But there is a missing twenty percent of human behavior about which neoclassical economics can give only a poor account. As Adam Smith well understood, economic life is deeply embedded in social life, and it cannot be understood apart from the customs, morals, and habits of the society in which it occurs.
In short, it cannot be divorced from culture. Consequently, we have been ill served by contemporary economic debates that fail to take account of these cultural factors. Fukuyama begins with a general argument about the importance of cultural factors in economic growth. He concentrates on the specific factor of trust, which he defines as "the expectation Rather, acquisition of social capital "requires habituation to the moral norms of a community and the acquisition of virtues like loyalty, honesty and dependability.
Continuing, Fukuyama explores the development and expression of trust in different countries, grouping them into low-trust China, Italy, France and Korea and high-trust Japan and Germany categories.
The United States is also classified as high-trust, but merits a section by itself. These detailed examinations of specific societies and cultures comprise the bulk of the book. And whether or not readers buy Fukuyama's central thesis, they will find these sections to be masterful analyses based on detailed knowledge of the societies involved. Fukuyama directly challenges neo-mercantilists such as James Fallows and Lester Thurow who argue that Asian economies are somehow fundamentally different from Western ones and who imply that all Asian societies are essentially alike in their Confucian values.
He contrasts China's Confucian society, where the family is paramount but there are few viable institutions between the family and the state, with another Confucian society, Japan, where many such intermediate institutions sprang up a century or more ago.
This cultural ability to form non-family, non-government organizations, he argues, is key to the formation of successful, large, modern business organizations. Moreover, a high level of trust in a society facilitates productive activity for all sizes of organizations by reducing risk and the need to expend resources accumulating information about business counterparts. Trust within organizations fosters cooperative work in teams and thus creative feedback and innovation. But, Fukuyama argues, trust and other cultural virtues can be destroyed more easily than created.
Large centralized governments destroy those intermediate institutions between the family and the state and hence destroy trust. The French Revolution and Napoleon's dictatorship destroyed many such institutions; hence France's poor performance in industry and technological innovation relative to other societies in which such institutions survived.
Furthermore, beliefs and practices that are extreme in emphasizing the individual rather than the group also destroy intermediate institutions and trust. In the United States, the school of scientific management pioneered early in this century by Frederick W. Taylor reduced workers to interchangeable receivers of instructions and stifled the sort of bottom-up contributions of innovation that had thrived in earlier workplaces and that was never extinguished in Japan.
In castingideology aside, Fukuyamais thus setting himself free to gaze directlyupon the real world, and, for the most part,he demonstratesa good understandingof thatworld. The irony is that in doing so he also demonstratesjust why it is that philosophy is far from dead. Fukuyama'spracticalargumentis both straightforwardand reasonable: economic performancewill be greatly aided where a high degree of trust exists in civil society-that is, in nonfamilial,nonstaterelations.
In societies with overly strong family bonds, or where Catholicismor communismhas been strong,individualshave difficultyformingthe social bonds that could lead to efficient micro-economic relationships. Lacking an ability for "spontaneoussociability,"these societiesfall prey eitherto the inefficiencies of nepotismor to the transactioncosts inherentin contractsand formalrules.
Where trust exists between employees and employers,between executives and their nonfamily managers, and between suppliers and producers, informaland low cost arrangementsprevail. In the course of the argument,Fukuyamatakes us on a tour of Japan, Germany,the U. Along the way we examine everythingfrom sharecroppingin centralItaly to the structureof the Japanesekeiretsu.
Indeed,his commandof each culture is impressive enough to forgive both the odd generalization such as his insistencethatwe may speakof a "relativelyhomogeneousChineseeconomic culture" p. Even his highly debatablecentralclaim that prosperitycan be measuredby the size of firms large corporatestructuresare taken as evidence of an ability to move spontaneouslybeyond familyowned enterprises does little This content downloaded from Fukuyamacovershis bases well, admittingthat other factors such as inheritancelaws, education, entrepreneurialspirit, government dependence,and perfectionism,as well as "the kinds of issues studied by mainstream economists," all play as important a role in determiningprosperityas does trust.
It is just that those factorshave been commonly recognized, while trust has been largely regardedas a cultural anachronismof no consequenceto the modern marketworld. Fukuyama's contentionis that far frombecoming irrelevantwith the advent of contract, trustingsocial relationsgo a long way towardmakingcontractswork.
None of this, Fukuyamavigorously asserts,should be confused with a romanticplea for the returnto the halcyon days of precapitalisttraditions and communities. Thereis no turningbackfrom the end of history,afterall. No, "liberaldemocracyand capitalismremainthe essential,indeed the only, frameworkfor the politicaland economicorganizationof modernsocieties" p. It is not just that they work; the theory is sound as well: "we can think of neoclassicaleconomicsas being, say, eighty percentcorrect" p.
Fukuyama'sclaim is thatfor all of its abilities,the marketcould still do with a little help from precapitalistcultural remnants. Herein lies the problem however, for such an argumentnot only underestimatesthe ability of the market'sown culture to destroy traditionalpatternsof trust,it also ignores the ethical questions thatsuch destructionbegs.
Fukuyama does recognize that the marketplays a role in the break- down of trust and social solidarity,pointing out on two occasionsthe effect that Schumpeteriancreative destructionhas on human relations. This ad- mission is qualifiedhowever, for he contends that this destructionis "only part of the story," as there exist "degrees of freedom in how capitalist societies can be organized" p. In otherwords, Marx'scash nexus does not set the limits of the capitalistimagination.
With this in mind, Fukuyama defends a workplacethat, if not democratic,is at least a long way from the horrorsof Wigan Pier. He even goes so far as to argue that "managerswho hope to get loyalty, flexibility, and cooperativenessout of their workers without giving anythingin return The question is whether Fukuyamareally means "exploitative,"which carriesa nasty normativeconnotation,or whether"stupid"was the word he was looking for.
The statementis an odd one coming from someone who is supposed to be making a prudential rather than a moral argument. It amounts to a telling slip, however, for it points to Fukuyama'sreluctanceto push the logic of his own argument.
If benevolentpaternalismis betterthan old style Taylorism,then why, from the standpointof trust,would we not see democraticlabor relationsas being better still? And if this is the case, then why, again in the name of trust, would we feel any special need to defend the marketat all?
The trickto these questionsis to see thatFukuyamais not arguingin the name of trust. This point brings us to the heart of what is wrong with this book: namely, that it presents an inversion of virtues that only the market itself could create. In Fukuyama'sworld, trust is subservient to market efficiency:if we trust we will prosper and if we do not, the loss is to be measured in financial, not moral, terms.
Yet surely there is a difference between promotingtrustas a means to a successfulmarriageor a successful This content downloaded from In the former cases, trustis a means to ends which are defined largelyin termsof trust,and hence to speak of it instrumentallydoes it no violence. In the lattercase, trust is at the serviceof relationshipsin whose internallogic trustplays no part. In fact, one could argue that, analyticallyand historically,it is distrustthat is and has been an intrinsicpartof marketrelations.
It may be true that many successful marketactorshave managed to look beyond Tayloritemanage- ment principles,yet this does not mean thatprogressivelaborpracticesnow define marketculture'spredominantmodusvivendi.
If they did, statements such as "workersusually find their workplacesmore satisfying if they are treatedlike adults Consider, for example, the business climate into which this book is being introduced. Wealthin the society that Fukuyamalauds for its high- trust quality the U. It is here that working men and women watch as every layoff produces another surge in the Dow Jones.
What or whom, exactly, is one to trust here?
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