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Thursday, August 2, 2012

Culture DOES Matter - Why Some Societies Have Done Better Than Others

What accounts for the economic differences between countries? Why are some countries rich and others poor?

A Chinese exchange student studied in the United Sates or a year in the mid-90s just as China was beginning to implement its most dramatic economic reforms.  At this time, before the economic revolution had taken hold, China was still a developing country as it had been for centuries.  As the West accelerated from the 19th to the 20th century and became an industrialized power, China lagged far behind.  “We have culture”, said the student. “Thousands of years, many powerful dynasties from Xia Dynasty 4000 years ago.  Evolved religion, Confucius, art, philosophy, culture.  Why are we so backward?”

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The young man only had to wait a few years to see how all this history and culture would provide the foundation for rapid economic development.  This development was principally due to the reforms started by Deng Xiaoping and enthusiastically endorsed and expanded by his successors; but there is no doubt that the cultural infrastructure of the country was the foundation on which these more practical changes was built.  A culture built around Confucian principles of respect for elders and tradition, wisdom, loyalty, discipline, and trustworthiness more easily coalesced around newly-enunciated programs of national reform.  A culture which had millennia of ‘authoritarian’ Mandarin rule would not find the centralized programs of the Politburo intolerable, especially since the economic changes implemented promoted economic development.

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The experience of Japan is no different.  The same rapid economic progress occurred when the Meiji leaders decided in 1868 to catch up with the modern world.

Lawrence Harrison, one of the first outspoken advocates for considering culture as an important factor in economic development recently wrote the lead essay for a conference on Culture and Economic Development sponsored by the Cato Institute. In it he said:
The "Confucian" countries (more accurately the countries strongly influenced by Chinese culture, which also embraces, in addition to Confucianism, Taoism, Buddhism, and ancestor worship) all share substantially in the universal culture of progress: education, achievement, work ethic, merit, and frugality are all highly valued in the East Asian societies. Their economic success contradicts Weber's analysis in The Religion of China in which he asserts that rapid capitalist development is unlikely in China in large measure because of the absence of anything like the Calvinist "tension" caused by uncertainty about being of the "elect."
Many observers attributed the stagnation of the East Asian economies (Japan excepted) at mid-twentieth century to Confucianism, particularly to the influential role played by the Mandarin literati (Mao a prototype) and the low prestige that attached to economic activity in the Confucian scheme of things. But all that was necessary to release the powerful education/achievement/merit/frugality undercurrent to perform its economic magic was encouragement from the political leadership, in the cases of South Korea and Taiwan stimulated by security concerns. The trigger for the magic in China was Deng Xiaoping's 1978 pronouncement, "To get rich is glorious," effectively marking the end of Mao's Marxist revolution.
Not only has China been dramatically successful over the last twenty years, but its diaspora population has thrived in every country in which it is a minority.  Chinese communities throughout East Asia (Malaysia, Vietnam, Thailand, etc.), the United States, and increasingly in Central Asia enjoy incomes, educational status, and economic influence far out of proportion to their numbers. Overseas Chinese are estimated to control 1.5 to 2 trillion USD in liquid assets and have considerable amounts of wealth to stimulate economic power in China (Wikipedia).

Harrison goes on to disaggregate ‘culture’ and suggests, based on his and others’ research that there are a number of characteristics which characterize successful cultures, whether as nations or communities living abroad:
Some economists have confronted culture and found it helpful in understanding economic development. Perhaps the broadest statement comes from the pen of [Harvard economist] David Landes: "Max Weber was right. If we learn anything from the history of economic development, it is that culture makes almost all the difference." Elaborating on Landes's theme, Japanese economist Yoshihara Kunio writes, "One reason Japan developed is that it had a culture suitable for it. The Japanese attached importance to (1) material pursuits; (2) hard work; (3) saving for the future; (4) investment in education; and (5) community values."
 Image result for images max weber

The Argentine scholar and journalist Mariano Grondona developed a ‘progress-prone, progress-resistant model’ of economic development – that is one which matched economic progress with prevalent cultural factors.  He had Argentina in mind for a country which was progress-resistant and the United States which was progress-prone; but expanded his research and conclusions more broadly.
[He devised] 25 factors broken down into four groups: Worldview, Values and Virtues, Economic Behavior, and Social Behavior. Of the most important in the Economic Behavior cluster are:
    • Work/Achievement, which contrasts the progress-prone “Live to work” with the resistant “Work to live.”
    • Frugality: “the mother of investment” vs. “a threat to equality.”
    • Risk propensity: moderate in the progress-prone culture; low, with occasional adventures, in the progress-resistant culture.
    • Competition: leads to excellence vs a threat to equality—and privilege.
    • Innovation: the progress-prone culture is open to and quick to adapt innovation, while the resistant culture is suspicious of and slow to adapt it.
    • Advancement: merit vs. family/patron connections.
Perhaps the more interesting research was carried out by Harrison and his colleagues at the Fletcher School at Tufts University (Culture Matters Research Project) to see how these general categories correlated or were associated with certain cultural factors, such as religion:
The data roundly validated Max Weber’s thesis in The Protestant Ethic and the Spirit of Capitalism: Protestant countries do better than Catholic countries in creating prosperity. To be sure, the averages for the Catholic countries are depressed by Latin America’s slow development, but even when one looks only at First World democratic-capitalist societies, Protestant countries do substantially better than Catholic countries with respect to prosperity, trust, and corruption.
More broadly, the analysis of religions suggests that Protestant, Jewish, and Confucian societies do better than Catholic, Islamic, and Orthodox Christian societies because they substantially share the progress-prone Economic Behavior values of the typology whereas the lagging religions tend toward the progress-resistant values.
Harrison cites the Nordic experience as an example of the importance of religion and culture to economic development:
All five Nordic countries—Finland, Sweden, Norway, Denmark, and Iceland—have a Lutheran background, even though few today are churchgoers. Lutheranism is the source of much of the Nordic value system that has produced high educational levels, extensive welfare programs, and high quality entrepreneurship symbolized by Finland's Nokia and Sweden's Volvo, Saab, and Ikea. The compatibility of economic efficiency and social spending in the Nordic context is apparent form the 2006 World Economic Forum ratings.
The Economist recently observed, "High taxes and generous welfare safety nets need not undermine competitiveness…Scandinavian economies are ranked high in the league…" (Sweden was number two in the world.)
The United States government (USAID) surprisingly deals with the issue of religion and culture directly, and cites the research of Islamic researchers who suggest why Muslim countries (and Muslim communities within non-Muslim countries, such as Azeris in Georgia) lag behind.  With 19 percent of the world’s population, Muslims earn only 6 percent of its income. Why?
Unchangeability. Islam stands for unchangeability, and it defines and promotes a social system lacking capacity for adaptation, according to a
frequently expressed view of Western scholars and secularist movements across the Islamic world. This explanation emphasizes that religion
(Islam) is an obstacle to free thinking and innovation. The implication is that one must choose either “Mecca or mechanization” because the two are not compatible.

Communalism. Islamic civilization remained largely communalist even as Western Europe turned increasingly individualist, and communalist
norms dampened incentives to develop capitalist economic institutions. Western thought espouses a strictly individualist economic morality,
which encourages people to pursue their own ends without having to consider their social consequences, but a communalist morality focuses
attention on collective needs. 
Public discourse. Islamic societies have reduced the role of public discourse, discouraging individuals from questioning. The relative openness
of public discourse in the West helped create an engine of growth that the Muslim world failed to develop. New ideas tend to emerge in environments
hospitable to free inquiry and experimentation. If it is risky to put forth new ideas, they will not be expressed.

Education. Some argue that Islam helped shape an educational system that limited curiosity and innovation. Traditional education, in turn,
played a critical role in conditioning individuals to accept the social status quo. The impetus for changing any part of the educational curriculum
came largely from abroad. (Bureau for Policy and Program Coordination, Paper 3, June 2004)
Timur Kuran* and Anantdeep Singh of Duke and University of Southern California, respectively, studied the question of Islam and economic development in India  where Muslims are a significant minority, but lag far behind Hindus in per capita income. (Economic Modernization in Late British India: Hindu-Muslim Differences 2004).  Kuran and Singh cite two principle factors behind this lag – the waqf inheritance system and Shari ’a Law.   The traditional inheritance system which channeled money through inefficient family structures, inhibited the flow of financial resources to modern institutions; and while Hindus were investing in banks and other financial institutions and using their profits for further growth, Muslims did not, and their growth was stagnant.

Kuran and Singh also cite Muslim adherence to Shari ’a law which kept them out of the mainstream of British civil, contract, and criminal justice. 
Kuran (2003) identifies the absence in Islamic law of the concept of a corporation and two institutional bottlenecks that once seriously hampered
economic growth in the Muslim world: the Islamic law of inheritance, which inhibits capital accumulation, and the waqf system, which locks vast
resources into unproductive organizations designed to deliver social services. (USAID, op.cit)
Thirdly Kuran and Singh cite Islamic education as an obstacle to development – i.e. a religion-based educational system cannot possibly expose students to the more general learning of the modern world.

The issue of gender and the status of women in Muslim society has been raised by all researchers and considered by them to be a continual impediment to real economic progress.

Harrison and his colleagues ask the question “Can societies with cultural traditions reform or reject them to be able to move quickly into the modern world?”, and replies with the example of Quebec, a Canadian province which for decades had been no different from a Third World country.  Yet, in a relatively short time, it moved out of its restrictive past.  How did it do this?
  • The use of an inclusive nationalism to promote unity, effort, and sacrifice.
  • A process of "declericalization" in which the church's influence was drastically reduced, above all in education, over a five-year period (1961-66). Like Ireland and Spain, Quebec is sometimes referred to today as "post-Catholic."
  • Massive resource allocation to education.
  • Promotion of gender equality, particularly in the workplace.
  • The creation of a modern, creative state that has spearheaded development ranging from Cirque de Soleil to advanced biotech industries. A "corporatist" approach bringing business, labor, the professions, etc. together with government for policy discussions has been generally successful.
  • State-led efforts to reduce inequality.

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In an article (8.2.12) in the New York Times,Jared Diamond, the author of Guns, Germs, and Steel, a book which focused more on geo-climatic factors in development than on the social ones raised in this blog post, cites those which he feels are as important or more important than socio-cultural ones:
Latitude, which has big effects on wealth and power today: tropical countries tend to be poorer than temperate-zone countries. Reasons include the debilitating effects of tropical diseases on life span and work, and the average lower productivity of agriculture and soils in the tropics than in the temperate zones.
Access to the sea. Countries without a seacoast or big navigable rivers tend to be poor, because transport costs overland or by air are much higher than transport costs by sea.
The history of agriculture. If an extraterrestrial had toured earth in the year 2000 B.C., the visitor would have noticed that centralized government, writing and metal tools were already widespread in Eurasia but hadn’t yet appeared in the New World, sub-Saharan Africa or Australia. That long head start would have let the visitor predict correctly that today, most of the world’s richest and most powerful countries would be Eurasian countries (and their overseas settlements in North America, Australia and New Zealand).

Obviously both geo-climatic and cultural factors play a role in economic development; and they are not the only ones.  North Korea, for example, is part of the East Asian cultural tradition which because of a powerful and perverse dictatorship has rejected it and gone underground.  One suspects that when the Communist regime in that country has had its day, that the same thousands of years of cultural history will re-emerge; but for now economic development is hindered by politics.

Saudi Arabia and the Gulf States are Muslim but wealthy, although that wealth is derived from the ground and not from the same entrepreneurial spirit and energy of Asia.  Religion was the locus of culture in the Middle Ages and the Renaissance, monasteries were the repositories of learning, religious art and music reigned; and it was not the counter-productive factor that it seems to be today. 

Islam in the centuries after Mohammed was the only bright light in the world, making advances in science and mathematics while Northern Europeans were still in caves; so the lesson is perhaps not what cultures were, but what they have become.

For years, the discussion of culture as a determining factor was verboten, largely because of relativist, Marxist-influenced academicians who insisted that all society was a question of economics, institutions, demographics, and control of the means of production.  These theories were co-opted by the Political Correctness advocates who said that to criticize a particular culture was to deny its inherent value.  Since all cultures are equal, there must be more secular answers to questions of economic and social progress than religion.

In conclusion, culture may not be the only factor contributing to or detracting to economic and social development, but it certainly is a very important one, and should not be dismissed for politically correct reasons.

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