Counterbalancing marketization informally: Georgia’s new-institutionalist reform and its discontents

Discussing the case of institutional change and its discontents in the Georgian context, this article critically engages with one of the most influential perspectives on informal economic practices, namely the new institutionalist perspective. The examination of the responses to the new-institutionalist remedies reveals counterintuitive outcomes to allegedly successful market-enhancing reforms. The reforms were resisted and they failed to deliver the promise of improved entrepreneurial opportunities and eased social vulnerability. I suggest that the new-institutionalist prescriptions result in counterintuitive outcomes as they are based on two misleading assumptions. First, they read informal practices as a priori market-like and second, they see the transition to a market economy as a relatively harmonious process. I argue that, informal economic practices are not necessarily market-like, nor is the establishment of market-enhancing reforms uncontested by informally operating actors. Instead, the persons operating informally draw on non-commodified resources and suffer significant social and economic losses when the state-supported process of marketization deepens. The process of adjusting to marketization and coping with its costs inevitably involves elaboration of practices and interventions that defy and contradict the market logic. Precisely, this dismissal of the need for non-market-based solutions in current theory and practice leads to informalization of the resistance against marketization.