits considerably. Social position and reputation are more important than profitability. In other situations, MSE operators only hire from their villages far away because they trust their kin rather than “outsiders” who are readily available and may have more experience and skills. When ethnicity excludes “others” from outside the ethnic group, despite their availability and higher skill levels, this can have a tremendously negative impact on competitiveness and employment, particularly urban employment in densely populated areas.
In Afghanistan, the grape/raisin value chain operates through personal, familial, ethnic and historical relationships. Businesses must negotiate a maze of bribes, taxes and government requirements that increase transaction costs. However, businesses with the right connections due to their ethnicity and family ties are able to sidestep many of these costs and risks and gain access to land and capital. Small businesses and potential new investors without such ethnic and political influence face significant and sometimes insurmountable barriers to entry. These informal regulations that are established through the social norms and codes of conduct restrict competition and participation in the development of value chains, and ultimately, consolidate the market benefits in the hands of the already wealthy and powerful.
Religion and Caste
Religion underpins and provides the belief rationale for many informal regulations. Interpretation of religious beliefs in fatalistic terms can indicate a tendency to limit social mobility, individualism and entrepreneurialism. Although highly context-specific, fate-based beliefs tend to devalue efforts to influence outcomes through investments in technology or changes to production and marketing practices. In Liberia, ACDI/VOCA’s ACE project learned that beneficiaries who were quick to adopt new practices and who began to accumulate wealth were accused of witchcraft. Community members appeared to feel threatened by the pace of change. In response, the project initiated activities to show that incremental practices were required to increase on-farm productivity. By increasing the flow of information concerning the physical cause and effect and by helping community members to take a stepwise approach to upgrading, ACE sought to lessen the negative reaction to individuals’ success.
Barbara Harriss-White’s studies in India found that religion can supply a collective identity which in turn provides indispensable conditions for capital accumulation. “In India, religious affiliation can govern the creation and protection of rent, the acquisition of skills and contacts, the rationing of finance, the establishment and defense of collective reputation, the circulation of information, the norms that regulate the inheritance and management of property and those that prescribe the subordination of women”. In addition, Harriss-White found that religious groups provided insurance and last-resort social security. Jains, for example, were often wealthy local merchants, moneylenders and pawnbrokers who had indirect power over the local rural economy through webs of credit. The Muslim traders of Pallavaram on the other hand were limited in their economic growth because of lack of access to finance. Outside of a religious grouping, money was lent but not borrowed (other than from commercial banks). Transactions between religious groupings were been observed to be more exploitive than within religious groupings.
The caste system describes a stratification in which social classes or subclasses of traditional Hindu society are separated by distinctions of hereditary rank, profession or wealth. Caste is the class stratification of religious groups. Different castes engage in different productive activities according to their historical connections. Skills are passed on through apprenticeships which are gained through social networks based on kin, caste and locality. Caste is least flexible where social disadvantage is most entrenched and poverty is more profound. It makes for compartmentalized labor markets with non-competing groups whose options are severely constrained. Lower levels of technology are relegated to lower castes—for instance the dalits have to carry heavy loads on their heads—wheelbarrows are not available to them. Workers themselves may enforce caste stratification to protect their place in the labor market.
Caste is an evolving institution that can change if economic opportunity is available. For example, in West Bengal the poorer the worker, the less choice he will have in participating in the labor market. Yet the social ranking can shift if the household acquires more land and does not have to hire out, since hiring out labor is considered demeaning and associated with lower social ranking.
Low social status (especially when encoded in ‘caste’ relationships) can be a major obstacle to dialogue. In an example from Sri Lanka, traditional producers of cane and bamboo products were cut off from access to a critical material from natural rain forests—a softwood called Enipeththa. The producers were victims of well-intentioned but unnecessarily draconian blanket ban on extracting forest produce. Because they belong to a low-status caste, the producers were unable to get forest authorities to listen to their arguments for a more pragmatic sustainably-managed approach, which would have conservation advantages by reducing damaging illicit harvesting. Practical Action assisted producers to overcome this constraint by organizing collective efforts by producers, forest authorities, police and other stakeholders such as the national Craft Council to analyse the issue, negotiate and devise a solution.
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