A Damaged Culture?  
Thursday, December 13, 2012
Daron Acemoglu and James Robinson

That’s what James Fallows said in his 1987 article in The Atlantic was the problem with the Philippines. According to this hypothesis the difference between the Philippines and South Korea in 1960, say, was that the former had a bad culture, while the latter had a good one, or at least one that was consistent with economic growth. For every country that is poor, there is normally a commonly cited cultural explanation of why it is poor, resting on some dysfunctional aspect of national character or religion, and Philippines is no exception to the rule. Therefore, let’s take the bull by the horns and get this explanation out of the way.

Fallows starts his argument by stating:

The countries that surround the Philippines have become the world’s most famous showcases for the impact of culture on economic development. Japan, Korea, Taiwan, Hong Kong, Singapore—all are short on natural resources, but all (as their officials never stop telling you) have clawed their way up through hard study and hard work. Unfortunately for its people, the Philippines illustrates the contrary: that culture can make a naturally rich country poor.

Yes it is right that people in Japan, for example, study and work hard. But the economic growth of Japan was certainly not due to culture. As we note in Why Nations Fail, Japan was a very poor feudal society lacking a modern state until the 1860s when a political revolution created new institutions that set it on the path to modern economic growth.

This growth was in fact relatively modest until after World War II. Then in the wake of military defeat and the US occupation, Japanese society shifted in a radically more inclusive direction. There was agrarian reform and the break up of the big industrial cartels, the Zaibatsus, and there was a new constitution that helped to create a much more inclusive political system. A broader distribution of political rights went along with a powerful central state whose famous agency, the MITI, played an important role in encouraging investment and steering the post war economic growth. Where is Japanese culture here?

Having asserted that East Asian success is due to good culture, Fallows goes on to argue:

It seems to me that the prospects for the Philippines are about as dismal as those for, say, South Korea are bright. In each case the basic explanation seems to be culture: in the one case a culture that brings out the productive best in the Koreans (or the Japanese, or now even the Thais), and in the other a culture that pulls many Filipinos toward their most self-destructive, self-defeating worst.

But have the prospects of South Korea always been bright as Fallows claims ? Were the economic prospects of North Korea, which shares the same Korean culture of course, not just as bright until the economy became enmeshed in collective ownership and central planning which destroyed incentives and opportunities? As we discuss in Why Nations Fail, this example is telling. North and South Korea had the same culture when they were divided but very different institutional structures were created in the South. It is of course not culture that explains South Korea’s success but institutions.

Fallows does approvingly quote the analysis of Benigno Aquino, whose assassination launched the People’s Power Movement in the 1980s which finally ousted Ferdinand Marcos in 1986 and whose son is the current president. It goes like this:

Here is a land in which a few are spectacularly rich while the masses remain abjectly poor… . Here is a land consecrated to democracy but run by an entrenched plutocracy. Here, too, are a people whose ambitions run high, but whose fulfillment is low and mainly restricted to the self-perpetuating elite.

This description of the problems of the Philippines could apply to any run-of-the-mill Latin American country, but how does culture come into the picture exactly?

In the end Fallows’ argument boils down to something remarkably like that proposed by Edward Banfield in his famous book about the south of Italy The Moral Basis of a Backward Society, which we briefly discussed in this post. Here is Fallows’ version:

Filipinos pride themselves on their lifelong loyalty to family, schoolmates, compadres, members of the same tribe, residents of the same barangay. … But when observing Filipino friendships I thought often of the Mafia families portrayed in The Godfather: total devotion to those within the circle, total war on those outside. Because the boundaries of decedent treatment are limited to the family or tribe, they exclude at least 90 percent of the people in the country. And because of this fragmentation—this lack of nationalism—people treat each other worse in the Philippines than in any other Asian country I have seen.

He goes on to give examples of how Filipinos fail to care about any public goods, throw their food wrappers in the street and refuse to cooperate to the benefit of society.

It is a bit hard for us, though, to see how this adds up to a cultural theory of what Benigno Aquino was pointing out.

Fallows does argue that these cultural traits were intensified by Spanish and US colonial rule, and the sense of “dependency” and passivity that they inculcated. Yet it is a bit of a mystery how exactly dependence is related to the family-centric behavior he noted above.

In reality everyone in every country of the world trusts their family more than people outside their family. As Victor Nee and Sonja Opper show in their recent book Capitalism from Below, the great manufacturing boom that started in China in the 1980s was primarily driven by the private sector. The Communist Party did not provide institutions, so Chinese entrepreneurs built them themselves, for example by using reputation and existing trust relationships to enforce contracts. But contracts are easier to enforce with your kin and it is easier to lend money and be sure you’ll get it back if you lend to kin. Thus strong kin relations did not inhibit this crucial stage of Chinese capitalism, they facilitated it.

As for littering, standard economics suggests that individuals are very bad at efficiently dealing with public goods or public bads, which is where the state comes in. The Philippines certainly has had a very different state than Japan and South Korea, and as we will argue in our next post, this seems a much more plausible part of a convincing story of the path of economic development in the Philippines than building it all (or attempting to   build it all) on culture.

There undoubtedly are cultural differences between the Filipinos and the Japanese, for instance. But the striking thing about Japan is how it modernized while preserving its rich and unique culture. Our guess is that the Philippines can do the same.

Article originally appeared on Why Nations Fail by Daron Acemoglu and James Robinson (http://whynationsfail.com/).
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