Economic performance has long tended to be better in Northern than in Southern Europe. Among the myriad causes that have brought this about, one was that Northerners on the whole behaved better than Southerners.

One of our many lazy mental habits is glibly to take it as read that economic activity is, and indeed must be, carried out “within a legal framework” which largely conditions how people behave. The law says that they must respect each other’s person and property, fulfil their obligations, pay their taxes and care for their dependents. They will by and large do these things if the law is enforced. The state is there to enforce it. As rivalry in enforcement would lead to a shambles, society entrusts to the state the monopoly of law enforcement and willingly shoulders its cost. Despite occasional causes for grumbling, it is broadly agreed to be money well spent, for where would we be without the law?

The double trouble with this line of soothing tale, which nearly everybody accepts and recites, is that it is not altogether true, and that even if it were, it would fall far short of an explanation of why broadly comparable legal systems are consistent with vastly different economic behaviour in different societies. To begin with, it is not even certain that the “legal framework” really acts the way imagined in standard economic and social theory. The state guards its law-making and enforcing monopoly with ferocious jealousy. The fact that it is an effective monopoly should lead us to expect that it will maximise some kind of net result, achieving some high degree of compliance with the law, and do so economically. In reality, because it is a monopoly subject to a popular mandate and must not arouse dread, fear and hatred, it is restricted in what it may and what it must not do. It must produce compliance and serve up justice in white gloves on a silver platter—a demand it is most of the time quite unable to meet. It must be sensitive to shifts in public opinion between novel shades of political correctness and human-rights-ism, as well as to pressures from single-issue groups and special interests. As a result, it must become a law factory, pouring out an ever broader stream of new and complex legislation. Perhaps more important, it is financed from taxes imposed on people according to criteria that have little to do with what these taxpayers, taken individually, obtain from the state by way of law enforcement services. Like any other tax-financed service where contributions are divorced from benefits, the “legal framework” is an open invitation to free riding. Individuals will unload (or at least have a good try at unloading) onto the state responsibilities that in a well-ordered society they could and would themselves carry on their own behalf or for neighbours, partners and peers.

Here we reach the nub of the problem of why people in some societies behave mostly well, while in others they so often misbehave. Law even at its best controls only a small part of human behaviour. At its worst, it aspires to control a great part, but largely fails. Vastly more important than the legal system is the set of much older and more deeply rooted set of unwritten rules (technically, spontaneous conventions) barring and sanctioning torts, nuisances and incivilities that together define what each of us is free to do and by the same token what no one is free to do to us. If these rules are kept, everyone is free, property is safe and every two-person transaction is mutually beneficial, (though third persons may be exposed to negative externalities—for the rules are no bar to competition or the general rough-and-tumble of ordinary life).

How well these rules are kept depends on how well children are brought up, on war or peace, and on other ultimate causes that are not hard to divine. The proximate cause, however, is the effectiveness of sanctions. To mete out punishment for misbehaviour always involves some cost to the well-behaved who take it upon themselves to administer it. He and those he cares for benefit if misbehaviour is punished and hence deterred, but he would benefit even more if the punishing were done and the cost borne by someone else. Rational calculus may tell him that given the likelihood of others undertaking what he would not, his best course is to undertake it himself.

If all or most calculate the same way, all or most will contribute to discouraging misbehaviour and the cost to each will be correspondingly lower. Punishing the breach of the rules by individual or joint action, particularly within peer groups, will also have become a convention, one of the basic rules whose breach, in turn, will itself tend to be sanctioned by punishments that may range from reproach and the cold shoulder to ostracism and business boycott.

There are a number of ways in which the peoples of the Northern half of Europe seem to be better behaved than their Southern counterparts. Dependability, punctuality, respect for the given word, steadiness of effort, greater discipline at work and lesser need for close supervision seem to be some of them, though this is but an impressionistic judgment that it is hard to document by statistical evidence. These are not traits that make life in Northern societies necessarily more fun, more cheerful or less boring, but they do make for efficiency and prosperity despite the handicaps of climate. A brute fact that seems to bear this out is that most manufactured goods and some services originating in Northern Europe are more expensive than their close substitutes made further South, but sell just as well.

North and South have contrasting mentalities with regard to punishment for certain types of misbehaviour. In the North, self-dealing, conflict of interest and corner-cutting are punished by serious social sanctions if they are not outright crimes punished by the state. In addition to the punishment, the perpetrator is considered dishonourable, covered with shame. In the South, though perpetrators may well be detected, they are in puzzling ways quite often allowed to get away with impunity and are not even ostracised, but rather regarded with envy and reluctant admiration. Even stealing from the public purse may be regarded as a bit of a joke. Elected officials jailed for corruption are often triumphantly re-elected when they are released. It is not too rash a generalisation to say that while Northern society may be priggish, Southern one is amiably and cynically indulgent. Needless to say, the prevailing impunity further encourages corrupt practices, which in turn act as significant handicaps to efficient resource allocation.

One aspect of behaviour whose economic significance towers above all else is the attitude to property. It is distinctly different in Southern from Northern Europe. Beginning with land, the monarch in Spain, Portugal, France and the Papal states had greater latitude to dispose of the property of his subjects and in terms of security of tenure, there was little equivalent in these countries of the freeholder so widespread in Northern Europe. Moreover, Southern European society was deeply (and it would seem lastingly) influenced by the egalitarian streak in the New Testament, the severity of Jesus toward the rich and the money-changers in the Temple, and, nearer modern times, the teachings of the Catholic Church regarding what has come to be called “social justice”. Property, especially moneyed property, let alone “finance capitalism”, is distinctly unpopular in Catholic culture but is fairly well tolerated fact of life in the Protestant one. We could see the reasons why even if had never heard of Max Weber.

Unpopularity of property, shading into hatred and moral condemnation, immensely strengthens the hand of the state, for it is the sole seat of redistributive power that can legislate property and income away from some and to the benefit of others. The stronger the state, the greater the role assigned to the “legal framework” whose dynamics push it to encompass and regulate more and more aspects of personal and social behaviour. As a corollary, the raison d’être of the unwritten, conventional rules is undermined, the private punishment on which they depend is discouraged by the monopolist state, and the practice of civil society to look after its own interests and concerns withers away in some places though it persists in others, and its roots can probably never be quite eradicated.

 

*Anthony de Jasay is an Anglo-Hungarian economist living in France. He is the author, a.o., of The State (Oxford, 1985), Social Contract, Free Ride (Oxford 1989) and Against Politics (London,1997). His latest book, Justice and Its Surroundings, was published by Liberty Fund in the summer of 2002.

The State is also available online on this website.

For more articles by Anthony de Jasay, see the Archive.