Thursday, June 09, 2005

"Trust" & Governing Institutions (in response to Reem)


I totally agree, Trust is another issue that we've brought up previously in this forum. I wonder how to solve the problem though! Fukuyama, and others who have written about differences between "first" and "third" world societies, refers to "Social Capital," which basically implies the same thing.

Dr. Lester Salamon, one of my Professors, says that civil society in America is one of the major reasons Social Capital exists. I don't think you can apply that to Lebanon, where we have relatively strong civil societies (or rather, societies), but very little social capital.

Who can prescribe the proper medicine for us?

As for my comment about Islam and "modern governance," I just want to offer my apologies. I really don't like delving into such sensitive issues, but I just allowed myself to type. However, I'd like to clarify a few things:

The philosophy upon which market economies are based on today is founded on two individuals: Adam Smith & John Locke. Ultimately, the market preceded religion and philosophy, however, it was the Western European elite who developed governing institutions that nurtured it and ultimately allowed them to draw strength out of it.

I'll provide you with a quote from a book I'm reading about the downfall of the USSR (and its aftermath). The title is Armageddon Averted; by Stephen Kotkin. The quote is from Pg. 18.

"Obsolete industry can in theory be overcome, no mater how vast its extent. But even after [abandoning the planned economic model], Russia was not able to overcome its unprecedentedly large industrial junk heap, or quickly to create substantial new, dynamic sectors. That was because Russia lacked the indispensable liberal institutions that make markets work, while it possessed a plethora of the kinds of institutions that inhibit effective market operation. Here was a banal but useful reminder: the market is not an economic but a political and institutional phenomenon."

When I read that paragraph, my eyes lit up because I saw it as a close reflection of the Middle East. Just let me provide you with another quote that is also very relevant to this discussion. This one’s from page 166 of the same book:

“All countries, not just Russia, are unique. Institutions differ markedly just within the G-7. But either a country has some form of an effective regulatory civil service, or it does not. Either a country has some version of a strong judiciary to enforce the rule of law, property rights, and the accountability of officials, or it does not. Either a country has a reliable banking system to make affordable credit available, or it does not. Russia did not. And the international power hierarchy (known as the world economy), making no allowances for culture, punished Russia for lacking efficacious variants of such institutions. Russia’s entire economy ($350 billion) was valued at little more than total US health care fraud.”

In short, Reem, what I’m saying is that there seems to be specific types of governing institutions that allow for a market to flourish. These institutions are based on the philosophies of Smith, Locke, and (in the case of bureaucracy) German philosopher Max Weber. They can definitely be adopted by Muslim or Middle Eastern elites and molded to suit the local modalities. However, unless they are adopted, I don’t think the region will be getting anywhere quickly in that “international power hierarchy known as the world economy.”

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