Technology and Cultural Comparative Advantage

1. Technology and Cultural Comparative Advantage John Hooker April 2006

2. A New Economic Order? • The world economy seems to be moving toward a new equilibrium, based on cultural comparative advantage. • Moving away from Western economic hegemony. • Successful countries draw on their cultural strengths. • Japanese quality • Indian information technology • Korean manufacturing efficiency • Chinese entrepreneurship & relationship-based business • Western technology

3. A New Economic Order? • What is the Western comparative advantage in the new order? • Perhaps technological innovation. • It is rooted in the Western cultural system.

4. Caveats • I am using an alternative paradigm for economic explanation. • Based on cultural anthropology • Franz Boas, Edward Hall, Marvin Harris, Ruth Benedict, Geert Hofstede, et al. • Cultural factors are fundamental rather than externalities. • Culture provides the social infrastructure that makes commerce and industry possible. • Not a rejection of standard economics, but an alternative point of view.

5. Caveats • Cultural analysis does not stereotype individuals. • Every culture contains the full range of personality types. • But they fit into the system differently. • Cultures are like ecosystems. • They are systems. • They can coexist on the same planet. • Diversity is good. • But cultures create meaning. • They require interpretation (à la Clifford Geertz).

6. Caveats • Beware of Western universalism. • The Western view of culture: • Everyone is basically the same inside. • Culture is all about food, language, customs, dress. • There is one rational way to live and one path of development. • Democracy, human rights, individualism, capitalism are for everyone. • Most non-Western countries are “less developed.”

7. Caveats • Culture is really about fundamental, unacknowledged assumptions. • The West universalizes because its cultural system requires it.

8. Caveats • I make no judgment about which cultures are “better.” • But I insist they are radically different.

9. Example: Japanese Quality • Continuous improvement. • Group-oriented, rather than requiring individual reward. • Long time horizon. • No need for cause-and-effect manipulation. • Maintain group harmony by honoring everyone’s ideas. • Nemawashi. • Kanban systems minimize rework, maximize flexibility. • Lean manufacturing, reduced setup times.

10. Example: Japanese Quality • Just-in-time inventory management • Outgrowth of keiretsu (formerly zaibatsu). • Old-boy networks, trust relationships. • Keidanren.

11. Example: Japanese Quality • Case study: fuzzy control • Initially rejected by Western engineers as unprincipled. • West misunderstood Japanese acceptance of fuzzy logic. • Not because it is “feminine” or “Buddhist” logic. • Real reason: Western-style scientific modeling of nature is unnecessary to support Japanese culture. • Also: Fuzzy rule bases are ideal collaborative projects.

12. Example: Indian IT • Pantheism vs. secularism • No need to maintain & manipulate nature. • Coping mechanisms: • Inner discipline • Get control of one’s mind rather than the environment. • Modern form: study, intellectual discipline, academic competition. • Networking. • Efficient way to absorb technical knowledge. • A verbal culture. • Well suited to academic discourse, information age.

13. Example: Indian IT • Case study: software development • No need for the technology, but well suited to create it. • Create an orderly world of the mind, rather than an orderly world externally. • Indians see themselves as Westernizing • There is a common reliance on rationality. • But Indians are leveraging their own cultural traits.

14. Example: Korean Manufacturing • Initially an imitation of Japanese zaibatsu. • Park Chung Hee helped create the chaebol (1960s, 1970s). • Samsung, LG, Hyundai, SK Group, Daewoo • Cozy relationship between leading industrial families and the government • Allowed Korea to build major private corporations in a relationship-based culture. • Emphasis on manufacturing for export. • Korea manufactured itself out of the Asian financial crisis.

15. Example: Korean Manufacturing • Unique organizational characteristics • Loyalty to the boss. • Paternal relationship. • Highly disciplined, hierarchical groups. • Organized by age. • Highly competitive, masculine culture. • Strong national solidarity. • Focus on loyalty to team. • Bottom line and short-term profitability are secondary.

16. Example: Chinese Entrepreneurship • Entrepreneurship is a cultural trait of coastal Chinese. • Particularly, speakers of Yuè (Cantonese), Mĭn (Fujianese), and Wú(Shanghaiese) dialects. • Uncertainty tolerant culture. • Self esteem tied to wealth and status. • “To be rich is glorious” (Deng Xiaoping). • Masculine culture, competitive.

17. Example: Chinese Entrepreneurship • Relationship-based business. • Guānxìis a time-tested mechanism. • World’s largest economy for 8 of last 10 centuries, soon to be again. • Chinese and other Asian businesses are making inroads into South America, Africa, Middle East. • These countries are more comfortable with Chinese relationship-based business style than Western rule-based transparency.

18. Western Technology • Two roots • Disenchantment of nature (cf. Max Weber). • Opened the way to manipulation of a secular world. • Greek rationality. • Human beings are rational, autonomous individuals. • Reality is intelligible (even mathematical). • The result: science-based technology. • Cope with uncertainty by controlling and ordering the external, secular world. • Family, community, internal self-discipline less important.

19. Western Technology • Technology is easily transferred to other countries. • Does the West have a comparative advantage here? • Technological innovation may be less transferable.

20. Technological Innovation • Cultural roots • Reasoning from first principles. • The universe is intelligible. • Individualism. • Individuals have the right to rethink everything. • Universalism of rules. • Laws of science, morals. • Autonomous individuals can be governed only by laws, not persons. • Laws must be self-evident, inherently logical. • They are therefore universal and can be discovered by any individual.

21. Technological Innovation • Massive cultural/educational investment • Students asked to rethink the field, see things for themselves. • Geometrical proofs, science experiments. • Most students hate this. • Only a few will catch on. • Individual expression valued. • Concept of plagiarism. • Makes society hard to govern. • Payoff: new ideas for technological coping mechanism.

22. Technological Innovation • Arguments that technological innovation is transferable: • Only a few need be involved. • Subculture of Westernized elites in many countries.

23. Technological Innovation • Arguments that technological innovation will remain a Western comparative advantage: • World is not Westernizing. • Information technology actually reinforces regional differences. • West overestimates Westernization trend because it universalizes. • Non-West overestimates Westernization to emphasize its “development.” • Ideas bubble up from below.

24. Technological Innovation • A problem with relying on technological innovation: • Protection of intellectual property rights. • Enforcement already difficult. • Despite recent strengthening of IP rights, overall historical trend is away from commoditization. • Growing influence of the “South.” • WTO is nominally democratic. • U.S. domination of WTO may weaken (e.g. “group of 20” at Cancun meeting). • Liberalization of TRIPS agreement at Doha meeting.

25. Other Candidates for Western Cultural Comparative Advantage • Entrepreneurship • Not uniquely Western, but it helps. • Transparency • Results in very efficient commerce, but requires stable institutions. • May remain a Western peculiarity. • Relationship-based business may prevail in an unstable world. • Information technology facilitates it. • Western transparency-based finance already shaky as a global system.