The Common good

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When we talk about the drivers of economic growth and decline in a country, we often think about statistics, graphs, and values. However, beyond that, the people living and working within the country are the most fundamental force. As a result, local beliefs, perspectives and traditions become key factors in shaping the behaviour of the population. In cases where traditional economic models cannot explain certain trends or growths, cultural economics provides a reasonable explanation for why certain systems behave in certain ways. But how do different cultures influence economics?

Work ethic

Attitude towards labour depends on cultural peculiarities, religious beliefs, and the history and mentality of the nation. These factors often lead to varying cultures and attitudes towards work within different countries, which translates into different behaviours regarding work ethics.

For example, Japan became a developed country just 25-30 years after WWII. This quick development can be attributed to Japanese work culture, which is largely based on concepts like “kaizen”(continuous improvement) and “giri”(individual duty and obligation). Many of these concepts originated in post-WWII quality circles within Japanese industries. This work ethic has brought about high levels of productivity and efficiency in various industries such as manufacturing and technology, bringing about drastic developments in Japanese industries and propelling Japan to quickly rebuild its post-war economy.

Entrepreneurship and innovation

Entrepreneurship and innovation are considered driving forces of an economy, ensuring that markets remain competitive by introducing novel ideas, further developing existing products and enhancing efficiency. Individualistic societies rewarding progress and being open to change often have an advantage in driving innovation.

For example, Silicon Valley encourages brainstorming and the free flow of ideas. After many ideas are produced, they are selected based on merit, not the position of the individual who suggested them. This is in stark contrast to the hierarchical structure of most companies, where a top-down mode of instruction prevails. Silicon Valley also embraces failure, with the “Fail Fast to Succeed Sooner” mentality being popular. This growth mindset inculcates the resilience required to follow through with ideas that may be challenging or seemingly impossible. As a result of such practices, Silicon Valley has produced innovative ground-breaking ideas.

Social capital and trust

Trust and collaboration between individuals lay the foundations for successful teamwork, imperative for any nation’s economy to succeed. Besides requiring less time and money for negotiations and preparation for the implementation of contracts, societies with higher trust and social capital also often have low crime rates, allocating more resources towards the economy and producing more robust economic systems. Societies with higher trust also tend to prioritise the well-being of individuals, through strong support systems uplifting the vulnerable and minimising negative impacts like anxiety and depression.

In Nordic countries, which rank among the richest in the world, a significant reason for stronger and more vibrant economies is their comprehensive welfare systems. The success of these systems is reflected in multiple happiness indexes, where Nordic countries consistently rank highly. Beyond higher happiness, increased trust also leads to more stable working environments and better cooperation in the workplace, resulting in thriving businesses and better-performing economies.

However, there are some limitations to cultural economics. This includes the fact that cultural economics is unable to consider non-cultural factors like play, like countries’ access to natural resources. Furthermore, it may be difficult to take into account the dynamic and subjective nature of culture, leading to a one-sided analysis of the behaviours of the economies. Yet, despite the caveats, cultural economics offers a multifaceted lens to examine the intricate relationship between culture and economics. By delving into how work ethics, innovation and social support shape economic behaviours and outcomes, this field continues to illuminate the interplay between society’s heritage and economic structures.

References

No.	Sources
1	https://www.worldfinance.com/featured/how-culture-can-help-explain-economic-development
2	https://www.weforum.org/agenda/2014/12/what-role-does-culture-play-in-development/
3	https://www.econstor.eu/bitstream/10419/188230/1/pjcss269.pdf
4	https://innovation-entrepreneurship.springeropen.com/articles/10.1186/s13731-021-00163-7
5	https://www.sciencedirect.com/topics/earth-and-planetary-sciences/cultural-economy
6	https://zenodo.org/record/1083307/files/14618.pdf
7	https://www.psychologytoday.com/sg/blog/the-power-of-experience/202309/learning-from-the-psychology-of-silicon-valleys-innovation