Deconstructing Cultural Values And Economic Success In Asia

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Asia is the new economic powerhouse. Growth rates have been nothing short of impressive: first Japan, then the Asian tigers, China, India, the ASEAN countries. In 2011, the Asian Development Bank projected the ‘Asian Century’: Asia could regain its dominant global economic position it once held before the Industrial Revolution by 2050, almost doubling its share of global GDP from 27 percent in 2010 to 51 percent. Particularly East Asia has received a lot of attention and terms such as “Asian Miracle” have been buzzing. Some scholars, such as Kuznets, identified and described the “East Asian Development Model” on a more economic basis whereas other observers of these trends like Hofstede and Bond searched for different explanations beside the rather narrow economic orthodoxy for these booming performances: There must have been something else than capital, labour and technology that accounts for those dual-digit growth rates. Cultural values seemed a good option and a convenient complement to popular beliefs – we have all been confronted with the stereotype of the hard working Asian who is very good at maths.

Along the same lines of argument, Harrison and Huntington edited a book with the title “Culture Matters” after a symposium at Harvard University to discuss the role of culture in a number of social sciences. The theories of Alexis de Tocqueville and Max Weber, who attributed the success of Western capitalism to protestant and cultural values, served as the base of the general approach of the work. David Landes’ contributing essay title “culture makes almost all the difference” sums up the tone of the book. As an illustration of his point that success comes from within, Landes explains the Japanese economic miracle as a result of the “Japanese version of Weber’s Protestant ethic.” Self-discipline, tight family bonds, the intense sense of group responsibility are all traditional values that brought about a higher sense of duty to the nation which made possible the collective effort to modernise and grow. Also, through a sense of their own superiority, the Japanese were supposedly able to detect Western superiority, and thus they learnt everything they could from the Europeans and Americans to upgrade their country.

This seems a rather racist position to hold and reveals a major flaw in the cultural argument. Following Landes’ logic, namely, would mean that North Korea is an underdeveloped country because the work ethics and cultural values are not conducive to economic activities. North Korea is therefore doomed unless it changes its culture – not the political system or economic policies. Yet one would assume that the traditional cultural values of North Korea are shared with South Korea – but why has North Korea not become prosperous then?

The example of China and Confucianism is another conundrum. Weber’s hypothesis that Confucianism was a major obstacle to the development of modern capitalism in China proved very influential in the 1950s. A famous scholar of Chinese history, John Fairbank, reasoned that China’s backwardness was essentially a cultural problem because Confucian values resulted in a rigid hierarchy adverse to change and profits. However, more recently Confucian attributes are often presented as the fuel of the Chinese growth model: hard work, honesty, integrity. How do these two opposing views then explain China’s economic success since Deng Xiaoping’s open door policy since 1978?

The cases of Japan, the two Koreas and China reveal the limits of the cultural argument: It fails to explain economic success because it does not give reasons for changes over time and space. Under the assumption that culture is fixed, different outcomes of the same conditions should be impossible, but North and South Korea disprove this. Hence, other factors such as institutions, policies or politics must play a more dominant role. Moreover, this cultural determinism is an extremely fatalist interpretation and would mean that economically unsuccessful countries are doomed: There is no hope for North Korea. Further, it can be entirely arbitrary whether certain values are interpreted to be economically beneficial or detrimental: collectivism in Japan was good for growth but counterproductive in China. Even if one were to accept a changing nature of cultural values, the cultural argument does not hold as it becomes impossible to prove causality.

As a whole, the cultural argument does not appear overly convincing. However, to deny any link between culture and economics also seems untenable. A lot of research and branches of economics deal with the influence of non-economic factors on output. Akerlof and Kranton, for example, investigate the role of identity in economic choices and preferences which are determined by the social – and cultural – context. Similarly, Zak and Knack found a correlation between growth rates and levels of trust which are higher in more homogenous societies like Japan. So, culture seems to be undoubtedly linked to economic activity and institutions. The people who operate in the economy and build the political and institutional frameworks are undeniably influenced by their values, language and religion. Therefore, culture helps clarify variance in the different development paths and outcomes. But as to whether economic success in Asia is a result of cultural values, the answer has to be a definite no. TC mark

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