The New Wealth of Nations

By Richard Lamm
Volume 2, Number 2 (Winter 1991-1992)
Issue theme: "Getting past the immigration taboo - an international perspective"

I have just returned from a trip around the world; a trip where among other things I explored why certain nations succeed brilliantly and other nations stumble along in poverty with marginal economies.

In previous travels to South America, I accepted the standard south-of-the-border excuse that its poverty and problems were caused by Yankee Imperialism. It sounded logical and was reinforced by my (then) orthodox liberalism that had to find victims and oppressors. Poor Mexico - so close to the United States, so far from God, spoke for all of South America.

I also assumed that this complaint was too universal, too passionate, not to contain truth. Likewise, Africans have for all essential purposes a single excuse for their poverty colonialism. They would have been successful countries but for European domination. All of this was reinforced in my mind and theirs by the US academic community. The dependency theory is the standard academic explanation and teaches that many of the developing countries are being held back and oppressed by the developed countries, and that their poverty can be largely explained by our wealth.

But time and experience made me at first skeptical, then antagonistic, to these explanations. I was greatly influenced by reading Larry Harrison's powerful book, Underdevelopment Is a State of Mind, where he brilliantly compares Argentina with Australia, Haiti with Barbados, and Nicaragua with Costa Rica. He postulates that failure is home-grown. Essentially updating Max Weber's he Protestant Ethic and the Spirit of Capitalism, Harrison shows how culture can either facilitate or get in the way of development. He went to Latin America with the U.S. Agency for International Development (AID), and acknowledges that economic development is a mix of many factors, but his thesis is that the single most important one - culture - is rarely discussed. I made his thesis my travel companion on a recent visit to Latin America, Africa, India and Asia, and found it immensely useful in explaining various levels of economic success and failure in those areas.

A new equation is slowly emerging that helps explain the wealth of nations a theory that emphasizes culture and values. Classic economic development theory looked at many factors in examining national power, but emphasizes the presence of natural resources. A country without iron ore, coal, oil, or substantial other natural resources could not become a modern economic power. A dated but classic economic study on Italy showed that while Rome once ruled the globe, in the modern economic world Italy did not have sufficient natural resources to become a major industrial power. By extension (though not covered in the study) Japan, Taiwan, and Hong Kong could never become major economic players. Wealth, when it was not plundered from someone else, was homegrown and created out of indigenous natural resources.

But Japan, South Korea, Taiwan and Hong Kong (and others) have shown us that it is the human resources that play the greatest role in economic development - not the natural resources. Nations poor in natural resources can substitute human resources for coal and iron ore and still become wealthy and prosperous. Renewable human skills are more important than the one-time inheritance of natural resources.

These new industrial models often import raw materials thousands of miles across oceans, turn them into goods and products and ship them back to the source of the natural resources where they are sold at a profit. Adding value to natural resources is much more profitable than producing the natural resources in the first place.

This new equation does not argue that human resources are everything. Obviously a collectivist system or totalitarian government can squelch even a skilled and motivated work force. North Korea's poverty flows from a flawed economic and political system - change those factors and I suggest North Korea will do well. East Germany differed from West Germany because of a dysfunctional political and economic system. But note that even communism cannot completely suppress German industriousness. East Germany had the most prosperous economy in the Eastern Bloc. China and Taiwan share the same cultural traits, but China is governed by a flawed economic and political concept that prevents it from duplicating Taiwan's success.

A handful of countries have such rich treasures of natural resources that they are wealthy by inheritance. Saudi Arabia, Kuwait, and United Arab Emirates did not earn or create their wealth. They inherited it. Their experience has little applicability elsewhere.

Economic development does not

take place in a vacuum. Human beings

are creatures whose behavior is

molded by culture, customs,

and the institutions built by the

culture into which they are born.

In the non-totalitarian world, I suggest, Larry Harrison has correctly articulated the underdiscussed and underrated factors in determining the success of nations culture, values, and attitudes. He is not alone. James Fallows in his book, More Like Us, observes In the long run habits, values, and the behavior of ordinary people determine national strength. Senator Patrick Moynihan similarly states that The central conservative truth is that it is culture, not politics, that determines the success of a society. The more I observe the world, the more these words make sense to me.

How do I use the word culture? Let us use George Stuart's definition in People and Places of the Past (1983) where he defines culture as the learned patterns of behavior that dictate how people organize themselves, what they believe, and the ways they make and do things. Or better, perhaps, is the classic definition of Sir Edward Burnett Tylor, the founder of modern anthropology Culture... is that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society. Culture is the learned' behavior that we acquire as a member of a society.

Economic development does not take place in a vacuum. Human beings are creatures whose behavior is molded by culture, customs, and the institutions built by the culture into which they are born. We build our buildings, said Winston Churchill, then they build us. Exactly! The mold which gives individual action a collective aspect are the working rules or culture.

This, then, is my thesis those cultures which stress education, delayed gratification, a work ethic, the acquisition of skills, etc. have an incredible advantage over those which do not. Those countries and cultures which have built institutions that recognize merit in advancement (what you know rather than who you know), political stability, and which instill in their people a desire for education and self-betterment are the countries that have succeeded in the new international marketplace. Success and performance are closely linked to attitudes and values. Understand the difference in attitudes and values and you will much better understand the difference in performance.

Culture is difficult to discuss in academic circles because it offends the liberal orthodoxy. Attacking a people's culture is thought to be as bad as attacking their race. We buy into cultural relativism in which all cultures are assumed to be equal. I suggest that all cultures deserve respect and understanding, but they are not all equal. It is not doing Africa a favor to reinforce the concept that the legacy of colonialism is holding it back. It is internal forces that the Africans must correct - not external factors. Tribalism in Africa better explains Africa's dilemma than colonialism, though the roots of poverty and wealth are multidimensional. But we do a grave injustice to our friends when we reinforce their excuses. Nations, like individuals, love to blame others for their faults. It's a human response. I believe, however, that nations in trouble will not get better until they admit the real nature of their problems and take responsibility for their own weaknesses.

Some will say I dramatically understate the negative effects of colonialism. Perhaps. Schopen-hauer wisely observed Every man confuses the limits of his mind for the limits of the world. But common sense tells me that colonialism is more of an excuse than an explanation. It excuses much; it explains little. If colonialism is to be blamed for most of Africa's ills, we should observe a similar impact wherever colonialism has put down roots. If colonialism is a dependent variable, then it must leave its nasty legacy wherever it has existed. Yet many countries have treated colonialism as a hurdle - not a barrier. They made use of the advantages of colonialism and were not defeated by the negatives.

European colonialism in Africa interrupted and disrupted traditional African societies; it exploited and divided tribes. In certain cases, like Portugal and Belgium, the colonizing countries were particularly brutal and cruel to the local people. Nowhere was colonialism without its abuses. On the other hand, colonialism also left Africa with incredible assets like better health, education, literacy, infrastructure, and whole economies that were developed by the colonialists and passed on to the newly independent nations. European colonialism in Africa was nowhere as harsh as Japanese and Chinese colonialism was in Korea, and in Africa it lasted 60 years; in Korea, hundreds of years. Yet South Korea left colonialism behind and has prospered.

Colonialism . . . is not the

dependent variable that influences

the success or failure of countries.

. . . Increasingly Africans are rejecting

the excuse of colonialism.

Korea's per capita GNP on 1961 stood at $82 (U.S.) - near the bottom of the international income scale. It had all the problems of a resource-poor, low income, developing country with the bulk of its population dependent on scarce farmland for bare subsistence, according to one standard guide book. Today Korea is universally recognized as an economic miracle. Why? Some say because the United States gave foreign aid. That's true, but it is of small importance. Korea's success is widely written about. Nowhere do I detect but passing mention of foreign aid being a principal or even an important factor. South Korea created its wealth; it helped itself far more than it was helped by others.

Africa has actually received far more foreign aid than Korea (in total dollars, not per capita), but Africa has little to show for it. Between 1960 and 1986, $166 billion was given to sub-Saharan Africa. But, as African writer Hilary Ng Wengo states in Plundered Eden

[Leaders in Africa] mismanaged economies, squandered national wealth and literally threw away the future of their people as they jostled with one another for personal power and gain.

Korea, on the other hand, leaped out of colonialism. What was its secret? Observers generally state the high rate of literacy; the motivation of the people and their ability to save, delay gratification, and build for the future.

Similar stories abound on other colonies and former colonies. Hong Kong is still a colony, and yet it produces more wealth than Zaire, Zimbabwe, Zambia, Malawi, Tanzania, Angola, Mozambique, and Botswana combined - despite the fact that Hong Kong has no natural resources and the above-named African countries are generally rich in them. Hong Kong does have a culture that stresses hard work, skills, and motivation. Singapore is a former British colony (like Kenya), and it had a colonial government longer than any in Africa. Today it is one of the most prosperous countries in the world. Singapore took what the British had left and added it to a rich culture that stressed education, and achieved meteoric success. Barbados is a former British colony peopled by the descendants of slaves who were uprooted from Africa and brought under unspeakable conditions to the New World. Yet 257,000 Barbados citizens create more wealth on 166 square miles than Free and Independent Liberia does with ten times as many people and no legacy of colonialism. Barbados adopted British culture and values.

Colonialism, therefore, is not the dependent variable that influences the success or failure of countries. It has not held back societies and cultures that had the ability and willingness to overcome the negatives and accent the positives. This is not to justify colonialism, only to accept it as a historical fact and seek to evaluate its consequences. Colonialism happened. The question that must be asked is are these countries better or worse off because of the colonial experience? Does it do much to explain Kenya's (and Africa's) current problems? I am very skeptical. It may have had a larger impact on Mozambique and Zaire because they had more brutal experience with it, but I doubt that it explains anywhere near as much as its proponents claim.

The values and attitudes that

people bring to a particular

experience are of overwhelming

importance. The same experience

that defeats one group,

inspires another to success.

Better a brutal truth than a well-meaning lie. We must, above all, be honest and candid in our evaluations. Increasingly Africans are rejecting the excuse of colonialism. Ali Mazrui in his book Cultural Forces in World Politics argues that African culture has taken the wrong things from the West

We borrowed the profit motive, but not the entrepreneurial spirit. We borrowed the acquisitive appetites of capitalism, but not the creative risk-taking. We are at home with Western gadgets, but are bewildered by Western workshops. We wear the wristwatches, but refuse to watch [them] for the culture of punctuality. We have learned to parade in display, but not to drill in discipline. The West's consumption patterns have arrived, but not necessarily the West's technique of production.

We owe our international neighbors our honest diagnosis. I believe that in the noncommunist world most countries have their present and future in their own hands, and have mostly themselves to blame for their deficiencies. South America is not poor because the United States is exploiting it (though we clearly have done that to some extent); it is poor because the people have what James Fallows calls a damaged culture. Tough words, I admit, but confirmed by the South Americans themselves. Carlos Rangel, a Venezuelan journalist, states

It was Latin America's destiny to be colonized by a country that, though admirable in many ways, was at the time beginning to reject the emerging spirit of modernism, and to build walls against the rise of rationalism, empiricism, and free thought - that is to say, against the very basis of the modern industrial and liberal revolution, and of capitalist economic development.

Rangel blames, not colonialism but, antisocial individualism, an aversion to work, and an affinity for violence and authoritarianism.

The principal variable that separates the success of Hong Kong and Taiwan from the poverty of Brazil and kenya is culture. The values and attitudes that people bring to a particular experience are of overwhelming importance. The same experience that defeats one group, inspires another to success. If your religion (your culture) teaches that if you rise above your caste you risk your soul and your status in your next life, your society will have less social mobility. You may well find more peace in such a society, and you likely will develop fewer ulcers, but it is counterproductive to what the developed world thinks of as human progress. It limits not only wealth and motivation, but individual creative capacity, literacy rates, and life expectancy. It is hard to write off these social accomplishments as merely Western materialism. Good health, low infant mortality, the ability to reach one's potential and to advance one's talents seem to become more important to all advanced societies.

We are all God's children, and every person and every culture deserves understanding and respect. But, as we search for why some have a high standard of living and others a low one, we must not avoid the examination of the cultural differences between societies. For when we ask why some countries and some people live in poverty and squalor, we must, with Shakespeare observe The fault, dear Brutus, lies not in the stars but in ourselves.

About the author

Richard D. Lamm served as governor of Colorado for 12 years, following 8 years in the

Colorado state legislature. Currently he directs the Center for Public Policy and

Contemporary Issues at the University of Denver. This essay is reprinted with permission

from Chronicles, October 1991.