Low Trust in Tribal Societies Contributes to Poverty

Previously published on abu al-fin blog

Society in general and the economic system in particular require trust built on ethical foundations and social norms as the basis for successful cooperation. Economic activity in modern society has become increasingly complex and lacking in transparency as a result of the rapid development of new technologies and new products and services and the globalization of supply.

....the more complex a phenomenon is, the more complex the regulatory system has to be that is supposed to solve it. Usually, any rules, laws and contracts leave scope for circumventing or undermining them and excluding such imperfections may be burdensome.

Trust therefore offers a shortcut solution, especially if it grows out of common ethical foundations and social norms such as professionalism (where people take pride in the quality of their work) and reputation. Ethical foundations and social norms may help society to protect individuals from serious damage.... _Ethics and Trust in Society

Trust is crucial for the smooth functioning of a society's financial transactions, economic markets, and social infrastructures.

Tribal societies -- or subcultures within a multicultural society -- tend to be inward-looking, exhibiting less trust to those outside the inner circle. When tribal societies are multiplied -- in a multi-cultural society -- the regulatory and legal infrastructure necessary to deal with a "low trust environment" can become so unwieldy as to exact inordinately high costs.

...the people in societies that are generally distrustful are less likely to enter into risky social interactions and more likely to interact in relatively closed circles, even at the risk of giving up new opportunities. Development of generalized trust under these circumstances, he goes on to argue, is not easy: not only does distrust breed distrust, but individuals in these societies must make conscious efforts to develop the social intelligence required for detecting risks and taking risks when appropriate. _Trust in Society Chap. 1 (PDF)

Such low trust tribal societies can make it almost impossible to carry out the most standard and straightforward business transactions -- unless either bribes or the threat of force are utilised. Poverty is generally rampant in such societies to begin with, and the lack of trust (or trustworthiness) only compounds the problem.

Tribalism tends to foster economic exchange within groups, because people trust other members of their tribe. The “social pressures” within a tribe are strong. In economic history, there are a number of well-known examples of minority groups that were important commercially. They were able to sustain trust in the process of trading among themselves because of strong within-group enforcement of ethical norms. The challenge is to go beyond within-group trade to broader commercial activity.

Schneier points out that Quakers played a role in the development of capitalism in the West because they developed a reputation for fair dealing. I would argue that one unusual feature of Quakerism is the importance of the belief that “there is that of God in everyone.” This means that Quakers would expect one another to obey their strongest moral codes even when dealing with non-Quakers. An extended capitalist order requires that individuals treat outsiders as moral equals in the context of economic transactions.

However, for the most part, the scaling up of cooperation beyond small groups requires legal incentives and institutions. In a large, complex society, in the absence of laws and enforcement mechanisms, individuals or groups would be too prone to defect.

...We no longer live in tribes. Instead, we are embedded in complex, large-scale social institutions. However, our basic tribal instincts have remained. _The Tribal Mind Arnold Kling

In multi-cultural societies, the "tribe" is embedded in complex social institutions as well. If governments show favouritism to one tribe or another, relations between cultures or tribes within a larger society can grow contentious.

In situations where the average IQ within tribes is seen to vary -- where professional and occupational aptitudes are not equal between population groups -- entirely new areas of contention are introduced. This is particularly true when societal institutions such as government, media, and academia refuse to accept the well documented innate differences which can exist between population groups, or tribes.

When low intelligence and high levels of violence coexist within particular population groups, cultures, or tribes, problems of trust can grow particularly acute -- especially when social institutions consistently fail to take these differences into account in making and administering laws, and in describing the reasons for societal breakdowns and disagreements.

The problems of low trust in multicultural societies -- and the tendency toward a rapidly growing, unwieldy regulatory and institutional environment to compensate for the low trust -- can put such societies at a distinct disadvantage against competing societies, all other things being equal.

For those who feel compelled to create "shadow economies," "shadow governments," and other backup institutions and cooperatives meant to compensate for the failures of a dysfunctional larger society, such things must be kept in mind in the planning and early implementation phases.

When it is impossible to avoid fractious multiculturalism altogether, lower overhead solutions to the inevitable problems inherent in multiculturalism must be devised.

Hope for the best. Prepare for the worst.

h/t GWPF.org