Culture and Economic Development
by LAWRENCE E. HARRISON
December 4th, 2006
Since I was first involved in international development assistance, almost a half century ago, dominant development paradigms have come and gone, among them Rostow's stages of economic growth, national planning, focus on the poorest of the poor, appropriate technology, dependency, focus on the private sector, the Washington Consensus, and institutional development. During those fifty years we have witnessed a few success stories, largely in East and South Asia. But what most captures those years is a sense of disappointment, of frustration—of "development fatigue"—driven by the failure of the ...view middle of the document...
" How then would Easterly explain why, in multicultural countries where the economic opportunities and incentives are available to all, some ethnic or religious minorities do much better than majority populations, as in the case of the Chinese minorities in Indonesia, the Philippines, and Thailand—and any other place to which the Chinese have migrated, including the United States? Why has the Washington Consensus worked well in India and poorly in Latin America (with the exception of Chile), where socialism, and even authoritarian socialism in the cases of Cuba and Venezuela, appear to be alive and well? Cultural factors may not supply the whole explanation, but surely they are relevant.
Alan Greenspan got it right when he said, in the wake of the collapse of the Russian economy in the late 1990s. “I used to think that capitalism was human nature. But it isn’t at all. It’s culture.”
Some Culture-Sensitive Economists
Some economists have confronted culture and found it helpful in understanding economic development. Perhaps the broadest statement comes from the pen of David Landes: "Max Weber was right. If we learn anything from the history of economic development, it is that culture makes almost all the difference." Elaborating on Landes's theme, Japanese economist Yoshihara Kunio writes, "One reason Japan developed is that it had a culture suitable for it. The Japanese attached importance to (1) material pursuits; (2) hard work; (3) saving for the future; (4) investment in education; and (5) community values."
Even the culture-skeptic Jeffrey Sachs recognizes the influence of culture. His chapter in Culture Matters says, in essence, that culture doesn't matter. And while that theme echoes in his recent book The End of Poverty, at one point he also has this to say: "Even when governments are trying to advance their countries, the cultural environment may be an obstacle to development. Cultural or religious norms may block the role of women, for example, leaving half the population without economic or political rights…"
Italian economist Guido Tabellini recently undertook a study of comparative economic performance in European regions employing data from the World Values Survey concerning trust, control of one's destiny, and respect for others (all three of which turn out to be positively correlated with economic development), and obedience, which correlates negatively. His conclusions:
These cultural traits are strongly correlated not only with the economic development of European regions, but also with the economic development and institutional outcomes in a broad sample of countries…An implication of this analysis, therefore, is that there is no primacy of formal institutions over culture. On the contrary, both are likely to interact and to shape the actual functioning of real world institutions, and to influence the incentives and the behavior of economic and political agents. 
Moynihan and the Culture Matters Research...