Financial Express, 7 November 2006
Economic interactions between individuals are greatly shaped by trust. If a person is mistrustful, he is more likely to only do transactions with family members. Participation in the market economy is all about improving welfare by transacting with strangers, and this requires trust. This trust can either come about from living in a homogeneous social community, or it can come from the contract enforcement processes of the State. A country where people trust each other is said to have high "social capital" or "trust capital".
In order to quantify this idea, there have been worldwide efforts at measuring trust. This is done by running surveys which ask the question "Generally speaking, would you say that most people can be trusted, or that you can't be too careful in dealing with people?". If a person is trusting, the answer is likely to go closer to "most people can be trusted". If a person is mistrustful, the answer goes closer to "you can't be too careful in dealing with people".
In traditional village communities, an extensive set of social interactions bind families, and reported levels of trust tend to be high. In 1995, the scholar Robert Putnam argued that trust levels in the US had declined for 40 years, and that television was a major factor behind this decline. This sounds like a plausible hypothesis: if people spend more time looking at the TV, they have less time to talk with each other and develop trust in each other. However, this was just a hypothesis; it was very hard to empirically verify it using data.
In a recent paper (http://tinyurl.com/ykld6j), Ben Olken of Harvard has done remarkable empirical work in Indonesia which sheds light on this question. His data covers 600 villages in Indonesia, where the essential random mountain landscape cuts off some villages from some transmission towers. Hence, he gets a fairly random allocation of some villages obtaining reception of more channels while some villages obtain reception of fewer channels.
This constitutes a natural experiment in the impact of television consumption upon trust. Olken finds that each additional channel induces roughly 4 minutes of additional viewing by a person per day, which works out to an increase of roughly 5% in viewing time. He finds that additional television channels have a substantial and negative effect upon trust measures. Watching more TV makes you have less trust in others. This is pioneering evidence on how television impacts upon society.
From an Indian perspective, we are now in the midst of a giant experiment where television is being beamed into remote locations all over the country. It is impossible to turn the clock back on television. We are probably experiencing similar effects, where television time comes at the expense of conversation time, thus diminishing trust capital in the country.
This is, of course, only one of the many forces at work which are shifting society from a traditional feudal mode, based on strong ties into the immediate family and community, to the capitalist mode, based on anonymous interactions with strangers. A young man growing up in Bihar, conscious of the caste of every individual around him, migrates to Bangalore in search of work, and gets used to eating in restaurants where he has no idea about the caste of the cooks. In our aspiration for an idea of India that overshadows caste or religion, we rejoice in this transformation.
However, Olken's finding should caution us. Television does not just break down trust in the near and dear. It breaks down trust in all, and thus makes transacting more difficult.
This emphasises the role of the State in building impersonal infrastructure for contract enforcement. The rise of capitalism is all about being able to enter into transactions with strangers. Trade is good: A successful market economy is one in which more transactions take place. But if trust in the counter-party is a pre-requisite, then many transactions will be stillborn. If, on the other hand, the State runs effective contract enforcement systems, then people who don't trust others will still be willing to contract with them.
As highlighted by the World Bank's Doing Business database, India fares very poorly in this regard. If there is a contractual dispute, the process of resolution, and obtaining recourse through the courts, takes years. Progress towards becoming a mature market economy requires a revolution in the swift and uncorrupt functioning of the police and the courts. This is the task of the State that is more important than running welfare programs.
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