Dorothy Chou is a Senior Policy Analyst at Google.
Almost 20 years ago, Francis Fukuyama wrote a book called Trust, which claims that social capital and shared values and ethics create conditions necessary for modern economic growth. He argued that societies that facilitate stronger relationships of trust are able to innovate and scale more effectively than those that do not.
Two factors contributing to trust in society are structural: legal certainty and transparency about how laws are enforced. Together, these elements grow trust in a way that encourages investors to take necessary risks when it comes to businesses and markets. By contrast, when information is incomplete or not readily available, people are unable to make informed decisions or accurate forecasts for the future, making them more risk averse or creating moral hazard.
To see if that theory applies today, the Milken Institute provided us with a preview of data being assembled for the Opportunity Index: Access to Global Capital which will be released in early 2013. To help us look for correlations between measures of government transparency, foreign direct investment, and GDP, they assessed 34 different indicators that fell into four general categories: transparency of business, the political and legal system, the policymaking process and quality of regulation.
Here are a few of their observations about the data from 2011:
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