If you’ve followed this blog for long enough, you’ll know that I have a lot of respect for non-free-market-economist Ha-Joon Chang. He was my dry and entertaining introduction to a way of thinking that is not dominated by free market orthodoxy. I mean, I still generally believe that Free Markets are usually the best solution – but I’m more open to the idea that it might not always be the case. One of this books is “Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism”. It sounds like the economic version of a conspiracy theory – but it’s had support from unusual places (mainly: Nobel prizewinner Joseph Stieglitz). And in Chapter 9, Chang deals with cultural stereotypes.

The Theory: Some Countries Are Culturally Doomed To Fail

When economists look back in retrospect, they ask some awkward questions. Like:

  1. How did we get here? and
  2. Why do some countries fare better than others?

Some answers:

  1. Germany has been an economic triumph because of its protestant work ethic and commitment to efficiency.
  2. Japan has done similarly well because of its Confucian ideals and general industriousness.
  3. Africa is corrupt and filled with self-interested malignant bureaucrats; and its people are lazy (!).
  4. The Greeks are spendthrift.
  5. The Arabs are unscrupulous.

Or put somewhat less offensively: some cultures are better suited to economic prosperity than others.

I’ve sometimes wondered about this around the dinner table. Are Latin American countries doomed to high inflation because of their hot-blooded populist tendencies? Is Zimbabwe suffering from a nationwide disillusionment that it can’t break out of?

And on the face of it, there does seem to be a correlation between cultural truisms and economic progress.


The Chang Counter-Argument

Mr Chang gives examples of older cultural stereotypes.

Of The Japanese

American missionary Sidney Gulick, after living in Japan for 25 years, wrote in 1903:

“[many Japanese] give an impression…of being lazy and utterly indifferent to the passage of time”

British socialist Beatrice Webb, after a visit to Asia in 1911-1912, described the Japanese as having “objectionable notions of pleasure and a quite intolerable personal independence”. And that in Japan, “there is evidently no desire to teach people to think”.

Of The Germans

Some common attitudes toward the Germans before their economic revolution in the mid-19th century:

“[the Germans] work and do as they please”

“a plodding, easily contented people…endowed with neither great acuteness of perception nor quickness of feeling”

“not distinguished by enterprise or activity”

“the tradesman and the shopkeeper take advantage of you wherever they can, and to the smallest amount imaginable rather than not take advantage of you at all…This knavery is universal”

“some will laugh all sorrows away and others will always indulge in melancholy”

So the Japanese were lazy, mindless and hedonistic. And the Germans were considered slothful, overly-emotional, relaxed, stupid and dishonest.

It hardly rings true today, does it?

The Point

Perhaps the chain of causality is wrong. Culture and economic development are inter-connected – but maybe people in poorer countries appear lazy because their unemployment rate is high, rather than the unemployment rate being high in poor countries because the population is lazy.

And if that’s the case, then perhaps small economic improvements can have big multiplier effects. And sometimes disruption, even a disruption as chaotic as losing World War II, can lead to great economic recoveries that are completely at odds with the ‘culture’ that preceded it.

Which (I think) is a much more hopeful view of the world. And also, there is good historical reason to hope.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.