After Long Years | Page 8

trust. If people were not to trust
each other and/or the economic framework (within which they interact)
- economic activities would have gradually ground to a halt. A clear
inverse relationship exists between the general trust level and the level
of economic activity. There are four major types of trust:
a. Trust related to Intent - the market players assume that other players

are (generally) rational, that they have intentions, that these intentions
conform to the maximization of benefits and that people are likely to
act on their intentions;
b. Trust related to Liquidity - the market players assume that other
players possess or have access, or will possess, or will have access to
the liquid means needed in order to materialize their intentions and that
- barring force majeure - this liquidity is the driving force behind the
formation of these intentions. People in possession of liquidity wish to
maximize the returns on their money and are driven to economically
transact;
c. Trust related to knowledge and ability - the market players assume
that other players possess or have access to, or will possess, or will
have access to the know-how, technology and intellectual property and
wherewithal necessary to materialize their intention (and, by
implication, the transactions that they enter into). Another assumption
is that all the players are "enabled": physically, mentally, legally and
financially available and capable to perform their parts as agreed
between the players in each and every particular transaction. A hidden
assumption is that the players evaluate themselves properly: that they
know their strengths and weaknesses, that they have a balanced picture
of themselves and realistic set of expectations, self-esteem and
self-confidence to support that worldview (including a matching track
record). Some allowance is made for "game theory" tactics:
exaggeration, disinformation, even outright deception - but this
allowance should not overshadow the merits of the transaction and its
inherent sincerity;
d. Trust related to the Economic horizon and context - the market
players assume that the market will continue to exist as an inert system,
unhindered by external factors (governments, geopolitics, global crises,
changes in accounting policies, hyperinflation, new taxation - anything
that could deflect the trajectory of the market). They, therefore, have an
"investment or economic horizon" to look forward to and upon which
they can base their decisions. They also have cultural, legal,
technological and political contexts within which to operate. The

underlying assumptions of stability are very much akin to the idealized
models that scientists study in the accurate sciences (indeed, in
economy as well).
When one or more of these basic building blocks of trust is fractured
that the whole edifice of the market crumbles. Fragmentation ensues,
more social and psychological than economic in nature. This is very
typical of poor countries with great social and economic polarization. It
is also very typical of countries "in transition" (a polite way to describe
a state of total shock and confusion). People adopt several reaction
patterns to the breakdown in trust:
a. Avoidance and isolation - they avoid contact with other people and
adopt reclusive behaviour. The number of voluntary interactions
decreases sharply;
b. Corruption - People prefer shortcuts to economic benefits because of
the collapse of the horizon trust (=they see no long term future and
even doubt the very continued existence of the system);
c. Crime - Criminal activity increases;
d. Fantastic and Grandiose delusions to compensate for a growing
sense of uncertainty and fear and for a complex of inferiority. This
nagging feeling of inferiority is the result of the internalisation of the
image of the people in their own eyes and in the eyes of others. This is
a self-reinforcing mechanism (vicious circle). The results are
under-confidence and a handicapped sense of self-esteem. The latter
undulates and fluctuates from overvaluation of one's self and others to
devaluation of both;
e. Hypermobility - People are not loyal to the economic cells within
which they function. They switch a lot of jobs, for instance, or ignore
contracts that they made. The concepts of exclusivity, the sanctity of
promises, loyalty, future, and a career path - all get eroded. As a result,
there is no investment in the future (in the acquisition of skills or in
long term investments, to give but two examples);

f. Cognitive Dissonance - The collapse of the social and economic
systems adversely affects the individual. One of the classic defence
mechanisms is the cognitive dissonance. The person involved tells
himself that he really chose and wanted his way of life, his decrepit
environment, his low standard of living, etc. ("We are poor because we
chose not to be like the inhuman West");
g. The Pathological Envy - The Cognitive Dissonance is often coupled
with a pathological envy (as opposed to benign jealousy). This is a
destructive type of envy, which