I hesitate to bring this essay to the public, but on balance I hope that it sheds some additional light on the matter of the cause of freedom and its prospects on The Peninsula. I hope it is not taken in the wrong way. It was Laurence Vance's review of Mises's thoughts on Islamic culture which persuaded me to finally air this piece.
One of the startling cultural differences that I experienced as a Texan working in Iraq between June and November 2003 was the profoundly high relative time preference of the Iraqis. Why is it this way and how can it be changed?
Time preference is the propensity to trade or not to trade present goods for claims to future goods. High time preference is a reluctance to make such trades, and low time preference is a willingness to make such trades. Examples of such trades are: saving money for your child's education (present good = money, future good = education), buying a dishwasher (present good = money, future good = no manual dishwashing), working overtime (present good = leisure, future good = money income), and oral hygiene (present good = leisure, money for toothbrush, etc., future good = complete set of teeth).
Time preference is a ubiquitous element of human action, as provided by the examples above, and as discussed by Mises. As explicated by Mises, and later, Hoppe, this trading of present goods for future goods is the engine of improvement of material well-being. Hoppe has shown that the very process of trading present goods for future goods results in lowering the time preferences of both oneself and others, resulting in a double spiral: a spiraling down of time preferences, and a spiraling up of wealth – a process he rightly calls "civilization."
High time preference behavior decivilizes, and low time preference behavior civilizes, the society in which it is practiced. Instances of high time preference behavior are to be condemned, for they hinder, halt, or reverse the growth of the wealth of a nation. High time preference behavior is an "excessive" valuing of present goods over future goods, indicating a "gratification now" mindset, a discounting of future goods and bads.
Some Examples
My experience in Iraq is limited to a window of 6 months, but I have the advantage of having compared my experience with many fellow Southrons.1 I was involved in the US government-sponsored rebuilding efforts as an employee of a major American contractor. I worked as a chemical engineer, helping to rebuild plants in an LPG production chain in southern Iraq. Here are some high time preference behaviors that were commonly observed:
The inability or unwillingness to plan and schedule. At many plant sites, Iraqis have been asked to help construct schedules so that material deliveries can be scheduled, labor needs can be coordinated among plants, and projects can be cost-controlled. I know of no instance in which a schedule has been produced by an Iraqi. There has been no difference in propensity for schedule generation at plants where good Iraqi-American relations exist and those where less favorable relations exist (relations run the gamut from labor riots and rock throwing to the giving of gifts, sharing of dinner, and invitations to Iftar).
The inability or unwillingness to promptly attend planned meetings. On one occasion, I suggested a meeting to some of my Iraqi colleagues. They agreed that we should meet to review the proposed location of some new pumps, and that all relevant disciplines be represented from the Iraqi side and the American side, a complement of about 15 people. I prepared a notice for the meeting, and asked the lead Iraqi to set the time and place of the meeting. I gave each one of the attendees a copy of the meeting notice. On the appointed day, at the appointed time, three Iraqis showed up. They were unconcerned that their colleagues were late. Within one hour, all attendees finally arrived, and the meeting was begun. For the skeptical reader, I must underscore my judgment that this instance, and many like it, have nothing to do with passive resistance to an American presence, but are an element of Iraqi culture also present in Iraqi-only meetings.
Poor driving habits. There are decidedly fewer cars in Iraq than Kuwait, but their driving habits are quite similar. Excessive speed, weaving in and out of lanes, straddling lane dividing lines, non-use of seat belts and child restraints, and following closely are all prevalent. The worst American teenage boy drivers behave better than many Iraqi (and Kuwaiti) drivers.
Poor dental hygiene. While low Iraqi income (most Iraqi plant workers earn between $60 and $120 per month) has been offered by some of my colleagues as a reason for poor dental hygiene, I don't think that claim holds. Some of the worst dental hygiene (visible food particles, yellow matter, and tartar between and on teeth) has been observed on the higher-paid Iraqis, who have cell phones and wristwatches and other luxuries.
Poor Safety Practices. My environmental engineer roommate nearly passed out when he learned of an Iraqi innovation: oil divers. These intrepid (and stupid) men don scuba gear and swim in lakes or pools of oil, working in the complete darkness of that fluid, fixing leaks or recovering items. Lesser evils include the non-use of hardhats, gloves, grinding shields, steel-toed boots, and safety glasses (new sets of all of these sit a few hundred meters away in the plant warehouse, dutifully requisitioned months ago by the likes of yours truly); as well as dubious practices such as draining diesel, lube oil, gasoline, propane, and other hydrocarbons directly onto the ground. Again, for the skeptic, you might protest that Iraq is a desert – there's no groundwater to contaminate, so what's the problem? The problem is that there is groundwater, and most of the refineries and chemical plants are on sabkha geography, with nearby farms that use well-water for irrigation, watering animals, and drinking. The engineers in these plants are aware of the effects of their actions, but choose to discount the long-term effects.
Some Counter-Examples
While all of these are true, there are also examples that countervail.
Islamic Observances. Islam is a religion of orthopraxy more than orthodoxy. As such, the so-called Five Pillars of Islam are mainly actions.2 Prayers are performed daily five times, and most Iraqis cleave to strict observance. The sacrifice of daylight fasting during Ramadan is quite harsh in the desert climate – no drinking of water is allowed – and this is also observed quite strictly by Iraqis. These and other religious actions are indeed low time preference behaviors. Unfortunately, these observances do not contribute to material well-being. The future goods the actors seek are for the afterlife, while the present goods they forgo are material. Hence, these practices, while they may increase the spiritual wealth of Iraq, they do so at the expense of its material wealth.
Shia Khums. Many Iraqis are Shia Muslims, and therefore submit to an annual charitable tithe of 20% over and above the Zakat. This is indeed a low time-preference behavior, to the extent that it is practiced. I have been told by a few Iraqis that the Khums is not widely observed in Iraq, but this may be due to current economic circumstances, where excess wealth is rare.
Why High Time Preferences?
The most likely answers are the confluence of recent rule by an oppressive dictator, the decade-long blockade of the country, and the uncertainties associated with invasion and occupation by the US military.
Several Iraqi friends of mine told tales of slowly selling all of their appliances (first the microwave, then the dishwasher, finally the refrigerator) and then the barest luxuries, like doors from their homes. These sales were necessary to keep food on the table in the face of stagnant nominal wages and skyrocketing consumer good prices.
Sabah Noori, one of my best Iraqi friends, lamented that much of his life was taken from him by conscription in the Iraqi army, instead of applying and building his knowledge of chemical engineering.
Another Iraqi friend had bittersweet feelings about the US invasion. He detested Saddam Hussein, and was now happy to be able to complain without fear of retaliation. He considered himself already an old man, being 35, but he felt there was much hope for his children.
The ongoing uncertainties of the political future of the country may result in continuingly high time preferences, but the changes also generated a feeling of hope among Iraqis. I fear that recent developments in Iraq show that this hope is wearing thin, revealing impatience and frustration with the US government and the US-appointed interim government.
Are Time Preferences Important?
It has been suggested by colleagues and reviewers of this article that there are many examples of cultures that, notwithstanding their cultural backwardness (from our perspective), they get the job done. And so it is that in, for instance, Trinidad and Mexico, I have observed that chemical plant personnel "get on," and are able to carry out their work despite their limin' and mañana attitudes, respectively. However, they do so less ably than their counterparts in countries whose work ethic is more capitalistic, for lack of a better word, such as those I have observed in Japan, Germany, Korea, and China.
High time preference does not doom a society, but it does make economic growth slower than otherwise. And, to the extent that growth can influence ideology, there may be a sort of ideology trap whose escape depends, in part, on growth. Of course, ideology is not entirely endogenous, and so there are other ways. Nonetheless, lowering time preferences is important.
Solutions
One of the hopes for the growth of material wealth in Iraq is the adoption of a lower time preference. How can this be accomplished? Security, commerce, and friendship.
I will not address security here. However, it is quite clear that security of property and person result in fewer uncertainties, which result in lower time preferences.
Commerce will lower time preferences in many ways. First, the division of labor will immediately increase wealth due to the Ricardian (or should it be Millian?3) Law of Association. An increase of wealth, ceteris paribus, will result in a lower time preference. Second, the emergence of new businesses in Iraq means the emergence of new cost accounting, which substitutes for collectivist plans that do not allow for rational economic calculation, such as the UN Oil-for-Food Program.4 Third, these new businesses become constrained by business necessities, such as creating and adhering to schedules. So, profit will provide incentives to engage in low time preference behaviors. Fourth, commerce includes goods such as satellite dishes (banned under the last regime), VCD players, and the television programs that play on them. One can hope that Muslim mores will help to act as a filter for the worst that Hollywood has to offer, as it seems to do in Kuwait, based on my 6 months of watching Kuwaiti television.
Friendship with those in the West is just as important. It took lots of persuasion to convince my colleague Abdul Khalik that not every single woman in America sleeps around, but he finally believed me. Discussing politics and religion and sports and family really builds bridges (for instance, we can all agree that Test Cricket is absolutely ridiculous). More friendship between Iraqis and Americans means a lower likelihood that they will fear or distrust one another. This means lower uncertainty, which means lower time preference.
To the extent that culturally-ingrained practices of high time preference can be overcome with better conditions and the ideology of liberalism, I remain guardedly optimistic about the prospects for economic progress in Iraq.
- My fellow workers hailed almost exclusively from the industry of the US Gulf Coast: Texas, Louisiana, Mississippi, Alabama, and Georgia. Whatever effect this may have on our collective judgment may be left to the discernment of the reader.
- They are: the declaration of faith, Salat (praying 5 times per day), Zakat (purification through alms-giving in the amount of 2.5%), Ramadan (the month of daylight fasting), and the Hajj (once-in-a-lifetime pilgrimage to Mecca).
- See Concepts of the Role of Intellectuals In Social Change Toward Laissez Faire, page 59.
- Many who are not familiar with the economy of Iraq are not aware that the natural abundance of arable land and low labor costs should make Iraq a net exporter of food as well as oil, and that one reason for the underproduction of food in Iraq during the 1990’s was the lack of farm-related equipment. Indeed, the poor state of the farm equipment is matched by the poor state of all capital goods, including oil refinery and chemical plant equipment. This capital either fell into disrepair because new bearings or tires or bushings or other spare parts could not be bought, or replacements could not be bought, both due to the blockade. As an example, the ammonia-urea complex (in case you don’t know, urea is fertilizer, an important complementary good to farming) near Khor Az Zubair was having its compressor rotors refurbished in a Japanese shop when the blockade hit, and the rotors have been rusting in a warehouse at a wharf in Japan ever since, limiting the plant’s production considerably.
November 16, 2004
