Noah Smith has a new post that quotes me saying things that I don’t believe, and that he knows (or should know) I don’t believe. I admitted in the comment section to his critical post that I shouldn’t have called the Chinese “pragmatic.” It’s clear from this follow-up post, and the comment section where he responds, that Noah and I actually have pretty similar views on culture.)
Take two very poor countries, North Korea and Pakistan. Then ask which one is likelier to be rich in 50 years time? I’d say North Korea, and if you hooked Smith up to a lie detector, I imagine he’d do the same. But why?
For me the answer would be culture, culture, culture. But not culture in the sense that ignorant people use the term “culture.” Rather culture as a sort of residual. We can observe cultural differences, but don’t really know what part of the cultural differences matter for development. The easiest way to explain all this is with a bunch of examples.
Why do I think North Korea will do much better than Pakistan? Is it because I’ve met Koreans, and Pakistanis, and noticed some mysterious superiority in the Koreans that I have met? Not really. Both the Korean and South Asian people I’ve met seem highly productive. Nothing about them would provide me with any useful information to predict North Korea will grow faster than Pakistan.
Alternatively, suppose it were the case that both Koreas were currently desperately poor, and India and Bangladesh were rich, while Pakistan was poor. In that case I’d predict Pakistan would do much better over time, even though nothing changed in the personal characteristics of the people I happen to have met who were Korean or South Asian. One notices cultural patterns in development, but that doesn’t mean one knows which particular cultural characteristics explain those patterns.
Here’s another example. Back in the early 1980s I saw China moving toward a market economy. At the same time I knew that all of the very fast-growing economies in the world, whose growth wasn’t based in resource extraction (i.e. South Korea, Taiwan, Hong Kong, Singapore, Japan, etc.), were located in East Asia. I noticed that China was right in the middle of this group, and also shared cultural similarities. Thus I predicted China would grow really fast, and because I was correct I’ll be able to retire early. Yes, I know, that violates the EMH 🙂
So why fixate on “culture”? Why not “geography?” Because it seems like culture is the key factor. Australia is a neighbor of New Guinea, yet has cultural similarities to Europe. Singapore is next to Indonesia, but has cultural similarities to Taiwan and Hong Kong. Israel is next to Egypt, but has cultural similarities to Europe. When culture and geography diverge, go with culture.
So far this seems very deterministic, but when you look closer you realize that it really isn’t. That’s because economic development reflects many factors, and culture impacts those factors in diverse and often unpredictable ways. A (by no means exhaustive) list includes skill at governance, skill at entrepreneurship, propensity to save, work hard, etc. Many people assume that cultures that work hard are richer. And yet the data shows that Germans work less hard than Greeks, for instance. The data doesn’t match the stereotypes.
In the eastern Mediterranean there are lots of cultures that have a reputation for entrepreneurship (Greeks, Armenians, Lebanese, Jews, etc.) When these people move to a country like the US, they often do just as well as immigrants from a country like Germany, perhaps even better. So the stereotypes often do more to mislead than illuminate.
So maybe the Germans don’t work harder than the Greeks, but their culture led to more effective governance. That’s certainly plausible, but the result also seems quite “fragile.” After all, Greece is the birthplace of democracy, and Germany . . . well let’s not talk about that period. And although a high saving propensity probably helps, the (low-saving) US is the richest big country in the world.
I think that conservatives often err in assuming culture is constant over time, and more importantly that the advantages of certain cultural attributes is stable over time. A culture that is able to mobilize horseman to sweep across the grasslands and conquer huge regions, may not be well-suited to organizing large assembly lines that run with mindless precision. And that latter group may not be good at service/tech industries that require lots of creativity and individual initiative. And of course there are the contingencies of history—the Cold War separated the two Koreas, the two Germanys, the three Chinas.
So with all these caveats why do I cling to culture as an important factor? Because it obviously is. For some reason it has become politically incorrect to talk about culture. (Oddly, a few years back the non-culture explanations (genetics) were taboo.) Others seem bothered by the non-scientific aspect of culture. But I still see strong cultural correlations in economic performance. That information seems useful, even predictive where the contingencies of history have created artificial outcomes, and so I see no reason to throw out useful information.
Interestingly, Noah Smith uses exactly the same analysis I would use to predict China might do better than his opponent assumes. He notes that Japan, Taiwan and Korea have moved up to European levels of income.
PS. Just be be clear, I think all cultures are capable of achieving a great deal of economic progress, and indeed going forward I expect the less developed parts of the world to grow much faster than the developed regions. In the long run all countries will be rich, but I believe that culture plays a role in how fast they’ll get there.
The recent “global recession” might well have seen the fastest progress in all of human history. Here are a few snippets from The Economist:
National campaigning will start after various state-assembly elections in November. Observers expect a more presidential style of contest than usual. So television will especially matter: at the last election in 2009, 460m people [in India] had a box at home. Next year nearer 800m will.
And from the same issue:
Mr Webb estimates that since 1994 rural income per person has risen at an annual average rate of 7.2% in real terms (compared with 2.8% for urban incomes). Between them, the rise in income and better connections add up to a radical transformation in rural Peru. The study suggests the two are closely related. It points to the wisdom of boosting investment in infrastructure in the poorer rural parts of Latin America: Andean roads are vulnerable to rains and mudslides and need active maintenance, and there is scope to slash journey times further. Clearly, peasant farmers respond as creatively as anyone else to the opportunities that come from being connected to the market economy.
For most of my life I’ve thought of the world as being overwhelmingly poor and rural. But just in the past few years things are changing fast. We’ve suddenly gone from most people not having telephones and TVs to most people having them. From most people living in rural areas to most living in urban areas. The impact on governance, and indeed culture, will be huge. Look for India’s caste system to gradually break down.