Tuesday, July 05, 2005

Can you trust a European? 

Hindrocket has linked to the story of Tony Blair's call for a summit on Europe's social model. John thinks that while the issues Blair discusses are economic, the root of them are ideological. I'd argue it's more sociological, and for support I turn to this study of Russian attitudes (h/t: Scott Clark).

Would you trust a stranger on a train to look after your bag while you run to the toilet?

Probably not if you're Russian. Seventy percent of people in Russia believe "you can't be too careful in dealing with people," while only a quarter agree that "generally most people can be trusted," according to a poll of 1,500 Russians conducted by the Bashkirova & Partners market research firm last month.

The lack of trust does not just translate into a greater air of suspicion, it also carries a heavy price that weighs down the entire economy.

In the absence of effective mechanisms that enforce contracts and protect property rights -- what economists broadly call "legal institutions" -- trust is left as one of the few informal pillars of economic activity.

Although the costs of mistrust are indirect and hard to quantify, they undeniably take a heavy toll on economic activity. Insecurity forces companies into unprofitable businesses to secure supplies, confines entrepreneurs to dealing only with close partners and deforms the whole structure of the economy.

White this doesn't necessarily go into the rest of Europe (you can cut up the data here and decide for yourself,) it certainly appears to. The European model has long been built on suspicion of private motives: A social welfare program that replaces private charity; supernational institutions because of fear that national institutions lead to war; monetary policy delegated to a supernational organization because of fear of inflation and currency depreciation, &c. The US in contrast moves more and more towards reliance on substitutes for government action and there's outcry when the government moves into private areas (see Kelo.) I do not know if that is the direction where Blair sees the conversation he's trying to start. But it should.