with the rest of the world. It is noteworthy that India’s and China’s fastest pace of economic growth over the past century coincided with an opening up of their economies to international trade, foreign investment, and the rigors of international competition. During the Ming dynasty in China the country turned inward, trade with the outside world collapsed and the economy came to a standstill, rapidly falling behind Europe, which, in contrast, had set a course of vigorous development, having “discovered” the New World with its resulting commercial advantages. India spent the first four decades after independence mired in poverty and lack of opportunity, largely isolated from the global economy.

The concept of trust and its role for economic and financial development has received increased attention in the recent literature. From the point of view of economic theory, trust can be seen as the probability that an individual assigns to a specific event (such as a business partner’s compliance with the contract terms). Empirical evidence now abounds on the fact that an individual’s level of trust in others is affected by cultural aspects such as religion or ethnic origin of her ancestors, although the impact of inherited culture on trust is attenuated for individuals with higher levels of education (Guiso, Sapienza, Zingales 2006). The European survey Eurobarometer contains questions about bilateral trust between individuals from different countries (for example, how much the Swedes trust other Swedes, or Germans, or Italians) and it has been shown that bilateral trust is affected not only by historical and linguistic features (such as the number of years a country pair has been at war between 1000 and 1970, or the commonality of linguistic roots), but even by the genetic distance between two populations.<sup>38</sup> The economic literature has further proved that people who trust more other people are also more likely to become entrepreneurs; and that the level of trust between two countries affects the level of trade, FDI and portfolio investment between the two countries (Guiso, Sapienza and Zingales 2009).

The ethical code and the moral values underpinning a society will, likewise, be fundamental. Sen (2009) reminds us that in _The Wealth of Nations_ , Adam Smith “talked about the important role of broader values for the choice of behavior, as well as the importance of institutions.” “But it was in his first book—he adds— _The Theory of Moral Sentiments_ , published some 250 years ago, that he extensively investigated the powerful role of non-profit values. While stating that “prudence” was ‘of all virtues that which is most helpful to the individual’, Smith went on to argue that ‘humanity, justice, generosity, and public spirit, are the qualities most useful to others.’”<sup>39</sup> Friedman (2005) argues that “economic growth not only relies upon moral impetus, it also has positive moral _consequences_ ” (p.18), as “the predominant tendency is for economic growth to render a society more inclined toward openness, tolerance, mobility, and democracy.” (p. 101).

> 38 Guiso, Sapienza and Zingales (2009) use a linguistic measure proposed by Fearon and Laitin (2003), and a measure of genetic distance developed by Cavalli-Sforza, Menozzi, and Piazza (1996).

> 39 Sen, Amartya, “Adam Smith’s market never stood alone”, _Financial Times_ , 11 March, 2009.

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