Why Market-Making Interactions Between States and Firms Fail Despite Aligned Interests and Ideas: Organizing the Hungarian Mortgage Market As a Socio-Technical Process

Our paper addresses the question of creating markets and the relationship of state and market actors therein. Most accounts of successful market-making interactions between firms and states stress the importance of aligning stakeholders’ interests and ideas. Yet market-making efforts often fail despite such an alignment. We inquire into the causes of these instances by comparing a case where market organizing efforts succeeded with one where they failed after an initial alignment of stakeholders. Evidence is drawn from our archival and interview-based study on the evolution of the Hungarian mortgage market. The paper looks at the historical junction at which a fundamental institution of capitalism was instituted in a post-socialist setting. As such, it provides a window on the work of making "mundane" markets, which often involves trying to replicate existing models elsewhere, as opposed to creating entirely new types of markets or markets for new products--the focus of much sociology of markets. First, we suggest that market-making is a process that progresses through different phases. In each phase, different aspects (political, technical, and financial) of the market are problematized and correspondingly, different actors play a central role. This explains why the alignment of stakeholders in one phase does not guarantee the success of consecutive phases, where new alignments must be found. Second, we highlight the importance of the technical policy-formulation phase of market-making. To be sure, the type, duration and substance of phases is not pre-determined, it is empirically established. However, the technical work of formulating policy emerges as a potential sticking point in the market-making process. We analyze in both cases how banks and the Ministry of Finance negotiated the properties of the planned mortgage banking system, and how law-makers debated the moral problematic as well as the concrete details of the proposals. We show that whether the initial alignment of interests was followed by success or failure in setting up the planned market depended on the ability of existing technical (legal, accounting, finance) infrastructures to accommodate the new market format that was required by stakeholders. Third, we show that this ability, that is, the path-dependency vs adaptability of infrastructures to stakeholders’ needs was contingent on the technical experts of public administration organizations. We suggest that whether experts acted as guardians of path-dependency or as agents of change of existing infrastructures did not depend primarily on their interpretative frames, but rather on the organizational arrangements under which they operated. We theorize our findings on regulation drawing on the sociomaterial approach of Actor-Network Theory and the Social Studies of Economization and Marketization. We argue that successful market-making requires the alignment not only of human stakeholders but also, crucially, of inert technical infrastructures through a process along which interests, ideas and technical infrastructures coevolve.