Trust: The Social Virtues and the Creation of Prosperity

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9780140259438: Trust: The Social Virtues and the Creation of Prosperity

In his bestselling The End of History and the Last Man, Francis Fukuyama argued that the end of the Cold War would also mean the beginning of a struggle for position in the rapidly emerging order of 21st-century capitalism. In Trust, a penetrating assessment of the emerging global economic order "after History," he explains the social principles of economic life and tells us what we need to know to win the coming struggle for world dominance.

Challenging orthodoxies of both the left and right, Fukuyama examines a wide range of national cultures in order to divine the underlying principles that foster social and economic prosperity. Insisting that we cannot divorce economic life from cultural life, he contends that in an era when social capital may be as important as physical capital, only those societies with a high degree of social trust will be able to create the flexible, large-scale business organizations that are needed to compete in the new global economy.

A brilliant study of the interconnectedness of economic life with cultural life, Trust is also an essential antidote to the increasing drift of American culture into extreme forms of individualism, which, if unchecked, will have dire consequences for the nation's economic health.

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About the Author:

Francis Fukuyama, a senior social scientist at the Rand Corporation, lives in McLean, Virginia.

Excerpt. Reprinted by permission. All rights reserved.:

Chapter 1

On the Human Situation at the End of History

As we approach the twenty-first century, a remarkable convergence of political and economic institutions has taken place around the world. Earlier in this century, deep ideological cleavages divided the world's societies. Monarchy, fascism, liberal democracy, and communism were bitter competitors for political supremacy, while different countries chose the divergent economic paths of protectionism, corporatism, the free market, and socialist centralized planning. Today virtually all advanced countries have adopted, or are trying to adopt, liberal democratic political institutions, and a great number have simultaneously moved in the direction of market-oriented economies and integration into the global capitalist division of labor.

As I have argued elsewhere, this movement constitutes an "end of history," in the Marxist-Hegelian sense of History as a broad evolution of human societies advancing toward a final goal. As modern technology unfolds, it shapes national economies in a coherent fashion, interlocking them in a vast global economy The increasing complexity and information intensity of modern life at the same time renders centralized economic planning extremely difficult. The enormous prosperity created by technology-driven capitalism, in turn, serves as an incubator for a liberal regime of universal and equal rights, in which the struggle for recognition of human dignity culminates. While many countries have had trouble creating the institutions of democracy and free markets, and others, especially in parts of the former communist world, have slid backward into fascism or anarchy, the world's advanced countries have no alternative model of political and economic organization other than democratic capitalism to which they can aspire.

This convergence of institutions around the model of democratic capitalism, however, has not meant an end to society's challenges. Within a given institutional framework, societies can be richer or poorer, or have more or less satisfying social and spiritual lives. But a corollary to the convergence of institutions at the "end of history" is the widespread acknowledgment that in postindustrial societies, further improvements cannot be achieved through ambitious social engineering. We no longer have realistic hopes that we can create a "great society" through large government programs. The Clinton administration's difficulties in promoting health care reform in 1994 indicated that Americans remained skeptical about the workability of large-scale government management of an important sector of their economy. In Europe, almost no one argues that the continent's major concerns today, such as a high continuing rate of unemployment or immigration, can be fixed through expansion of the welfare state. If anything, the reform agenda consists of cutting back the welfare state to make European industry more competitive on a global basis. Even Keynesian deficit spending, once widely used by industrial democracies after the Great Depression to manage the business cycle, is today regarded by most economists as self-defeating in the long run. These days, the highest ambition of most governments in their macroeconomic policy is to do no harm, by ensuring a stable money supply and controlling large budget deficits.

Today, having abandoned the promise of social engineering, virtually all serious observers understand that liberal political and economic institutions depend on a healthy and dynamic civil society for their vitality. "Civil society" -- a complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churches -- builds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in broader society and through which the values and knowledge of that society are transmitted across the generations.

A strong and stable family structure and durable social institutions cannot be legislated into existence the way a government can create a central bank or an army. A thriving civil society depends on a people's habits, customs, and ethics -- attributes that can be shaped only indirectly through conscious political action and must otherwise be nourished through an increased awareness and respect for culture.

Beyond the boundaries of specific nations, this heightened significance of culture extends into the realms of the global economy and international order. Indeed, one of the ironies of the convergence of larger institutions since the end of the cold war is that people around the world are now even more conscious of the cultural differences that separate them. For example, over the past decade, Americans have become much more aware of the fact that Japan, an erstwhile member of the "free world" during the cold war, practices both democracy and capitalism according to a different set of cultural norms than does the United States. These differences have led to considerable friction at times, as when the members of a Japanese business network known as a keiretsu buy from one another rather than from a foreign company that might offer better price or quality. For their part, many Asians are troubled by certain aspects of American culture, such as its litigiousness and the readiness of Americans to insist upon their individual rights at the expense of the greater good. Increasingly, Asians point to superior aspects of their own cultural inheritance, such as deference to authority, emphasis on education, and family values, as sources of social vitality.

The increasing salience of culture in the global order is such that Samuel Huntington has argued that the world is moving into a period of "civilizational clash," in which the primary identification of people will not be ideological, as during the cold war, but cultural. Accordingly, conflict is likely to arise not among fascism, socialism, and democracy but among the world's major cultural groups: Western, Islamic, Confucian, Japanese, Hindu, and so on.

Huntington is clearly correct that cultural differences will loom larger from now on and that all societies will have to pay more attention to culture as they deal not only with internal problems but with the outside world. Where Huntington's argument is less convincing, however, is that cultural differences will necessarily be the source of conflict. On the contrary, the rivalry arising from the interaction of different cultures can frequently lead to creative change, and there are numerous cases of such cultural cross-stimulation. Japan's confrontation with Western culture after the arrival of Commodore Perry's "black ships" in 1853 paved the way for the Meiji Restoration and Japan's subsequent industrialization. In the past generation, techniques like lean manufacturing -- the process of eliminating buffers from the manufacturing process to facilitate feedback from the factory floor -- have made their way from Japan to the United States, to the latter's benefit. Whether the confrontation of cultures leads to conflict or to adaptation and progress, it is now vitally important to develop a deeper understanding of what makes these cultures distinctive and functional, since the issues surrounding international competition, political and economic, increasingly will be cast in cultural terms.

Perhaps the most crucial area of modern life in which culture exercises a direct influence on domestic well-being and international order is the economy. Although economic activity is inextricably linked with social and political life, there is a mistaken tendency, encouraged by contemporary economic discourse, to regard the economy as a facet of life with its own laws, separate from the rest of society. Seen this way, the economy is a realm in which individuals come together only to satisfy their selfish needs and desires before retreating back into their "real" social lives. But in any modern society, the economy constitutes one of the most fundamental and dynamic arenas of human sociability. There is scarcely any form of economic activity, from running a dry-cleaning business to fabricating large-scale integrated circuits, that does not require the social collaboration of human beings. And while people work in organizations to satisfy their individual needs, the workplace also draws people out of their private lives and connects them to a wider social world. That connectedness is not just a means to the end of earning a paycheck but an important end of human life itself. For just as people are selfish, a side of the human personality craves being part of larger communities. Human beings feel an acute sense of unease -- what Emile Durkheim labeled anomie -- in the absence of norms and rules binding them to others, an unease that the modern workplace serves to moderate and overcome.

The satisfaction we derive from being connected to others in the workplace grows out of a fundamental human desire for recognition. As I argued in The End of History and the Last Man, every human being seeks to have his or her dignity recognized (i.e., evaluated at its proper worth) by other human beings. Indeed, this drive is so deep and fundamental that it is one of the chief motors of the entire human historical process. In earlier periods, this desire for recognition played itself out in the military arena as kings and princes fought bloody battles with one another for primacy. In modern times, this struggle for recognition has shifted from the military to the economic realm, where it has the socially beneficial effect of creating rather than destroying wealth. Beyond subsistence levels, economic activity is frequently undertaken for the sake of recognition rather than merely as a means of satisfying natural material needs. The latter are, as Adam Smith pointed out, few in number and relatively easily satisfied. Work and money are much more important as sources of identity, status, and dignity, whether one has created a multinational...

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Francis Fukuyama
Published by Penguin Books Ltd (1996)
ISBN 10: 0140259430 ISBN 13: 9780140259438
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