economic development and culture
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Economic Development and Culture. Team 7 Chapter 8 Ben Kerstens , Kyle Hassan, Wade English, Devon Purcell, Greg Lappo , James Mounts, Kelsie Lynn, Michael Barker, Chris Gist, Jacque Daly. Background. Economic Development and Globalization - PowerPoint PPT PresentationTRANSCRIPT
Economic Development and Culture
Team 7Chapter 8
Ben Kerstens, Kyle Hassan, Wade English, Devon Purcell, Greg Lappo, James Mounts, Kelsie Lynn, Michael Barker, Chris Gist, Jacque Daly
Economic Development and Globalization◦ What happens in one nation affects another
nation.
Paradoxes of economic development◦ Trade, Democracy, and Open and Free markets◦ Culture and change
Background
Background, Cont. Emerging theories on international trade
and development◦ Mercantilism:
strict regulation, favorable balance of trade◦ David Ricardo:
Economic development comes from three things: land, labor and capital.
Each nation must examine and use its competitive advantage.
◦ Post – Ricardo: Identifying specific factors leading to economic
growth
Post-Ricardo, Cont.◦ Free-market capitalism assumes a level playing
field China and India require a disproportionate amount of
natural resources. The huge boom in China and India’s economy affects
other, more developed nations, like the U.S.◦ Immiseration:
An economy can suffer even while growing rapidly Over producing and exporting will lower global
demand, effecting price.
Background, Cont.
Problems with global economic development◦ Previous government policies gave some
countries late starts in economic development. Chinese policy of targeting development areas Indian policy of waiting for paperwork before starting
a company.◦ Funding
UN and World Bank have provided over 1 trillion dollars, with little success.
Squandered by the nations who receive it
Background, Cont.
Ranking Nations◦ http://www.heritage.org/index/ranking
Nations in Class:◦ Germany: 71.8 (23rd)◦ Norway: 70.3 (30th)◦ Switzerland: 81.9 (5th)◦ Spain: 70.2 (31st)◦ Sweden: 71.9 (22nd)◦ China: 52.0 (135th)◦ Japan: 72.8 (20th)◦ Italy: 60.3 (82nd)
Background, Cont.
Amy Chua links democracy and markets. Fall of the Berlin Wall and the move from
communism to capitalism, and the belief that democracy and free and open markets would transform the world into a peaceful global community
Rise of militant Islam, ethnic wars, two genocides, and increasing threat of nuclear war
Paradox 8.1Are democracy and free markets antithetical to each other?
Majority tend to be ethnically related and poor
Elect popular leaders who have little if any understanding of business and economics
Leaders become dependent on educated and skilled members of the minority that control a disproportionate share of the national wealth
Indonesian Riots of 1998
Developing Nations
Happens when developing nations introduce democratic elections at the early stages of economic development.
When governments become dependent on the minority group, bribery and corruption usually occur, and demagogues appear who incite envy and hatred of the minority group
Destructive Cycle
Developing nations open up markets dramatically to international trade by lowering tariffs.
Not free because both market-dominant majority and Knowledgeable, networked minority engage in bribery and related activities to satisfy the other group and benefit themselves
Inequalities persist and usually increase, sometimes significantly
Destructive Cycle cont.
Democracy and free markets, which exist simultaneously in developed economies, are opposed to one another in many developing nations
There are no policy suggestions, but this allows us to understand more clearly the process of ethnic antagonisms and violence
Conclusion of paradox 8.1
Paradox 8.2
Does trust increase trade among nations?
Does increased trade lead to conflict and war among nations?
Trust and Trade Culture
Geography
Alan Rugman on Globalization
http://www.geographicguide.net/europe/maps-europe/political.htm
Trust and Trade Continued Democracy and peace
Study on trust and trade
http://www.americancitizenstogether.org/ACT/Web/Cartoons_2.html
War and Trade Does trade lead to peace?
History is mixed
How can increased trade lead to war?
WTO and International Court of Justice
Conclusion No steadfast conclusion
http://www.costpernews.com/archives/will-affiliate-marketing-make-it/
Institutions- Courts of Law, Police Systems, and Government systems
Trustworthy as perceived by Citizens
Circumvent the Legal System◦ Gangs◦ Italian Mafia
Paradox 8.3Are institutions more important than culture for explaining economic development?
Douglas North (Nobel Prize Economics)◦ Need trustworthy Institutions
Mancur Olsen (1982)◦ Increase in Interest Groups=Decrease in
Prosperity◦ When institutions impede progress
Institutions Critical for Economic Development
Hernando de Soto (2000)◦ West has more capital
◦ Essentials-Capital cannot be created without initial capital.
◦“Dead Capital” ⇨ “Genuine/Active Capital” Shantytowns
Why Capitalism Triumphs/Fails
Particular Issue in China and Russia◦ 60% of population resides in countryside◦ Livelihood is farming◦ Stricken of lifestyle when Government enforce
ownership Argentinean Barrio- Buenos Aires
◦ 829 settlers in total◦ 419 received title and 410 did not◦ Improved quality of life
“Dead” to “Active” Capital
Tan (1999) and Peng (2002) Study of China’s Development◦ Native Chinese working in China under Communist
governmental rule and institutions
◦ Chinese Americans
◦ White Anglo-Saxon Americans
Concluded institutions are more important than culture
China’s Development
North (2005) pointed out about China’s development◦ 1. While the institutions China employed are different
from developed nations, the incentive implications were similar.
◦ 2. China has been confronting new problems and realistically attempting new solutions
North’s analysis of China’s development suggests culture is more relevant than institutions
China’s Development
Turkey changed from a theocratic Muslim nation to a secular nation in a few years (even though the population was 99% Muslim)
Major changes included:◦ Shift from Islamic to European code of laws◦ Closing of religious schools and lodges◦ Use of the Roman alphabet ◦ Recognition of the Western calendar rather than a religious one
Turkey’s development indicates institutions are more important than culture
Turkey’s Development
Paradox 8.3Are institutions more important than culture for explaining economic development?
There may be no solution to the paradox about the relative importance of culture and institutions. They are both important, they are very closely related but separate concepts.
Individualism - Individualism stresses the primacy of the individual, who sees themselves independent from the group an makes decisions accordingly.
Collectivism - The opposite of individualism, the individual makes decisions in terms of group values rather than personal preferences.
Question - When nations become more economically developed to they tend to become more individualistic.
Paradox 8.4Does economic development and globalization lead to individualism?
Replication of original Hofstede survey; focused on 22 nations on all five continents.
Original four dimensions could not be statistically related to economic development.
Three of four dimensions were found in all the countries, uncertainty avoidance was not.
Survey discovered a new dimension called Confusion dynamism
Hofstede and Bond (1988)
Confusion dynamism- emphasizes persistence, ordering relationships by status, behaving in accordance with this order, stressing thrift, and having a sense of shame.
Confusion dynamism is extremely prevalent in the east Asian countries.
Confucius created the ideal person who contributes to society
This dimension can be statistically correlated with economic growth.
Confusion Dynamism
Individualism and collectivism can exist together within a culture
Key: Delay present gratification for future rewards
Increased GNP or wealth generates individualism
Increased individualism accompanies economic growth
Greater affluence allows individuals to make broader choices and satisfy a larger number of needs and desires.
Results
German
ySp
ain
Switz
erlan
d
Swed
en Italy
Japan
Norway
China
United
State
s0
20406080
100Hofstedes' individualistic score
Hofstedes' individ-ualistic score
Examples
Developed and developing countries can regress economically
◦Russia◦Japan◦Germany
Paradox 8.5Why do citizens vote for and accept stationary bandits as political leaders?
How and why regression occurs
◦ Mancur Olson – Roving and Stationary Bandits Genghis Khan – Roving Bandit Joseph Stalin – Stationary Bandit Adolph Hitler – Stationary Bandit
Thank YouDanke Schön
DEBATTEDEBATE
Why does providing aid to developing countries usually fail?
What are the problems between helping nations develop (with global funding) and the self interest of multinational companies?
Background
Paradox 8.1
How do you think your country would trust the other groups countries?
Would this lead to greater peace and/or trade?
Paradox 8.2
Are there some instances where institutions aren’t the answer and a more cultural approach is necessary?
Paradox 8.3
Paradox 8.4
Stationary Bandits◦ Do you think the protests and revolt against
Muammar Gaddafi in Libya is happening because he is a stationary bandit?
Paradox 8.5
Danke für Eure teilnahme
Prost!