Customer Reviews

Trust: The Social Virtues and the Creation of Prosperity

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I live in Europe close to the fault line between (in Fukuyama-speak) low-trust-land and high-trust-land and I have rarely read such an interesting book. In some ways the book is the successor to Max Weber's magnum opus, The Protestant Ethic and the Spirit of Capitalism (published in 1905) about the impact of protestant religion and culture on economical success in Germany.

Rather than compare Protestantism with Catholicism and their economical impact on German citizens, Fukuyama divides the world into high and low trust societies. Within Europe low trust societies largely coincide with Catholic countries and high trust societies coincide largely with Protestant countries, hence some of Fukuyama's work will sound familiar at times to a reader of Max Weber. Still, Fukuyama's categorisation is not based per se on religious affiliation. Fukuyama is at pains to attribute the low trust of Italians or French to historical events or situations. At times it seems he goes out of his way to avoid attributing any causal role to religion. But the advantage of his approach is that his methodology in theory works in any culture outside the European Christian context. Fukuyama also applies his trust criterion on societies such as the US, Japan, Korea, Taiwan and China. The Middle East and Africa are conspicuous in their absence, possibly because there are few if any examples of so-called high-trust cultures in these parts of the world.

There are a few shortcomings to the book :

Fukuyama only draws economical consequences from the presence or absence of trust, for instance, he claims high trust cultures such as Japan and Germany find it easier to form very large companies, whilst low trust cultures such as Taiwan or Italy feel more at home in family companies. It is a pity he does not extend the field of study of consequences into areas such as corruption (low trust countries generally score higher on corruption), the law (for instance perjury is not regarded as a big deal in low trust countries), demographics (intermarriage, such as consanguineous marriages, is much more common in low trust cultures such as in the Middle East), etc...

The division of the world by Fukuyama into low and high trust cultures is very binary. Some studies by others into trust have first segmented the environment of individuals in concentric layers, starting with the immediate family, then friends, then the extended family, then the local community, then the country and then his or her civilisation. In such a scenario trust typically decreases with each layer which is further removed from the individual (although there are exceptions, such as in failed Islamic states where more trust is put by individuals in the Umma - all Muslims - than in the nation.), but the slope of the curve differs between low and high trust cultures. Still, as a simplification, the division into two extremes of trust is an interesting start.

Like all human phenomena, economic organisation can never be explained by one variable. But even if trust turns out to be only one of the variables which have a high correlation with economic structure, it remains a valid subject for a book like this.

Finally, some reviewers have accused Fukuyama of explicitly arguing that economic development is hampered by low trust, whilst I think he actually argues economic structures are merely different in both categories. Nobody will argue Belgium, a typical low-trust culture, is poorer in GDP per capita terms than - say - the neighboring Netherlands, a typical high trust culture that even shares its language with the majority of Belgians. But it is true that Belgian multinational companies are even rarer than famous Belgians.

Despite the simplifications this is still a very interesting book for those interested in the compatibilities or incompatibilities of cultures in the workplace. One of Fukuyama's underrated books.

In this challenging book, author Francis Fukuyama examines the role of "trust" in economics. He proposes that it is the social capital of a given country (or even area within a country) that defines how its economy functions. In a high-trust society, individuals have a propensity to join voluntary organizations, and as such there are likely to be many organizations (including business organizations), of all sizes. In a low-trust society, where individuals are only able to organize within their own clan or family, organizations are likely to be either small, or very large (and state-operated). Along the way, he examines countries around the globe, but focusing primarily on China and the Confusion countries, Italy, France and Korea (as low-trust societies), and Japan, Germany and the United States (as high-trust societies).

I found this book to be quite fascinating. I must admit that I am not an expert on economics, but I found the author's arguments quite convincing. His examination of various countries explained a lot of things that I have noticed before, but he succeeds in putting it all into a whole new paradigm. I highly enjoyed this though-provoking book, and recommend it to everyone!

The author divides societies into two classes: high trust and low trust. High-trust societies form volunteer and meritocratic organizations that expand in scope and efficiency to reach optimum economies of scale. These commercial and non-profit organizations (which are not dependent on family ties) create a network of efficiencies that benefit commerce, media communication and social change.

Low-trust societies, in contrast, rely on the extended family to build commercial, social and political networks. The trouble with the extended-family approach to economic development is that all families will soon run out of blood-line managerial, scientific, literary or artistic talent. The Latin Catholic and Chinese cultures are described as low-trust societies.

One conclusion to this analysis is that it is the lack of trust in society that forces developing countries to have large government organizations. In countries such as Mexico, the lack of trust in the players and in the notion of market efficiency itself leads to the creation and perpetuation of state monopolies.

The author wonders if trust in the American society is declining, to judge, at least, by the rising number of guarded residential compounds. The Clinton impeachment trial, from one lens, is about the threat to trust in public life. According to the model, if trust declines, so too will economic prosperity.

As a result of his previous major work Francis Fukuyama achieved fame as the man who predicted 'the end of history'. With this new work he has turned his attention from the political arena to consider comparative international economic performance. He describes the broad theme of Trust: The Social Virtues and the Creation of Prosperity as follows; "that social capital has a significant impact on the vitality and scale of economic organizations".

Many commentators have tried to evaluate the importance of culture in determining national economic success. Fukuyama claims to have identified the key, performance-determining, aspect of national culture, namely, the level of trust present in a society. He maintains that culture is of critical importance to everyday economic life and that only high trust societies can create the kind of large scale business enterprises that are needed to compete in today's global economy.

The culturalist view of history attributes the success of Japan and later of other East Asian countries such as China, Hong Kong, Malaysia, Singapore, South Korea and Taiwan to their common Confucian traditions and their concomitant cultural characteristics. However, the traditional drawing of distinctions between Eastern and Western cultures is seen as too simplistic by Fukuyama, who points out the many differences inherent in East Asian societies. He points out not only the differences between Japan and China, but also those between China and Chinese societies abroad such as Taiwan and Hong Kong. This attention to detail and depth of analysis is one of the strengths of Fukuyama's study.

To date, the debate on this topic has centred around culturalist explanations of the economic success of the Asia-Pacific Region, but Fukuyama has gone further by attempting to apply his thesis to all developed economies; Chinese, European, North American, Japanese and former communist. Fukuyama, following Weber, sees the earlier economic success of Western Europe as culturally determined, namely as a logical result of the Protestant work ethic.

Fukuyama sees three types of trust; the first is based on the family, the second on voluntary associations outside the family, and the third is the state. Each of these has a corresponding form of economic organisation; the family business, the professionally managed corporation and the state-owned enterprise, respectively. Societies in which family ties are strong (and thus ties outside the family relatively weak) have great difficulty creating large professionally managed corporations and look to the state to perform this critical economic function. Societies with high levels of trust, and many voluntary associations can create large economic organisations without state support. Fukuyama cites China, Italy, France and South Korea as societies with a strong role for the family and weak voluntary associations, while Japan, the United States, and Germany are said to have strong and plentiful associations beyond the family. The detail with which Fukuyama supports each of these examples is truly impressive and betrays the depth of research that undoubtedly went into writing this book.

Overall Trust: The Social Virtues and the Creation of Prosperity has to be considered a highly original work which has and will continue to raise significant interest. While many will dispute Fukuyama's main contention that significant comparative advantages arise from differences in levels of trust between countries, he offers a great deal of evidence to support an argument which is certainly correct at an intuitive level.

Reviews of Fukuyama's book Trust tend to be by those who read it for the political and economic insights. Since I have lived in Asia and Africa, what interested me was the insight on how lines of trust between human beings are seen by different cultures.

Reading this book explains why Americans should hesitate to invest in China (they only really trust those in their own families). It explains why Japanese trust their companies not to be fired. And it explains why American conservatives favor local and private solutions to problems rather than government.

Businessmen and others who assume all people think like Americans might benefit from reading this.

One problem is that it is a thoughtful book, but not a book that is easy to read.

This book argues that economic development is 80% good economics and 20% good culture. This is not a new concept, as many other authors, such as Lawrence Harrison, have grappled with the issue of culture in economic development.

Fukuyama slices culture and focuses particularly on the issue of trust, as the bond that reduces transactions costs. The literature on transactions costs is also vast, initiated by Coase in the 1930s.

The main contribution of this book is to establish an empirical link between trust and the reduction of transactions costs which consequently account for a more friction-less economy. However, as a non-economist, Fukuyama writes to the international relations and political science professional, as a respected scholar mainly in these circles. As such, he does a good job of bringing somewhat theoretical economic concepts to the forefront of policy makers.

This book blends together extensively detailed research and great style of presentation. Immensely readable. However, a vague feeling persists that data has been "fitted" to support the theory being presented. Any mention of Latin America, Indian subcontinent, Africa and others has been completely glossed over. Also, the picture being painted for China is not flattering. A long-term sustained prosperity for China is not predicted by Fukuyama, based on his observation of Chinese cultural values. But all-in-all extremely informative and provided insights into the cultural aspects of macro-economics.

If you are a post-modern liberal-minded type, swear by the perfectibility of democratic capitalism and put your faith in the healing powers arational phenomena like culture and religion have on our over-busy life then you would like this book. Moreover, if you are a sociologist then you would appreciate the lucidity of thought and tenacity of argument that the author shows when he examines different societies. Even then if you are a leading American political scientist and a best-seller author then you must be Francis Fukuyama himself.

Francis Fukuyama's book comes as a sequel to his magnum opus 'The End of History and The Last Man' which made waves in academic circles. In this book he claimed that after the demise of communism, history had virtually come to a halt - income the free market concepts like de-regulation, liberalization and free competition and all others exeunt.

In his latest book, he adds another ingredient for the making of a successful society - social capital. The author gives the idea of trust. According to him trust is the expectation that arises within a community of regular, honest, and cooperative behaviour, based on commonly shared norms, on part of other members of that community.

He divides societies on the basis of the quantum of trust that exists therein. China, France, Korea and Italy are low-trust societies whereas Japan, Germany, America are high-trust.

He starts from social set-up and correlates it with the industrial structure a society may evolve for itself, and tells how the former determines the position of a country in the global diversion of labour. Though people may interact through contract lams but if they trust each other the cost may be effectively reduced. Similarly if an economic turmoil hits a country, a socially well knit society may cope with it more hard-nosily. Also a high-trust society is more capable to form large organizations. For instance, the Japanese keiretsu networks help each other out when in distress.

As such he does not make a case for 'cultural determinism' that certain societies are bound to succeed while others to fail and falter. In his own words "there is no necessary trade-off between community and efficiency but those who pay attention to community may indeed become the most efficient of all."

With minor exceptions the book makes an interesting reading, intelligent in content and thought-provocative, indeed a marvelous piece of value-added research.

Asks the question how people come to trust each other enough to create the vast sustaining enterprises of prosperity. A must-read for world-philosophers, subject to the caveat that the generalization to nationalities can be attacked as weak, though this does not make it less compelling.

Fukuyama outlines how the "intermediate social organizations" of society, under the Protestant ethic, permitted the development of modern capitalist structures; whereas in low-trust societies (where you cannot depend on the corresponding person to trust you, or you to trust him), only family oriented businesses could grow, and inevitably collapsed after the second or third generation. He links the development of these intermediate organizations--guilds, PTAs, unions, volunteer activities--to the social fabric that engendered trust. He comments that a country can "spend" this hard-to-develop social capital and eventually become a rigid, non-trusting, and economically backward state. Furthermore, Fukuyama points out that the United States probably is doing just that, in nearly all intermediate social organizations, which are now surrounded by litigious critics--the educational system, Boy Scouts, union-management conflicts, the Catholic Church (which has never trusted its parishioners to have other than the standard orthodoxy, and now has suffered enormous scandal), and so forth. The lack of trust in our country is seen as pointing to our economic future, whether for good or bad.

Fukuyama is a genuinely interesting and informative writer. In his sense of fairness, he also points to examples where trust is generated, and cites them as necessary for a country to make both social and economic progress. I really enjoyed the multiple perspectives that the author brings to his task of explaining how some countries are prosperous, and some are not. He is truly an innovative thinker.