Culture: Part I

Attitudes, Values, Beliefs, and the Microeconomics of Prosperity

The first three words mentioned above are the words that would best describe culture. If there is an economic and human progress in a certain state or nation, we know that one way or another, their progress is somehow intertwined with the kind of culture that they have, the beliefs and values that they uphold. “Economic Culture” is how we call the beliefs, attitudes, and values that influences the economic activities of institutions and individuals. Different countries with different cultures were able to obtain economic progress, the beliefs and values that influenced them maybe different, but these countries were able to achieve economic prosperity. These countries include Japan, United States, Italy, etc. which also had a series of unfortunate events economically speaking, they went through recessions, and crisis, just like all of us, but the way they managed to handle it is a different story. In Chapter 2, the author discussed the existence of unproductive culture, cultural differences, in today’s modern economy, globalization of markets, etc.

Prosperity (Comparative and Competitive Advantage)

In this part, I’m going to define comparative and competitive advantage so we can easily brush up on our International Trade Theories. Comparative Advantage is theory that countries should specialize in the production of goods and services they can produce most efficiently. It may be agricultural products, minerals, or even services. Competitive Advantage on the other hand is when a firm is able to deliver the same quality of products at a lower price (cost advantage) or even exceed the quality (differentiation advantage). Most of the time, developed countries are the ones who possess this kind of advantage, those who are equipped with the right equipment, technology and can mass produce.

We determine productivity by wages, national income per citizen, and the quality of work that they give back to their firms, thus, making productivity the basis of competitiveness. The way global economy works right now, the level of competition is not only about the quality or uniqueness of the product, today, it’s also about the strategies used by the firms and nations. Whether the source of economy of a country is industrial or agriculture, what matters the most is for the firm or the country to be able to organize what they have in order to be more productive, for the individuals of that country to prosper. The way we see it right now, comparative advantage already gave way to competitive advantage. Right now, the competition is not about what we have but what we make, those countries that in years have developed strategic plans already had improved their standard of living.

Prosperity (Microeconomic and Foundation)

As stated in Chapter 2 “The microeconomic foundations of productivity rest on two interrelated areas: the sophistication of company operations and strategy, and the quality of the microeconomic business environment”. The sophistication of ideas contributes to countries prosperity, but sometimes, even if there are ideas, implementing it would be difficult due to feasibility and efficiency issues. If there is a sustainable improvement in the quality of products and if there is a certain degree of specialization in a nation’s input, then we can say that economic development is successful. Microeconomic capabilities and incentive will create more advanced form of competition, which creates quality of products, incentives for individuals, thus leading to prosperity. Economies that are less developed has little local rivalry, vigorous competitive rivalry will help economies to advanced, by having such rivalry will make local industries to have a sudden shift from what they’re doing, they’re going to try to be more innovative, creative, and competitive.

Cluster is a network of industries and institutions; they are competitors that are geographically concentrated. This kind of organization is an avenue for industries to be more innovative and improve faster because of geographical reasons. Silicon Valley, Hollywood, and Wall Street are just some of the clusters which have an advanced or developed economy. In this kind of organization, the government also has a role. They need not provide anything to the industry, however providing the needs of the individual such as education, efficient physical infrastructure etc. in order for the individuals to function well and competitively when they work in the companies. The good thing about cluster based policies is that it is more decentralized, also it encourages not only state but also local levels.

Prosperity (Economic Policy and the Process of Development)

Economic progress can be defined as a continuous gain when it comes to the nation’s business, its developments, and its increasing level of competitiveness, sophistication, and productivity. There are many different ways of determining if an economy is developing. We can measure it thru the local healthy rivalry, development in technology, sophistication of home demand, increasing investments, etc. These are role of the private sector. The government plays a significant role in order for this to be achieved. Working with private sectors is a must; this should be done in order to establish trust on both parties, also to discuss on how they’re going to achieve their goal of progress, with universities to produce competitive educated individuals, and other institutions or organizations. Expanding investments and capitals will also help for an economy to progress.

Prosperity (Implications of beliefs, attitudes, and behavior)

Productivity is the key tool to achieve prosperity. This is the basic belief that helped economies to progress. Controlling resources, military, government agencies etc. doesn’t entail economic progress. Lack of framework can be a hindrance for individuals or even their leaders, because without it they won’t see how the modern day economy works. There maybe imposing parties of what to do and what not to progress, however there are still some beliefs that are ought to be changed to achieve this goal. For some, rigid hierarchy is needed to maintain control, but some are too blind to see that sometimes, it can be the source for failing to develop because of the abuse of power, monopoly is good because for sure there is only one distributor, but it also close their minds that their might be other companies whose quality is far way better than what they have, self-contained family relationships should determine partnership, but also they fail to see the abuse that might happen or lack of interest, assurance that the partner will work well is questionable, since its family, they can get away with the responsibility is easily. A deeper understanding of economic culture is needed by some in order for them to deal with their weaknesses and beliefs.

Changing it will be hard because it’s already embedded on them, dealing with it in a manner that would hopefully benefit them someday is the challenge that is difficult to face.

Why do nations have unproductive cultures?

So the question that pops in our minds is written above. The author gave us several answers. The first is that economic culture in some countries is greatly influenced by ideas, theories, and paradigms. Ignorance about the international economy is one reason. Ideas became an integral part of their beliefs, channeled thru their educational institutions, government leaders and officials, intellectuals and other means. What they know may include flawed theories, but sometimes this flawed theory that is being applied is convenient and is benefiting one party. For example, military dictates everything at would rather starve their people than to let go of their flawed ideologies.

Second, past and present microeconomic context might have a strong effect to economic culture. The way people behave in this society has something to do with the amount, or the benefits that they can from the kind of economic system that they’re currently in. Workers in developed countries have employment benefits (i.e health insurance, loan, salary increase etc) that is why their work ethics is good. If you compare it with the workers in less developed countries, they have no incentives at all so there’s is no reason to work harder, which means you can’t blame them if they have poor work ethics. If the economic system in one’s country encourages such behavior that is flawed, then chances of changing it and improving is unattainable. If you observe people who migrate from less developed countries to developed countries, you will notice that there is a sudden shift with their performance and economic culture, that’s because the economic system that they’re currently in doesn’t tolerate their flawed behaviors.

Third is that social policy have a strong influence on economic culture because they have an influence in the economic context. Social policies affect the workers attitude in work, savings, education, investing, unintentionally; they influence a certain aspect of a nation’s economic policy. This makes social policy and economic culture intertwined.

Given these explanations, we can say that economic culture can be learned in two ways, directly and indirectly. In some countries, beliefs, attitudes, and values may include self interest and all that, but also social and moral values. Economic culture is hard to change; it’s with the nation for years, decades, or centuries. If economic culture can’t be changed, then maybe modifying it would help, and hopefully in a positive way that would work in their advantage.

Global Convergence around the Culture of Productivity

Politics and economy has always been intertwined. Protectionist policies were established to protect local industries and domestic products, politicians know that if they implement this, the locals would favor them, thus making them the favorite of their country. Protectionist policies by developed countries made it even more difficult for less developed countries because now they are forced to sell their products in a cheaper price. What made it worse is that since less developed countries already have few income, they became the “dumping site” of developed countries, vast amount of foreign aid were given to them which lead to an even more disastrous economies, dependent leaders and ineffective leaders. Global politics caused by the Cold War made nations to change their economic policies. The ability of less developed countries to improve was very limited. If there was any incentive for them to work better, if they know that there is a bright future ahead of them, it is safe to assume that they won’t under perform, that they’re going to strive to do great. However, opportunities never arised, in the economic system that they’re in, which is the cause of their slow paced development and backwardness.

Today seems to be a whole lot different. Globalization now provides powerful discipline on flawed behaviors. Being unproductive is a taboo. Being productive has its rewards; it can be Direct Foreign Investment, technological advancement, and doors for economic opportunity. Progress and prosperity will only happen to those countries that are willing to embrace everything that it offers, and everything that it requires, which includes the change of their economic culture for some.

What we’re seeing right now is a common international economic culture that cuts across the economic culture that some countries uphold. A common set of beliefs, attitudes, and values that would cater to development, progress, and prosperity is what’s going to be upheld. The pressure of performing well, being competitive, and being productive will be the reason for flawed ideas and ideologies be erased from their economic culture. Oppurtunity of the global economy will be grabbed by everyone for them to improve. Hard to imitate competitive advantage will result for one to excel more, so being unique with high quality would be a key for advantage. Given that globalization offers learning experience for countries with flawed ideologies, adapting to changes in the international arena would be a lot easier given that information is already wide spread and means of communication has never been this easy.

The result is that nations are striving to be as productive as they can be, to be as competitive as they can be, and to assure quality as much as they can. Given this, the improvement of different countries with their economic culture is noticeable and so as their positive effects. The negative effects are yet to be know, but given that the flawed ideas and ideologies are slowly being forgotten, then it’s a good sign that negative economic culture do change in a slow, yet more effective and sustainable way.