Socially embedded and contested networks

Whilst the work of institutional economists is a useful starting point for defining and identifying institutional arrangements and environments, as Hodgson (2004), Martin (2003), and Neilson & Pritchard (2009) point out, this work is aspatial in that it fails to sufficiently acknowledge the influence of power relations and cultural and social norms in economic activity. Institutional economists (such as Williamson, 2002) emphasise the importance of institutional arrangements that control access to

information but neglect to analyse how and why particular institutional environments exist that create spaces of uneven access and asymmetries in knowledge between those involved in exchange, such as trade. One reason for this failure is that in economics the application of institutional analysis is often restricted to macro level examinations of countries or organisations.

As discussed in the section 3.8.3, Whatmore and Thorne (1997) suggest that the influence of social agency networks can be introduced to strengthen the social

embeddedness of the analysis by acknowledging that ‘all individuals, institutions and alliances enact in a variety of partial knowledges through networks which involve a

‘lengthening’ of spatial reach and a ‘strengthening’ of environmental and social embeddedness’ (1997: 294).

To instigate a discussion on the understanding of social institutions in economic activity it is necessary to acknowledge the contributions of the ‘new economic sociology’ school of thought that focuses on the failure of economists to incorporate social structure into analysis (Swedberg, 1997). The principal contributor to this school is the sociologist Mark Granovetter who stresses the importance of recognising social relations and networks as the mediators of economic institutions such as

markets. In his most famous article, he emphasises the concept of embeddedness,⁴⁴ stating that economic actions are ‘embedded in concrete systems of social relations’

(Granovetter, 1985: 487).

The notion of heightening the importance of social and cultural embeddedness in commodity chain analysis is of direct relevance to fair trade as a movement that aims to introduce more civic norms and institutions into market operations. This concept of embeddedness principally finds its roots in the work of Polanyi who is regarded by Hess (2004: 167) as the ‘father of embeddedness’. Polanyi (1957:250) wrote that ‘the human economy… is embedded and enmeshed in institutions, economic and non-economic [so therefore] the inclusion of the nonnon-economic is vital’. As discussed in Chapter Two, Polanyi provided a social history of the economy highlighting how the economy has always been embedded in society and not in aspatial abstract market environments. In re-working the embeddedness concept, Granovetter applies it at a more micro scale to emphasise how all economic actions are social.

Despite the differences in the scale of analysis, the importance of highlighting the embeddedness of economic activity in the ‘social’ is that it conflates with assumptions of the ability of others to act ‘rationally’, which is at the core of classic economic models. Instead it highlights how individuals and organisations are embedded in a wide array of multi-scalar institutions and practices (Allen, 2003: 48) and networks of social relations which vary according to context and can either enable or constrain economic activity. Utilising the concept of embeddedness in this way ‘brings the

44 This thesis explores embeddedness in more detail in Chapter Four, discussing its contribution to extending the global production networks model.

sociological setting of the economy back into the fulcrum of economic thought’

(Neilson & Pritchard, 2009: 51). It therefore stresses the need for research such as this to acknowledge the specific social, political, and cultural factors in place that govern, regulate, and embed certain actors in particular local institutional realities (Martin, 2003).

Bair (2008) identifies how, for Granovetter, it was important to understand the networks of social ties and obligations that people are subjected to and how such factors place constraints on economic activity. This is in contrast to the GCC and GVC work that largely marginalises social analysis when analysing production location and supply chain formations that advocates of transaction cost economics focussed upon (Coase, 1988, Williamson, 2002) and of whom Granovetter (1985) was critical.

Accepting that the GVC approach is less spatially embedded and that there is a need to ‘socialise’ the analysis, Hess (2004) feels that the work of Granovetter over territorialises the analysis and so he has promoted a reconceptualisation of

embeddedness to incorporate relations and connections beyond those only found in local places. Hess (2004) then suggests that embeddedness is multi-dimensional (vertical and horizontal) and of numerous types (social, cultural, political, and economic). Accepting that the concept of embeddedness represents the social relationships between actors in a GPN, Hess (2004) identifies three dimensions of embeddedness.

The first, societal embeddedness, focuses upon the social, political, and cultural background from where a participant in a production network originates. The second, network embeddedness, explores the webs of multi-scalar relations and

inter-connections between actors operating across spatial scales. The third, territorial embeddedness, examines the ‘anchoring’ of actors and processes in particular places, for instance, when participants are tied-in to particular production networks.

Hess (2004:174) also points out how ‘the literature on embeddedness stresses the central role of concrete personal relations and networks of relations to generate trust’.

Bair (2008) identifies how this resonates with the work of Powell (1990) who

suggests that the ‘social relations in which they [networks] are embedded generate mutual expectations and relations of trust, which arise from repeated exchanges’. This concept of the development of trust in networks relates to the work on social capital and trust by Putnam (2000), Sayer (2001), and others discussed in Chapter Two.

Here, as then, the literature on trust and social capital tends to over-state the positive outcomes from social relations and assumes that collaboration will engender such responses toward the betterment of livelihoods and economic development, when the corollary may also be true. Such an argument is put forward by Levy (2008: 943) who states that GPNs are entangled with ‘charged social and political issues’ and are ‘thus characterised by contestation as well as collaboration among multiple actors’. This is because GPNs are not just about value adding activities but ‘comprise complex political economic systems … [embedded in] their socio-political context’ (Levy, 2008: 943). Levy develops the perspective further by stating that ‘GPNs resemble contested organisational fields in which actors struggle over the construction of economic relationships, governance structures, institutional rules and norms, and discursive frames’ (2008: 944).

This resonates with the point emphasised by Sayer that kinship networks ‘are likely to be characterised by power asymmetries’ (2001: 699). In supporting the turn to

recognise social institutional environments, Sayer (2001) highlights the importance of also analysing power relations within such spaces. Using institutional analysis to bridge between macro and micro or structure and agency, Sayer argues that power is not limited to rules in systems that are the focus of conventional global political economy studies,⁴⁵ but also power exists in the ‘lifeworld’.

Adopting the concept of embeddedness to analysis in the GPN approach is arguably the most significant departure from the GVC framework. For Coe and Hess (2007: 5) the concept of embeddedness is important so as ‘not to lose sight of socio-cultural specificities in the organisation and regulation of global production networks’ as the operations of lead firms become embedded in local markets.

45 For instance, Rodrik et al. (2008) stress the importance of recognising hybridity of institutional environments and doing so means there cannot be a one size fits all model to suit all circumstances.

However, their analysis remains at a macro level and is dismissive of the role of geography.