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.

Culture

In Eat the Rich PJ O'Rourke tells the following story:

A Scandinavian economist once proudly said to free-market advocate Milton Friedman, "In Scandinavia we have no poverty." And Milton Friedman replied, "That's interesting, because in America among Scandinavians, we have no poverty either."

The point is that culture matters -- which is exactly what Thomas Sowell emphasizes in Black Rednecks & White Liberals. While you can read a column by Sowell in which he lays out his theory in some detail, essentially it is that many Black Americans have adopted the backward, redneck ways that were widespread among Southern whites -- a development that white liberals have not only failed to condemn but in some cases actually defended.

It is this cultural backwardness -- one that has been attacked by Bill Cosby for example -- that has played the primary factor in holding back Black America, according to Sowell -- more so than even Jim Crow or the legacy of slavery. He argues for example:

Those who try to claim that the shattered families in today's ghettoes are "a legacy of slavery" ignore the fact that, a hundred years ago, a slightly higher percentage of blacks than of whites were married and most black children were raised in two-parent families, even during the era of slavery.

As late as 1950, a higher percentage of black women than of white women were married. The broken families of today are a legacy of our own times and our own ill-advised notions and policies.

He also notes that many successful Black Americans today are products of West Indian culture -- Colin Powell, whose parents are from Jamaica, springs to mind -- rather than mainstream Black culture. The success of many African immigrants, who likewise are from a different culture, also seems relevant.

But the book isn't just about Black America. Actually the title subject occupies only the first essay, with subsequent chapters devoted to matters such as the success of German immigrants throughout the world (in places as diverse as Russia, Australia, Brazil and the U.S.), a history of slavery (basically the fact that slavery was practised in the U.S. is unremarkable -- slavery has been found throughout the world. Indeed, the word "slave" is derived from Slav. What is more remarkable is the lengths the Western world went to end the practise -- such as fighting a bloody civil war in the U.S. -- while slavery persisted elsewhere in the world for much longer. Indeed, it didn't formally end in Saudi Arabia until 1962), and a chapter on Jews.

The point that is driven home over and over again is that culture matters. Some cultures are more successful than others. While perhaps obvious I think this is a point that some people resist. But who can really contest this? Can we not admit that a culture that allows a woman to vote is superior to one that burns women at the stake or endorses female circumcision?

If one accepts the massive role culture plays then to me it seems logical to raise another question: what is the real ability of government to shape culture and behavior? Take gun violence for example. Which is more logical: Japan has lower rates of gun violence because of its restrictive laws on gun possession or because of the cultural values of its citizens? If the U.S. and Japan were to switch systems of law would crimes committed with guns suddenly spike in Japan and recede in the U.S.?

Now, does that mean that government has a zero or negligible effect? No, of course not. But I would submit that the role of culture is plainly considerable. To continue with the gun control example, even though gun control is far tougher in Washington DC than Wyoming, where do you worry more about being a victim of gun violence? The problem isn't the laws, it's that Washington DC seems to have more people willing to use guns to commit violent acts. Can government effectively promote cultural values less prone to violence? The answer to me is not at all obvious. Plainly it can increase penalties on the use of violence, but how can government change the underlying culture?

Further, think about the implications of culture on the poverty debate. The fact that so many immigrants can come to the U.S. and make a successful life should raise some serious questions. Basically that people can arrive in another country, often without even speaking the language, and accumulate significant wealth indicates that poverty stems not from an inherently unfair system of laws or rules but from inferior cultural values. Indeed, when I read this book about welfare reform what constantly struck me was not how lazy welfare recipients were, but their consistently poor decision making. How can government ameliorate that? Is it even possible?

Seems to me that the best way to promote enhanced cultural values is through trade and interaction among cultures, with superior cultures/values replacing inferior ones. Sowell notes that both Japan and Scotland rapidly made the transition from backwards societies to modern ones by throwing off their old ways and seeking to learn from abroad (which is why allowing foreign students to study in the U.S. is so important). Isn't this the exact opposite of multiculturalism? Indeed, is it any coincidence that the success of various racial groups in the U.S. is seemingly inverse to their participation in racial and identity politics?

The price of "keeping it real."

Update: Related thoughts, especially on the poverty angle, here.