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Culture, development and globalization
Friday, 19 December 2008 04:28

Globalization was created in the West.  Earlier periods include the age of discovery and then the globalization through colonisation in the 19th and early 20th centuries.  Modern globalization kicked off after the second world war, as US political and economic leadership led Europe and then Japan to prosperity.

Globalization then spread to East Asia, with the Asian tigers (Hong Kong, Korea, Singapore and Taiwan), then South East Asia and China.  International trade and investment were powerful motors for economic development.  South America and especially Africa have substantially missed the globalization boat, and lagged behind in economic development.

Why is this the case?  Have cultural factors played a role?  Cultural determinism -- the idea that a group's culture explains economic performance -- has enormous intuitive appeal.

First, let's turn to Max Weber and his theory of the Protestant work ethic as a key factor explaning successful growth in capitalist countries.  It seemed a good idea for a while, until it was noticed that Catholic countries like France and Italy were growing faster than Protestant Britain and Germany.  And also, within Germany, Catholic Bavaria more than holds its own against the rest of the country.

Then, it was thought that they perhaps Christian culture was the factor behind the superior economic performance of Western countries.  But then how could that explain the rise of Japan, and then after that Korea, China, Taiwan and so on.  Could it be Confucian values like respect for authority, importance of education and savings.

The conclusion is clearly that we cannot observe a grand theory of culture and development.  Also, cultures do change.  Japan, Korea and Taiwan have become very modern vibrant societies with dynamic economies.  And some parts of the world, like Islamic countries and Africa, which were believed to have a cultural disadvantage, have a number of success stories.  If some parts of the world were culturally doomed, there would be no point in even helping these countries! 

But does that mean that culture does not matter?  While economic policy, geography and the burden of disease are key determinants of economic growth, certain cultural attributes do count.  Some analysis has shown that work ethic, thrift, honesty and openness to foreigners can play a role in economic growth.  In the case of Japan, it seems clear that company loyalyty, responsibility, interpersonal trust and implicit contracts helped drive its successful post-war economic performance -- cultural traits which some parts of the West are seeking to emulate. 

In the case of the US, a culture of optimism and risk taking also seem to play an important role in entrepreneurship and innovation.  As also seems to be the case today, optimism and risk taking can at times be excessive, leading to financial crisies.  The US will need every ounce of optimism that it can muster to get it out of the current turmoil.

All things considered, optimism and self confidence may be the ultimate strength and comparative advantage of the US economy.  But let's hope that this cultural trait does not change       

Reference: Human Development Report 2004 -- Cultural liberty in today's diverse world, United Nation's Development Programme (UNDP)

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