Trust: The Social Virtues and The Creation of Prosperity Paperback – June 18, 1996

This book has 31 chapters over 362 pages of prose. That works out to about 11.7 pages, and so each chapter is very bite sized. The notes to the book are 57 pages long and are arranged by page and the bibliography is 21 pages and, I estimate, about 500 different sources. So, I the breadth and depth of the book are good. In fact, having this many sources reminds me of Thomas Sowell's writings. The book was written before the 1997 Asian financial crisis, and so if you are a person who reads the news every day, you can go back and see how well this book predicted things. (Not, as it turned out, all that well.)

I don't think I've read a book this interesting in quite some time. The things that he talks about in the Chinese context are the things that I am most familiar with (I've lived here for a number of years), and those observations were 100% correct. That makes me very comfortable with believing his observations about the places that he discusses with which I am less familiar (Italy/ Korea). Even though Fukuyama has a mass of detail, his writing doesn't come across as fatty and manages to keep the reader interested. (It is because of the shortness of the chapters that I kept wanting to stay up another 30 minutes to just "squeeze in another chapter.")

There are, however, a couple of downsides. The first problem is there is not quantitative analysis and testing. I know that every author thinks that for every graph/ equation s/he will cut his readership in half, and I think that this author took that idea very literally. I count not one single graph in the whole book and ONE single table. The questions that I had (and that the author did not come close to answering) were: 1. If a country does have a large number of small firms (because of trust), then does it really make any difference? (Hong Kong SAR has one of the highest per capita incomes in the world in spite of this.) 2. Can some economies get away with having a low trust society because they are small enough to do that? So, is it possible for Hong Kong to have a high level of development, but not to expect China to be able to do the same thing because it is too big to do so? 3. Can we get some quantitative idea of how being low-trust impedes economic development? He classifies France as low trust, but in the same chapter (#11) says that it has one of the highest GDPs per capita and is a leader in many technological fields. 4. So, again, what does low trust correspond to? 5. Fukuyama gives some praise to the quality of French bureaucracy, but does that mean that if a country like Japan succeeds at once point in time that their bureaucracy was smart but when their growth severely declines that it became stupid? Or that growth can be improved by smartening up the bureaucracy?

Ultimately, I'm not clear what the author is concluding (or even asserting). Korea is a low trust society. Japan is a higher trust society, but they both went through the Asian financial crisis. Korea came out of it, but Japan has yet to come out of it--15 years later. Japan has a lot of name brands, but Korea has fewer. Israel has almost NO name brands that anyone recognizes, but tons of companies listed on NASDAQ and more venture capital (per capita) than anyone. And its income per head is almost exactly the same as ROK's. But if Israel has no world beating companies, it must be because trust is low (mustn't it?) So now what?

Other questions: Are all voluntary organizations good? Recently in the United States we've seen Occupy Wall Street, and in American English there exists the word "community organizer." (I'm not quite sure what they do that is of value.) Does it follow that more of them would be better (i.e. a matter of degree)? Or is it a matter of type? Is the capacity for forming organizations actually even getting less? How is this facilitated/ vitiated by the internet (which was not around in full force at the time of the writing of this book)?

At a minimum, this book has some interesting history and some interesting conceptual discussions. But the actual *testing*/ demonstration/ QUANTIFICATION of the concepts with data is lacking.

Toward the end, some of his arguments got *really* strained. He talked about the failure of black Americans to reach income parity and their various social pathologies as a consequences of atomization/ fragmentation. (p.302). And he goes on to say that Caribbean blacks are less fragmented and so they do a bit better. (And the same as to why Chinese people come to the United States and make money. More cohesiveness and willingness to buy from each other.) I just don't know how much that holds water. There are other factors (none quantified), such as: self-selection, attitudes toward work, and IQ. Was social trust and cohesiveness 25% of the story? 50%? 75%? No guess.

I bought this book second hand (paperback) and it was worth the price. It was a weekend worth of reading time, and because of the wonderful ease of Fukuyama's prose, I don't regret having spent the money or the time.

More accurate is the first sentence of chapter 28 (of 31), “In this book we have examined a variety of societies from the standpoint of one specific aspect of culture as it relates to economic life: the ability to create new associations.” That chapter proceeds to summarize the book. If I could go back a few weeks, I would tell my younger self, “Read chapter 28 first. You will then find it considerably easier to understand what he is trying to say in the previous 27.” I found the organization of the book less than optimal :)

Fukuyama says that the ability to trust and work with other people is necessary for economic success. (He calls this “social capital” early in the book but “sociability” later. I have no idea why.) In some places, people find it hard to trust outside the extended family. These places will mostly have family-owned and -run businesses. Where there is already a lot of “sociability,” it will be easier for businesses to become big.

Fukuyama spends the first 22 chapters contrasting a group of what he calls low-trust societies (France, southern Italy, Korea, and China–including Hong Kong and Taiwan) with three high-trust societies (Japan, Germany, and the United States). Some of it was interesting. Some of it was strained. And I kept wondering how much had changed in the twenty years since the book was written.

One of the book’s themes is that there is no one capitalism. There are different capitalisms in different places, shaped by each place’s history and sociology. The book says little about Africa, Latin America, the rest of Asia, or the former communist countries--though implicit in his argument is the (successful) prediction that exporting European and American laws into the former communist countries will not be enough to turn them into prosperous capitalist democracies; the suppression of civil society turned them into low-trust countries, which will make both economic and political life difficult. Fukuyama is critical of economists who fail to take into account how people and societies differ and/or who ignore “transaction costs.”

He has some interesting things to say about religion, how Americans can be both individualistic and communal, and the limits of multi-culturalism, e.g.,the lack of a strong common culture may make minorities worse off because they will not be treated as trustworthy. In fact, I thought the book got more interesting as it approached the end–though it had less to do with trust!

I waffled between three and four stars but finally decided on three, for two reasons. One, its age. Two, its over-promising title.

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.

a must

The idea is very good. But the book could be better documented.

important read for today's world

Important work!