Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism

development. Let me mention the most important ones.

Confucianism discourages people from taking up professions like business and engineering that are necessary for economic development. At the pinnacle of the traditional Confucian social system were scholar- bureaucrats. They formed the ruling class, together with the professional soldiers, who were second-class rulers. This ruling class presides over a hierarchy of commoners made up of peasants, artisans and merchants, in that order (below them were slaves). But there was a fundamental divide between the peasantry and the other subordinate classes. At least in theory, individual peasants could gain entry into the ruling class if they passed the competitive civil service examination (and they occasionally did). Artisans and merchants, however, were not even allowed to sit for the examination.

To make matters worse, the civil service examination only tested people for their scholastic knowledge of the Confucian classics, which made the ruling class scornful of practical knowledge. In the 18th century, Korean Confucian politicians slaughtered rival factions in a row over how long the king should wear mourning following his mother’s death (one year or three years?). Scholar-bureaucrats were supposed to live in ‘clean poverty’ (although the practice was often different) and thus they actively looked down upon money-making. In the modern setting, Confucian culture encourages talented people to study law or economics in order to become bureaucrats, rather than engineers (artisans) or businessmen (merchants) – occupations that contribute much more directly to economic development.

Confucianism also discourages creativity and entrepreneurship. It has a rigid social hierarchy and, as I have noted, prevents certain segments of society (artisans, merchants) from moving upwards. This rigid hierarchy is sustained by an emphasis on loyalty to superiors and deference to authority, which breeds conformism and stifles creativity. The cultural stereotype of East Asians being good at mechanical things that do not need much creativity has a basis in this aspect of Confucianism.

Confucianism, it can also be argued, hampers the rule of law.Many people, particularly neo-liberals, believe that the rule of law is crucial for economic development, because it is the ultimate guarantor against arbitrary expropriation of property by rulers.Without the rule of law, it is said, there can be no security of property rights, which, in turn, will make people reluctant to invest and create wealth. Confucianism may not encourage arbitrary rule, but it is true that it does not like the rule of law, which it regards as ineffectual, as seen in the following famous passage from Confucius: ‘If the people be led by laws, and uniformity sought to be given them by punishments, they will try to avoid the punishment, but have no sense of shame. If they be led by virtue, and uniformity sought to be given them by the rules of propriety, they will have the sense of shame, and moreover will become good.’ I agree.With strict legal sanctions, people will abide by the law out of fear of punishment, but too much emphasis on law can make them feel that they are not trusted as moral actors.Without that trust, people will not go that extra mile that makes their behaviour moral and not just law- abiding. Having said all this, however, it cannot be denied that Confucian denigration of the rule of law makes the system vulnerable to arbitrary rule – for what do you do when your ruler is not virtuous?

So which is an accurate portrait of Confucianism? A culture that values ‘thrift, investment, hard work, education, organization, and discipline’, as Huntington put it in relation to South Korea, or a culture that disparages practical pursuits, discourages entrepreneurship and retards the rule of law?

Both are right, except that the first singles out only those elements that are good for economic development and the second only the bad. In fact, creating a one-sided view of Confucianism does not even have to involve selecting different elements. The same cultural element can be interpreted as having positive or negative implications, depending on the result you seek. The best example is loyalty. As I mentioned above, some people think that the emphasis on loyalty is what makes the Japanese variety of Confucianism more suited to economic development than other varieties. Other people judge the emphasis on loyalty to be exactly what is wrong with Confucianism, since it stifles independent thinking and thus innovation.

It is not just Confucianism, however, that has a split personality like the protagonist in Robert Louis Stevenson’s Dr Jekyll and Mr Hyde. We can perform the same exercise with any culture’s belief system. Take the case of Islam.

Muslim culture is today considered by many to hold back economic development. Its intolerance of diversity discourages entrepreneurship and creativity. Its fixation on the afterlife makes believers less interested in worldly things, like wealth accumulation and productivity growth.[23] The limits on what women are allowed to do not only wastes the talents of half the population but also lowers the likely quality of the future labour force; poorly educated mothers provide poor nutrition and little educational help to their children, thereby diminishing their achievements at school. The ‘militaristic’ tendency (exemplified by the concept of jihad, or holy war, against the infidels) glorifies making war, not money. In short, a perfect Mr Hyde.

Alternatively, we could say that, unlike many other cultures, Muslim culture does not have a fixed social hierarchy (which is why many low caste Hindus have converted to Islam in South Asia). Therefore, people who work hard and creatively are rewarded. Moreover, unlike in the Confucian hierarchy, there is no disdain for industrial or business activities. Muhammad, the Prophet, was a merchant himself. And being a merchant’s religion, Islam has a highly developed sense of contracts – even at wedding ceremonies, marriage contracts are signed. This orientation encourages the rule of law and justice[24] – Muslim countries had trained judges hundreds of years before Christian countries. There is also an emphasis on rational thinking and learning – the Prophet notably said that ‘the ink of the scholar is more sacred than the blood of the martyr’. This is one of the reasons why the Arab world once led the world in mathematics, science and medicine. What is more, although there are conflicting interpretations of the Koran, there is no question that, in practice, most pre-modern Muslim societies were far more tolerant than Christian societies – after all, this is why many Iberian Jews escaped to the Ottoman Empire after the Christian reconquista of Spain in 1492.

Such are the roots of the Dr Jekyll picture of Muslim culture: it encourages social mobility and entrepreneurship, respects commerce, has a contractual frame of mind, emphasizes rational thinking, and is tolerant of diversity and thus creativity.

This Jekyll-and-Hyde exercise of ours shows that there is no culture that is either unequivocally good or bad for economic development. Everything depends on what people do with the ‘raw material’ of their culture. Positive elements may predominate, or negative ones. Two societies at different points in time or located in different geographical locations, and working with the same raw material (Islam, Confucianism or Christianity), can produce, and have produced, markedly different behavioural patterns.

Not being able to see this, culture-based explanations for economic development have usually been little more than ex post facto justifications based on a 20/20 hindsight vision. So, in the early days of capitalism, when most economically successful countries happened to be Protestant Christian, many people argued that Protestantism was uniquely suited to economic development. When Catholic France, Italy, Austria and southern Germany developed rapidly, particularly after the Second World War, Christianity, rather than Protestantism, became the magic culture. Until Japan became rich, many people thought East Asia had not developed because of Confucianism. But when Japan succeeded, this thesis was revised to say that Japan was developing so fast because its unique form of Confucianism emphasized co-operation over individual edification, which the Chinese and Korean versions allegedly valued more highly. And then Hong Kong, Singapore, Taiwan and Korea also started doing well, so this judgement about the different varieties of Confucianism was forgotten. Indeed, Confucianism as a whole suddenly became the best culture for development because it emphasized hard work, saving, education and submission to authority. Today, when we see Muslim Malaysia and Indonesia, Buddhist Thailand and even Hindu India doing well economically, we can soon expect to encounter new theories that will trumpet how uniquely all these cultures are suited for economic development (and how their authors have known about it all along).

Lazy Japanese and thieving Germans

So far, I have shown how difficult it is to define cultures and to understand their complexities, let alone finding some kind of ideal culture for economic development. But, if defining culture is difficult, trying to explain something else (say, economic development) in terms of it seems to be an exercise fraught with even greater problems.

All this is not to deny that how people behave makes a difference to economic development. But the point is that people’s behaviour is not determined by culture. Moreover, cultures change; so it is wrong to treat culture as