TOC Why Nations Prosper? Your Turn

March 27, 2012

Sovereign bond traders be warned. "The beauty of numbers [...] is that they can be plugged into a spreadsheet to produce "answers" that have a comforting impression - or illusion - of precision. Social cohesion, by contrast, cannot" (*). A trained social anthropologist, Gillian Tett is naturally quick on the scent of qualitative aspects in a world of quantitative assessments.

Rating agencies may reply their role is precisely to refine such qualitative ore into quantitative metal. This misses the point. While numbers carry the aura of science, the truth conveyed by rating agencies is based on expert authority. Traders are free to believe their recommendations, or not.

Recommendations bought by those they recommend should be heavily discounted. Self-fulfilling recommendations which alternatively inflate and burst reputation bubbles should be carefully monitored. But these issues belong to past fillips. Today's focus is about social cohesion.

Following "James Robinson and Daron Acemoglu, two US academics", Gillian Tett declares "economic data matter enormously [...] so does social cohesion". As the latter feeds social solidarity and is in turn fed by it, she echoes Philip Stephens' column on this very topic. Holding solidarity to be the necessary complement to capitalism in powering society, I find myself in good company.

If this trend conveys the truth, it raises the question of what nations can do to boost their social cohesion. Daron Acemoglu and James Robinson called their book "Why Nations Fail" (1). This should give us pause. Surely teaching nations how to prosper would have increased sales. Did the authors pass on this opportunity solely with an eye on future consulting fees or rather because intellectual honesty compelled them to modesty?

Having no reputation at stake in the matter, I fear not to venture some answers. And first isn't it obvious that moral cohesion fosters social cohesion? John McDermott's obituary of James Q. Wilson conveniently reminds us that moralism is still alive in today's world (**).

This approach however is double edged. One can create an "inclusive" polity through the prior exclusion of all dissenting minorities. Yet what XVIth century diplomats dignified with the latin phrase "cujus regio, ejus religio" (2) would be frowned upon today as so much religious cleansing. The Spanish Golden Century may pass Daron Acemoglu and James Robinson's criteria, modern sensitivities condemn the Spanish Inquisition.

On the other hand the search for a morality which approves all behaviors so as to include everyone leads to pure hedonism. This selfish perspective bodes ill for the personal sacrifices society may demand from its members to sustain solidarity. James Q. Wilson precisely faulted America for having "become a nation of Calvins", little boys exclusively bent on bettering their individual lots (3).

While capitalists tend to act as typical Calvins, capitalism itself promotes economic growth, which in turn lightens the costs of social cohesion. Since Gillian Tett shows social cohesion lowers the interest a nation must pay to finance economic growth, this circularity goes a long way to explain how nations prosper and fail. Some happy circumstances trigger this feedback loop constructively until some shock suddenly turns it back against itself.

Western nations have recently found economic growth to be as elusive as moral cohesion. Still one is forgiven to think the dawn of the Information Age should create a new round of happy circumstances. For this to be the case, we must face at least two challenges it has thrown us so far.

Together with digital encoding and processing, Internet has practically erased the cost of distributing information but also enabled widespread content piracy. Social networking has extended the benefits of digitization to social interactions but also forced users into a modern form of serfdom.

Plunder and slavery have a long and common history. Together with more peaceful forms of commerce, these ageless economic activities fueled the ever grasping expansion of the Roman Republic. Their modern resurgence may be less bloody than of old, it is no less oppressive and therefore offers us with as tremendous an opportunity as before. For plunder and slavery beg to be replaced with more efficient forms of production. Beyond economic growth, their very elimination would directly reinforce social cohesion by turning its excluded victims into willing members of society.

Writing about the future of newspapers, Andrew Edgecliffe-Johnson shows how such an evolution could happen (***). Linking "the debate about charging for news" with "the rise of targeted advertising", he hints towards a grand bargain among pirates.

As original reporting becomes available for a price, consumers may be ready to stop plundering online content providers if they may choose to pay in kind rather than in cash, by letting advertisers target their personal profiles. I find only one fault with Andrew Edgecliffe-Johnson's reasoning. It implies a symmetry which may be more principled than practical. Are corporate pirates really ready to pay consumers to make profiles available?

Replacing plunder with market based transactions is made even more difficult by the ambiguous nature of the new value chain of information.

This fillip is an original creation and documents its sources in a traditional, inefficient way. Were it to carry live links, shouldn't I feel entitled to a cut on the income earned by the publishers on the readers I would bring them? Conversely if I were content to quote sources without adding any content of my own, wouldn't their publishers feel aggrieved not to share any revenue my site could extract from advertising?

More than money, so touchy a topic to some, traffic has long be the standard exchange currency among dealers in information. David Carr reviews "two approaches to give credit where credit belongs" (****). Whether through the adoption of aggregation rules from "the Council on Ethical blogging and Aggregation" or symbols from "the Curator's Code", the goal is to better redistribute traffic among all those who contribute to traffic.

Traffic is not the only currency, news are not the only goods traded online. Still the ideal of recognizing every party's added value carries over. If we are careful to distinguish sales from taking and fulfilling orders, selling is all that concur to land the customer on the online merchant's order form.

The economic gap is obvious. Adam Sternbergh speaks of "superviewers" (*****), Brooks Barnes of a "built-in fan base" (******), this is the tip of the iceberg. Every recommendation should be accounted for when genuine and freely exchanged. Yet today's social salesmen toil in servitude.

In the American past, the frontier furthered social cohesion through a sense of destiny, with the lure of new land and job opportunities for all.

If Western societies transform the Information Age into a new frontier, they will prosper. They surely can but will they? The question remains open.

Philippe Coueignoux

  • (*) ........... Why investors must get a grip on 'granny tax' and other rows, by Gillian Tett (Financial Times) - Mar 23, 2012
  • (**) ......... The American Aristotle who emphasized morals over money, by John McDermott (Financial Times) - Mar 10, 2012
  • (***) ....... There is still hope for the news business in the digital age, by Andrew Edgecliffe-Johnson (Financial Times) - Mar 22, 2012
  • (****) ..... A Code Of Conduct For Content Aggregators, by David Carr (New York Times) - Mar 12, 2012
  • (*****) ... Veena Versus The Superviewers, by Adam Sternbergh (Financial Times) - Mar 18, 2012
  • (******) . How to Build Must-See Fever, by Brooks Barnes (New York Times) - Mar 19, 2012
  • (1) see an introduction to Why Nations Fail published by MIT
  • (2) see Cujus regio, ejus religio in the wikipedia
  • (3) see the Calvin and Hobbes comic strip in the wikipedia
March 2012
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