Jun 14, 2011

Building Trust

Great paper by Richard M. Locke (to download it click "cached" in the link provided):
This paper [argues] that trust can be created, even in contexts void of the supposed prerequisites and /or preconditions underlying it. It has sought to illustrate this argument through two case vignettes of collective action among producers in Southern Italy and Northeast Brazil. Although both cases presented in this paper centered on the food/agricultural industry, my other research includes similar cases of cooperation among producers in the shoe, garment, jewelry and machine tool industries. In short, the outcomes observed are in no may particular to or derivative of the two sectors described above.
What all these cases share is the process through which trust was built among them. Although the initial challenges facing fruit exporters in Petrolina-Juazeiro and mozzarella manufacturers in Campania were different, the underlying thrust of their problems was the same: failure to cooperate would undermine the competitiveness, perhaps even the viability of the local industry. As a result, the producers came together in defense of their own self-interest. And in both cases, the initiative was taken by a small group of large producers, precisely those who had most to lose should the situation not be corrected. In Caserta, four large producers involved in both buffalo herding (milk production) and cheese manufacturer came together to found the Consorzio in order to defend themselves from the dual threat of large, outside firms entering the local industry and of local firms adulterating the product. In Petrolina-Juazeiro, again four of the largest growers came together to establish Valexport in order to avoid past mistakes that led to the decimation of the local melon industry.
Yet, in both cases, these producers’ associations quickly became more encompassing and hence representative organizations. As a result of government pressure, both the Consorzio and Valexport opened its doors to all local producers involved in the same sectors. As a result, both associations soon aggregated a diverse mix of members, of different sizes and at times with different interests. Essentially government agencies entered into an exchange with these producers’ associations. In return for the provision of a public or quasi-public good -- the granting of the DOC in the case of the buffalo mozzarella cheese producers in Southern Italy, and extensive financial and technical support in the fruit-fly eradication program in the case of Petrolina-Juazeiro -- the government insisted that these associations open their doors and become truly representative bodies. In many ways, this makes sense since given that democratic governments are not supposed to support a few select societal actors but rather all of their citizens. However, there are numerous examples of precisely this kind of selective support for industry actors by governments throughout the world (see Evans 1995). Thus, I am not arguing that government everywhere and always acts in ways that encourages associations to become more representative and encompassing, only that public policy can play a positive role in building trust by precisely engaging in these types of exchange.
Finally, both cases illustrated the importance of self-governance mechanisms in supporting and maintaining the cooperative efforts of the local producers. Careful monitoring efforts by Valexport was essential to the success of the fruit-fly eradication program. Without these efforts as well as the association’s provision of collective services to all members, pest control in the PJ region would not have been possible. Periodic testing and sanctioning of members were also essential to the ability of the Consorzio to reduce the adulterating practices among its members. Had these practices continued, the distinctiveness and hence source of competitiveness of the entire industry would have surely eroded. In short, all three elements – self-interest, government policy, and self-governance institutions were essential to the construction of trust among producers in Campania and Petrolina-Juazeiro.
If trust can be built in the Italian Mezzogiorno and the Brazilian Northeast, two regions often portrayed as deserts of trust, lacking most if not all of the supposed sociological and institutional preconditions underlying this resource, then surely, there is hope for other actors in other regions of the world. My hope is that this paper will help us look beyond our own preconceived notions of the very limited circumstances under which trust can exist and begin to imagine how trust-like behavior can be promoted in a wide array of socio-economic and political circumstances.
This paper changes the notion of lack of social capital in Northern Brazil, but specially in Souther Italy. Cooperation can emerge and this paper shows how. The paper should be discussed in economic development (or institutional economics) classes after discussing books like  The Moral Basis of a Backward Society or/and Making Democracy Work. By the way, the list of references in the paper by itself is a comprehensive reading list for a class on economic development or institutional economics. 

Update: a review by John Wilkinson.

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