The Economic Costs of Mistrust – Asian Patterns of Success and Failure

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Professor Gordon Redding, co-editor of the Oxford Handbook of Asian Business Systems, looked at the role that social capital – or trust – plays in societies’ abilities to grow high levels of wealth per capita. He explained that relational trust is that which develops between individuals who come to know each other and build bonds of reciprocal dependence. An example of this is guanxi in Chinese culture.

System trust is that which develops when a society creates stable institutions that people come to rely upon and to believe in, such as honest accounting, good public administration, honest government, reliable information and standards like weights and measures.

When system trust is strong, it supports doing business with people you do not know, by providing reliable information and by underwriting any risk through systems of law that work.
For social capital to grow, it needs to have people with a sense of citizenship, so that they can act in the public interest in either introducing forms of order or sustaining those that exist.

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