By Francis Fukuyama
The Free Press, 458 pages
Why are some nations richer than others? Rand Corp. political scientist
Francis Fukuyama argues in his latest book that some societies are able
to develop cultural norms, such as hard work and mutual trust, more
than others. Such positive cultural values foster economic growth, their
absence retards it. Cultural values are like appropriate economic policies,
they are necessary, though not always sufficient, for economic growth
These issues are not new. The question of why economies grow has
been at the core of economics since the discipline's inception.
The very title of Adam Smith's An Inquiry into the Nature
and Causes of the Wealth of Nations demonstrates the question's
Smith's assertion that wealth is produced most rapidly when the
economic role of government is limited is probably the most influential
and durable argument ever made by an economist. Many contemporary
economists, including some with Nobel prizes, have further explored
the roots of economic growth. But Fukuyama argues that while the
efforts of these economists have been fruitful, most since Smith
have ignored a crucial growth variablethat of culture:
"We can think of neoclassical economics as being, say eighty
percent correct: it has uncovered important truths about the nature
of money and markets because its fundamental model of rational,
self-interested human behavior is correct about eighty percent of
the time. But there is a missing twenty percent of human behavior
about which neoclassical economics can give only a poor account.
As Adam Smith well understood, economic life is deeply embedded
in social life, and it cannot be understood apart from the customs,
morals, and habits of the society in which it occurs. In short,
it cannot be divorced from culture. Consequently, we have been ill
served by contemporary economic debates that fail to take account
of these cultural factors."
Fukuyama begins with a general argument about the importance of
cultural factors in economic growth. He concentrates on the specific
factor of trust, which he defines as "the expectation ... of regular,
honest, and cooperative behavior, based on commonly shared norms."
Social capital, which is the ability of people to work together
for common purposes, "arises from the prevalence of trust in a society,"
and cannot be acquired through rational investment decisions. Rather,
acquisition of social capital "requires habituation to the moral
norms of a community and the acquisition of virtues like loyalty,
honesty and dependability."
Continuing, Fukuyama explores the development and expression of
trust in different countries, grouping them into low-trust (China,
Italy, France and Korea) and high-trust (Japan and Germany) categories.
The United States is also classified as high-trust, but merits a
section by itself.
These detailed examinations of specific societies and cultures
comprise the bulk of the book. And whether or not readers buy Fukuyama's
central thesis, they will find these sections to be masterful analyses
based on detailed knowledge of the societies involved.
Fukuyama directly challenges neo-mercantilists such as James Fallows
and Lester Thurow who argue that Asian economies are somehow fundamentally
different from Western ones and who imply that all Asian societies
are essentially alike in their Confucian values. He contrasts China's
Confucian society, where the family is paramount but there are few
viable institutions between the family and the state, with another
Confucian society, Japan, where many such intermediate institutions
sprang up a century or more ago. This cultural ability to form non-family,
non-government organizations, he argues, is key to the formation
of successful, large, modern business organizations. Moreover, a
high level of trust in a society facilitates productive activity
for all sizes of organizations by reducing risk and the need to
expend resources accumulating information about business counterparts.
Trust within organizations fosters cooperative work in teams and
thus creative feedback and innovation.
But, Fukuyama argues, trust and other cultural virtues can be
destroyed more easily than created. Large centralized governments
destroy those intermediate institutions between the family and the
state and hence destroy trust. The French Revolution and Napoleon's
dictatorship destroyed many such institutions; hence France's poor
performance in industry and technological innovation relative to
other societies in which such institutions survived.
Furthermore, beliefs and practices that are extreme in emphasizing
the individual rather than the group also destroy intermediate institutions
and trust. In the United States, the school of scientific management
pioneered early in this century by Frederick W. Taylor reduced workers
to interchangeable receivers of instructions and stifled the sort
of bottom-up contributions of innovation that had thrived in earlier
workplaces and that was never extinguished in Japan. Only in the
last two decades has U.S. management theory rediscovered the virtues
of worker participation in design and production decisions.
Similarly, American liberals' extreme emphasis on the rights of
the individual, often at the expense of the best interests of intermediate
groups or of society as a whole, stifles trust and hence cooperation
and innovation. In this Fukuyama essentially echoes the arguments
that Philip K. Howard makes in his recent bestseller, The Death
of Common Sense. But there are also dangers from the conservative
end of the spectrum. Policies that result in extreme economic and
social inequality, and belief systems in which haves are encouraged
to be complacent about the needs of have-nots, lead to the breakdown
of social institutions and cultural virtues.
Thus readers will find that Trust contains useful
insights into other societies, many stimulating arguments and plenty
of plain old good writing.