By Prateek Raj – Until the end of the fifteenth century, impartial institutions like courts and police that serve all parties generally—so ubiquitous today in the developed world—weren’t well developed in Europe. In such a world without impartial institutions, trade often was (is) heavily dependent on relationships and conducted through networks like merchant guilds.
Such relationship-based trade through dense networks of merchant guilds reduced concerns of information access and reliability. Not surprisingly, because the merchant guild system was an effective system in the absence of strong formal institutions, it sustained in Europe for several centuries.
In developing countries like India, lacking in developed formal institutions, networked institutions like castes still play an important role in business.
If information access is poor (lack of transparency) or businesses don’t adopt reliable business practices (poor financial reporting or opaque quality standards), these deficiencies at the business level can make customers and investors question the reliability of new businesses.
Politicians, like medieval rulers, may be more willing to enter into a nexus with dominant businesses, like medieval merchant guilds, if 1) market frictions or 2) lack of incentives make the economy dependent on such businesses. more> https://goo.gl/faiBJ4
Posted in Book review, Business, Economic development, Economy, History, Leadership
Tagged History, Markets, Merchant guilds, Printing press, relationship, Trust
Can Governments Earn Our Trust? Author: Donald F. Kettl.
By Donald F. Kettl – The foundation for building trust begins with the argument for transparency. The central idea, developed during the Enlightenment, is that government’s legitimacy builds on the consent of the governed. But, to give consent, citizens must know what government is doing and find effective levers of influence.
James Madison, one of America’s most distinguished founders, and later the country’s fourth president, wrote in Federalist 51, part of a series of papers devoted to making the case for the new American Constitution: “If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.”
Of course, men are not angels, so democracy requires ways of helping the governed to control government. That begins, in the minds of many theorists and citizens alike, with the most important and fundamental tool to build trust: transparency.
The underlying assumption is that the more information that’s available to the public, the more accountable and better-performing government will be.
In the United States, the Sunlight Foundation is singularly devoted to making all government information open and available in real time. more> https://goo.gl/m71Cs4