Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor [Hardcover]

John Kay (Author)

Book Description

Publication Date: May 25, 2004

A witty and accessible tour de force that is immersed in the latest economic thinking, Culture and Prosperity is an indispensable guide to the world around us and destined to become a classic text for understanding the politics of globalization.

Guided by the belief that a combination of lightly regulated capitalism and liberal democracy -- the American business model -- is not just appropriate for America at the dawn of the twenty-first century, but a universal path to freedom and prosperity, the United States is an unrivaled colossus seeking to remake the world in its own image.

After a decade of successive market revolutions around the world, beginning with the collapse of the Berlin Wall and continuing in countries as diverse as Argentina and New Zealand, the effectiveness of the market economy as a route to prosperity and growth is not in question, but a more sophisticated appreciation of the strengths and limits of markets is urgently required.

In this new and illuminating analysis of the nature and evolution of the market economy, John Kay attacks the oversimplified account of its operation, contained in the American business model and favored by politicians and business people. He even questions whether it offers an accurate description of the success of the American economy itself.

In an absorbing argument that rewards close reading, and rereading, Culture and Prosperity examines every assumption we have about economic life from a refreshingly new angle. Taking the reader from the shores of Lake Zurich to the streets of Mumbai, from the flower market of San Remo to the sales rooms at Christie's, John Kay reveals the connection between a nation's social, political, and cultural context and its economic performance.

Editorial Reviews

From Publishers Weekly

Kay, an Oxford economist with a regular column in the Financial Times, tries to follow up on the success of Jared Diamond's Guns, Germs, and Steel, but falls short of the mark (not to mention being perhaps a few years too late). The historical examples used to illustrate basic economic principles lack pizzazz, and hypotheticals meant to reflect contemporary individuals are equally stiff. Kay largely forgoes cultural analysis in order to meticulously define the most fundamental rules of market economies in the sort of dry academic prose that spends as much time announcing the contents of upcoming chapters as it does on dealing with the subject at hand. Eventually, Kay comes around to the suggestion that markets are successful when they are buttressed by strong institutions working together in "disciplined pluralism," but he never quite explains why some cultures are able to achieve and sustain such conditions while others aren't. He also points out that these ideal economic conditions are at some variance with the "American business model" of self-interested players operating with little government interference or taxation, but this is neither a new nor original observation. Though closing chapters do make a compelling argument for the supremacy of microeconomic analysis over sweeping macroeconomic theories, that simply isn't enough to propel the book ahead of better competitors with a long head start.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

From Booklist

Kay, a British economist and columnist, offers insight into American economic life in relation to other economies. He contends that rich states, including the U.S., most European countries, Canada, and Japan, are the product of literally centuries of civil society, politics, and economic institutions all evolving together. He cites the lessons learned from the common characteristics of productive economies, which include the evolutionary development of market institutions, the need for these institutions to be integral to the social and political realities of the state, and pluralism (which he defines as the role of open debate and decentralized authority instead of central planning). We also learn what causes different levels of productivity in various countries; the fact that unrestrained greed and opportunism leads to poor countries, not rich ones; why the industrial revolution happened in Britain and not China; and why America is the showcase for capitalism and Russia currently is not. The author cautions, "markets work, but not always and not perfectly." Mary Whaley
Copyright © American Library Association. All rights reserved

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Product Details

• Hardcover: 432 pages
• Publisher: HarperBusiness; First Edition edition (May 25, 2004)
• Language: English
• ISBN-10: 0060587059
• ISBN-13: 978-0060587055
• Product Dimensions: 8.8 x 6.1 x 1.3 inches
• Shipping Weight: 1.5 pounds
• Average Customer Review: 4.3 out of 5 stars  See all reviews (18 customer reviews)
• Amazon Best Sellers Rank: #1,536,356 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

18 of 19 people found the following review helpful:

5.0 out of 5 stars Entertaining Look at the Limits of Free Market Economics, August 5, 2004

By 

Donald Mitchell "Jesus Loves You!" (Thanks for Providing My Reviews over 109,000 Helpful Votes Globally) - See all my reviews
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This review is from: Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor (Hardcover)

I am quite accustomed to having scholars in other fields point out the follies of most economic theories. Seldom have I seen the questioning sword come from an economist. The novelty was quite rewarding.

As Culture and Prosperity suggests, economics has a limited ability to predict and explain human behavior. Many other fields do better. One problem is that much economic analysis assumes what does not exist: everyone considers only economic factors in their decisions; perfect information exists; circumstances are in a stable state; and so forth. Many economists proudly proclaim that it doesn't matter whether or not their work predicts anything accurately or not. All that matters is that the math is correct.

In Culture and Prosperity, the nominal topic is explaining why people in some countries enjoy more prosperity than those in other countries. Actually, that subject takes up less than a quarter of the book. So if that's your main interest, you may find this book to be a little overkill.

To answer the question posed in the topic, you take a brief tour through the history of economic thought from Adam Smith through to the latest theorists and Nobel Prize winners in economics. If you find all of that more than you want to know, just pick up the argument in part five after reading the opening examples.

One of Professor Kay's strengths is that he uses interesting human examples to make his points. He also avoids math for those who find that challenging. Further, he minimizes the use of jargon. It's an unusually clear argument.

Essentially, he concludes that the driving forces in developing prosperity are division of labor (harking back to Adam Smith), more effective organizations (teams can do more than individuals), having individuals and companies make many decisions rather than relying on central planning (pluralism), and creating scarce talents that have value to many others (seeking economic rents). It also helps to have a culture that favors honesty, an interest in being productive, and other social values that are constructive. Many other items play some role.

But his basic points are important for governments: Give up on planning your economies -- seek to facilitate the conditions that lead to prosperity instead; Don't assume that the American way to prosperity can be dropped down into any country without the other characteristics of American society (the reasons why Russia has done poorly).

Professor Kay also has some valuable things to say about the problems for America with the American Business Model (greed is overtaking effectiveness for leaders) and the future of economics (economists need to rejoin the real world).

If you are an economist, you will probably find this book to be very elementary. If you took a single economics course, you will find this book approachable and an entertaining way to catch up on what's happened in the field since you studied it. If you have never taken economics, this book will teach you most of what you need to know about public policy with regard to economics.

Those who believe in efficient financial markets should be sure to read this book. You need to change your thinking!

Although this book will probably not be referred to as long as The Wealth of Nations, I hope that economists will learn from its arguments and style to make their work more helpful to the rest of us.

13 of 15 people found the following review helpful:

5.0 out of 5 stars Analysis of the intersection of culture and economic theory, June 16, 2004

By 

Harold McFarland (Florida) - See all my reviews
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This review is from: Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor (Hardcover)

The subtitle to this book describes the content succinctly - "Why Some Nations are Rich but Most Remain Poor". Author John Kay, a prominent British economist, postulates that one of the reasons is due to cultural factors. These cultural norms may both free and confine the society when it comes to prosperity. If international trade benefits both rich and poor countries then why do poor countries remain poor? In a brilliant exposition of economics he argues that it is not the free markets and constant search for materialistic acquisition that has made America prosperous but it is largely a factor of the various institutions we have in place. That is one reason why many countries have been unsuccessful in trying to emulate the American economic machine. If our success were based entirely on free markets then bringing them to other countries would allow them to prosper, but they often do not. If you were taught the traditional Adam Smith and Keynesian economic models you will be delighted with this additional perspective on the international market and why our models often don't work in other countries. By the same token the models that work in their cultures may not work at all in ours. A fascinating read and a fresh view of international economics, "Culture and Prosperity" is a highly recommended book.

8 of 9 people found the following review helpful:

5.0 out of 5 stars The mystery of prosperity, August 19, 2004

By 

B.Sudhakar Shenoy (India) - See all my reviews
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This review is from: Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor (Hardcover)

The title and the cover design of this book are extremely attractive. So are the introductory chapters that start with the description of the hypothesis based on the title. This evokes further interest and the soon we find ourselves reading topics that are a rare combination of economics, literature and culture.

There are examples of people in different continents whose income levels in dollar terms vary astronomically. Those who live in poor countries earn less despite good academic qualifications while even a not so educated farm worker in a rich country like Sweden is paid handsomely. The book attempts to solve this mystery.

There are only nineteen countries with a combined population of about 1 billion that are "rich". These countries spring back to prosperity within a short time even when they are flattened by bombs - Germany and Japan for example. It is interesting to note that these nineteen countries have many similarities - statistically atleast - in terms of economic policy, honesty of people, climate, etc. Switzerland tops this list. These "rich" countries are not dependent on their natural resources and have significant trade in value added products and services between them. The rest of the world is just not able to catch up. ( Even the oil kingdoms do not appear in the list of rich in terms of per capita GDP). The book goes on to explain that it is disciplined pluralism with a combination of economic, social and political institutions that is responsible for such success.


Let us then look at the "poor". Pakistan for example has nuclear weapons capability, but a weak public health care system. Can a nation boast of technology when people die from disease ?. This discussion goes on. The next logical step for poor countries would be to exactly replicate the policies of the rich as a quick and sure road to prosperity. Here the author feels that the process needs to evolve over long periods and cannot be transplanted. This is perhaps a very controversial view and can generate a healthy debate.

There are several chapters meant to explain the concepts stated in the hypothesis on prosperity. The bulk of these are devoted to economics while politics and social systems do appear with some icing of art and literature. One might be tempted to visit France and also develop an interest in paintings, Van Gogh, to be specific.

I found every chapter very interesting particularly in the style and simplicity of explaining complex economic issues without the aid of mathematical tools - free markets, perfect competition, economic rent, consumer surplus, central planning, monopolies, and a host of other key topics of economics and wealth generation. Economics is treated as a subject of allocating scarce resources among competing ends. Nobel laureates in economics are quoted liberally adding to the richness of the discussion. The glossary of economic terms provides a good reference.

Having enjoyed the reading on various economic concepts and issues, finally there appears to be a disconnect between from where we started and how the book concludes. Despite this shortcoming the book can be considered a great collection of ideas on a very important global issue.