Saturday, 8 March 2014

See Guest Column on Trust as Foundation of Society; An Economic Perspective

                                               GUEST COLUMN BY
                                               Dr Anshuman,Professor and Head,Economics
                                               Petroleum University,Dehradun

Trust has been the foundation of every society in all civilizations in all times. Whenever there  has been deficit in trust, it has led to catastrophic effects on the people, societies and countries. All wars, riots, civil wars, etc. are the manifestations of the trust- deficit.In a simple society, the daily activities were run on the basis of trust without any modern institution. People used to keep their money with other respected members of the community on the basis of trust without ay legal agreement. Many business activities were held without any written contract.

With  the economic development , many institutions have sprung up to enforce the contracts , which earlier were performed by trust. However, if one attempts to analyze  the cases of breach of contracts in modern time and earlier time , one would find that cases  of breach of contract are   more in modern society than earlier time in absolute term as well as  proportion of total contracts. Its testimony is modern judiciary flooding with cases of breach of contract by one of the parties in the agreement. It proves that the trust has eroded in the society in general.

 Today, every body is interested in his own advancement with no consideration of others. Though the Economics law propounded by Adam Smith also advocates this philosophy, it has its own flaws. Adam Smith suggested that if each member of the society is advancing its own interest, in doing so, he is also advancing the interest of the society as a whole. However, this law has proved wrong time and again. The recent Sub-prime crisis of the US has again manifested this. The mortgage originators, investment bankers and other players involved in the financial sector worked for maximizing their own profits at the cost of society at large. However, the end result has been the enormous cost inflicted not only on the whole US economy but also on the whole world economy. It  eroded again the trust of Americans in its financial sector and of countries in American economy. It has taken many years to restore this trust again in the American financial sector. Still it is not fully restored, which is evident by weak recovery sign in the economy.                                               

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