John Felix Raj. S.J.
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
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.
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”.
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
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.
India’s Underdevelopment Attributed To Mistrust And Dishonesty
By Fr. J. Felix Raj.
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.