## Saturday, July 19, 2014

### What does socialism do to ethics

Marginal Revolution has a post about the moral effects of socialism. In this, we are pointed to a fascinating new paper. Ariely, Garcia-Rada, Hornuf, Mann have a new paper where they analyse the natural experiment of one Germany that was arbitrarily sub-divided into communist GDR and capitalist FRG. They find that people with a greater exposure to socialism are more likely to cheat.And, a paper by Al-Ubaydli et al on PLOS One in March 2013 finds that the framework of markets and trade increases trust in strangers.

I have heard similar concerns about low ethical standards in China as the outcome of many generations of communist rule.

Was it just a matter of stamping out religion? Is the causal chain composed of destroying organised religion that leads to cheating by individuals? This does not square with some other evidence. This paper by Gregory S. Paul in the Journal of Religion & Society finds that highly secular democracies consistently enjoy low rates of societal dysfunction.

In the comments on the Marginal Revolution post, mm says that P. J. ORourke says that he knew communism was not going to work when it managed to convert Germans into lazy workers.

These ideas resonate for us in India, with our experiences with the corruption and cheating that is associated with government-controlled resource allocation. There is a fundamental tension between socialism and our core aspirations like the rule of law, a Calvinist work ethic, and fairness and honesty in our dealings. What mechanisms might be at work in the corrosion of values under socialism? From my observation of India, I may conjecture:
1. When things are available through connections or the black market, this gives everyone incentives to engage in illegality, and to violate the rule of law. When storage is proscribed as hoarding' and forecasting the future becomes black marketing', people get used to the idea that illegal activities are to be pursued, and the people who are willing to engage in greater illegality get ahead in life.
2. In the parts of India where land reform took place, it became more acceptable to steal other people's stuff.
3. People became supplicants in front of a powerful State, and detested the bureaucrats and politicians who wielded discretionary power. This created pervasive hatred and disrespect for the State, an environment that was conducive to breaking laws more frequently.
4. When inequality is bemoaned and envy becomes fashionable, there is reduced incentive to engage in hard work as a tool to get ahead in life.
5. A big State employs more people, and employees of government and public sector companies tend to have a diluted work ethic.
6. There is a big gap between all the talk about poor people and the reality of the socialist State. This breeds cynicism about politics and government, and fewer wonderful people get involved in matters of the State.
7. When the political leadership allocates time and money to doing central planning and running welfare programs, this comes at the expense of time and money focused on catching crooks.
If we are able to retreat from an intrusive State, and build the rule of law for a narrow set of interventions that do public goods and address market failures, this will help create a new tone of flesh in the Republic. But the changes in behaviour that come with a socialist phase take many decades to get stamped out. We should change things from here on -- but we will live with the consequences of Indian socialism for a long time.

Hence, questions about ethics are going to be a key feature of the Indian story for years to come. I have written before on related themes: Indian capitalism is not doomed, and Ethics and entry barriers. There are now 40 posts on this blog with the label `ethics'.

1. Some interesting and rather original inputs. Thanks for sharing.

2. Your arguments that the socialistic state tilts people towards deficits in public morality, were wonderful to read and thought provoking.

If morality is to come in again in the India like situation, we would need to actively create environments for market-like forces to be able to act. Say, in the area of law enforcement, can we do something to improve information availability for people and simultaneously enable people to have a voice in focus-setting for their policing. What I'm saying is this-provide relevant information for the society to take periodic decisions on the kind of policing focus it wants. What it may do is increase the responsibility of all stakeholders towards better compliance as well as resource allocation.

Increasing the circle of inclusiveness of decisions of government can delegate part of govt responsibilities to people, which in turn will, presumably make the people more responsible in their public actions. Clearly, for this to happen, governments should operate in limited, critical areas.

Thanks for provoking thinking on this..

1. "Increasing the circle of inclusiveness of decisions of government can delegate part of govt responsibilities to people, which in turn will, presumably make the people more responsible in their public actions."

High hopes! We need to remove the common notion among the middle class that the junta can take good decisions for themselves. When in fact, socialism, welfare, etc is actually desired by common people in their public demands. Take any survey of the people on any matter in the world and you will find that majority are misinformed or have no clue. How in the world, do we expect the junta to be able to make proper decisions. There is a reason why democracy has evolved from open debate in Greek colloseums to a representative system, with some role for elites, experts (with hopefully deep institutional expertise). Why do we want to turn back the clock to a medieval form of democracy?

2. I seem to have conveyed it wrongly. I'm certainly not for referendum decision making.
The current set of problems due to mai-baap sarkar have arisen from the veneer of socialism on unaccountable decision making and implementation in government. If socialism makes corruption attractive, representative democracy as practised in India does no better. That's because there is near absent accountability of decisions and policy implementation, by the bureaucracy to the people. The only accountability is for politicians at election time, on broad political ideology. And then there is hardly any variance in the decision making and implantation practices to differentiate and choose between different political parties.
The representative politician is indeed the representative of the Aam Janta and that must be respected. But to have the influence of the enlightened elite in Indian politics will take a really long time to happen.
The possible solution to my mind is to increase the transparency in information sharing with people and to roll the feedback from that into further policy setting/decision making. This can create the impetus to improve public (esp middle class) participation in governance and in parallel improve over time, the compliance attitude of people towards rules in general. These mechanisms are also market mechanisms as opposed to the theoretical socialistic high grounds.

3. Ok, I misunderstood. I guess the other issue is that the "enlightened elite" is hardly to be found and often has huge odds against it. Perhaps its always been that way in most places of the world throughout history. Hard to say. The elite needs patronage to flower, which is largely absent, or comes with strings attached, leading to a compromised elite (which doesn't deserve the title of elite).

One approach to study would be Lee Kuan Yew's in Singapore. Maybe it was easier for him as he had only one city-state to deal with. But, perhaps there were elements in his approach which are compatible with democratic systems. Or, why not replicate useful parts of the model in a few cities within the country. The point is that there are perhaps top-down approaches worth considering as opposed to the people-driven bottom-up change. Information sharing and transparency are surely useful and will lead to improvements, but I don't know if that is enough to improve institutions, or if we have the patience for that.

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