Pervin Goker
Introduction
Man has created various concepts for his convenience, one of which is institutions, and these are essential for maintaining order in that they streamline the activities to achieve a particular objective. There is a formal organisation to institutions which lay out rules and regulations for the conduct of the operations earmarked for them.
This essay deals with the issue of mind and culture over institutions in nurturing social capital in four selected nations of the world. The essay has basically two parts viz. the theoretical basis and the implementation. The theoretical basis consists of resource, bare necessities and trade, man and economy, economics and rapport, culture and mind, and venture and culture. The implementation includes the background of the nations in picture, the report on economic freedom and the issues of the nations considered.
Theoretical Basis
Preface
Gwartney, Lawson and Hall (2016, p. v) have given an index which explains the effect that economic freedom has on investment, growth and income levels and the rate of poverty. They use many data points to create their index to rank 159 countries. This section opens with the theoretical concepts involved which make way for the implementation section which describes the report on the Economic Freedom of the World in greater detail.
Resource
A resource is something useful and of value to mankind. Raw materials are also resources that are transformed into finished products for the consumption of the human race. A resource can be free or may be restricted by man. Air or solar energy for instance, cannot be controlled by man but can be harnessed for energy purposes. Wind energy can be created by the use of windmills. Similarly, solar energy is an example of a clean energy source.
Fossil fuels, on the other hand, leave a carbon footprint which is not in the interest of the environment. Use of petrol and diesel has caused the greenhouse effect. The emission of greenhouse gases like carbon dioxide has caused the temperature all over the world to rise. Moreover, this has caused the solar ice caps to melt and the water level in the seas to rise. This has led to and will lead to inundation of the coast in several areas of the world. Another side effect of this is the depletion of the ozone layer that protects the earth from harmful ultra violet rays.
Hence, there is a need to use energy responsibly. Energy supply in the restrictive sense of fossil fuels is limited. However, solar energy has an unlimited supply given that the earth requires only a very small potion of this resource which will always be available from the sun (Simon, 1996, 54). Since this is non-polluting, it is prudent to use this resource.
All nations begin from a primitive level and go on to become flourishing economies. This is a continuum which cannot be skipped. The difference is the speed at which different countries undergo this transformation. This again depends on various factors. One begins from a subsistence economy where all production is only meant for self-consumption. There is no incentive for producing more since one can only consume what one requires.
Contact with other people leads to the awareness of various other commodities that are available for consumption. Then starts the next phase where one specialises in producing one particular type of commodity at which one is most efficient. The barter system of trade originated in this manner where exchange of goods started.
The barter system led to the invention of money which could facilitate exchange in a better manner. Money made man independent as he became fully satisfied with his transactions where he felt that justice was done in the exchange. This led to long distance trade as transport and communication became easier.
However, there are societies that cannot or do not take advantage of trade and commerce. New jobs are not created as division of labour for this is not available. If one is not in touch with others, new ideas and requirement are not created (Bauer, 2000, p. 7). One accepts the prevailing conditions and stagnates. Ultimately, one falls behind and the gap between the prosperous and the backward segments increases.
Man and Economy
With an economy in place, man tries to compete for resources and to emerge ahead in the race. When we speak of competition, the term perfect competition comes to mind. Perfect competition is when all competitors have the same access to resources so that no one has an unfair advantage.
While monopolies are seldom the norm, perfect competition is also not the real picture (Hayek, 1948, 92). In reality, competitors are not of the same standard with one or more having different advantages. While only the fittest survives, sometimes it is difficult to choose between sellers if they have exclusive advantages amongst themselves.
Free trade should be allowed if any unfair advantage should be removed. In a market economy, sellers could have efficiencies that they can use to their advantage by providing competitive prices. The market forces of demand and supply ensure that there is equilibrium in the economy.
There should be every effort to thwart unfair trade practices like creating monopolies which can lead to an imbalance. The existence of competing sellers in the market ensures that any attempt towards monopoly is paid back in the same coin.
Hence, if there should be equilibrium in the economy, the individual is primarily responsible for it. Whether as a seller in the market or as a buyer who consumes goods, he is responsible to ensure that the economy perform uninterruptedly.
Economics and Rapport
Following from the previous section, it becomes imperative that man has to play his role in the economy jut as he plays a role in the larger society. No man is an island. He is a social being and is dependent on and relishes the contact of other human beings. Since he is not self-sufficient, he needs the help of others.
There is a fellow feeling between individuals that arises out of constant contact and inter-dependence. Man thinks not only about himself, but also about others. He does not do anything that is detrimental to his or the interests of his fellow beings. He is aware that a self-serving nature may only be of use in the short term and will eventually backfire on him.
Sentiments have a negative connotation in comparison to emotions. However, we use the two terms interchangeably. Sentiments in common usage refer to feelings that an individual has for another. Man uses his mind to help others in the mistaken belief that it will be beneficial to him.
However, over time he starts to have genuine feelings for others. At this point, helping the other becomes second nature to him. If he forgets himself in the bargain, it would only be disadvantageous for him. This is the case when others take advantage of his generosity.
Morality is the sense of right and wrong that individuals have regarding any aspect. These are a set of dos and don’ts that man adheres to. Guy and Sugden point out that since man shares a rapport with others, this is reflected in markets too (Marmefelt, 2008, 106).
Culture and Mind
The human mind is taken as being different from man in the mind Vs matter debate. However, the mind is the product of the brain which is an organ of the human body. It is from the mind that thoughts, feelings, emotions etc. arise. Since these are intangible, the mind is considered to be different from matter which can be seen and touched.
The mind is said to influence culture and vice versa. It influences culture in that the collective conscience of a community is influenced in various ways. Attitudes existing at a particular time change with the passage of time. Persistent propaganda from the state, the media etc. are also known to change culture through the human mind.
On the other hand, the culture of the place where an individual lives also has an effect on the person’s mind. For instance, independent cultures which give importance to self-sufficiency will also mould the individual to become self-sufficient. If the culture stresses on inter-dependence and co-operation, the individual in question will also cooperate and depend on others.
Theorists of race try to simplify the relationship between the mind and culture and claim that the mind an individual possesses is based on the race the person belongs to. However, those who professed the enlightenment idea stressed on the similarities that all humans had irrespective of differences like race etc. This pointed to the fact that there was a common mind to mankind (Jahoda, 1993, 82).
Venture & Culture
One should not be naïve to think that if a dictator is overthrown, democracy will automatically follow (Lavoie & Chamlee-Wright, 2000, p. 1). If a dictator is overthrown, the result could be anarchy and someone or another group could wrest power. If one desire democracy, there should be a transition towards it either solely by the citizens or in consultation with outside forces.
Similarly, one cannot expect that throwing out a planned economy will automatically bring in a market economy. There should be a step-by-step and time bound plan to move to a market economy. This is possible by removing the regulations and controls on the economy in a phased manner.
This is the basic difference between the erstwhile Warsaw Pact nations and China. While the Warsaw Pact nations made a sudden turn towards capitalism, China took an entire decade to move from socialism to capitalism. China not only did not feel the upheaval that the others did, but also went on to become the largest economy in the world.
Economic development is a cherished objective of any nation. However, development should not be only for the sake of development. It should contain the social aspect also. If development should be sustainable, it should cater to the larger sections of society that have been left behind. It should also focus on protecting the environment if the fruits of development are to be borne by mankind.
Implementation
Background
Latvia and Lithuania are Baltic nations from Europe whereas Kazakhstan and Kirghizstan are situated in Central Asia. All the four nations were part of the erstwhile Soviet Union which followed socialism and communism for seventy years from the time of the October Revolution.
Latvia and Lithuania were Christian by religion and Kazakhstan and Kirghizstan followed Islam. However, the restrictive and secretive Soviet Union managed to keep these four and another eleven republics in its hold. Its vice like grip was all pervasive such that it could quell rebellions not only in its own region but also in the neighbouring communist countries.
The communist nations of Europe (excluding the Soviet Union) did not suffer from secession and continued to live in a state of relative isolation from the rest of the world. However, the about turn was sudden and in the face. With communism collapsing, each of the constituent republics of the Soviet Union became independent and suddenly was left to fend for itself.
They lost the structure that was in place and had served their purpose till then. All of a sudden they had to make a start in various aspects like governance, economy etc. They were long exposed to the totalitarian regime which they wanted to shake off. They could not think of other alternatives to capitalism in the bargain (Nørgaard, 2000, p. 7).
Since they had to make a fresh start, the institutions that were needed had to be recreated. This included the creation of social capital. However, institutions were not the only source for creating social capital. The human mind and the culture of the place were also nurturers of social capital. These have had a profound impact in creating social capital. People went back to their roots to create a fresh present from their stifling past which they had left behind for ever. It was a daunting but possible option in front of them.
A Report on Economic Freedom
The World Economic Freedom Report (Gwartney, Lawson & Hall, 2016) measures the amount of freedom that nations have in terms of their economies. They use various dimensions and sub-dimensions to arrive at a rating and ranking for each nation on the dimensions, sub-dimensions and overall economic freedom. The 2016 report has its basis as 2014.
The dimensions being considered for the report are viz. size of government, legal system and property rights, sound money, freedom to trade internationally and regulations. Each dimension has its own sub-dimensions which take a closer look at the intricacies involved in the respective dimension. Data for the four countries Latvia, Lithuania, Kazakhstan and Kirghizstan are available from 2005 onwards (Gwartney, Lawson & Hall, 2016).
Latvia’s overall rating has increased from 6.96 to 7.57 during the last decade. Similarly, its rank increased from 47 to 27 in the same period. While Latvia scored well on all dimensions, the legal system and property rights saw a slight decrease (Gwartney, Lawson & Hall, 2016). Lithuania’s overall rating has increased from 6.58 to 7.81 during this period. The rank increased from 63 to 15. Even Lithuania had a slight decrease in legal system and property rights (Gwartney, Lawson & Hall, 2016).
Kazakhstan’s overall rating went up from 6.88 to 7.35 with the ranking moving up from 70 to 52. However, the ratings for size of government and for freedom to trade internationally have gone down (Gwartney, Lawson & Hall, 2016). Kirghizstan’s overall rating went up from 6.54 to 7.16 with the ranking moving from 82 to 70. All the dimensions showed an increase over this period.
The above figures do not show any pattern in particular. The reason could be that neither is the overall rating averaged out of the dimensional values nor is the dimensional rating averaged out of the sub-dimensional values. Among the ranks, Lithuania moved from 63 to 15 which is quite impressive. Kirghizstan has had no decrease in overall rating or dimensional rating in comparison to the others.
Central Asia
There is a misconception that the Central Asian republics are unlikely to enjoy prosperity. There are three main reasons for the same. The first one is the traditional hierarchies which have survived the onslaught of communism. However, traditional hierarchies are not a parameter for a nation witnessing a dismal growth (Kattz, 2000, pp. 602-3).
Secondly, Islamic communalism is being blamed. It must be borne in mind that Central Asia is not the only region suffering from the scourge of communalism. Moreover, it has not reached the proportions found elsewhere in the world. Thirdly, Soviet occupation is also seen as the culprit. However, most of the countries from the erstwhile Soviet Union are on the path to recovery and accelerated growth.
There are numerous civil society organisations in operation in Central Asia. It also has its fair share of indigenous societies viz. collective farms, neighbourhood authorities and unofficial religious scholars. However, the government is deeply suspicious of such associations which have to be registered. Moreover, the fee for the same was made out of bounds for many associations. The meetings of the associations were supposed to be witnessed by government security staff.
One is also prohibited from joining unregistered associations and political parties and unions of foreign nations. However, one can expect that civil bodies will take over the functions that the state should perform. There is a requirement for such associations in Central Asia which have a local presence (Kattz, 2000, pp. 602-3).
NGOs in Central Asia still depend on foreign aid rather than on locals. Some international agencies give large amounts of aid to build capacity. The irony is that while 90% respondents to a survey in Kazakhstan and Kirghizstan wanted to join an NGO, only a little over half the respondents were ready to volunteer for NGO’s (Kattz, 2000, pp. 602-3).
There is the dichotomy that while people find the situation hopeless, they also instil hope in the fact that civil society would come to the fore in Central Asia at some point in time. Civil society can develop along its own indigenous models which are not on the lines of the Western form of civil society (Kattz, 2000, pp. 602-3).
Baltic States
Of the three Baltic states, Lithuania has a longer history when compared to the other two. Lithuania remained independent for quite some time in comparison with Latvia (and Estonia) which had remained occupied by other forces in Europe. Lithuania had a Catholic church which was in the forefront when it was occupied by the Russian forces. It could instil a sense of national pride due to this. Latvia on the other hand was Protestant. This church however could not hold its own during the Russian occupation (Nørgaard & Johannsen, 1999, pp. 47-48).
However, the changing forces in Latvia could help transmit ideas and concepts from the West to those countries. In comparison, Lithuania could not imbibe the knowledge of Western Europe. Hence, when serfdom was abolished elsewhere, it took another 40 years to do so in Lithuania (Nørgaard & Johannsen, 1999, p. 48).
Russia occupied all the three Baltic states in 1940 and brought them under its rule. Democratically elected governments were replaced by communist regimes in all the three regions (Nørgaard & Johannsen, 1999, p. 46). After about half a century of Russian rule, fatigue had set in to the regime. In order to placate the population, it was decided that more notes be printed. However, that did not solve the problem. It only led to economic imbalances on the eve of the split from Russia.
The Baltic states have three things in common. They all know the after-effects of the Soviet Rule. Along with nationalities within Russia and outside, the Baltic States have suffered at the hands of the totalitarian rule by Russia. Secondly, they have a distinct regional heritage. Being neighbours, they influenced each other and have come together to be part of the erstwhile Soviet Union. However, after they seceded from Russia, each one has charted its own course as it deemed fit.
Today the three nations are competing amongst each other to quickly integrate with the rest of Europe. They had to make a political and economic transition and make their international standpoint clear to the world.
In terms of democracy, they had a choice to have a constitution that was exclusively theirs or go for an ethnocracy which does not have any space for outsiders or minorities. They could go for a parliamentary democracy or a presidential democracy where the president is powerful. Similarly they could take a multi-party system of elections where every party is proportionately represented. On the other hand they could also go for a two party system of elections. They could select a government where popular participation is high or go for elite driven one.
The selection was also between the EU based welfare capitalism and the US based laissez faire capitalism which does not interfere in market activities. They could have an economic policy with active or minimal state support. Similarly they could either introduce changes in a phased manner or subject people to a shock treatment. The policy style of the state could be consensual bottom up or elite top down approach.
They could go for a modern or a post-modern state. Similarly, they could opt for national or for international security. They could either have a self-sufficient economy or look for integration with the other nations of the world (Nørgaard, Johannsen, 1999, p. 16).
Conclusion
Social capital has been primarily seen from the standpoint of institutions in that it is a concept needing the assistance of institutions for it to flourish. Though the role played by institutions in nurturing social capital cannot be denied, this essay has taken the example of four emerging nations of the world which actually witnessed the collapse of institutions in every aspect. These are nations that have pulled themselves from destruction and are on the path of progress.
In this context, it is nothing more than the human mind and the culture of a people that have seen them through in creating human capital which had once flourished but now had to start from scratch. The examples taken are from two cultural milieus but having a common recent history. This essay points to the time in history when there were no institutions to further social capital. Social capital improved nevertheless. The spirit of human endeavour has not diminished and continues to sparkle resplendently with the passage of time. It guides man in all human aspects including social capital.
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