Capitalism on a collision course with culture

By Robert Samuelson

THE World Bank recently issued a massive report on global poverty.

The aim seems to have been to demonstrate that big reductions are possible, but it gives just the opposite impression: Large parts of the world seem impervious to sustained, rapid economic growth; globalisation's reach is limited.

The question of why will preoccupy the economic and finance ministers now gathering in Prague for the annual meetings of the World Bank and International Monetary Fund (IMF).

Plenty of countries have dramatically reduced poverty. Consider China. Since 1980, its economy has grown about 10 per cent a year. By the World Bank's count, the number of desperately poor (defined as those living on US$1 a day or less) has dropped by more than 200 million since 1978.

The frustration is that so many other countries can't do the same. The World Bank report contains one stunning table that illustrates the problem. It shows poverty changes in different regions between 1987 and 1998.

The table qualifies the glowing claims for globalisation. Trade, technology and pro-market economic policies are supposedly beating back poverty. Not yet. The World Bank figures that 1.2 billion people live on US$1 a day or less.

Outside East Asia, little progress occurred in the past decade. The advances in Asia came despite the region's 1997-98 financial crisis that hurt some countries (Indonesia, most notably).

Indeed, the figures actually make things look better than they are.

In South Asia (India, Pakistan, Bangladesh), the share of people in poverty dropped slightly. But population growth meant that the number of people in poverty rose almost 50 million. And, in the former Soviet bloc (not shown), the share of people in poverty rose from less than 1 per cent to 5 per cent.

What happened? Globalisation's opponents say that the benefits of growth didn't flow to the poorest of the poor: Greedy multinational companies and corrupt local elites are grabbing all the gains. This sounds good but is untrue.

The World Bank concludes: "In the vast majority of cases, growth led to rising consumption in the poorest fifth of the population, while economic decline led to falling consumption."

This is common sense. To cut poverty, countries have to get richer -- and the effects do trickle down.

Globalisation's boosters claim it's been stymied: Too many countries abstained from reforms -- or botched them. True. Africa largely missed the process. In Russia, the dismantling of the command-and-control economy enriched local elites through corrupt "privatisation" programmes.

But these facts beg the basic questions. Why did some countries reject reforms? Why did they fail elsewhere? Much of Latin America, for example, abandoned trade protectionism and favouritism for local companies. Between 1985 and 1996, average tariffs fell from 50 per cent to 10 per cent. The results have been modest.

What explains the contrasts? Perhaps culture. The gospel of capitalism presumes that human nature is constant. Given the proper incentives -- the ability to profit from hard work and risk taking -- people will strive.

Maybe not. In a recent book entitled Culture Matters: How Values Shape Human Progress, scholars from the United States, Africa and Latin America argue that strong social or moral values predispose some peoples for and against economic growth.

As a result of history, tradition, religion, some societies can't easily adopt capitalist attitudes and institutions.

Even when they try, they often fail because it's so unnatural.

"Competition is central to the success of enterprise, the politician, the intellectual (and) the professional," writes Mariano Grondona, an Argentine political scientist and columnist. "In resistant societies, competition is condemned as a form of aggression."

Daniel Etounga-Manguelle of Cameroon contends that Africa suffers from a reverence for its history.

"In traditional African society, which exalts the glorious past of ancestors through tales and fables, nothing is done to prepare for the future," he writes.

Once stated, culture's impact seems obvious.

Yet, caveats apply. Culture, though deep, is not immutable. It's changed by experience. Since the late 1980s, India has gradually shifted from protectionism and state control towards pro-market policies. It has raised annual economic growth to about 6 per cent.

Nicholas Stern, chief economist of the World Bank, expects this will soon produce noticeable drops in poverty.

No one likes to talk about culture, because it raises two contradictory objections. The first is that the West (mainly the US) is foisting its values on others in the name of economic growth.

The second is that some cultures perpetuate economic inferiority or poverty.

But culture will not vanish because it's inconvenient. It's constantly colliding with rampant global capitalism.

This is a defining conflict of the new century. -- Washington Post Writers Group

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