Sardanapale

My quote of the day is a bit long - but all lovers of capitalism with relish every word:

“At the heart of this shift (the emergence of trust in business relations in the 19th century) was a greater accumulation of capital over the long run as opposed to merely short-term profit, an emphasis that has been arguable a defining characteristic of capitalism.

As Tilly writes, businessmen started to see ‘individual transactions as links in a larger chain of profitable business ventures,’ instead of just ‘one-time opportunities to be exploited to the utmost.’

If your prosperity in the long run depends on return business, on world-of-mouth recommendations, and ongoing relations with suppliers and partners, fair dealing became more valuable. The lubrication of commerce that trust provides became more than desirable. It became necessary.

What was most important about this new concept of trust was that is was, in some sense, impersonal.

Previously, trust had been the product primarily of a personal or in-group relationship – I trust this guy because I know him or because he and I belong to the same sect or clan – rather than a more general assumption upon which you could do business.

Modern capitalism made the idea of trusting people with whom you had ‘no prior personal ties’ seem reasonable, if only by demonstrating that strangers would not, as a matter of course, betray you.

This helped trust become woven into the basic fabric of everyday business.

Buying and selling no longer require a personal connection. It could be driven instead by the benefits of mutual exchange.

The impersonality of capitalism is usually seen as one of its unfortunate, if inescapable, costs…

One of the fundamental problems with trust is that it flourishes only where there are what sociologists call ‘thick relationships’ – relationships of family or clan or neighborhood.

But these kinds of relationships are impossible to maintain with many people at once and they are incompatible with the kind of scope and variety of contacts that a healthy modern economy (or a healthy modern society) needs to thrive…

Breaking with the tradition of defining trust in familial or ethnic terms was therefore essential. As the economist Stephen Knack writes, ‘the type of trust that should be unambiguously beneficial to a nation’s economic performance is trust between strangers, or more precisely between to randomly selected residents of a country.’

As with much else, though, this relationship between capitalism and trust is usually invisible, simply because it’s become part of the background of everyday life.

I can walk into a store anywhere in America to buy a CD player and be relatively certain that whatever product I buy – a product that, in all likelihood, will have been made in a country nine-thousand miles away – will probably work pretty well.

And this is true even tough I may never walk into that store again. At this point, we take both the reliability of the store and my trust in that reliability for granted. But in fact they’re remarkable achievements.

This sense of trust could not exist without the institutional and legal framework that underpins every modern capitalist economy… But the measure of success of laws and contracts is how rarely they are invoked.

As Stephen Knack and Philip Keefer write, ‘Individuals in higher trust societies spend less to protect themselves fr-om being exploited in economic transactions. Written contracts are less likely to be needed, and they do not have to specify every possible contingency.’

Trust begins… because of the ’shadow of the future’. All you really trust is that the other person will recognize his self-interest.

But over time, that reliance on his own attention to his self-interest becomes something more.

It becomes a general sense of reliability, a willingness to cooperate (even in competition) because cooperation is the best way to get things done.”

James Surowiecki, The Wisdom of Crowds, pp. 122-5.

I feel lazy today, and am just pasting this good BBC online article on the French strikes (my own thoughts are opposite)

“French President Nicolas Sarkozy’s controversial economic reforms certainly struck a chord with the country’s voters in this year’s election.

But although he can claim a mandate for change after his victory in May, his plans to shake up the public sector pension system have provoked an all-out response from transport unins. This level of militancy comes as little surprise to long-time observers of the French industrial scene.

But even they may be shocked at the full extent of the country’s simmering workplace tensions.

In the run-up to this year’s voting, analysts at the World Economic Forum (WEF) gave France the worst possible rating in the category of “co-operation in labour-employer relations” - that is, how workers get on with their bosses.

Last year’s WEF Global Competitiveness Report found that in this respect, France was bottom of the league out of 125 countries surveyed, giving it the most confrontational workplace environment in the world.

In recent weeks, the new 2007-2008 edition of the report has been published. So have French labour relations become any more harmonious? In a word, no. The latest WEF survey covers 131 nations, not 125. But France is still languishing on the lowest rung, in 131st place.

Does this matter? Well, it certainly helps to drag down the country’s overall rating. France is ranked as the 18th most competitive nation in the world, the same as last year.

But that still leaves it trailing behind the US (1st) and Japan (8th), not to mention other big EU economies such as Germany (5th) and the UK (9th).

What’s more, French executives who submitted their views to the survey rated “restrictive labour regulations” as by far the biggest problem in doing business.

Mr Sarkozy’s reforms are broadly aimed at sweeping away some of those restrictions, which work well to protect those who are already employed, but do little to encourage firms to take on more staff.

Economists describe the system as a two-tier labour market, with a high level of employment protection and very little turnover. That offers little hope to the 8.4% of the population who do not have a job - a figure that rises to 22% among the under-25s.

Mr Sarkozy has already given ground on some of his campaign pledges. For instance, his promise to replace no more than 50% of retiring bureaucrats has been softened, so he will now replace 66% of those who retire.

But he insists he will not budge on the reform of the “special regimes”, which cover 1.6 million public sector workers’ pensions - and which the transport workers are fighting so hard to retain.”

The whole article is here.

The French are not known for their love of understatement. But you can’t accuse the Court of Accounts, the government’s main (if toothless) financial watchdog, of putting things too bluntly.

“The effectiveness of urban policies is dubious,” it says in a report. It deplores “the multiplicity of mechanisms” designed to help impoverished suburbs and the “complexity of the decision-making process”.

It also states that monitoring of the myriad of youth associations that receive public money in the banlieues “appears to be lacking”. You can say that again.

Despite a sharp increase in spending (plus 15% between 2003 and 2005, and a total of 4bn euros in 2006), “deprived urban areas are still lagging behind,” the court says.

It may be time to call a spade a useless spade: France has nothing to show for a costly “policy for the city” that should be scrapped.