You can be a well cultured despot you know

Noah and Scott‘s argument about China’s culture is going nowhere. They’ve got bogged down talking about whether culture affects economic potential or not. Long story short, of course it does! Consider these two examples:

Chinese expats around south-east Asia seem more entrepreneurial and they sure as hell are richer than the locals in places like the Malay Peninsula and Thailand. Less fortunately, Black Africans are less trusting than other people and this is just one reason economic growth is more difficult there. Without being able to trust that someone will take your money, disappear into another room and come back with what you want there can be no Argos. And where would you be without Argos? A lot poorer. [1]

The reasons for these cultural traits are complex. I don’t know the Chinese, but Africa’s level of trust appears to still be badly effected by the long defunct institution of slavery; kidnapping was very common for 200 years or so in a way which the rest of the world hasn’t had to deal with. You can be culturally more entrepreneurial. Likewise, you can culturally more or less prone to trust strangers. Both of these have real effects for lots of things, including economics. There, cleared that one up for you.

But whether culture affects wealth given a certain set of economic institutions is irrelevant. What is important is whether culture can influence China’s institutions. China is still deep in the throws of catch up growth, entrepreneurship is of course very important, but not nearly as important as having institutions which allow for the full execution of whatever entrepreneurship occurs. As I said earlier:

No amount of “pragmatism” will make a self-interested elite step aside, the pragmatic thing to do is to expropriate assets and imprison your enemies: to shut down economic activity you’re not involved and to erect barricade between the population and your clients…

Until now, Chinese elites have not been threatened by creative destruction they have been able to harness it to embellish their own power, wealth and status. The true test of Chinese growth will come when China’s central planning runs out of steam and urban elites and rural poor separate from the CCP begin to erode its power, then we will see whether elites will be forced to do what is right.

The only way China’s culture will significantly influence its long run – at least until it reaches say half of rich world income per capita) – growth prospects is by influencing its institutions. An entrepreneurial culture, or pragmatic culture, is completely unrelated to whether China adopts a growth friendly political framework over the next five to ten years. What matters is whether the politically powerful can be convinced/forced to become economic losers. Look at those guys at the top. Do you think they’re culturally inclined to agree to that?

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[1] Not sure if that translates to my non-British readers. Argos is a shop with a tiny shop front full of catalogues and a big warehouse full of stuff. You order at the front and stuff appears a few minutes later from the back. The flippancy of my reference is of course a little ruined by this extensive footnote.

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3 thoughts on “You can be a well cultured despot you know

  1. Chinese expats around south-east Asia seem more entrepreneurial and they sure as hell are richer than the locals in places like the Malay Peninsula and Thailand.

    Because they’re Chinese, or because they’re expats? Expats always tend to have more get-up-and-go, because they are, by definition, the people who got up and went.

  2. Less fortunately, Black Africans are less trusting than other people and this is just one reason economic growth is more difficult there.
    Low levels of trust are also a feature of some Chinese populations and most Indian ‘caste’ based communities. I wonder whether high trust ethnicities are so because their self-dealing generates surpluses they need to invest with outsiders whereas confiscatory or Ponzi style inter-communal trade dominates where there is a sudden inflow of ‘hot’ funds- hot in the sense of being indiscriminate and information asymmetric.
    Entrepreneurial/ agricultural Sub-saharan ethnicities which have spread greatly in historic times had good trust based on quite long term contracts based on cattle sharing, salt trading and even supply of marriage partners and children to adopt from more fertile farmers to less fertile pastoralists.
    The problem for Africa is that traditional property rights and non-monteized trade and exchange has no relation at all to what the Law recognizes. In India, the commercial code of certain castes and creeds was upheld and codified by the Colonial authorities and that meant the Colonial experience probably increased capital accumulation for already mercantile castes. This didn’t happen, with some exceptions, in Africa.
    Interestingly, in India, when paternalistic Colonial laws prevented agricultural castes selling to mercantile castes, the effect was to increase the net fungible assets of the latter and depress that of the former thus locking in their first mover advantage in a highy tangible and visible way.
    A related point is the right to alienate land or other assets, as well as that of asserting rights over one’s own earned income or profits (i.e. your being able to say I don’t have a moral or legal obligation to provide for relatives and, what’s more, my estate goes to my widow and kids not some rabble from the ancestral village) itself increases ‘trust’ because if the guy you’re doing business with suddenly dies, his estate can honour the contracts he made. The alternative is that his wife and kids turn up penniless on your doorstep because a horde of freeloaders from the village have turned up to lay claim to the dead man’s estate.
    Chinese captialism, like Indian capitalism, aint particularly lovely to look upon in the sense that there is a high degree of inter-generational and cadet affine exploitation but something which has become ingrained in both is the concept of some non-monetized type of inter-gernerational and affine capital transfer.
    The Chinese have adoption of a sort that would have been familiar to the Romans, the Indians have some spiritualized conception relating to reincarnation or something equally nebulous.
    Both Indian and Chinese corruption have skyrocketed by an amount equal to f.d.i. The tipping point for both is when they export capital- as indeed they must because (in the case of India) you need to be investing half your income, as against maybe 15 in the U.k, for basic insurance and pension cover.

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