By: Jigger S. Latoza

No, this is not a column about condoms.

Last July, I was invited by the National Economic and Development Authority to sit as a reactor in the Western Visayas leg of the Philippine Development Plan (PDP) consultation-workshop, which sought to generate inputs for the updating of the PDP, as well as of the Regional Development Plan.   The consultation also aimed at generating insights on the contributions of Western Visayas to the attainment of PDP targets.

Under AmbisyonNatin 2040, we envision that by 2040, the Philippines would be — a prosperous, predominantly middle-classsociety; a healthy and resilient society; a smart and innovative society; and a high-trust society.

The “high-trust society” goal calls to mind my Social Change course at Ateneo de Manila in the late 1990s. One of the required readings in that course was the book “Trust: The Social Virtues and The Creation of Prosperity.”    Published in 1995 by The Free Press in New York, the book was written by Francis Fukuyama, a public intellectual whose expertise is on political science and political economy.

Dr. Fukuyama, a graduate of Cornell and Harvard, argues that economic prosperity and business success are not solely caused by adequacy of resources or strategic economic development plans or operational efficiency or friendliness of government to the business sector.  An equally important factor, Fukuyama says, is a “culture of trust,” coupled with a capacity for “spontaneous sociability.”    In gist, Fukuyama suggests that social capital – the capacity of people to trust those outside of their family circles, and collaborate with other people or groups of individuals for the attainment of shared goals within the norms of ethical behavior — is an essential ingredient of economic prosperity.

In his important work, Fukuyama compares and contrasts the attributes of “low-trust” societies such as Southern Italy, France and China and “high-trust” societies such as the United States, Germany and Japan.   In low-trust societies, suspicion about people’s motives prevails.  In high-trust societies, there is a presumption that, in general, people are good-natured and that presumption governs business relationships until those people prove to be not worthy of being trusted.

On one hand, low-trust societies are generally family-centered.  In these societies, the state wields power that regulates, sometimes even control, economic activities and transactions among businesspersons.   Consequently, transactions are slow and costs are high.    The slow speed of distrust makes business vulnerable to corruption and influence peddling.  The endless, unreasonable demands for proofs of the goodwill and capacity of investors also result in red tape.  Bigger business opportunities requiring immediate decisions and actions on the part of parties fly out to other societies where social capital is huge.   Oftentimes, therefore, businesses cannot go past the micro or small enterprise category.

On the other hand, high-trust societies are institution-centered; they transcend boundaries set by familial relations or clannish considerations.  Collaboration is an economic development driver.  The state deregulates business activities, making it easy for investors to do business.  Due to the high speed of transactions because the parties trust each other, there is practically no room for “under the table” arrangements.  High-trust societies are breeding grounds for medium and large and more efficient business enterprises, which generate revenues for government, create jobs for people, and foster economic prosperity.

Is the Philippines a low-trust or high trust society?

I don’t want to presume that my answer is like yours.  Let me share with you two anecdotes instead.

One is about my friend, a young entrepreneur, who has applied for a bank loan to grow his business ventures.  The tangible assets of his corporations are many, supported by the necessary documentation.  Audited financial reports are made available, site visits are undertaken, several meetings are conducted.  Yet, it takes banks four to six months or even longer to act on the circuitous application process.  Making matters worse sometimes is the decision of the banks – after all the hassle — to deny the application because they have “reserved” significant slices of their loan portfolio for certain businessmen even though the latter don’t need the loan.  Banks seem unable to go beyond the comforts of their financial cliques and their exclusive list of preferred clients.   Decisions are slower than a snail, discouraging visionary entrepreneurs from helping fuel the engines of economic growth and dampening their desire to multiply the benefits of their prosperity beyond their families.

Another story involves my 95-year-old grandmother and my 68-year old mother.  When we eat at restaurants, they need to present their Senior Citizen card to be ableavail of the 20% discount.  My grandmother’s hair is silver; her face wrinkled.  She could barely walk without a cane, and finds it difficult to hear.   My mother uses a cane too and although she doesn’t look her age, one with common sense wouldn’t mistake her for a 40-year-old.  She’s on dialysis and, oftentimes, she’s being wheeled into the restaurant, making her a PWD too.   One time we dined with some visiting relatives from the US.  Our guests were amused yet dismayed about this demand to show proof that one was a Senior Citizen or a PWD even if those facts were staring the waitstaff in the face.    They shared that in the US, waitstaff or cashiers trust their common sense and personal judgments that when people look like senior citizens, they must be senior citizens.

In situations like these, trust cannot be nurtured.  Social capital, which is created and transmitted through cultural mechanisms such as tradition and religion — is hard to build and sustain.   Collaboration for innovation and the attainment of shared social and economic goals is difficult to forge.

In contrast, according to Fukuyama, “if people who have to work together in an enterprise trust one another it is because they are all operating to a common set of ethical norms….such a society will be better able to innovate…since the high degree of trust will permit a wide variety of social relationships to emerge.”