Cuba Needs Social Capital, Not Just Money, to Prosper

Santiago de Cuba (Cuba), 26 de julio de 2013. El Canciller Ricardo Patiño, junto a jefes de Estado y de delegación, asistió al evento de conmemoración al 60 aniversario del Asalto al Cuartel Moncada. Por Ecuador además participó la Ministra de Defensa, María Fernanda Espinosa. Foto: Fernanda LeMarie - Cancillería del Ecuador.

Is a nation’s prosperity a function of the social virtues of its people? And if so, what are the social virtues that foster economic development?

In 1989, social scientist Francis Fukuyama published an essay titled “The End of History?” His central argument was that with the collapse of Communism, liberal democracy stood alone as the only form of government compatible with socio-economic modernity. This piece relies on his work, and his book Trust, to argue that Cuba’s economic future requires the end of a culture of distrust.

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When I studied international economics in the 1960s, the explanations offered for a nation’s economic prosperity were along the lines of geography, climate, soil fertility, resource endowments, culture, religion, work ethic and more. Social virtues, such as trust, were not studied.

Today, most thoughtful observers understand that free political and economic institutions require a dynamic, independent civil society, which depends on people’s habits and ethics. Aside from skills and knowledge, the human capital of a nation has to do with people’s ability to associate with and trust each other.

In societies with little capacity for free, voluntary associations, such as Cuba, people cannot develop a basis for trusting each other. People who do not trust each other will only cooperate reluctantly under extensive and inefficient systems of formal rules and regulations that must be coercively enforced.

In many of the former communist societies, habits such as excessive dependence on the state, the inability to compromise and a disinclination to cooperate voluntarily have all contributed to slowdown market-based economic growth and the consolidation of democracy.

In our hemisphere, think of Cuba, and the ongoing process in Venezuela, where there are virtually no independent social groups between the family and the state. In these societies, social ties and moral obligations tend to be restricted to the family. Outside the immediate family, individuals do not trust each other and do not feel a sense of responsibility to others.

In democratic Latin America, businesses tend to be family owned and managed, resulting in a relatively small business scale. There is a cultural reluctance to reach outside the family circle to bring in untrusted professional managers for top positions.

Low levels of trust also result in low levels of what Fukuyama calls “spontaneous citizenship.” This is measured by such things as the proclivity of people to abuse common areas, their reluctance to contribute to charity, or to keep public spaces clean. These manifestations are evident in Latin America.

Societies dominated by pervasive social distrust are also characterized by a schizophrenic-like attitude where people distrust the government, but simultaneously believe that a strong government is necessary to control their fellow citizens.

Trust and similar values like truth-telling increase the efficiency of economic systems. Free-market systems also require legal institutions like commercial, contract and private property law where trust functions as an emollient to the social system. Fukuyama argues that it is all about the institutions. Indeed, when critics point out that Cuban-Americans have been very successful in the United States, I note that yes, we have, but relying on institutions borrowed from American society.

Post-Castro Cuba will have to develop its own democratic and market-friendly institutions. And, as is evident in Communist societies, the proliferation of institutional rules to regulate wider and wider sets of social relationships engenders social dysfunction.

There is an inverse relationship between rules and trust. The more people depend on rules to regulate their interactions, the less they trust each other. A society’s endowment of social capital is critical to economic development. And six decades of totalitarian rule have served to deplete Cuba’s reserve of social capital.

A low social capital nation will have mostly small and inefficient companies, and will also suffer from pervasive corruption and ineffective public administration. The tragedy is that once social capital has been depleted, it will take generations to replenish it with a culture of “spontaneous citizenship” and personal responsibility.

The popular “No Castro No Problem” slogan is only partially correct. An end to Cuba’s totalitarian culture of distrust will also be necessary to fulfill the promise of economic development.

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