Zakaria on Capitalism vs. Culture: Master of the Question mal posée

As part of a series of posts about the recent “culture-counts” flap, I’m tackling some of the (many) articles weighing in on the subject, partly as a way of clarifying the meaning of the “culture” argument for those who, for reasons well worth exploring, cannot abide it, partly as a way to address the classic problem of most social “science”, the badly posed question that sets up an unnecessary, even misleading antinomy – this, not that.

I begin with a high profile target, Fareed Zakaria, who ought to reread his own brilliant piece right after 9-11 on why Arab countries had so much trouble adjusting to modernity.

Capitalism, not culture, drives economies

By Fareed Zakaria, Thursday, August 2, 1:40 AM

Mitt Romney has explained that his comments abroad were simply truth-telling. “I tend to tell people what I actually believe,” he said. With regard to one much-debated comment — on the cultural differences between Israelis and Palestinians — many agree with him. The Wall Street Journal editorial page and columnists including Marc A. Thiessen and John Podhoretz all applauded. Podhoretz wrote: “Anyone who publicizes his remark is helping Romney win the election.”

“Culture makes all the difference,” Romney said at a fundraiser in Israel, comparing the country’s economic vitality to Palestinian poverty. Certainly there is a pedigree for this idea. Romney cited David Landes, an economics historian. He could have cited Max Weber, the great German scholar who first made this claim 100 years ago in his book “The Protestant Ethic and the Spirit of Capitalism,” which argued that Protestant values were the most important fuel for economic progress.

The problem is that Weber singled out two cultures as being particularly prone to poverty and stagnation, those of China and Japan. But these have been the world’s fastest-growing large economies over the past five decades. Over the past two decades, the other powerhouse has been India, which was also described for years as having a culture incompatible with economic success — hence the phrase “the Hindu rate of growth,” to describe the country’s once-moribund state.

China was stagnant for centuries and then suddenly and seemingly miraculously, in the 1980s, began to industrialize three times faster than the West. What changed was not China’s culture, which presumably was the same in the 1970s as it was in the 1980s. What changed, starting in 1979, were China’s economic policies.

The same is true for Japan and India. Had Romney spent more time reading Milton Friedman, he would have realized that historically the key driver for economic growth has been the adoption of capitalism and its related institutions and policies across diverse cultures.

This is a somewhat facetious line of argument. Chinese ex-pats always showed exceptional talent in economic and entrepreneurial activities. But the important issue Weber addressed in the Protestant Ethic (now available in a great new edition/translation by my colleague Stephen Kalberg) was not “who can develop economically at all?” but how was the West capable of generating a form of economic development never before seen on the planet?

The fact that copying that model took most countries (with the exception of Japan) several centuries merely underlines the exceptional nature of that effort. The question facing us now is not who can generate, but who can take advantage of both the blueprints of development and the massive global economy that beckons any country ready to open the gates. As Zakaria himself noted in his 9-11 essay:

[In] the Arab world, modernity has been one failure after another. Each path followed–socialism, secularism, nationalism–has turned into a dead end. While other countries adjusted to their failures, Arab regimes got stuck in their ways.

Now while Zakaria notes that “Importing the inner stuffings of modern society–a free market, political parties, accountability and the rule of law–is difficult and dangerous,” he does not seem, at least in this (very lite) current essay to realize the “cultural dimension” of that argument. Why is it difficult and dangerous for societies to adopt these “inner stuffings of modern society”? Is it merely because the dictators refuse (as the political model would like to imagine)? Or do the problems permeate the society, as in the strength of honor-murders as a reflection of profound anti-egalitarian patriarchal culture that runs throughout the social and political strata?

Moreover, Weber’s argument, which I know from personal experience had an enormous impact on my father, David Landes’ scholarship, was fundamentally about culture – indeed about religion, more precisely, demotic religiosity. As Weber says at the very start, it’s not about making money but what you do with your wealth. The spirit of capitalism that interests him, Weber notes, does not begin in wealthy Florence with the Medici, but in the backwoods of Pennsylvania with Ben Franklin. Until people stopped turning their fortunes into positions of leisured wealth and political power, and kept reinvesting them in further capital ventures, modern industrialization did not occur.

The link between economic policies and performance can be seen even in the country on which Romney was lavishing praise. Israel had many admirable traits in its early decades, but no one would have called it an economic miracle. Its economy was highly statist. Things changed in the 1990s with market-oriented reforms — initiated by Benyamin Netanyahu — and sound monetary policies. As a result, Israel’s economy grew much faster than it had in the 1980s. The miracle Romney was praising had to do with new policies rather than deep culture.

Here’s a classic example of the false dichotomy. Changing policies and institutions only works if there’s a culture to take advantage of it. It’s a bit like installing new software in a machine that doesn’t have the speed or memory to work it (or is that too value-laden a comparison?). Capitalist laws and institutions will only work well if the culture underlying those principles already exist, especially the values surrounding positive-sum, voluntary interactions.

I have not yet found the reference, but I have heard that Schumpeter referred to capitalism as the “first culture in which one doesn’t need to kill another man in order to become a man.” My only quibble is that it’s not the first. But as a statement about the radical value shift involved in moving from coerced to voluntary relations, I think it gets at a core issue.

Ironically, the argument that culture is central to a country’s success has been used most frequently by Asian strongmen to argue that their countries need not adopt Western-style democracy.

This may offer an important clue. I’ve often found, even among medieval historians, that people oppose arguments that they think may lead to politically objectionable positions. Here, culture is allegedly used by dictators to prevent liberal political even as they implement liberal economic reforms (i.e., unfetter capitalist tendencies). How many important arguments (like the fall of the Roman Empire in the West), are subject to this kind of pre-emptive thinking?

Singapore’s Lee Kuan Yew has made this case passionately for decades. It is an odd claim, because Singapore’s own success would seem to contradict it. It is not so different from neighboring Malaysia. The crucial difference is that Singapore had extremely good leadership that pursued good economic policies with relentless discipline.

I’m not sure what the argument is here. Malaysia is not an economic basket case as this comparison implies. And Singapore isn’t really a country so much as it is a city-state.

Despite all this evidence, most people still believe that two cultures in particular, African and Islamic, inhibit economic development. But the two countries that will next achieve a gross domestic product of $1 trillion are both Muslim democracies — Turkey and Indonesia.

Turkey is not nearly as healthy economically as this figure implies.

Of the 10 fastest-growing economies in the world today, seven are African.

The lower the GNP, the faster the rate of economic growth.

The world is changing, and holding on to fixed views of culture means you will miss its changing dynamics.

It’s not at all clear what “fixed views of cultures” means. This sounds a lot like Jared Diamond’s dismissal at the end of his piece for the NYT of “one-factor explanations.” The cultural issues are very complex (as are all “cultures”). And they do change, although not as quickly as laws and institutions, which (one can delude oneself into thinking), offer a quicker fix.

Actually, I think one of the assumptions behind much of the rejection of the “cultural” explanation lies in an assumption that somehow culture is unchangeable. Hence Erekat’s claim that Romney’s remarks were “racist,” as if somehow Palestinian or Arab culture was in their “genes.”  Granted there are cultures that change faster than others; granted we do not know what happens in the long run to cultures that change (too?) rapidly (e.g., China); granted some cultures change very slowly (Arab, so far). But cultures change.

In my course of honor-shame culture, I point out that in the Middle Ages, Europe was still very much an honor-shame culture, and that it took most of a millennium to shift some fundamental values. (Anthony Kwame Appiah has some very interesting remarks on the dynamics involved.) I think, for example, that Palestinian culture would change rapidly once it got free of the talons of an honor-obsessed elite (religious and secular) and stopped thinking of the destruction of Israel as the only path to happiness.

I think people who think the culture argument is racist actually reveal how little confidence they have in the ability of (certain) other cultures to change.

When societies or people succeed, we search in their cultures for seeds of success. Culture being a large grab bag, you can usually find what you want. We observe the success of Jewish, Lebanese, Chinese and Indian people in various societies and attribute it to culture. But it may really stem from the traits of diaspora populations — small groups of entrepreneurial immigrants forced to live by their wits in alien cultures. Interestingly, Palestinians have a reputation around the Middle East for being savvy merchants and traders and have been successful in the United Arab Emirates, Jordan and Saudi Arabia.

Interestingly, Muslim immigrants to Europe in the past generation have had a miserable record of integration, indeed, in far too many instances, a record of regression.

Culture is important. It is the shared historical experience of people that is reflected in institutions and practices. But culture changes. German culture in 1935 was different from 1955. Europe was once a hotbed of violent nationalism; today it is postmodern and almost pacifist.

If we want to see post-modernism (and some of its offshoots like post-colonialism) as shifts in culture (really in intellectual culture), that doesn’t guarantee that such shifts are stable, or capable of generating a self-sustaining culture. This post-modern turn among an intellectual elite driven by both tyrannical guilt and a huge fund of unacknowledged envy, may turn out to be a suicidal move.

The United States was once an isolationist, agrarian republic with a deep suspicion of a standing army. Today it has half of the world’s military power.

These remarks show a real misunderstanding of what “culture” means. This is about social “consensus,” or changing self-images and attitudes, not about the underlying culture. And while these attitudes and self-perceptions may change (Greece and Rome were both demotic polities that became imperialist), culture dynamics – values/modes of interaction and communication – operate at slower and more basic levels.

Daniel Patrick Moynihan once observed: “The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change culture and save it from itself.” That remains the wisest statement made about this complicated problem, probably too wise to ever be uttered in an American political campaign.

So now we have the key. Those who emphasize culture are the conservatives who want to slow change, those who reject it for political (ie legal and institutional) drivers to change are the liberals.

If you read Rip Van Winkle, you can see how a culture could change as a result of a political revolution. That’s not, however, the simple result of political changes. Americans were poised to shift towards the new civil polity, to leave behind “hat deference” and other cultural symbols of aristocratic dominance and to adopt a culture of egalitarianism, voluntary association, and self-reliance. The French less so. A François de Vinquel, falling asleep in 1788 would awaken to a monarchy in 1828 that resembled the earlier one far more than America in the aughts of the 1800s resembled the same place in the 1760s.

The idea that politics will solve the problem may offer some relief for the impatience to see change advance rapidly. It can, however, backfire. All those believers in positive-sum, “rational” behavior who pushed the “Oslo Peace Process,” and who thought that they could change Yassir Arafat around by bringing him back to “govern” the Palestinians, miscalculated badly, with strong negative consequences for the economy. Not only did the experiment blow up in everyone’s faces (a characteristic result of unfettered negative sum thinking like Yassir’s), but given the poisoning of a entire generation of youth with genocidal hatreds, the cause of Palestinian autonomy has been set back catastrophically.

What I find disturbing here is that not only are the “liberals” (as here defined) so impatient to effect change that they ignore (or misinterpret) any data that may “get in their way,” but they are as quick to dismiss anyone who might point out the dangers in assuming that political changes will transform the culture, as a bunch of “right-wingers” of bad faith. It’s mistakes like this that may have Europeans making critical errors in dealing with an immigrant population of Muslims who have very different values and attitudes towards relations with the “other,” and towards accepting criticism, than they do.

Bottom line: This is not an “either-or” issue. Capitalism is a cultural phenomenon with legal, institutional and even political manifestations.