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Social values
By John Felix Raj. S.J.


Social Values - I

Honesty And Integrity Should Be Basis Of Economic Growth

(Published in the Statesman, March 14 & 15, 2005.)

Adam Smith had predicted in 1750 that Chine and Industan would emerge as economic powers in the 21st century. China has become a major player in the world economy. Twenty years of sustained growth have transformed the economy. It is fast becoming the centre of growth of regional production and trade. While Smith’s prediction is coming true in respect of China, India is lagging behind. China’s strategy is methodical and deliberate, but India’s is chaotic and opportunistic.

Management institutes teach a lot of things - managerial economics, accounting, rural development, marketing, and retailing, among others. Nowadays, they are also trying to instill something they should have been doing all along. They call it “ethics”, and a few of them call it “business ethics” or “development ethics” (as if that was something different from “regular” ethics), but they are all trying to counteract the loss of trust, honesty and truthfulness that has been created by the massive business frauds of the last few decades.

Code of conduct
Ethics is a code of conduct, concerned with how a person should behave. It refers to principles that define behaviour as right and wrong. Such principles do not always dictate a single moral course of action, but provide a means of evaluating and deciding among competing options. Values are the inner judgments that determine how a person is and behaves. We translate values into principles so that they can guide and motivate moral and ethical conduct. Values are different from ethics.

Ethics are said to flow from the head, while values from the heart. Ethics have western leanings and values eastern. Ethics are what we practice at work place while values are what we live at home. For example, trust, truth, honesty, integrity are values. The terms “ethics” and “values” are not interchangeable. Ethics flow from values and not vice-versa.

Paul Zak and Stephen Knack of the World Bank Research Group have observed that high-value societies exhibit higher rates of investment and growth and vice versa. They show that very low value societies can be caught in a poverty trap. According to them, values potentially can influence economic performance through either of two major channels, “micro-economic” and “macro-political”. At the micro level, social ties and inter-personal trust can reduce transactions costs, enforce contracts, and facilitate credit at the level of individual investors. At the macro level, social cohesion underlying trust and honesty may strengthen democratic governance, improve the efficiency and honesty of public administration, and improve the quality of economic policies.

Key factors
Trust and honesty are key factors. According to Piotr Sztompka, trust is a belief that the other agents would act in a predictable way and fulfil their obligations without special sanctions. A prerequisite of trust is honesty. As Jim Clemmer explains, honesty is a clear conscience “before myself and before my fellow human beings”. Honesty is the awareness of what is right and appropriate in one’s role, one’s behaviour, and one relationship. With honesty, there is no hypocrisy or artificiality, which create confusion and mistrust in the minds and lives of others.

Honesty makes for a life of integrity because the inner and outer selves are a mirror image. To have one form internally and another form externally creates barriers and can cause damage since one would neither be able to come close to anyone else, nor would others want to be close. Some think, “I am honest, but no one understands me”. That is not honesty. Honesty is as distinct as a flawless diamond, which can never remain hidden. The worth is visible in one’s actions.

Honesty and integrity are fundamental to leadership. Honesty and integrity produce trust, which produces high levels of confidence. High confidence encourages people to dream and to reach for new horizons. High confidence fosters risk-taking. Risk-taking and initiative are fundamental to organisational change and improvement. Our ability to lead others is directly related to our ability to forge strong relationships. Leadership quality is directly related to relationship with people. Strong relationships are dependent on trust. Trust provides the glue. But, unfortunately, values are not always present in many people and countries.

Here is a first-hand report of the Venezuelan situation by Mark Tweito. “Having now lived for over a year in Venezuela, I have been able to put my finger on one of the reasons I feel that Venezuela is not able to economically advance at the level it could. It is not that Venezuelans are lazy, as many of them work long hours for little pay. It is not a matter of intelligence either, as most Venezuelans are able to grasp difficult concepts and are able to make do with the materials at hand in order to solve problems. However, there is a rampant problem with distrust. This arises from the rampant corruption on the part of many citizens. It is simply harder to make business when trust is lacking. If Venezuelans want to improve their economy, one of the best ways would be to act trustworthy”.

Dominant economy
The USA is the premier and dominant economy through the post-World War II period. With a population of around 285 million, it is known as the “land of opportunities”. It has a little bit of every country, culture and religion in the world. The USA produces the largest GDP in the world, valued at $9.87 trillion in 2000. Its GDP per capita is around $37,600 in 2002. The real GDP, GDP per capita and inflationary rates have been more or less representative of a leading world power over the past several decades.

Bradford DeLong and Claudia Goldin show that tolerance and trust have been main reasons for the USA’s undisputed economic growth. “We are different but we can live in harmony” has been the mantra in the USA where creativity and knowledge are valued. Unity in diversity breeds creativity. Silicon Valley is a concrete example for this. You ask the people in SV what makes their company special. The immediate answer is: “integrity”. As George Anders, a Fast Company senior editor based in SV, put it: “we live and work in a world where the Internet changes everything”. But the smartest people here believe that honesty is still the best policy.

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Social Values - II

India’s Underdevelopment Attributed To Mistrust And Dishonesty
By Fr. J. Felix R
aj.

Roughly three-fourths of the US GNP derives from labour inputs. High labour productivity, achieved by a trained and skilled labour force, which reflects human capital investment, incentive system, management and cultural factors, is responsible. Human capital has played a significant role in America’s 20th century economic growth — the increase in average schooling, the positive effects of policies intended to boost the knowledge and skills of people, the proper distribution of income that enables people to lead better lives, a measure of well-being.

But Russia demonstrated a prominent example of a low-trust society. According to Susan Rose Ackerman and Bo Rothstein, under the Soviet style of socialism, government institutions had become severely discredited among the population. Dishonest behaviour towards them was often seen as acceptable and even praiseworthy in the face of their legitimate power. In general, trust relationships extended little beyond the circle of family and close friends.

Erosion of values
India’s underdevelopment is attributed to the high degree of mistrust and dishonesty, erosion of values. According to a Transparency International survey (2003), India stands out as one among the 30 most corrupt countries in the world. TI has also found out that Indians pay a whopping Rs 267 billion in bribes annually with the health sector perceived to be the most corrupt with people being made to pay for what they are entitled to. High corruption demonstrates the low level of trust, honesty and integrity.

Corruption in governance is the root cause of many evils today, resulting in slow development. It brings down the quality of governance. A survey of seven government departments conducted in 2002 in five metros in India rated Delhi’s Customs and Excise Department, scoring 8.6 on a scale of 10, the most corrupt. As Frederick Keith Ross has said, “Corruption is a sin; every government denounces it and every government practices it”.

Politicians, bureaucrats and governments in India are involved in scams and scandals. The 1990s has been a decade of scams — Bofors, the bank securities scam, the hawala scam, the animal husbandry scam, the sugar scam, telecom scam, fertiliser import scam, PSE disinvestment scam etc. Governments at the Centre and the states are full of scandals and corruption charges involving those who occupy top political positions. Corruption manifests itself in many forms: at the highest political level as horse-trading of MLAs and MPs; at the fiscal level in the form of evading taxes; at the corporate level in terms of financing elections by black money and so on.

As Ruddar Datt puts it, “A strong feeling has grown in Indian political life that corruption has become a way of life. In case, you are caught taking a bribe, you can get rid of the crime by paying a bribe”. Unlike the developed countries, home and work place are two independent entities in India. Values, lived at home, are seldom carried to work place.

Bribe an incentive
That is why; bribe has become an incentive these days, which increases work efficiency in public offices. It is disturbing to note that corruption has brought India among the lowest in the list of countries in the matter of corrupt activities. Seventy per cent of India’s population lives in villages. It is known to be a cradle of all religions. In an Indian village, people of different religions and castes have lived together for centuries in harmony and peace. But of late, communal clashes are not uncommon, costing hundreds of lives besides wealth and property. The Godhra massacre of February 2002 in Gujarat where nearly 2,000 people, most of them Muslims including women and children were affected is a recent case in this regard.

While religious pluralism and multicultural and multi-linguistic realities are strength on the one hand, it also hinders India’s development. Communal violence is a major hurdle. Frequent communal clashes keep the environment disturbed with fear and suspicion and reduce the degree of incentives to invest and the potential for productive activity. Religions in India have not played a constructive role in nation-building and economic development.

No economic system can perform as well as free markets in an atmosphere of mistrust and dishonesty. An efficient market requires that parties to transactions trust one another and trust that the information presented to them is accurate. If stock analysts and everyday investors cannot be confident that they are being given accurate figures regarding the financial health and prospects of companies, they cannot make informed buying decisions. The result is simply gambling or, more likely, an increasing reluctance to invest. The stock market will plummet and investment will dry up, and without investment, there will be no capital improvements, no research, and no prosperity.

Values and ethical behaviour are not just goods relevant to Sunday morning; they are critical to our total well-being. Consumerism has become a cancerous culture. We give importance to “having” and not “being”. In being we grow together, but in having we shall all perish together. We increasingly are losing our understanding of just what it means to act fairly and honestly. To be sure, we have a multitude of laws on the books that say, in essence, “Thou shalt not lie. Thou shall not cheat”.

Complexity of laws
However, the very number and complexity of these laws, applied in different ways to almost every aspect of economic life, have blurred the basic point: lies and cheating are evil. The very complexity of our laws has encouraged many professionals and business people to find ways of conducting business that arguably fit within the letter of the law while avoiding its true intent.

We have become so tolerant of half-truths, hair-splitting definitions, and the notion that truth is “subjective” that we have lost our ability to enforce basic honesty and integrity, even where they are crucial to our life and economic well-being. When people perceive that the social system is untrustworthy and inequitable, their incentive to engage in productive economic activities declines. Anti-corruption programmes that are formulated to address issues of economic growth, income distribution, governance, government services in health and education, if implemented effectively are likely to not only reduce corruption, but also improve growth and development as well.

It is time we stopped talking and discussing about values and ethics, and start living it in our lives to bring changes in our educational institutions, organisations, companies and government departments. Higher the degree of trust and honesty, accountability and transparency, which results in strong human bond, higher will be the level of growth and development.
 

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