culture and public policy
case study on this question
3. Is culture the main factor that underlies economic development? You may use a case study of a region such as Africa, East Asia, the Middle East or Latin America as an example.
write a case study about the impact of cultures on some of the countries mentioned.
CULTURE AND ECONOMIC DEVELOPMENT
SOURCES OF ECONOMIC GROWTH
In this part of the course we will examine the role that culture plays in fostering economic development. The pursuit of economic development is probably the primary public policy objective of most states in the world. This is for a number of reasons. First, the people of these countries want a better life for themselves. Migration flows are overwhelmingly from poorer to richer countries. Few inhabitants of richer countries wish to migrate to poorer countries. The desire for material goods and for an improved quality of life is one that people around the world share. Governments that wish to secure popular support and legitimacy therefore seek to grow economically so that the living standards of their citizens can improve.

Another reason why countries pursue economic growth is because it enables them to increase their national power. Indeed, this is probably the most important reason why countries pursue growth oriented policies. For example, the Meiji regime in late nineteenth century Japan consciously emulated Western countries and sought to foster economic development in order that Japan could retain its national independence. Nations that fail to grow economically lose power relative to other nations since the maintenance of modern military forces requires substantial economic resources. Economic growth also enables governments to fund other socially desirable objectives such as education, health and social welfare. The same reasons for pursuing economic growth also exist among developed countries also.

The question of what enables some countries to grow economically while others stagnate is one that has long concerned economists and other social scientists. There are a number of potential causes of economic growth that we can identify. Economists see growth as a product of the factors of production, namely, capital, land and other natural resources and labour. Included under capital we could add technology and under labour we could add ‘human capital’ or investments in skill and education. Broadly speaking we can identify the following factors as potential sources of economic growth.

The first is capital or money that has been saved or not used for consumption. This is essential for the purchase of factors of production such as technology, raw materials and labour. An absence of capital can prevent economic growth from occurring. A key precondition of economic growth then is availability of capital. This can come from domestic saving or from foreign investment. Historically economic growth has been rare. Most societies have existed at a subsistence level, that is, at a level at which production and consumption are evenly matched leaving no surplus for reinvestment. In order for per capita economic growth to occur there needs to be improvements in productivity. In such case the use of the various factors of production can yield more goods and services than was the case previously. Increases in productivity can occur when there is a surplus that can be reinvested on improving methods of production.

This brings us to the second main source of economic growth, technology. If we were to single out one factor that accounts for the extraordinary economic growth attained by developed nations over the past two hundred and fifty years it would be technology. It is estimated for example that real per capita income in the United Kingdom today is some thirty times greater than it was in the time of Shakespeare some 400 years ago. The disparities in income that exist between the richest and poorest societies in the world today are even greater, being around one hundred fold. In seeking to account for these differences in income the use of technology is undoubtedly the key proximate explanatory factor since what distinguished rich from poor countries is primarily the greater levels of industrialization to be encountered in the former.

The industrial revolution involved the use of machines and of inanimate sources of energy such as coal, oil and electricity. These multiplied the effects of human labour making it possible for workers to produce much more than had been the case when they used handicrafts and relied upon animate sources of energy such as human muscle power and the horse. Allied to machine technology was the use of ‘social’ or organizational technology such as the division of labour and scientific management. Adam Smith writing in the eighteenth century noted that the task of pin production when subdivided in separate tasks performed by different workers could yield a much greater number of pins than it could when the performance of all of these tasks was undertaken by a single worker. It is estimated the use of scientific management in American factories multiplied output by up to 300 per cent. In the absence of modern techniques of organization sophisticated technology would be much less effective.

Use of technology also has effects on agricultural productivity, thereby permitting workers to be freed from farm work so that they can be available for industrial work. Whereas farmers in pre-industrial societies usually produced not much more than was needed to feed their immediate family, say, around six people, farmers in industrialised societies have attained high rates of productivity through the use of machinery and fertilisers. The production of the average American farmer for example feeds 120 people. An additional determinant of economic growth is demography. If there are increases in agricultural production but the population grows in tandem with these, then per capita production does not improve. The surplus is therefore consumed by additional mouths rather than being available to save.

In addition to technology investments in labour productivity or human capital have also underlain increases in productivity. This has occurred through education and training. A literate workforce is more productive than a non-literate one since it can undertake useful training. Higher levels of education in particular are required for workers in white collar, administrative and professional jobs. Developing countries therefore seek to develop their schooling systems as a means of fostering economic development.

In addition to these factors we can also identify aspects of the institutional environment as sources of economic growth. Economists argue that high economic growth is achieved in market economies where price signals that reflect supply and demand allow resources to be directed towards their most productive uses. If prices do not reflect supply and demand, whether due to government price fixing or the power of private monopolies, then resources are inefficiently allocated.

For example, the command economies of the former Soviet Union and other Eastern bloc countries were notorious for their inefficiencies. Producers of goods such as shoes for example were responsive not to price signals that reflected consumer demand for their products but to directives from central state planning agencies that required them to produce a certain quantity of shoes. The result was that they often produced shoes in either too large or too small a quantity for consumers, sometimes in the wrong sizes and of poor quality. Production then was ill matched to consumption since there was no way for consumer demand and preferences to be conveyed to producers. The presence of a command economy was a factor that impeded the ability of the socialist countries to sustain their rates of economic growth after the 1970s and was a key factor that led to the downfall of communist regimes.

The presence of favourable economic institutions such as markets, secure property title, enforceable contracts and the rule of law are key factors that account for economic growth. Institutionalist economists such as Douglass North have emphasised that economic growth is not purely a product of the market but of the institutional framework of economic activity also. In addition to institutions the infrastructure of economic activity such as roads, railways, ports, airports, telecommunications and electricity are also important.

The reading by Carruthers and Babb provides a good overview of theories of economic development. They focus upon the difference between neoliberal theory and its emphasis upon the importance of free markets and those theories that emphasise the need for state intervention. They note that whereas economists tend to assume that the free market will work everywhere since humans have similar desires to maximise their utilities, the sociological approach to development emphasises the importance of the political, cultural and social preconditions of markets. They note that the state can play a constructive role in securing the institutional foundations of a market economy such as laws, property rights and anti-monopoly legislation.

Other factors that are singled out as sources of economic growth include favourable geography, climate, soils, the absence of infectious diseases and favourable natural resource endowments. Many observers have noted that there are few developed countries in tropical areas, with the great majority being located in the temperate zones. Landlocked countries also suffer economic disadvantage by virtue of their lack of direct access to ocean ports.

The quality of government is also an important factor in stimulating economic growth. Governments are needed to provide public goods such as defence, law and order, a sound legal system and social welfare as well as the elements of infrastructure noted earlier. The ability of governments to pursue sound economic policies is also a factor that accounts for economic growth. Many have attributed the success of East Asian societies to the adoption of far sighted government industry policies rather than to the free play of market forces.
CULTURE AS A SOURCE OF ECONOMIC GROWTH
One factor that has recently been advanced as a source of economic growth is culture. The idea that culture plays a role in economic development is one that can be traced back to Max Weber. In his famous book on the Protestant Ethic and the Spirit of Capitalism, Weber argued that the teachings of Calvinism had encouraged what he called an ethic of ‘this worldly asceticism’. ‘Asceticism’ in this context refers to a practice of self-denial and self-discipline. Many religions had encourage ascetic behaviour among their adherents in order to focus their attention on ‘other worldly’ matters such as the afterlife or the attainment of nirvana (bliss) but Calvinist Protestantism had been unique in that it had encouraged ascetic conduct in this world or the world of the here and now. More specifically, Protestants undertook hard work and sought wealth in order to demonstrate that they were members of the ‘elect’ whom God had predestined for salvation. It was believed that those who work hard and accumulated wealth had acquired respectability and were therefore more certain of having obtained God’s favour or grace (it could not be known for sure though whether this was the case or not). Protestants therefore led abstemious lives of self-denial and hard work in order to reassure themselves that this was indeed the case and that they were guaranteed salvation. In so doing, they had adopted certain patterns of behaviour that had what Weber called ‘an elective affinity’ with ‘the spirit of capitalism’. It should be noted that Weber was not arguing that Protestantism caused the rise of capitalism. Rather his point was that the Protestant ethic was more compatible with the capitalist ethos of systematic, planned work, saving and reinvestment than was traditional Catholicism and that this was reflected in the greater proportion of Protestants to be found in business and in their greater level of business success.

There has been great debate over whether Weber was correct or not. The general consensus seems to be that Weber was correct and that Protestants and Protestant countries have been more engaged in capitalist activity and more economically successful. This is not to say that Catholics and Catholic countries cannot also be economically successful but that on average, there are disparities in levels of economic attainment. For example, Catholic countries in Europe industrialised later and long had lower per capita incomes than did Protestant countries.

If this is the case, then is there a general case for arguing that economic development is culture dependent and that some cultures are more favourable to economic development than others?

Some writers argue yes. Many have identified ‘functional equivalents’ to the Protestant ethic in Japanese Buddhism and variants of Javanese Islam for example, arguing that they foster the same kind of this worldly asceticism that Weber saw in the Protestant ethic. The argument that is usually advanced here is that economic development depends upon the ability of individuals to work hard and to save money and reinvest it rather than to spend it. Economic surpluses did exist in pre-industrial societies but they were generally confiscated by government in the form of tax and spent on non-productive purposes such as conspicuous consumption. These took the form of palaces, expensive ornaments and artwork, clothes and so forth. If people wished to acquire wealth in such societies they did so by confiscating it from others (through taxation or tribute) or by engaging in acts of piracy or wars of conquest. Wealth acquisition in societies that do not experience economic growth is a ‘zero sum game’ since one can acquire wealth only at the expense of others. By contrast, in a society in which the economic pie is enlarging, one can acquire wealth by engaging or investing in production and trade.

We could see such conspicuous and wasteful consumption in the Iraq of Saddam Hussein where he spent the nation’s oil wealth on acquiring military weapons and using them in wars of conquest and on constructing numerous palaces. Such forms of consumption were ways of advertising social status and were used by the nobility for this purpose. There was little interest or incentive for reinvestment of the surplus since possibilities for improving agricultural productivity were limited and the value systems of such societies generally scorned manual labour and those who used technology. Instead, their value systems prized the warrior virtues of the feudal nobility as in medieval Europe and Japan, the studied refinement of the scholar gentleman as in ancient China or the ritual purity of the priestly caste as in Hindu India. Values among the elites of such societies were non-economic since they were military or religious in nature or prized stylish conspicuous consumption over mundane utilitarian production. The Protestant ethic then was unusual in that it prized such mundane values as hard work and production rather than conspicuous consumption or the otherworldly pursuits of the monk or holy man.

Others reject the view that economic development depends upon the presence of a particular value system. Jeffrey Sachs in his reading argues that cultures can adapt to changing economic circumstances. Catholic countries in Europe now have per capita GDPs that equal those of Protestant countries. Likewise, Weber believed that China was incapable of sustaining economic development due to its Confucian culture. Once China and Chinese societies such as Taiwan, Hong Kong and Singapore sustained high rates of economic growth though this was now attributed to the benign influence of ‘Confucian values’. Rather than being seen as a brake on economic development, these values were now seen as being conducive towards it.

For Sachs then, the role of culture in economic development is overrated. Instead, it is factors such as technology, institutions, climate, geography, the prevalence of disease, the availability of a surplus for reinvestment, human capital and basic infrastructure that account for disparities in economic development between nations rather than culture. Whereas Europe for example has rich soils, a long coastline with many harbours, short distances between the interior and the coastline, navigable rivers, a temperate climate and an absence of diseases such as malaria, Africa suffers from an absence of natural harbours, long distances between the coastline and the interior, an absence of navigable rivers, a tropical climate and many infectious diseases that afflict humans and livestock. For Sachs, the cultural explanation is one that is usually invoked ex post facto and one that is circular in nature: people are poor because they lack the right culture, and the evidence of their unsuitable culture is their poverty. If they succeed in overcoming poverty though then their culture is now seen as being one that is favourable to economic development. For Sachs, the causes of economic development are multiple rather than singular and no one factor can be identified as being of overriding importance.

In contrast to Sachs, Lawrence Harrison believes that, as the title of one of his books has it, that ‘underdevelopment is a state of mind’. He believes that culture is the key to explaining disparities in economic development. At the heart of the development process is the creative capacity of human beings. He acknowledges that natural resources, climate, geography, history, market size and government policies influence the development process but the engine for him is human creativity. The reason for this is that the ability to innovate is one that underlies the capacity of individuals to create and apply technology, to improve human capital by undertaking education, to create good government and to cooperate in productive enterprises. Development also has a non-economic dimension since it involves improvements in the areas of health, education and welfare. His model of the development process is one in which a society’s basic world view is the source of its values and attitudes. Of critical importance within this world view are its time focus (past, present or future), the extent to which it encourages rationality and its concepts of equality and authority. In general, an orientation towards the future rather than the past, a scientific rather than magical worldview and a preference for equality rather than authority encourage development.

This basic worldview influences three other factors that are of critical importance in fostering development, namely, the extent of identification with others, the rigour of its ethical system and attitudes about work.

The first of these factors is important because it underlies the radius of trust within a society. Widespread mistrust undermines the capacity of a society to build public institutions and the ability of individuals to work together for the common good. Fukuyama has noted how differences in levels of trust account for the different types of economic enterprises that are found in societies. Harrison notes that the ability to compromise in political life can contribute towards political stability.

The rigour of the ethical system can contribute to development by reducing corruption and nepotism, encouraging the payment of tax, strengthening the legal system and fostering a belief in justice that can enable individuals to cooperate productively.

Attitudes about work are also important because they underlie creativity, planning and hard work.

His diagram depicts these three factors of identification with others, rigour of the ethical system and attitudes about work as underlying such virtues as cooperation, compromise, self-discipline, justice, dissent, creativity, planning and hard work. These in turn affect seven conditions that encourage the exercise of the human creative capacity. These are the expectation of fair play, the education system, the health system, experimentation and criticism, matching of skills to jobs, rewards for merit and stability and continuity. These in turn affect the capacity of a society to experience social and economic progress.

Harrison then is arguing that not only is the market embedded in wider social institutions such as the government and legal system, but all such institutions rest on cultural foundations. In the absence of such foundations, these institutions will not work effectively. In other words, such factors of production as technological innovation, economic organization, education or human capital, government and legal institutions rest on cultural foundations. Culture is therefore the key explanatory variable in accounting for economic development. For example, he argues that notwithstanding similar endowments of natural resources, the nations of North and Latin America exhibit disparate levels of economic development because of their different cultures. North America inherited British institutions and culture whereas Latin America inherited the institutions and culture of Spain and Portugal. These Hispanic cultures, unlike that of Britain, are not favourable to economic development.
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