Trust deficit: India must generate social capital for people to believe institutions are as good as gold

Subscribe to enjoy similar stories.India’s social capital deficit registers as a factor in its current account deficit through the demand for gold. Our appetite for gold is not an irrational cultural quirk. It is, in part, a revealed preference and a tangible symptom of our collective distrust in one another, society and civic institutions.

More dramatically, economist Ajay Shah tells me that gold is a vote of no confidence in civilization itself. Whatever people might say in opinion polls about how much they trust their government or their leaders, they reveal their true beliefs when they buy gold despite other assets being available. Writing about the 19th century, historian Dietmar Rothermund noted that unlike Meiji-era Japan, surplus capital in India went into land and gold because of the absence of cross-cutting financial institutions that reallocate money.

These institutions didn’t come into being because the trust within caste-communities was accompanied by distrust among them, limiting the scale and scope of available investment opportunities. Things have improved tremendously since then. Even so, Indians have good reason to be sceptical of solemn constitutional promises, pieces of paper or numbers on a smartphone in an era when both Parliament and the Supreme Court have given us retrospective legislation and taxation.

When my mother sold her house, the buyers and government officials told her that digitized property records were useless, all laminated documents were suspicious and one had to look at a 40-year-old handwritten sheet of paper edgewise to see if the right type of pencil was used. Aadhaar is proof of neither age nor address. Courts can decide that the home that you bought from the municipal authority