Cultural Matter

The anthropological and cultural heritage of a people greatly influences its approach to social and economic institutions, consumption, savings, entrepreneurship, individual determination and achievements that ultimately determine the nature and degree of economic development.

Samuel Huntington begins his edited collection of essays, titled Culture Matters (2000: xiii-xv), by briefly presenting the cases of Ghana and South Korea. He points out how in the early 1960s the two countries had very similar economies. “Thirty years later,” Huntington (2000: xiii) observes, “South Korea had become an industrial giant […] on its way to the consolidation of democratic institutions.” Moreover, he argues that “[u]ndoubtedly, many factors played a role, but it seemed … that culture had to be a large part of the explanation.”

Culture and its relevance in economic development have been a topic of scholarly debate for the last few decades. After a decline, in the 1960s and 1970s, interest in culture as an explanatory variable began to revive in the 1980s. In this revival, one major contribution was made by Lawrence Harrison, former USAID official, who in 1985 published Underdevelopment Is a State of Mind: The Latin American Case.

In the scholarly world, a discussion has been emerging between (i) those who see culture as a major – although not the only – influence on social, political, and economic actions; and (ii) those who adhere to universal explanations, such as material self-interest among the economists, or supporters of rational choice among political scientists.

From the camp of those who do not recognize a significant role to culture in explaining economic growth is Jeffrey Sachs. He points out, in Notes on a New Sociology of Economic Development (in Harrison and Huntington 2000: 30-31), how in neoclassical economics “development is really not much of a challenge. Market institutions are a given. […] Neoclassical economics … has an ingrained optimism about the prospects for economic convergence … [such an optimism] is sustained by the view that flawed economic institutions will be swept away by institutional competition or through public choice.” In this light, Sachs (2000: 42-43) contends that the cultural explanation of economic performances may be helpful in some instances, but “such explanation should also be tested against a framework that allows for other dimensions of society (geography, politics, economics) to play their role.” The argument expressed here is that controlling for such variables could sharply reduce “the scope for an important independent role of culture” (Sachs 2000: 43).

The debate among scholars engaged in the importance that culture has in development can accurately be summarized by the following questions: “To what extent do cultural factors shape economic and political development? If they do, how can cultural obstacles to economic and political development be removed or changed so as to facilitate progress?” (Harris and Huntington 2000: xiv). The underlining assumption – especially of the latter question – is an understanding of culture as a hindrance to a de-contextualized and a-historical development process, which should unfold itself universally over time.

One other possible way to view culture is as an element of long-term sustainability of economic development. In this light, a given economic order is not to be defined as an “abstract social mechanism,” but as an expression of a “concrete historical community” (Ricoeur 1991: 326). If there are indeed features of the homo economicus inherent in general human dynamics these are enriched by different cultural aspects. The larger scope of my research aims at demonstrating that culture is a sine qua non conditio to the long-term sustainability of economic development.

Moreover, making culture a legitimate dimension in development shifts the focus of the debate from economic growth to economic development. The close link between economic growth and economic development has been described by Amartya Sen (1999: 12) as being at the same time “a matter of importance as well as a source of considerable confusion.” Since an expansion of wealth will make a contribution to the standard of living of the people in question, “[i]t was [thus] entirely natural that the early writings in development economics … concentrated to a great extent on ways of achieving economic growth,” Sen (1999: 12) continues . The process of economic development cannot abstract from expanding the supply of food, clothing, housing, medical services, educational facilities, and from transforming the productive structure of the economy. These changes are matters of economic growth.

The importance of growth depends on the nature of the chosen variable – i.e. GDP or other related indicators – whose expansion is considered as growth. The crucial issue then becomes, as Sen (1999: 13) points out, not the “time-dimensional focus of growth, but the salience and reach of GNP … on which usual measures of growth concentrate.” In drawing a distinction between development and growth, several are the points of difference between the two domains.
First, insofar as economic development is concerned with GDP per capita, it leaves out the question of the distribution of wealth. Noting this type of possibility does not question the relevance of income considerations as such, but argues against taking only an aggregated view of incomes.

Second, another source of difference between growth and development relates to the question of externalities and non-marketability. The GDP captures only those means of well-being that are transacted in the market. This leaves out benefits and costs that are not marketable. The importance of what is left out has become increasingly recognized in terms, for instance, of natural environment, natural resources, and social environment (Dasgupta and Heal 1979; Dasgupta 1982; Hirschman 1958, 1971).

Third, even when markets do exist the valuation of commodities in the gross national product will reflect the biases that the markets may have and so causing problems in dealing with different relative prices in different parts of the world. Finally, Sen (1999: 15) posits that GDP, in fact, represents “a measure of the amount of the means of well-being that people have, and it does not tell us what the people involved are succeeding in getting out of these means, given their ends.”