False Economy - Alan Beattie [134]
Inertia has a lot to answer for. Shifting wholesale from one system to another would take a good deal of coordination and the willingness on everyone's part to accept short-term losses—the cost of new keyboards and the time taken to learn them—in return for longer-term benefits. This is the kind of thing we have governments for, but as yet none has volunteered. If only the U.S. military, while imposing the standard eight-by-eight-by-twenty-foot shipping container, had sorted out keyboards while they were at it.
Now, if it is possible for an economy to get stuck in a rut for something as relatively discrete and testable as a particular technology, it is even easier for a country to adopt an economic system, or follow a particular policy, and stick with it even if it appears not to be working. Path dependence can arise even with consumers and companies all acting rationally and doing the best they can with the choices available to them. If we change that assumption as well, given the operation of politics and lobby groups, it becomes even easier to see how a wrong move might yet become self-reinforcing.
Cultures and institutions have a way of replicating themselves. Habits created by a particular environment endure even when the surroundings change. We saw in the last chapter how cultures of corruption can arise and become embedded in a particular society at a particular time. Only an eccentric would claim that certain peoples are born corrupt. But peoples can certainly carry with them particular conventions that they have learned from their milieu.
In one intriguing experiment, a pair of economists set out to discover whether acquired habits would persist even when incentives and the environment changed. Their laboratory was New York City, and their subjects the international diplomats at the United Nations there. As part of their diplomatic immunity, consular officials and their families were exempt from paying parking tickets—at least until 2002, when New Yorkers' famously short patience expired and the law was changed. But incentive to obey the traffic laws was low. Between 1997 and 2002, some 150,000 diplomats' parking fines totaling more than $18 million went unpaid.
It turned out that different nationalities used this free pass very differently. Consular officials from countries like Nigeria, which score badly on standard measures of corruption, had many more unpaid tickets than those from goody-goodies like Canada and the Scandinavian countries. Removing diplomats from their native habitats evidently did not change their ingrained instincts about obeying laws. Interestingly, the longer diplomats remained in New York the higher were their rates of violations, perhaps as they realized what they could get away with. Exposure to what they presumed to be a less corrupt environment than their home country (unless they encountered New York City politics) did not change their imported culture. Cultures are not endlessly immutable, else the national politics of the UK and other countries would be as corrupt now as when parliamentary seats were openly bought and sold in the eighteenth century. But neither are they instantly malleable.
The institutions that make economies effective inhabit attitudes and behavior as much as they do a society's external structures. Many developing countries have democratic constitutions and judicial systems modeled on Western European or North American models. In other words, they have consciously attempted to put themselves on the same path as economically more successful countries. Yet they have often failed, so far, to deliver the same results.
The rest of this chapter will focus on three big developing economies—Russia, India, and China—as they shift in various ways toward a market economy. First, we will look at how Russia emerged from communism, and how its experience differed from that of other Communist countries, including both China and various nations from the Soviet bloc in Central and Eastern Europe. Second, we will look at how modern