Friday, December 23, 2005

Does culture matter in economic performance?

The common-sense view: Yes!

However we better be careful about this issue. For example, we can ask: does culture matter in Olympic performance? Are some cultures more determined or hard-working than others? Are some cultures simply more "sports-minded"? As you can see, the culture-performance debate is not that simple.

Exhibit A: The historian Rodney Stark claims that the origins of modern capitalism can be traced to Christianity. He stands the usual argument on its head, that medieval faith was the scourge of the "Dark Ages". His argument: on the one hand, Christian theology is fundamentally committed to reason, the improvement of material conditions, and the autonomy of economic and spiritul life from the political. On the other, Christian monastic orders became the vanguards of commerce, and eventually, of capitalism.

Exhibit B: The Indian Economy blog takes umbrage at remarks made by renowned management guru Kenichi Ohmae. Essentially Ohmae is attributing the failure of Indian manufacturing (relative to say the spectular rise of Chinese manufacturing) to a cultural factors: Indians are "too inquisitive", limiting their ability to excel in disciplined factory-style work. Nay say the economists: Indian manufacturing has been stifled by state regulation; remove the regulation, and manufacturing would respond to economic fundamentals, such as the great degree of labor abundance in the Indian economy. Please read the comments, the ensuing debate is fascinating.

About the Philippines: we often read plenty of self-criticism about our poor teamwork, proclivity for petty politicking, "talangka" (crab) mentality, fondness for backstabbing, lack of punctuality, cunning dishonesty ("mahilig magpalusot"), and the thousand-and-one elements of a "damaged culture". And this is why we are so poor, and the rest of the world is getting rich.

I don't buy it. These are failings, for sure, but if you read newspaper columnists in virtually any country, there will be lots of cultural self-criticism being dished out. And similar name-calling and blaming for economic failure. This is all silly. There is no way to measure the importance of these cultural factors - if the stereotypes have any empirical value at all - in the economic performance of any country. I think Philippine culture has constrained economic growth, to the same extent that Philippine culture has prevented Filipinos from bagging an Olympic gold. Namely, not at all.

How to win an Olympic gold? Spend, spend, spend. Sponsor lots of competition. Get the average health and fitness level of the population up, to widen the pool of improvable talent from which to develop superior athletes. Import lots of foreign expertise to bring our techniques and training to world standard. Offer big monetary incentives to gold medalists. Hey, we seem to have started doing some of this in the recent Southeast Asian Games.

That sounds suspiciously like a prescription for economic excellence as well. Hmm...

16 comments:

Anonymous said...

Not too convinced about Exhibit A. Christianity is actually very, very socialist:

"It is easier for a camel to go through a needle's eye than for a rich man to go to heaven"

"Blessed are the poor"

Jesus driving out the money changers.

Add that to the medieval prohibition against interest.

Also, the Protestant Ethic paper was actually an anti-catholic diatribe. Of course, the problem is that Bavaria is pretty catholic. France is too.

AT

Econblogger said...

AT,

Right, you put your finger on what I find very spurious in this entire culture-performance debate. There are lots of stuff in a cultural construct like Christianity, much of it that can be extrapolated in contrary directions ("christianity is socialist", "no christianity is capitalist", "no its anti-feminist", "no it promotes equality"....)

Econometrics was exactly invented to get around this kind of stuff. Unfortunately given the state of the data for that time in history, I really can't figure out how rigorous statistical analysis can be brought to bear on this issue.

Anonymous said...

Actually, it shouldn't be that hard to get the data, right? Would take some digging up, but it's not that hard to come up with some European historical productivty numbers and religion (protestant vs catholicism). For Christianity vs others, we can look at productivity numbers across countries.

of course, in general, we do know what the answer is. European % of worldwide production only increased in the past 200 years or so. christianity has been strong there for over ~1700 years.

AT

Rizalist said...

This is a very rich area of discussion all over bloggerdom, and surprisingly it is discussed by such "culture"-related sites as Albions Seedlings ("The Anglosphere") and deep military and global warfare sites like Zenpundit. It's a terribly complex issue with many ramifications and pitfalls that bear on not only economics, but politics, war and religion. I hope the ECONBLOGGER will continue to explore it. A new discovery of mine whose intellectual flavor you might enjoy are the ChicagoBoyz.

MERRY CHRISTMAS!

Amadeo said...

In my opinion, to lend some validity to the Christianity factor, I would consider Christianity as a function or facet of western civilization and simply observe economic conditions and attitudes between those affected/influenced by it and those not influenced at it. Like the Middle East vs Europe or the US?

A great irony since Christianity also owes its origins to the Middle East. But I suspect its present forms and practices are quite alien to those of old and quite detached from them.

The old Christian holy and historical sites in those places, in my estimation, are now simply relics of the past and pious tourist areas.

Econblogger said...

There seems to me to be two distinct claims being discussed:

1. Historically, Christianity was responsible for the rise of capitalism.

2. Christianity (as a whole, or of form X) promotes economic growth. (E.g. Weber's argument.)

The data difficulty I was referring to pertains to 1. Namely, how to construct a data set that will clearly identify Christianity (and not other factors) as a decisive causal factor in the rise of capitalism in the ensuing millenia?

Claim 2. is more amenable to analysis. I think Barro and associates are working on religion as a causal factor in growth (though not very clear whether he is investigating the growth implications of various forms of religion, as did Weber.)

Pete said...

Culture does matter and it matters a lot. Do you honesly think we can be as ruthlessly efficient as the Japanese or the Koreans? Not in 100 years buddy.

Our hispanic culture is a handicap. This problem extends to the other Spanish colonies. But without getting into the details of the inefficiencies of the Iberian culture, let me just mention three words.

The Catholic Church.

There I said it. If you still think that culture is not a factor, then you probably believe too that the Philippines is only a good enonomic policy away from being the next Asian Dragon.

The problem runs deep into our collective psyches. But eventually, the pressures of Globalization will force us one day to look hard into ourselves. Forcing us to cleanse our minds of what makes us weak.

Econblogger said...

Interesting points, Pete. My take is that cultural factors are way too fuzzy-wuzzy to define in the first place. In contrast, economic policy is easier to define and measure. So regarding culture versus competing explanations, I would go for the competition - as of now.

Anonymous said...

November 7, 2005

Author: John Mangun

BUSINESS MIRROR Newspaper

“Outside The Box ”


Title: Philippine Cultural Economics

Basic cultural traits must have an impact on a nation’s economy. The way a people act and perhaps more importantly, how they perceive themselves to be must have a bearing on the development of their economy.

We look at Japan as a nation of worker bees where the individual downplays his own importance and personal needs for the greater good of the group. There must be some truth in that observation since we see a society and economy where workers strive to fit in the business machine and all work together for a common goal.

The people who founded the USA thought of themselves as rugged individualists, who conquered a land at any expense, hardship, and without regard to others, such as the Native Americans. Economically, the system encourages and rewards the groundbreaking entrepreneur, inventor, and capitalist.

The modern history of France begins with a political and social revolution that took its foundation on the phrase Liberty, Equality, Fraternity. However, the motivating cause of the storming of the Bastille was the dismissal of the king’s finance minister Jacques Necker. Necker unsuccessfully tried to reform the monetary and tax system that was unfair. ‘Fairness’ was the key concept that has allowed France, over the decades, to develop a socialist style economic system.

The Philippines therefore, also probably owes a part of its economic organization to its history and the traits that developed from that history.

The average Filipino of whatever economic class seems to have an inherent apprehension if not downright suspicion of government, especially when it comes to using the people’s money. No doubt, governments since independence have done little to promote confidence in the fact that government would do the right thing with public tax money. However, after living hundreds of years under two colonial ruling powers that felt no need to consult taxpayers on how the money would be used, it may be a cultural trait to assume tax money will be abused and wasted.

Realistically speaking, the Philippines is a nation of tax evaders. People speak openly and almost proudly of not paying their taxes and usually justify their behavior as a result of government waste, no matter who leads the administration. Probably no taxpayer in any country enjoys the idea of taxation, but here there seems to be something deeper about it. It is almost as if the Filipino is carrying on the campaign first started by Mabini against the cedula, and creating a tradition against government’s tax collection efforts. Is this a reflection anti-colonial mentality?

If our colonial history has influenced the culture that then influences the economic system, then perhaps there are other remnants of the colonial produced mentality. After a long period of colonial domination and lacking self-determination, a people tend to rely on colonial paternal provision. On the one hand, too many feel no obligation or wish to provide personal resources to pay for government. However, many more strongly believe that government has the responsibility and is even required to deliver the needs of the people.

There is a flawed contradiction in that the people are both disconnected from and still desire to be dependant on government. This kind of love-hate relationship towards the paternal provider prevents a necessary component for a vigorous economy; loyalty that comes from a sense of belonging.

When South Korea bordered on collapse in the wake of the Asian Crisis in 1997, tens of millions of people gave their money and valuable jewelry to support the government and the economy. It is hard to imagine 21st century Filipinos willing make a direct financial sacrifice to support the government and the economy. Individually, Filipinos are willing to make remarkable sacrifices for family and even friends. Generosity towards others is a cultural trait but it does not extend to the collective whole. It is difficult to mobilize a nation towards a common objective in the absence of economic loyalty towards the nation.

Having said that, there is a strong sense of ‘us against them’ thinking, perhaps another throwback to the colonial era when the vast majority of people were all in the same boat against the colonizers. It creates a false sense of ‘fairness’ where all should share equally. The idea of ‘across the board’ wage increases makes little economic sense. A mandatory increase in the daily wage whether the employee makes P4, 000 a month or P20, 000 is neither fair nor practical. Nevertheless, it does fit the mentality where one believes there is a constant battle between employer and employee regardless that not all employees are equal in position or duties.

Many of our “well-educate/well-traveled” elite are very quick to say we have a broken culture. Nonsense. It is only ‘broken’ in that it does not fit the Spanish or American mold and pattern. Our leaders would do better if they governed and did things a little more Filipino style. But that would require understanding the people and culture a little better, which is difficult for government officials who look to the culture and laws of former colonial masters for guidance.

Email comments to mangun@email.com.

Anonymous said...

John Mangun,

Nice post, but I got confused at the end. The last paragraph seems to contradict the whole body.

You made a very strong case that we are a culture of tax evaders, I am guilty of that sin myself. You also raised an excellent point on the amazing lengths the Koreans would go to lift themselves up -- and that it is inconceivable that millions of Filipinos would donate their own property to save the economy.

And then your last paragraph said:

"Many of our “well-educate/well-traveled” elite are very quick to say we have a broken culture. Nonsense. It is only ‘broken’ in that it does not fit the Spanish or American mold and pattern. Our leaders would do better if they governed and did things a little more Filipino style."

Filipino style? What the hell is that? Tax evasion? Family centric loyalties? Anti-colonial mentality?

The body of your message pointed out some of the many flaws of our culture, yet at the end, you say the broken culture ideology is nonsense.

Please explain.

Pete said...

I think what he is trying to say is that why should our culture be "rated" according to what the Economic Powers say is efficient, competitive, or desirable.

Yes, that is a very valid arguement.

But when the forces of globalization start wiping out our local industries (which are inefficient due to unnatural trade barriers to begin with), then you will realize that you have to play the Global Game. And whether you like it or not, you will eventually have to adhere to the standards of the Market.

Efficiency, productivity, lowest cost. These are not Western Colonial Ideologies. This is the law of the market and you cannot escape this reality. If we do not play to our strenghts (comparative advantage), we lose.

Or we can just rely on those remittances from our "heroic" OFW's that some of us call "traitors". The love/hate relationship of Pinoys extend to these people as well.

Econblogger said...

Hi, I'm back. The temptation in a culture debate is to lapse into stereotypes with little predictive power. Consider, in Mangun's post, the contrast between fairness in France and individualism in the US. So does this mean there is less value on fairness in the US, ans less value on individuality in France? So what was that "taxation without representation" hubbub then? All it ignited was a War of Independence. Hmm. And isn't the idea of individual rights (over the the prerogative of the State) a guiding light of the French Revolution? How do you explain Japanese anime and film in the light of the worker bee mentality?

The article furthermore points to a contradiction in the Philippine psyche: a sense of dependency on government, combined with mistrust of government. However citizens everywhere strike me as being mistrustful of their government, but very willing to depend on government dole-outs. Perhaps the difference is a matter of degree, but how to measure the differences? That, I submit, is the rub.

cvj said...

I agree that the culture debate has little predictive power but that is beside the point. Done right, it may at least help in explaining why conditions in a given locality are the way they are. As you mentioned earlier, statistical techniques may not be readily useful in this area of study so we have to make do with compelling narratives.

Econblogger said...

CVJ,

The problem is that compulsion is in the eye of the beholder. I tend to find a narrative based on stifling government regulation, or breakdown of property rights, or some such econonomic-type explanation, compelling. Somebody else may find worker-bee explanations or plain laziness compelling. So, how to choose?

cvj said...

While there is a danger when entering discussions involving issues such as culture's effect on economics to sink to the level of comparing astrological signs, i don't believe there is a substitute for old fashioned rhetoric. I think the use of historical counterexamples to dispute analysis based on stereotypes like you did in your preceding post is a good start. One economist i find good at this kind of thing is Paul Krugman when he presented a narrative that explained away the 'Miracle' part of the Asian Miracle.

Anonymous said...

If a culture favors patronage, dishonesty, and tax evasion, then it is BROKEN, period.

Yes, there are times when we must conform to the culture. There are also times when we must recognize that the culture itself is immoral, self-destructive, and outright wrong. (Remember slavery in the USA?)