SOCIAL TRUST AND ECONOMIC
DEVELOPMENT
Abstract
The
aim of this paper is to connect two major variables, social trust, and how it
affects economic and political development. Economic development generally
refers to the sustainable courses of actions whose effects go a long way in
ensuring that the living standards and health of the people are maintained (Roth and Schuler, 2006). Properly implemented action is very
vital in ensuring that the welfare of the people is taken into account. However,
other very important issues also play a great role in ensuring improved living
standards. For instance, economic and political development cannot be attained
if the social trust is not emphasized in addition to other aspect such as human
capital, literacy among others. Economic development is related to any intervention
policy whose aim is to counter the effects of prevailing challenges (Bjornskov, 2006). This paper
aims at comparing the contribution that social trust has on the level of
development in any given country or state. Though there are many arguments
brought forward regarding the contribution of so many other factors, the
toughest question is whether social status plays a great role in ensuring that
economic and political development of any nation are sustained.
Social
trust applies highly to enable the people to leave most or some of the duties
that they could do on their own in the hands of other people. It is worth to
note that the trustor may withdraw attention or support from the trustee if the
later is not willing to cooperate with their demands or wishes. It is a high
level of social trust that culminates into people participating actively in the
development of the society from both the economic as well as the political perspective
(Coleman, 1990). On the one
hand, failure by the people to have trust with each other within the systems of
the society is likely to bring about negative changes within the society. On
the other hand, however, when there is a complete trust among the people that
everyone can participate actively in societal activities without fear of either
losing their efforts to opportunistic people or fear of achieving less through
corrupt practices, then there will be economic development.
If the people perceive each other as potential
threats, they are likely to withdraw most of their interdependence. This
consequently results to decline in the level of economic development. Emphasis
placed on in-group cooperation will also adversely affect the economy. For
instance, development is a holistic product achieved when there is a
combination of diverse people from different backgrounds. Diversity is a source
of wealth. When people combine different skills from different places, then the
outcome is likely to have far-reaching impacts than when they use skills from a
similar social background(Demaris and Yang, 1994). This therefore means that for people to achieve
economic and political development then they must be ready to go out and seek
for more skills outside their environmental scope. This demands them to have
social trust from the people where they get the skills.
Social
trust has a great advantage in social science especially within the backdrop of
economic and political development. Most of the countries whose social trust is
very low experience many problems with their economic and political growth.
This thesis attempts to examine whether there is a correlation between social
trust and economic as well as political development (Butter and Mosch, 2003).
The findings of this paper show that there is a strong association between
social trust and economic growth of any society. Social trust has also been
strongly related to countries with a higher level of development. There is no
established direct correlation between social trust and economic development
but there are links or channels such as education, companies among others,
which are significant in understanding how social trust works in order to
account for the level of economic and political development in any country.
There
is a strong correlation between social trust and economic development. Social
capital has been described as the glue that holds together people and without it,
would be difficult to assist the society to develop (Serageldin, 1999). However,
other factors that has a direct influence on economic development, social trust
as a social science concept has been popularized in the course of the 20th
century as a strong factor that if well utilized can lead to economic
development.
Contents
CHAPTER ONE
1.0 Introduction
Social trust has been established to be an
important factor that has an indirect influence on the level of economic and
political development of any nation(Alesina
et.al, 2003).
Development encompasses diverse aspects of any society such as the economic
growth. This approach therefore puts it in a level where all the other facets
are to be taken into account to produce the holistic umbrella of its welfare
and which is encompassed under the umbrella of development. Major sources of
the weakness such as the lack of freedom, poverty, tyranny, poor economic opportunities,
social deprivation, neglect, and misuse of public facilities, and other
repressive activities are some of the avenues that the leadership can use to
retard the level of development. Non-developed nations are characterized by low
level of education, healthcares, as well as life expectancy. On the other hand,
developed nations are characterized by high level of dispensation of these
factors.
Most
of the activities that the society engages in depend on the delegation of the
topmost people who are either experts or leaders so that they can be
successful. Leadership therefore in almost all the facets of the society
becomes the key issue that the people should have in order to run the
development of the society successfully. The success of all these however
depends on the level of social trust that the people have upon the leaders or
the representatives have on the followers. Where the representatives win the
trust of their followers, then the activities that they engage on is likely to
be a big success (Karen,et.al,2005). Where the
followers do not have trust on their leaders, they are likely to manifest resilience
in every activity that they engage in.
This
thesis paper has also attempted to prove that there is a direct link between social
trust and economic or political development. The link between social trust and
economic or political development is manifested through channels such as education,
employer-employee relationships among other avenues. Though the concept of
social trust can be linked with the ethics of different economic agencies, its
effects to the development of the country cannot be taken for granted.
1.1 background of the study
Social trust is a very vital factor in
ensuring that there is sustainable development in any given society. It is the
trust that the people bestow to the people they choose to lead them that makes
them to support them in all situations (Beugelsdijk et.al, 2004). Without this
important pillar, there is a big possibility that individuals in any given
society will hesitate to indulge in development activities due to the fear of
their efforts being taken for granted by other parties.
With this important aspect of social trust
however, there is great possibility that people will put maximum efforts, which
will be aimed at maximizing on the returns that are vital in improving the
economic as well as the political development. In cases where for instance the
citizens have no trust with their leaders, they are likely to withdraw from
participating in projects that are meant to improve both the economic and the
political structure (Knack et.al, 1997). Most of the
activities that are done in the society are aimed at improving the standards of
living of the people. Two important pillars cannot be taken for granted. First
is the economic aspect. Secondly, is the political pillar. Both require
solidarity of the people in order to ensure that each person play their role to
maximize on the output.
There are several cases where individuals
may not cooperate with others in ensuring that there is sustainable development
within the systems of the society.
1.2 statement of the problem
Many
factors are mainly used in ensuring both political and economic development. Individuals
put many measures to ensure that they achieve the right target of both economic
and political level. Some of these factors may include putting a lot of
resources into projects aimed at improving people’s welfare, starting of
welfare activities among others (Knack, 1999).
Although
the contribution of these factors cannot be ignored, a main factor cannot also
be taken for granted when we are to talk about both the economic as well as
political development. Social trust is one of the main factors that cannot be ignored
if the society is to develop both politically as well as economically.
Different
countries have different levels of social trust and this is likely to have
implications to either the economic or the political development. There are
many arguments that are raised forward regarding the relation between social
trust and economic development. Social trust ensures that people are prepared
to give some of the responsibility that could hitherto be taken by all to one
person to ensure that they are the representative to their activities. Representing
the people demands one to have a high level of trust among the population (Knack,
1999). For example, for the government to function well, then the people must
be willing to trust the people who are leading them so that they can
participate actively in the activities geared towards economic as well as
political development.
In
most cases, the level of social trust among the population contributes
positively towards their prosperity. Countries with high level of trust are
highly prosperous while those with low levels of prosperity are less prosperous
(Uslaner, 2002. Non-developed countries like Brazil have low level of social
trust among the general population and this may relate directly to the level of
its development. In developed nations like the United States, the level of
trust among the people is very high. This may make them to be highly
prosperous.
CHAPTER TWO
Literature review
2.1 The concept of Social trust
Social
trust consists of two parts. There is the generalized trust and there is the
particularized trust. Social trust is categorized as the general trust. This is
a measure of the extent to which people trust others even if they may not have
any information about them. The particularized trust emanate from an individual
having a past experience with the individual. It can be got from information
that one has concerning the other party (Whiteley, 2000).
Social Trust in Economic and political Development
Social
trust can be viewed from both aspects of mental as well as social. The beliefs
and the goals of every individual who represents the others is the one that
drives them either to deliver positively or negatively in the society (Woolcock, 1998). Things such as satisfaction of
promises, contracts are likely to increase the trust on the people. This at the
end makes the population to cooperate with the implementing agencies and thus contributes
to developed economy as well as politics.
In
case the population to be governed puts trust among the leaders, then they will
assist likelihood in developing the country. for instance, it is the trust that
the American people puts in their systems that makes their spirit to be highly
aroused and contribute positively towards the development of their nation. On
the other hand, however, the less developed and the developing nations put
minimum or no trust to their leadership systems, which in the end makes the
economic, and the political systems drag behind (Méon
et.al, 2005).
The greatest factors that contribute to development include income equality
among the population, corruption avoidance, mature democracy, and generally
good governance. These factors are strongly linked with trust.
Social
trust, which can also be referred to as the interpersonal trust, has been known
to reduce costs in certain areas, and therefore contributes positively to the
development of the economy. In areas that demand that collective responsibility
is needed to solve problems, social trust is highly applicable. Civic
engagement in all the matters pertaining to the running of the daily endeavors
will be boosted to a higher level if the leaders earn trust from the general population
(Portes, 1998).
Different
societies have differing levels of social trust from the general populace. In
countries such as Denmark, Sweden, and Norway, most people have high degrees of
social trustworthy. In less developed countries such as Brazil, a low level of
trustworthiness is evident among the population. While social trust may be taken
to just be contained in interpersonal relations, more approach is explored
here. There are diverse aspects of social trust, which have either direct or
indirect effect on the political, as well as the economic progress of any
nation or society (Knack, 1999).
Democracy,
which is a product of the relation between the implementing agencies and the
people, contributes highly to the economic as well as the political development
of the people. The leaders cannot give democracy to the people if the leaders
are not socially trustworthy. The level of economic and political development
runs from the relation between social trust to corruption rates and not from
corruption to social trust (Inglehart,
1999). Therefore,
it is the level of social trust that dictates the level of development in any
given country.
In
countries like America, what are more emphasized are the morals of an
individual far more than the contributions that they make. Many emphases are
made on building the character than having a successful person who bears a bad
character. For example, members of the congress impeached President Bill
Clinton after they thought that he had strayed away from the normality. This
aspect of self-responsibility is the one that makes the American leaders to be
careful to a higher degree that they cannot even under deliver in the society,
which highly makes them, progress both economically as well as politically (Barro, 1991).
In
less developed or developing nations such as Brazil, the trust has not yet
picked up to a level that will allow the people to be motivated to assist in
economic development. This is largely a big blow to the economic and political
development (Berggren, 2009).
Fairness
is an issue that requires to be emphasized when individuals are to talk about
the social trust. It allows the few who serve the majority in the society to
win public trust from them. This happens in key areas such as the distribution
of resources and dispensation of justice across the whole population (Tocqueville,
1835).
There are differences in the way social trust is expressed in different
countries which contributes to the determination of the economic and political
development. For instance, in the United States of America, there are many
people who are willing to engage in voluntary associations as compared to the
number that is in Brazil. Most of these voluntary associations are the ones
that result to positively developing the society both economically as well as
politically. Engaging in voluntary services for the society means that the
people have trust that the activities that they are engaging in will both help
the general society as well as contribute positively towards attaining a
sustainable level of development for the current and the future generation.
Although there is little evidence to prove that participation leads to trust,
it is evident that the fact that the population can trust the future generation
to sustain the level of development that they leave behind them, then the
future generation is also obligated to work towards improving their current environment (Tocqueville,
1835). This inherent trend of events eventually leads to
sustainable development in all regions of a place. Consequently, there is a
high level of development that is achieved. In addition, societies like those
found in the United States of America have an inherent culture of trusting the
future generation as opposed to most societies in Brazil. This means that there
will be more development taking place both economically as well as politically
in the United States as opposed to that in Brazil. As people work towards
bettering their daily lives, they also give a significant amount of time into
caring about the welfare of the future generation (Uslaner, 2002). As they do that, sustainable development is
attained.
Another
aspect of social trust can also be viewed from the perspective of equality
among the general populace. When viewed from the diverse perspective, equality
can be either from the perspective of opportunity or economic equality (Barro, 1991). United States
of America ensures that there is equality of all people within the population.
All people are treated equally. This has been done through the emancipation
proclamation that holds that all men are created equal with inalienable rights
of life, freedom of speech and association. This is highly respected in the
United States of America practically. However, in other developing nations like
Brazil, though there is an allowance in the constitution giving the people the
freedom of expression, there are limitations that are imposed to the people
regarding the kind of statement that they are to make. Mostly, the people are
only allowed to say what the government only allows but not what the
individuals propose to speak about (Solow, 1957). Freedom of expression is what
brings about new ideas. It is the freedom of sharing ideas that people are able
to communicate to each other and come up with ideas that are likely to bring
about political reforms in the society. Restraining the people on the kind of
ideas that they are to share means that they are not at liberty to explore new
ideas that can assist in both economic as well as political development. This
greatly retards economic and political development (Warren, 1999). Denying people the freedom of speech also means that
they have very limited avenues that they can use to relay vital information to
the government. This limitation goes a long way in limiting the development
opportunities that are available. Lack of social trust between the government
and the citizen’s leads to breakdown of the relationship between the two
parties which heavily affects the political and economic development of the society
(Warren,
1999).
Social
trust among the people is attained where there is no or less inequality in the
society. Though this can be largely ignored in the non-developed nations, there
has been a strong correlation between the level of inequality and social trust
(Zak,
and Knack, 2001). The perception that there
is no equality in Brazil makes it to be economically and politically retarded.
On the other end however, there is high level of equality among the American
population which gives them a positive perception that leads to participation
in developing their economy. Researches done have proved that the low levels of
development that is experienced in the non-developed countries emanate from
lack by the government to implement the level of equality among the members of
the society members. This creates lack of interest by the people to engage in
economic and political development projects which in turn lowers the level of
development in the society (World Bank, 2005).
Non
developed countries such as Brazil have low levels of social trust. This makes
them to be stuck in what is referred to as the social trap. In this case,
social trust will not increase due to massive social inequality among the
populace. The policies, which are meant to be implemented by the public, will
not be achieved because of lack of trust among the people to their leaders (Méon
and Weill, 2005). In developed or industrialised nations such as
the United States of America, the opposite happens where the championing of
equality among the people will make them feel obligated to develop their
national projects through participating actively thus contributing to economic
development.
People
who lay a lot of trust on others are also inclined to have a positive
impression of their democratic institutions (Valerie and Margaret, 1998). They are therefore likely to
participate more in politics as well as civic organisations which are directly
linked to development. Social trust will also lead to people being tolerant to
others who have diverse views about the environment. In the United States for
instance, diversity of ideas is highly appraised but people with diverse ideas
are repressed in developing or non-developed nations like Brazil. Trusting other people will also improve the
level of charity work which is an important activity that bridges the gap
between the wellbeing and the less disadvantaged in the society (Luhman, 1979).This means that
the economic development will have been attained if charity work will be
encouraged through mutual trust.
Social
trust on another insightful perspective allows the people to have an optimistic
view on their own lives. It also allows them to be happy with how their life is
going. This makes them to be motivated to contribute positively towards the
development of both the political and the economic aspects. In non developed
nations, there is low level of social trust. This makes the people to have low
self-esteem. They may also be pessimistic about their lives therefore making
them to be unhappy. In more developed nations, the happiness of the people is
derived from the social trust that they have in other people. This makes them
to participate fully towards both economic and political development projects (Offe, 1999).
Patterns
created within the society are also linked with having a positive impact on the
level of development of both the political and economy. For instance, those
countries with more trusting people such as the United States have better
working as well as democratic institutions, greater economic growth, open
economies, less crime and corruption (Paxton,
1999). This is the
opposite picture witnessed in the less developed or the non-developed nations
like Brazil. Where the level of corruption is minimal, them the level of
economic development is likely to be very high. In addition, crime reduction
ensures that a lot of resources are not diverted to maintain law and order in
the society and therefore the level of economic development is ultimately
maintained.
It is
also argued out that the level of trust that people put on others determines
the degree of moral standards of the people.
Social trust reflects on the level of solidarity that the people have.
More so, there is a shared fate among the people and the believe that each one
of them bears the responsibility of sharing the resources that they have
therefore contributing positively towards economic development. The connection
between social trust and development is seen where there are good deeds from
well-wishers volunteering their time and other significant resources to improve
the lives of those with fewer resources. Most of these practices are more
prevalent in more developed countries as opposed to the less or non-developed
nations
(Uslaner,
2002).
Social
trust can be conceptualised as the measure of how people evaluate their moral
standards in their respective societies. Countries that have got low social
trust are unlikely to establish moral trust by not establishing universally
accepted social programmes. This can be because of the fear that the political
history of the society may interfere with such programmes for their own selfish
benefits. This leads to retardation of both the economic and the political
development. Countries with dishonest
leaders in their governance systems are unlikely to participate actively
towards improving their economic and political systems (Valerie and
Margaret,1998). In developed countries
such as the United States, such programmes are useful in that they act to
redistribute the resources thus creating more economic equality to the general
population.
The roots
of social trust within the society lie with the ability of the concerned
agencies to enhance a more equitable distribution of wealth and opportunities
in the society. This will ultimately mean that there are no areas that are
going to lag behind in terms of economic development. Lack of social trust to
other people may go a long way in preventing people from participating in
collective responsibilities that are likely to improve both the economy and the
political system (Alesina, 2003).
Greater
social equality and honesty among the people who are trusted by the others to
implement certain activities reinforce a sense of solidarity among the people
which consequently culminates into the people delivering positively for the
nation. For instance, the transparent and fair implementation of the universal
social welfare policies in Sweden has assisted in economic development (Alesina,
2003).
Generalised
social trust cuts across a large population with differing ways of doing
things. Particularised social trust only applies to people of the same category
or an in-group. Diversity is a source of wealth. When a population has a
general trust for all the members in the society, there is a likelihood of that
they will harness the available resources at their disposal to ensure that
their is both economic as well as political development within the society.
Where each group looks to their own selfish needs instead of seeking the
demands and the needs of all the people, differences are likely to arise and
hence conflicting interests. This leads to lowering the level of economic as
well as political development (Bengtsson
et.al ,2005).
Social
trust is an important element that links us to people who may be even different
from us. A reflection regarding the concern of others will also be stimulated
within the general population. Where people face discrimination and have very
few resources, the rest who are able will assist them hence leading to economic
development. This is mostly possible in the developed nations like the United
States of America. On the other hand however, societies characterised by high
levels of inequality and very few operational policies for increasing the
equality of opportunities for development, social trust is noted to be very low
among the general population (Newton,
1997). There is even less concern for people of different
backgrounds. In countries like Brazil, there is high level of unequal
distribution of wealth. The rich people and the poor may live next to each
other yet their lives may never intersect.
This therefore is likely to bridge the gap between the poor and the rich
thus resulting to retarded economic growth.
Social
trust in countries like United States of America has a positive impact on the
economic growth. It is the ability of the society to champion equal rights for
all that results to people bearing a positive attitude about the places that
they live in as well as the activities that they engage in. Making the people
feel appreciated means that their self-esteem will be raised and they are
likely to do all their activities knowing well that they will be highly
rewarded at the end of the activities (Sobel,
2002). Children in such countries are given equal
opportunities to attend harmonised medical treatment services, schools, and
other services. In non-developed countries like Brazil, the opposite happens
such that the people have unequal access to basic facilities which contributes
to the people having a negative attitude towards their system. With this kind
of attitude, they are unlikely to participate actively in their activities and
therefore lead to underdevelopment.
Lack
of social trust can also make people to feel insecure in their own countries
and therefore have the fear of participating in the daily activities with
people of different statuses. For example, in Brazil, the rich are highly
protected by the police and the private guards while the poor see them as their
likely enemies. In such societies, both the rich and the poor have no regard
for each other. The general trust in such a situation is lowered while the
particular trust among the members will be high (Roth
and Schuler, 2006). Though the particular
groups of the people are likely to assist each other in developing their
economic levels, the economic development would even escalate when people of
different groups work with each other towards improving their economic or
political systems. Where each person’s
particular group is highly emphasised, the demands of the others are seen as
conflicting with that of their own.
There will be many conflicts within the general population which is
likely to retard or adversely affect the economic development of the society.
On the other end however, individuals in countries like United States have
tried to bridge the gap between the poor and the rich. There are equal
opportunities as well as security. In such a situation therefore, everybody
feels secure to participate in activities aimed both the economic as well as
the political development of the nation (Uslaner and Mitchell, 2005).
There
are certain cases where there exists no trust between the people and the
leaders. In such event, the people may never understand that social equality
may not be practically attained. Underdeveloped countries have a problem of the
citizens being adamant of their leadership systems which they perceive as the
main source of the challenges that face the society (Stephen and Paul, 2002).
In addition, the people may never cooperate with the leaders in order to
contribute to both the political and economic development. This in turn affects
both the political and economic development programmes and projects. In developed
nations such as the United States of America, people are aware of lack of
practicality in systems of governance. Ignorance is highly eliminated to enable
the people to make rational decisions. In that case therefore, there is a
developed trust system between the people and the leadership system. This means
that the citizens will be highly willing to participate in development projects
more than those who have no trust to the leaders. For example, in non-developed
nations like Brazil, the citizens have little trust to their leadership system
and normally perceive them as retarding the process of development (Uslaner, 2002. Most of the projects that are initiated by experts
are not taken seriously by the citizens and they end up ignoring what is the most
important aspect of their life at the expense of what may never help them.
Robert putman in
his work, “making democracy work: civic traditions in modern Italy” looks into
the question of what makes a government to fail. He also aims to understand the
working of democratic institutions. He concludes that their success or failure
solely lies on social trust they are bestowed by the people. He noted that the
social trust facilitates efficiency of carrying out the activities of the
society by ensuring that the activities are coordinated (Putnam, 1993). This
largely is true. When we have people trusting the kind of authorities that
leads them, they are likely to come together and work towards achieving an end
for the betterment of the economy. In addition, where the people can be able to
trust each other with minimum conflicts, there is likelihood that they will
minimize expenses that can be used in resolving conflicts leading to
politically serene environment.
Social
trust is a determinant of both the economic as well as political development.
There are other studies that have shown that there is no direct correlation
between trust and economic development (Bjornskv, 2006). Among the three
pillars associated with economic development, social trust is regarded as the
most promising factor that facilitates better economic and political development
(Knack and Keefer, 1997).
In
an economic system, many commercial activities are determined by mutual trust
between two or more people or parties. For instance, an individual can be
trusted that after supplying him/her with goods or services, he/she can pay
later. For economic systems to thrive, the managers have to trust their
employees with the duties that they are designed to carry out to assist in its
growth. It is with the trust that the employees put on their employees that
make them feel free to carry out their daily duties with self-esteem. In most
cases, highly monitored activities may not give good results because of the
perception-inflicted on the workers. However, if the workers are conditioned to
believe that what they are doing is the right thing, then they will always work
towards maximizing the profits of the company or business, which in turn gives
rise to an improved economic system (Solow, 1957).
An
economic system requires investing with other agencies like the banks. It is the
trust that the investors have on the banks that makes them either to save or
not to save with them. In addition, the banks give individuals loans with the
assurance that in the near future, they will be repaying the amounts. In a
society where the people can be able to trust each other. then the likelihood
of dishonest activities are minimal (Demaris and Yang, 1994). This from
another perspective means that less money is used in protection of people’s
activities.
Zac
and knack (2001) have proved that social trust and investment rates are highly
correlated. They realized that for every seven-percentage point’s increase in
the social trust, the investment rate increases by one percentage point. The
reasons behind this are that first, the managers do not waste many resources
trying to monitor the workers. Secondly, property rights are better protected
in high trusted societies.
2.2 indirect influence of social trust on economic development
The
quality of an institution determines the level of productivity of such an
institution. The quality of an institution highly depends on the level of
social trust within it. Meaning that a direct contribution of the increase in
the level of social trust will lead to an indirect effect on the level of
production in a firm leading to improved economic system (Whiteley, 2000). Legal
disputes in the firm reduce drastically with increase in the level of social
trust in the institution. If the disputes are likely to occur, then the
application of legal law is easy. The environment in which the investment is
made is made safer and thus leading to increased output level. In places where
social trust is allowed to reign in investments, the rate of corruption is also
lowered. More resources will not be wasted through corruption leading to
improved economic system.
It
is the social trust that the people have on the political aspirants that makes
them to turn out in large numbers to vote for their desired leaders. This
aspect of political participation develops the political system. According to (Knack,
1992), the probability of citizens voting on the grounds of social trust
increases by 8.6 %. This means that the politicians must account for their
actions that are aimed at improving the economic systems of the society.
Coleman
(1990) identifies trustworthiness in a social setup as the most important
category of the social capital. From another point of view, the process of
exchange is highly dependent on the virtues such as trust. A significant factor
greatly influences economic outcomes. The level of inherent trust present in a
society is the one that highly influences the well-being of a nation. There
would be less political and economic development without norms and rules of
conduct. Social trust is one of the major norms that are highly influential
when one wants to
Chapter three
Methodology
The
method used in the collection of the data is the analysis of previously
collected data. The paper seeks to put together all the relevant data related
to the economic development of both the developed nations, represented by
United States of America and the non-developed nations, which are represented
by Brazil. The collection of data ensures that there is a comprehensive and
enough dataset that will significantly assist in analysis and come up with a
comprehensive conclusion that social status is indeed a factor that leads to
economic development. The collection of data will also take into account the
link between the individual determinants of economic growth such as the effect
of social status on per capita income. The role of social status on assisting
in the smooth running of companies and related agencies, boosting the esteem of
the employers has been explored.
Since
the concept of social trust cannot be directly quantified, data collected has
been coded to ensure that social status can be quantified to enable easy
analysis of the data. Although the issue of the use of trust in quantitative
analysis is a complex phenomenon, world values survey is an important agency
that can assist to get reliable information regarding the level of social trust
in different countries.
Chapter four
Results and analysis
The
sample that was taken for the purpose of analysis comprises of a few selected
countries, which represent both the developed and the non-developed, or
underdeveloped countries. The dataset shows the levels of interpersonal trust
for the selected countries. United States of America in the thesis represents
the groups of countries, which are developed, while Brazil represents
countries, which are non-developed or underdeveloped.
Levels of Interpersonal Trust
Country
Trust 81 Trust 86* Trust
90 Trust 95 Trust 99
USA 45,4
- 50 35,6 35,8
Japan
40,8 - 41
46 43,1
Germany
29,8 43,4 37,8
41,8 34,8**
France 24,8 21,3 22,8
- 22,2
Italy 26,3 30,3 35,3
- 32,6
Britain 44,4
39,7
43,6 31 29,7
Canada 49,6 -
52,4 - 38,8
Brazil - -
6,7 2,8 -
S.
Africa 29 - 28,3 18,2 11,8
Philippines -
-
-
5,5 8,4
Note: *The trust data from 1986 is taken from the Euro barometer
25. **Trust Data from Germany were taken from West Germany in 1981, 1986, 1990
and 1995. The Data from 1999 was taken from unified Germany.
As
it is evident from the table above, United States of America has a higher level
of interpersonal trust as compared to Brazil. Most of the renown developed
countries such as France, Germany, Britain and Italy recorded high rates of
interpersonal trust.
The
table also empirically shows the relationship between two components; social
trust and economic development. The United States of America records low rates
of internal crime, meaning that as the table suggests, the country has a high
rate of interpersonal trust. Brazil on the other end records low rates of
interpersonal trust characterized by high rates of internal crimes. There is
evidence and a strong correlation between the level of social trust and the
level of economic development. The major issue in this paper may not to
extremely lean on providing statistical evidence to prove that social trust
causes economic development but the greatest aim is to help in understanding
that the contribution of social trust cannot be taken for granted when we want
to improve the economic level of any given country.
Social
trust can be generally be referred to as a form of social capital that
indirectly assists in the economic development of a country or a region. Where the rates of criminals for instance are
more like in the non-developed countries such as Brazil, they are likely to
affect the economic development negatively. On the other hand, however,
countries like the United States where the criminal rates are comparatively low
have recorded high rates of economic development.
Though
most of the times social trust can be treated as a component of economic
growth, it can also be treated as a
product of social capital. It can be used as both an instrument of creating
social capital as well as a result of the presence of social capital. When it
is viewed from the perspective of creation of social capital, individuals who
are the main determinants of the creation of resources can be able to work with
one another as they utilize the available resources to improve the economic
standards of the society. For example, an individual can trust other agencies
to invest his/her resources in order to develop economically.
Trust
on the other end also tries to work to reduce the transaction cots that might
arise when one is carrying out their economic activities. When viewed from the
perspective of non-developed countries such as Brazil, illegal activities such
as insecurity, prostitution among others tend to retard economic development.
The level of poverty that is manifest in the country is therefore a to a greater extent caused by low levels of
social trust in the environment. Furthermore, social trust has worked to lessen
the level of community participation in development activities. Most of the
citizens have a fear that their commitments may not be rewarded but will be
used by the people who are the custodian of their resources for selfish
ambitions. In addition, the resources that could hitherto be used to finance
projects in the society are used in eliminating or fighting against the
prevalent abject poverty or criminal acts.
Social
trust can also limit economic growth in less developed or non-developed nations
as the credit-lending facilities may not lend individuals money on the account
that they may not possess enough security to prove that they are going to pay
the loan on due time. on the contrary, there are systems in the developed
nations that are created to ensure that the commoners can be able to access
credit-giving facilities even when the individuals do not have enough security
to be awarded the loans. Most of the developed countries have such mechanisms
that have greatly helped in eliminating poverty among the less disadvantaged
members of the society. The greatest level of trust that the developed countries
have on their systems is also another contributing factor. A country may not
develop if the people do not chose the right leadership systems. The people
have absolute trust on their leaders. Even where there are disputes, they are
solved at logical points of view. Other non-developed nations are likely to
suffer from losses of capital as they try to change their leadership systems.
People are also likely to use a lot of
their resources trying to criticize their leadership system while they would
have used the same amount of time to indulge in economic development
activities.
Chapter 5
Conclusion
There
have been several researches whose aim has been a search for the determinants
of economic growth. This search has been as old as the age when economics
started. Over the periods, scientific research has dominated the world of
research and this tends to allow more solutions to be unfolded. The coming up
of technological advancements has made it easier for more advanced and
intensive quantitative researches to be carried out. Despite all efforts that
have been put to come up with all the required factors of economic and
political development, there has been little feedback concerning the key
factors that are required in order to make progress in both the political as
well as the economic development.
Different
countries have identified different policies that they require in order to
enable them to prosper both economically as well as politically. Even if great
efforts have been made in an attempt to come up with diverse factors, there has
been lack of universal factors that facilitate both economic and political
development. Progress has continued to dominate the world of economy and the
researches have come up with different factors on the development of both the
economy as well as the political systems. The work of Putnam in 1993 came up
with the concept that social capital is also a major factor that contributes
greatly to economic development. He published his work under the title, “making
democracy work”. Social trust since the time has been experiencing a
considerable concern as one of the main force that contributes to a greater
extent to economic development.
In countries where social trust has been known
to be higher, then there has been a high rate of economic development. on the
contrary, countries with low rates of social trust have recorded low rates of
economic growth. The relationship between social trust and economic development
has been widely discussed in this thesis and there are considerable proves to
show that countries with high trust rates have been prosperous while those with
low rates of social trust have been less prosperous. The thesis has used the
example of United States as a country with high rate of social trust and
consequently improved economic development. on the other end however, Brazil
has been used as an example of countries with low levels of social trust and
consequently low rates of economic growth. The thesis has elaborated further on
the relationship between social trust and economic development and the reason
why social trust has been a significant factor in determining economic as well
as political development.
There
is a strong positive correlation between the levels of social trust and
economic development. The data collected and tested shows that social trust has
a significant influence on the level of economic development of a country. In
less developing countries like Brazil, there are very low levels of social
trust among the population and this has been directly translated into very low
economic development. Developed nations like the United States of America have
recorded higher levels of social trust. This has been shown by the way the
economy of the country has been on the upsurge.
The
research has also attempted to reveal the channels through which social trust
can be used to boost economic development of countries, which are more
developed. In addition, the results of the research can also be used to
challenge the developing or the non-developed nations to keep up the rate of
social trust in order to enable them to be on the same level with the already
developed countries. Another important query that would not be understood is
the source of the trust, the people who should trust others and the reason
behind laying trust on others. Some concepts on similar questions have however
been explored. This thesis paper has attempted to compare the level of trust in
less developed or non-developed nations represented by Brazil versus the
developed nations represented by the United States of America.
The
existing literature has underexplored the channels through which trust has been
used to enhance economic and political development. The existence of good
systems or channels is the one that makes the developed nations posses highly
developed economic systems as compared to the lack of good channels in less
developed or non-developed nations that ultimately makes them to drag behind in
terms of economic and political development. The thesis has shown that the
concept of trust as has been used as a factor that enhances economic
development should not be taken for granted but there should be more in-depth
research that should be carried out in order to understand the deeper link
between trust and the economic and/or political development. It has shown that
the social trust concept has a more diverse link to both economic as well as
political development that it could be previously thought. This means that more
research is required to come up with extra links between social trust and
economic or political development.
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