Bert hamminga Page title:  Capitalism and Honesty          version date 991015
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You make something because you believe it is good and you wish to share your finding with others: don't you think this is good? That is what you "ask" as it were, when you market a product. The money is the language. People "vote" with their money. That outlines the ethical conditions for capitalism: its participants need to have respect for themselves and for their (end)consumers.

Such respect can be most clearly seen in cases were the producer knows important aspects of their product are unnoticeable to the consumer, but nevertheless takes care of it.

You will know the difference between lunchrooms receiving regular customers and those in which faces are always different. The former are to be found in office building area's, the coffee is good, the food is fresh and well taken care of, prices are OK, waiters glad to see you again. Where few customers come every day, there will be a feeling of responsibility to customers. The latter you find on railway stations: bad coffee, dry tasteless food, high prices, indifferent service.   Typical for a place where very many people only sometimes go.

One time, someone came to repair my dishwasher, and noticed a lot of waste in it. Rinse your plates before putting them in, he said, please do not use your dishwasher as a garbage can. He looked as if he personally felt the suffering of my dishwasher from my bad treatment. Since then, a have always rinsed carefully. This man had not only been in my house for money. He had been there to do good. He showed he had a heart for my dishwasher and taught me to have it too.

Russian joke: father and son are gun repairmen. Father has a customer who regularly returns with a very old gun. Every time the father repairs the gun, but every time after a while the man returns with a broken gun. One time he came, the father was out, and the son investigated the gun. The recurring failure was caused by a commonly available part that seemed to have been repaired many times. The son replaced it. Because the man did not return, after a while the father asked the son whether he had seen him. After the son told about his repair, the father said: what have you done, now I 've lost a customer!

A Russian true story: rich Moscow business men at the black sea with their secretaries. A poor old woman came to them several times with her box of home made ice cream. They got fed up with it. What's the price of the whole box? They said. She told the price. They bought it and threw it into the sea. Laughter.

Zairian true story: one time a missionary drove through a puddle. The mud splashed on the clean Western suit of a Zairian standing by. As usual in such cases, he was given money to buy soap. Later, the man was told regularly to be found after rain near puddles. This was his "business".

Extreme cases of dishonesty to your fellow human as a customer are forbidden by law. Examples are forgery, fraud, poisonous contamination of food. But the difference between thriving or decaying capitalism hinges upon much subtler forms of honesty and dishonesty than law can distinguish: as a journalist, will you be poor, hunted for, and have a difficult life just because you want to unmask powerful people and present the truth? Or will you be rich and have an easy party-life writing gossip that does not need to be true, but just needs to sell your journal? As an artist: will you use your talent to meet the taste of rich and powerful people and have an easy life, or will you pursue what according to your own true conviction has value and needs to be done (and accept to remain poor)? The choice of the journalist and the artist is not only a matter of his personal character, but also the culture surrounding him: to what extent does your culture encourage criticism or apathy, personal contributions or conformism?

Another vital aspect of a culture is well known: criminal, disloyal and dishonest behaviour is a decisive feature of people coming from families without love, people who have not been able to learn to trust and love others and to be trusted and loved by others. If raised in such circumstances, people often do not feel the need to offer something in return for the wealth they take. Even when they sell, they do not care much whether the product sold is good for the buyer (think of drugs). Thus, the nature of family life determines how people as adults shall operate in society to procure wealth.

Some cultures rely chiefly on personal relations to avoid the unpleasancies (and Social Cost!) of disloyalty and dishonesty (Asian countries above all, and in the West Italy and France relatively most). Other cultures give a bigger role to their legal system. There is an estimate for the number of US lawyers per head of the population compared to Japan in the year 2000 as 23:1! (Christopher Robert C. The Japanese Mind London: Pan, 1984).

The basic problem in capitalist cultures is this: since both your buying and your selling markets are big, you constantly meet economically interesting people you did not know before. How to decide whether and how to deal with them? That is no problem if your contract does not involve time, that is, if delivery and payment are on the spot. The problem comes in as soon as you really need a contract, that is, if one of the partners has to wait for payment or delivery.

An attitude predominant in Anglo-Saxon cultures is to concentrate on the data: show me what you sell (buy), tell me the quantities you need, the dates of delivery, and the prices you are willing to sell (buy) for. A meeting is over when you agree on a contract containing these data. You both judge whether this contract  is the best of the market alternatives in terms of price, quality and delivery, you both sign it -after the small letters are studied by your lawyers-, and there can be no more misunderstanding. Everything is crystal clear, from the typical Anglo Saxon point of view.

Meanwhile the other party, if from a different culture, may feel like a woman who is not unsympathetic to the approaching party, but not ready for this speedy road to sex. This data approach may be thought to be savage and rude. Their primary aim may be to see whether you and he can become friends. That makes it apt to call it the relationship approach. While the data-capitalist bends over the papers on the table, the relationship-capitalist quietly waits till he is looked at. From there, the relationship-capitalist tries to enhance personal contact (ending his attempts if you fail to meet his character-requirements).

Fujitsu, a Japanese company needed a photo-film factory in Europe. While visiting Tilburg, accidentally on Sunday, the visiting staff saw a well filled Catholic church coming out. Though not Catholic themselves, it made them decide to build the factory in Tilburg. "People who go to church are likely to be honest people", they were heard to say.

Summarising: a relationship-capitalist spends a lot of time to try to make sure he will only deal with real friends who will not let you down. A data-capitalist might make 20 data-contracts while the relationship-capitalist makes only one. But the latter made a friend for life, yielding him hundreds of succeeding contracts without any effort. The data-capitalist has to fight for every new contract with his competitors. Moreover, since he does not know his contract parties well, he regularly faces disagreements in implementation. For that, the data-capitalist relies on lawyers and the legal system. That explains why the number of legal offices held in the US is several tens of times higher than in Japan. Moreover, the legal "business" is in the US considered to be just as legal a business as other types of business. As long as data, like cost, revenue and profit are the things you concentrate on, there is no way to discover that legal procedures to not in the least contribute to the wealth of a nation. In Japan, Singapore, France and Italy there is less money spent to boring court room hypocrisy, and instead of that more dining, going out together, meeting each others wives and children before risky agreements are made. That is cheaper, makes your product cheaper, makes you win the competition on the market. The strategy is to reduce overhead business cost by making business as much as possible an affair of personal trust like you find among friends and in your family.

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Before Westerners came to Japan, the Japanese had no word for the "things-figures-and-contracts"-approach of the Western data-capitalist. In the West, it is often called "objectivity". The Japanese chose to dub it "kyakkanteki", which literally means "the approach of the guest".

This "approach of the guest" is not limited to Western businessmen. The basic view of the world as a huge mass of things that can be observed to have relations to each other characterises a closely related set of Western philosophical doctrines that have always been most popular and most practised in Anglo-Saxon culture in the last 400 years: the different names these related philosophical doctrines have been given are: empiricism (Locke, Hume, John Stuart Mill), positivism (Comte), logical positivism (Wittgenstein, Carnap), analytical philosophy (Russell, Whitehead, Moore, Ayer ), philosophy of empirical science, critical rationalism (Popper, Lakatos). What characterises these approaches is the idea that the nature of the world and knowledge about it should be specified independently of the subject, the person who "sees" the world, thinks about it and knows about it. Abhorred is the idea of knowledge as something personal, depending on circumstances. Favoured is the idea that every type of knowledge worth its name is universally valid, always and everywhere, and independently of who "knows the knowledge". In other words, that knowledge is about universal laws of nature. Those laws are thought to be like the things we see: they are there, they exist, they are real, whoever likes it or not. Famous is the example of Karl Raimund Popper, who insists his philosophy concentrates on "theories" people have, that he compares to webs made by a spider. You can see webs "objectively" after the spider left it. From the nature of these webs we should infer whether the spider did his work properly, whether and to what extent he succeeded in approaching the real laws of nature. Popper calls this "verisimilitude". The verisimilitude of the scientific "spider's" web is objective: we should not need to know the spider to judge the verisimilitude of the web. This is, as has been pregnantly written: epistemology without a knowing subject. Kyakkanteki, as the Japanese say.

Circumstances for honesty and dishonesty

Dishonesty can originate from a short time horizon: there is a short term advantage in cheating, but if in the longer term your environment adapts to your cheating behaviour, you are likely to be worse off with your dishonesty than you would have been with honesty. In such circumstances dishonesty is simply irrational: you hurt your own interest.
Short term thinking is more rational in cases where contract parties are anonymous. Think of two people in a big football crowd, one of them selling a fake ticket to the other. You can get away with it.
In some cultures you can be in a social position where displaying honesty is a big sacrifice.

There can be considerable pressure on you to be dishonest: suppose you live in a country with two armed groups fighting for power (let us call them "government" and "rebels"). Your village is in the hands of the rebels. You are forced to feed them. They sleep with your wife. Then, they have to flee for the government. They flee eastward, and you have to tell the government they fled northward. Then, for a while, you have to feed the "government" soldiers. They sleep with your wife. But the rebels come back. the government flees westward, but you have to tell the rebels they fled southward....How honest will you be?

In general, honesty is a value but for almost (almost) everybody its rank as a value is lower than survival. Very few people will sacrifice honesty for a very small gain. Where are you? The rest is character. Thus, it becomes clear that you pay for being honest. In some cultures and circumstances the price of honesty may be unaffordable for most people. But you also pay for being dishonest.

The heaviest psychological suffering of German concentration camp survivors is the recollection of how by being dishonest they saved their life, often at the expense of others.  They survived, but the price was high. German camp officials loved games to see people survive by paying such a high price.

Truth, summarising, is not a free good, you pay for it. To some, it is quite a basic, though not absolutely vital need, to others luxury. How much you have to sacrifice for truth depends on your culture and in that culture on your political, social, business and family circumstances.

Free competition is an honesty promoting circumstance if sellers and products can be identified (so as a customer you can come back to what you thought was good and stay away from what you thought was bad). In such circumstances, customers will not return after being disappointed. The process is even stronger if consumers communicate efficiently: then, many consumers can completely avoid disappointment because they are warned. Free press is vital for the fight against dishonesty in general and consumer communication in particular.

If there is no free competition, organised countervailing power cures dishonesty: associations of train travellers can put pressure on train monopolists,  an ombudsman can help to put pressure on underperforming departments of government. Here also, free press is vital to make protest heard.

Dishonesty versus symbolic speech

There is a lot of cross cultural misunderstanding about "lying" and "cheating". Everybody frequently hears people from some culture say that people from some other culture cannot be "trusted". A large part of these kinds of disappointments stem from cross cultural misunderstanding of what really is meant by someone.

In Moscow I was going around with many people. Always at the end of our meeting my company would excuse him/herself by mentioning an obligation. They ranged from casual, like meeting someone else for some matter, to heavy, like visiting sick mothers on death beds. I finally found out that in Moscow, you are not supposed to say: "It is time for me to go", and leave. As a matter of politeness, you supply a reason. Everybody knows that reason is usually false, but is is appreciated by everybody as politeness. It is purely symbolic language. Now what degree of "seriousness" should the next obligation you mention have? That depends on two things: if you feel your company will be disappointed about your leaving, you will select a high priority obligation. And when you wish to express your appreciation for your company as a friend or relation you will choose to "confess" an obligation "you will not tell everybody". Both parties know it is symbolic (but do not forget to ask about the sick mother next time!), and appreciate it as an expression of friendship and appreciation.

In Uganda, Westerners are regularly taken apart by Ugandan "friends" and get to hear a story about private life, prospect for personal future and some small problems of today,  ending with the quest for some cash. Now the point is this: do not tell them, like I did the first times, that you get requests for cash several times a day, and that he should have posed the question right away because that would have saved both of us a lot of time, because you have the general policy not to give cash. No. That should be answered differently. You should tell him that you did not take much cash from Holland, you have debts at home, you have promised to give the rest of your money to some widows and orphans, but only at the end of the trip, because suppose you  get ill, you would  have to pay the hospital because "otherwise, my dear friend, you would perhaps never see me again and you would be very sad...."  etc. etc. etc. and as a rule of thumb the length of you symbolic language (lies, if you will), should have roughly the same length as your dear friend's preamble to his quest for cash. Your friend will perfectly understand what you really think. The rest is maintenance of mutual friendship. Take your time and have the courtesy to lie! 

The examples above should make clear that often "lies" are not a matter of dishonesty but of courtesy. You are simply supposed to be able to read between the lines, and if you can't because you do not know the culture, do not blame the speaker, a mistake often made by those who infer from certain experiences that certain people "cannot be trusted".

Disloyalty: Another problem can be the organisation of work. This is called the agency problem: an "agent" (for instance a manager) is someone paid to promote the interests of the owner (shareholder). But agents have their own interests too! Waiters on a fixed wage will behave differently from waiters whose wage is somehow made dependent on their appreciation by customers. This could be done by making the waiter share in the profit, or even make him the owner:  his interest will thenceforth coincide with that of the place. Private owners are obviously "loyal" to their own shop. Then there is no more "agency problem".

Pure economic theory: only one side of the medal

Pure economic theory implies that the economy works most smoothly if producers and consumers have perfect information, and instantaneously change their plans at the slightest change of prices, quantities or technical condition of production: if one of your thousands of workers is abundant, you fire him immediately. The day your journal's paper supplier is slightly more expensive then his competitor, he is replaced. If the lunchroom at the other corner drops its coffee price with 1 cent, you go over. That is what pure economists call perfect market flexibility. If things do not go that smooth, they call that friction. Frictions are is supposed to stand in the way of proper functioning of the market.
But does capitalism work most smoothly when every worker can be fired every day, and lunchrooms see their customer wandering around before lunch to check the latest coffee prices in cents?
What is not dealt with in this type of thinking is that both business, and consumption is developing relationships. Making friends. That one abundant worker   is part of a group of people loyal to the firm. A rational capitalist does leave him alone easily. That paper supplier is the guy whom you could phone out of bed if Sunday night you run out of paper, he will put himself personally behind one of his drivers' truck and bring you paper at 15:00AM! Will your  paper supplier keep doing that if you reconsider your orders by comparing prices of competitors? Would you not miss that nice person behind the bar of you lunchroom if you go over to the other lunchroom for one cent?
The lesson to draw from this is that pure capitalism cannot exist. "Pure capitalism" is an expression like "square circle", no such a thing can be imagined.  Capitalism is a game a culture can decide to play in certain realms of social life. And this can be done only if in other realms, the values of friendship, loyalty and human relations keep being bred strong enough to determine the basic attitude of the players of the capitalist game. If not, capitalism perverts, as it did during the immense suffering of the working class in nineteenth century Europe, and nowadays in Russia, or its egoistic mentality prevents it from creating general welfare, like in many African countries.


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