The first casualty when war comes is truth. – Hiram Johnson

Everybody talkin’ to their pockets
Everybody wants a box of chocolates
And a long-stemmed rose
– Leonard Cohen

Let’s talk a little about social capital.

According to studies, Greeks work the longest hours in Europe, and their retirement age is in the middle of the pack. Same goes for a lot of developing countries, and even some US inner cities. People work themselves to the bone, and they don’t get ahead.

Why are those countries in such a mess?

One reason is physical capital. Most of the difference between the productivity of an Indian coolie carrying bricks on his head and a US truck-driver is the truck.

Another reason is human capital. Poorly performing countries don’t have as many literate, well educated, highly trained workers who can handle complex, productive tasks with advanced tools and techniques. Not to pick on India, but the literacy rate is 74%.

The last reason is difficult to quantify and therefore not as much discussed in economics, but it’s absolutely critical: social capital.

Social capital is the set of social values, norms, and behaviors that improve the productivity of economic and social interactions. In the poor countries and communities, examples of dysfunctional norms and values abound. Girls shouldn’t be educated, or school isn’t cool. Certain jobs and places for university students should be reserved for certain races/castes (goes both ways). Cheating and bribery are endemic. Little things like people don’t show up on time, don’t wait on line, don’t observe traffic rules, literally dump waste in the drinking water, get away with murder. People don’t have incentives to be productive. And antisocial behaviors are not punished, but held in high regard, and reap rewards.

In advanced countries, social networks and hierarchies allow people to cooperate and pursue shared goals. Good behavior is rewarded and bad behavior punished, not just in courts where rule of law applies to all, but in the court of public opinion. Trust evolves – you don’t have to count your change, you can give your credit card to the waiter and not worry about them stealing. You don’t need to double-lock your door and put bars on your window and worry about rushing home before dark. Status accrues to people based on their abilities, achievements and character, not based on connections.

There were a lot of reasons for the financial crisis. But one was “I’ll be gone, you’ll be gone” when the losses turn up. In many cases the people in a position to know knew loans were bad, deals were bad, ratings were bad. But the incentive was to get the deal done, book the profit, cash the bonus. Clients turned into counterparties, it was OK to blow them up. Market makers were replaced by HFT programs with no responsibility for orderly markets. A looter mentality replaced building for the long term.

Division destroys social capital. You can have social capital with a left and a right. But you can’t have it when one section of society demonizes the other, assumes that the other side only cares about itself and not the country or broader good. You can’t have it without a basic consensus on the character of society, without the ability to develop institutions because the rules are changing. And bad behavior drives out good, when you assume one side is going to gain an advantage from lying, cheating, or stealing, it becomes an excuse to do it yourself.

We’re having an election Tuesday. Each side accuses the other side of lying – in all too many cases justifiably (12). If it’s close, one side will accuse the other of stealing it. If a poll or even an economic number (!) is seen to favor one side, it’s proof that the other side is cheating. There’s a war on facts, with economic data collection and reports de-funded if it’s believed they provide evidence for the other side.

We’re not going to turn into Greece because of the debt. We just won’t grow as fast if we spend on the wrong things. We will turn into Greece if we become a society of looters and moochers. And once we see each other that way, that’s how we behave.

You can’t have progress or a civilized society with people literally, or figuratively, taking a dump in the community pool. As a society, we need to call people out and exact a price when they do it.