Wednesday, December 10, 2014

The samurai and globalization: does culture matter for development?

Augusto Lopez-Claros & Valeria Perotti

The transformation of Japan into a modern economy at the end of the 19th century is a tale of culture and cultural change. The centuries-long transmission of values like honor, loyalty, duty, obedience and discipline in the bushido (the code of conduct of the samurai) contributed in fundamental ways to shape Japan’s human capital. However, a change in mindset – triggered by the personal influence of key political figures – needed to happen in order for the country to devote its efforts to economic development.

Japan’s 250-year old feudal shogunate collapsed in 1867-68 and power returned to the emperor in Kyoto. The Home Minister appointed in 1873, Okubo Toshimichi, was relentless in the recruitment of talent for his Ministry, believing that promotions should be based on merit rather than family or military connections, and that those trained abroad were particularly well-suited to assist him in his efforts to launch Japan in a sustained process of modernization. But perhaps Okubo’s most important attribute was his willingness to examine the economic and scientific achievements in the developed world and to inspire others at home with a vision of the meaning of a modern Japan.

Okubo embarked on a program of reforms, such as export promotion, the development of a merchant marine, the establishment of model factories, and government loans to small-scale industry. By 1878, when a group of former samurai assassinated Okubo as a consequence of the deep grievances generated by the collapse of the shogunate in key segments of Japanese society, the mindset had changed and Okubo’s associates had no problems moving his program forward. Within a hundred years, Japan had emerged as the world’s second largest economy and one of its foremost technological innovators.

It is difficult to argue against the extent to which a particular work ethic and system of personal values and attitudes—part of what we normally understand as culture—played a central role in Japan’s emergence as a world economic power. But for a variety of reasons, economists have avoided getting too closely involved with the concept of culture and its relationship to economic development. There is a general acceptance that culture must have a role in guiding a population along a particular path, but, as Landes (2000) points out, a discomfort with what can be construed as implied criticism of a particular culture has discouraged broader public discourse.

The role of culture in economic development is not an easy subject to get a handle on. To start with, one faces issues of definition. The more all-encompassing the definition, the less helpful it tends to be in explaining patterns of development. Economists tend to narrowly define culture as “customary beliefs and values that ethnic, religious, and social groups transmit fairly unchanged from generation to generation” (Guiso, Sapienza and Zingales, 2006). This approach is largely dictated by the aim to identify causal relationships, by focusing on aspects of culture that are constant over time. Not surprisingly, some of the most insightful writing on the subject has been done by anthropologists. Murdock (1965) argues that a culture consists of habits that are shared by members of a society. It is the product of learning, not of heredity. Woolcock (2014) highlights how the sociologic scholarship has evolved to consider culture as “shaping a repertoire or ‘tool kit’ of habits, skills, and styles from which people construct ‘strategies of action’” (Swidler, 1986, p.273).

A second complication is that even with a sensible definition, one would have to confront the fact that cultural identity is not fixed. Cultural change—anthropologists tell us—begins with processes of innovation, of which cultural borrowing or diffusion is by far the most common.  But it can also be precipitated by social acceptance, by selective elimination and by integration.

From a policy perspective, malleable aspects of culture are more interesting as they open up the possibility for intervention. The World Bank’s 2015 World Development Report cites a number of examples of interventions that have determined a cultural change to trigger improvements in welfare: one example is political affirmative action for women in West Bengal.

There are other complications, however, in attempting to use cultural explanations for economic development.Huntington (2000) remarks how in the early 1960s Ghana and Korea were broadly comparable in terms of income per capita, structure of production, and foreign aid. Thirty years later the contrast could not be more pronounced. According to Huntington, culture had a major role in explaining it: “South Koreans valued thrift, investment, hard work, education, organization, and discipline. Ghanaians had different values. In short, cultures count.”[1] The problem with this formulation is that it does not provide a very auspicious basis to start a dialogue with Ghana as to how they could catch up with Korea. Not surprisingly, international financial organizations and bilateral donors have shied away from framing the debate in terms of cultural norms. 

Beyond issues of presentation, it is possible that “culture”, in fact, disguises other forces at work, more amenable to change. How much of the Ghana’s stunted development is simply the result of bad policies? In many developing countries investors are unwilling to plan for the long-term because of the risks associated with political instability. What may appear to be cultural traits may, in fact, be behaviors shaped by economic incentives and thus amenable to change through changes in the underlying incentives. So, to take an example, the absence of a work ethic in the Soviet Union was not a reflection of some ingrained cultural trait, but rather was a natural response to an environment in which wage differentials were extremely narrow, promotion was not linked to performance, and life-time employment was more or less guaranteed. People’s behaviour at work was totally consistent with this particular set of dis-incentives.

Sachs (2000) identifies a number of factors which have fundamentally affected development in various parts of the world and can be detached from conceptions of culture. He notes, for instance, the (dis)advantages of geography, such as access to natural resources, being landlocked or part of a poor, volatile neighborhood. Easterly (2006) discusses the heavy burden on Africa associated with the historically arbitrary demarcation of international borders. Poverty may have more to do with geography and climate, with natural resource management, and with the toxic interactions between ethnic diversity and artificial borders, than with purely cultural factors.

As a result of globalization, because “citizens are more exposed to successful behaviors elsewhere” (Porter, 1990 p. 26), geography, climate, and natural resources are gradually giving way to knowledge, education, and access to new technologies as the key drivers of productivity and economic growth. We are witnessing the gradual emergence of a universal, global culture based on such values as adherence to civil and human rights, gender equality, respect for property rights, the rule of law, acceptance of market forces as a mechanism for resource allocation.

In saying that education and the acquisition of knowledge and skills are desirable development objectives we are making a statement that holds true across different regions of the world, that applies to all contemporary civilizations. Of course, societies will differ in the ways and the extent to which they have internalized some of these values in their policies, their traditions and their institutions. Acceptance of the desirability of gender equality, for instance, does not mean that inequalities and injustices based on gender—deeply entrenched in all our cultures, to a greater or lesser extent—will suddenly disappear. But few would disagree with the thesis that gender disparities are out of step with modernity and that their presence retards human progress. Development is not only about reducing poverty and expanding opportunities against the background of rising incomes. It is also in a very fundamental way about adopting a set of values that are compatible with humanity’s moral development.

Easterly, William. 2006. The white man's burden: why the West's efforts to aid the rest have done so much ill and so little good. New York: Penguin Press.
Guiso, Luigi, Paola Sapienza, and Luigi Zingales. 2006. “Does Culture Affect Economic Outcomes?”, Journal of Economic Perspectives 20: 23-48.
Harrison, Lawrence E., Samuel P Huntington. 2000. Culture Matters. New York: Basic Books.
Landes, David. 1998. The Wealth and Poverty of Nations. London: Little, Brown and Company.
Murdock, George Peter. 1965. Culture and Society. Pittsburg: University of Pittsburg Press.
Sachs, Jeffrey. 2000. Notes on a new sociology of economic development. In: Harrison, L.E., S.P. Huntington. 2000. Culture Matters. New York: Basic Books, 29-43.
Swidler, Ann. 1986. “Culture in action: symbols and strategies”, American Sociological Review 51: 273-286.
Woolcock, Michael. 2014. “Culture, Politics, and Development”. Policy Research Working Paper 6939. Washington: The World Bank.

[1] Huntington, p. xiii.