Social Science Research Network: The (True) Legacy of Two Really Existing Economic Systems
By running an experiment among Germans collecting their passports or ID cards in the citizen centers of Berlin, we find that individuals with an East German family background cheat significantly more on an abstract task than those with a West German family background. The longer individuals were exposed to socialism, the more likely they were to cheat on our task. While it was recently argued that markets decay morals (Falk and Szech, 2013), we provide evidence that other political and economic regimes such as socialism might have an even more detrimental effect on individuals’ behavior.
... If socialism indeed promotes individual dishonesty, the specific features of this socio-political system that lead to this outcome remain to be determined. The East German socialist regime differed from the West German capitalist regime in several important ways. First, the system did not reward work based to merit, and made it difficult to accumulate wealth or pass anything on to one’s family. This may have resulted in a lack of meaning leading to demoralization (Ariely et al., 2008), and perhaps less concern for upholding standards of honesty. Furthermore, while the government claimed to exist in service of the people, it failed to provide functional public systems or economic security. Observing this moral hypocrisy in government may have eroded the value citizens placed on honesty. Finally, and perhaps most straightforwardly, the political and economic system pressured people to work around official laws and cheat to game the system. Over time, individuals may come to normalize these types of behaviors. Given these distinct possible influences, further research will be needed to understand which aspects of socialism have the strongest or most lasting impacts on morality.
On a related note, I would add that there is a correlation between trust of (and care for) strangers and the degree to which a country is market oriented. It isn't clear whether trusting people are more inclined to engage in market exchange or market exchange makes people more trusting. One thought is that market exchange makes people interdependent and more attuned to the plight of others than does a centralized economy or a highly distributed economy where people are constrained to cooperating within face-to-face community.