A Farewell to Alms and other things

Finished reading it last night. Was going to summarize it but fortunately Robert Samuelson did that for me in his column today:

It's nature versus nurture. One of the big debates of our times involves the causes of economic growth. Why is North America richer than South America? Why is Africa poor and Europe wealthy? Is it possible to eliminate global poverty? The World Bank estimates that 2.5 billion people still live on $2 a day or less. On one side are economists who argue that societies can nurture economic growth by adopting sound policies. Not so, say other scholars such as Lawrence Harrison of Tufts University. Culture (aka "nature") predisposes some societies to rapid growth and others to poverty or meager growth.

Comes now Gregory Clark, an economist who interestingly takes the side of culture. In an important new book, "A Farewell to Alms: A Brief Economic History of the World," Clark suggests that much of the world's remaining poverty is semi-permanent. Modern technology and management are widely available, but many societies can't take advantage because their values and social organization are antagonistic. Prescribing economically sensible policies (open markets, secure property rights, sound money) can't overcome this bedrock resistance.

...Traditional theories have emphasized the importance of the Scientific Revolution and England's favorable climate: political stability, low taxes, open markets. Clark retorts that both China and Japan around 1800 were about as technically advanced as Europe, had stable societies, open markets and low taxes. But their industrial revolutions came only later.

What distinguished England, he says, was the widespread emergence of middle-class values of "patience, hard work, ingenuity, innovativeness, education" that favored economic growth. After examining birth and death records, he concludes that in England -- unlike many other societies -- the most successful men had more surviving children than the less fortunate. Slowly, the attributes of success that children learned from parents became part of the common culture. Biology drove economics. He rejects the well-known theory of German sociologist Max Weber (1864-1920) that Protestantism fostered these values.

Clark's theory is controversial and, at best, needs to be qualified. Scholars do not universally accept his explanation of the Industrial Revolution. More important, China's recent astonishing expansion (a fact that he barely mentions) demonstrates that economic policies and institutions matter. Bad policies and institutions can suppress growth in a willing population; better policies can release it. All poverty is not preordained. Still, Clark's broader point seems incontestable: Culture counts.

You should really read the whole thing to fully capture Samuelson's point but I think this is the gist. (you can also check out these links to get a better feel for the book) As Samuelson says, Clark's primary argument in the book about what separates prosperity from poverty often comes down to culture. As an example he compares the performance of textile mills in England and India. On the surface India should have crushed England and taken the lion's share of the textile industry: both had access to the same technology, the same costs of capital (i.e. interest rates) but India had the advantage of much cheaper labor. The problem for India, however, is that its labor was nowhere near as productive as England's. And this, mind you, was for employment that didn't require a great deal of sophistication. The tasks involved in running a loom were fairly simple, and citing educational differences doesn't really hold. Neither does superior management -- mills in both countries relied heavily on English management (and there are no signs the managers in India were rejects from the home country).

So what explains the differences then? Quite simply, Indian labor wasn't as reliable. Absenteeism was high. People would leave the factory for lunch. Mothers would bring their children with them to work -- all practices unheard of back in England.

Anecdotally I remember a teacher in high school telling me about the problems that Volkswagen encountered when operating in one particular third world country -- workers wouldn't report back to work after pay day. The workers logic was that they had enough money to live on for a while and they would report back to work when the money was close to running out. The mentality was just completely different.

The implications of this cultural argument are enormous. Plainly, as Samuelson notes with his China example, culture does not explain all. But it certainly explains a lot. Look no further than the U.S. Poverty in the U.S. isn't evenly distributed. It afflicts some subcultures far more than others. Everyone operates under the same rules but experience different outcomes. We see immigrants for example that come here with nothing, not even speaking the language, and rise to great prosperity. Why is that? I imagine culture and work ethic play a huge part.

If you accept that argument then it calls into question the wisdom in some respects of anti-poverty programs. These people don't need government aid, they need to adopt a new mentality and culture. How can that be done? Are government bureaucrats going to teach them?

Looking at the current political environment, how many politicians are willing to recognize this reality? When it comes to fighting poverty you hear a lot about the need for more programs but where is the presidential candidate who says that those in poverty bear at least some responsibility for their lot? After all, as George Will and other observers have pointed out, all you need to do to stay out of poverty is graduate from high school, hold steady employment of almost any kind and wait until you are married to have kids. Among people who follow such a formula poverty is negligible.

Their reluctance to say such things is perhaps understandable as the criticism they would receive would be blistering. We have a mentality that those in poverty languish there because of a lack of opportunity and because the system is biased against them. We even refer to poor families as "working families" -- I guess because all the rest of the people that aren't poor don't work and got to where they are via a lottery.

I think we criticize people who would utter such things because what they say is uncomfortable. We like to think that by changing the rules, or instituting new programs we can help the poor. And yes, there are things that can be done (like school vouchers to increase educational opportunities). But culture isn't something government can change, and I think that people are scared by their own helplessness. To admit a cultural root problem is to admit both that our options to assist are limited and that government isn't the answer, something I'm not sure many people can do.