Many commentators have tried to evaluate the importance of culture in determining national economic success. Fukuyama claims to have identified the key, performance-determining, aspect of national culture, namely, the level of trust present in a society. He maintains that culture is of critical importance to everyday economic life and that only high trust societies can create the kind of large scale business enterprises that are needed to compete in today's global economy.
The culturalist view of history attributes the success of Japan and later of other East Asian countries such as China, Hong Kong, Malaysia, Singapore, South Korea and Taiwan to their common Confucian traditions and their concomitant cultural characteristics. However, the traditional drawing of distinctions between Eastern and Western cultures is seen as too simplistic by Fukuyama, who points out the many differences inherent in East Asian societies. He points out not only the differences between Japan and China, but also those between China and Chinese societies abroad such as Taiwan and Hong Kong. This attention to detail and depth of analysis is one of the strengths of Fukuyama's study.
To date, the debate on this topic has centred around culturalist explanations of the economic success of the Asia-Pacific Region, but Fukuyama has gone further by attempting to apply his thesis to all developed economies; Chinese, European, North American, Japanese and former communist. Fukuyama, following Weber, sees the earlier economic success of Western Europe as culturally determined, namely as a logical result of the Protestant work ethic.
Fukuyama sees three types of trust; the first is based on the family, the second on voluntary associations outside the family, and the third is the state. Each of these has a corresponding form of economic organisation; the family business, the professionally managed corporation and the state-owned enterprise, respectively. Societies in which family ties are strong (and thus ties outside the family relatively weak) have great difficulty creating large professionally managed corporations and look to the state to perform this critical economic function. Societies with high levels of trust, and many voluntary associations can create large economic organisations without state support. Fukuyama cites China, Italy, France and South Korea as societies with a strong role for the family and weak voluntary associations, while Japan, the United States, and Germany are said to have strong and plentiful associations beyond the family. The detail with which Fukuyama supports each of these examples is truly impressive and betrays the depth of research that undoubtedly went into writing this book.
Overall Trust: The Social Virtues and the Creation of Prosperity has to be considered a highly original work which has and will continue to raise significant interest. While many will dispute Fukuyama's main contention that significant comparative advantages arise from differences in levels of trust between countries, he offers a great deal of evidence to support an argument which is certainly correct at an intuitive level.
I found this book to be quite fascinating. I must admit that I am not an expert on economics, but I found the author's arguments quite convincing. His examination of various countries explained a lot of things that I have noticed before, but he succeeds in putting it all into a whole new paradigm. I highly enjoyed this though-provoking book, and recommend it to everyone!
The author claims in his chapter, Friction-Free Economies, that it is necessary to turn to a cultural characteristic like spontaneous sociability to explain the existence of large-scale corporations in an economy, or prosperity more generally. The question of spontaneous sociability is particularly important because we cannot take the older ethical habits for granted. A rich and complex civil society does not arise inevitably out of the logic of the advance of industrialization. On the contrary, Japan, Germany, and the United States became the world¡¯s leading industrial leaders in large part because they had healthy endowments of social capital and spontaneous sociability, and not vice versa. Also, the author emphasizes on the economic function of trust and spontaneous sociability. If we presume that if legal institutions exist, the presence of a high degree of trust as an additional condition of economic relations can increase economic efficiency by reducing what economists call transaction costs, incurred by activities like finding the appropriate buyer or seller, negotiating a contract, complying with government regulations and enforcing contracts.
In conclusion, traditional sociability can be said to be loyalty to older, long-established social groups. By contrast, spontaneous sociability is the ability to come together and cohere in new groups, and to thrive in innovative organizational settings. Spontaneous sociability is likely to be helpful from an economic standpoint only if it is used to build wealth-creating economic organization. Traditional sociability, on the other hand, can frequently be an obstacle to growth.
Critique 1:
In the article, the writer talks about the free rider problem. It is said that when a country which has communal solidarity, people will get resources without contributing to society as much as others. The solution, suggested by the writer, is to designate the work in unit base. And, the writer cited a successful example of Mao¡¯s policy, a famous Chinese leader, towards peasants. However, nowadays, it seems that it is more difficult to prevent such problems as the relationship between people become more and more indispensable. It is difficult to delimit the job by unit clearly as what was done in agricultural society in the past.
Moreover, there is no perfect government policy in the world as it is impossible to balance all the interests equally among people. For example, the free rider phenomenon is serious in some countries. In some cases in Hong Kong, the free riders are getting the government¡¯s subsidy without contributing to the society. Especially, during the economic depression, people are in hard time and the government tries to help them by providing subsidy to the public. However, in some cases, the subsidy fund for a family provided by the government is similar to the salary during an economic depression. Therefore, many people select not to work which can be said to be a kind of free rider. Even through it is known by the government, it is unpreventable. Therefore, nowadays, the free rider problem is not easy to combat with.
Critique 2:
In this article, author mentions about the economic function of trust and spontaneous sociability. It is right that a high degree of trust can increase economic efficiency and reduce transaction costs comparatively. But, in my point of view, it doesn¡¯t mean the companies can get great benefit and guarantee from the high degree of trust, their gains are very limited. In economic activities, we should take a minimal level of trust and honesty for every economic partner, even the companies which have good relation and cooperative experience with us. Business is business. When you choose high trust in appearance, actually, you are also taking high risk in disappearance stealthily. Because all the economic activities only focus on one goal-benefits.
As the author mentions, societies manifesting a high degree of communal solidarity and shared moral value should be more economically efficient than their more individualistic counterparts. This is due to the ¡°free riders¡± problem. This kind of problems cannot be avoided. The greater organizations become, the greater the tendency of ¡°free rider¡± is. Why it happens? One reason is those organizations¡¯ benefits or efforts are most influence or control, and in the organizations, his or her individual benefits or efforts are ignored. We can see, in a small group, because the group members are highly dependent on one another, and, also when a single partner slack off, which will be noticed immediately by colleagues. So, I think, it needs kinds of high degree of trust and solidarity in a group. Moreover, it would be helpful to put the organization and an individual interest together, create member¡¯s self-motive, and enact proper roles are also good methods to limit free rider in the group.