Wednesday, February 14, 2007

Continental Culture
Mike Rappaport

Nobel Prize Economist Edmund Phelps argues that the culture of the European bears much of the blame for its poor economic performance:

The values that might impact dynamism are of special interest here. Relatively few in the Big Three [France, Germany & Italy] report that they want jobs offering opportunities for achievement (42% in France and 54% in Italy, versus an average of 73% in Canada and the U.S.); chances for initiative in the job (38% in France and 47% in Italy, as against an average of 53% in Canada and the U.S.), and even interesting work (59% in France and Italy, versus an average of 71.5% in Canada and the U.K). Relatively few are keen on taking responsibility, or freedom (57% in Germany and 58% in France as against 61% in the U.S. and 65% in Canada), and relatively few are happy about taking orders (Italy 1.03, of a possible 3.0, and Germany 1.13, as against 1.34 in Canada and 1.47 in the U.S.).

Perhaps many would be willing to take it for granted that the spirit of stimulation, problem-solving, mastery and discovery has impacts on a country's dynamism and thus on its economic performance. In countries where that spirit is weak, an entrepreneurial type contemplating a start-up might be scared off by the prospect of having employees with little zest for any of those experiences. And there might be few entrepreneurial types to begin with. As luck would have it, a study of 18 advanced countries I conducted last summer found that inter-country differences in each of the performance indicators are significantly explained by the intercountry differences in the above cultural values. (Nearly all those values have significant influence on most of the indicators.)

The weakness of these values on the Continent is not the only impediment to a revival of dynamism there. There is the solidarist aim of protecting the "social partners"--communities and regions, business owners, organized labor and the professions--from disruptive market forces. There is also the consensualist aim of blocking business initiatives that lack the consent of the "stakeholders"--those, such as employees, customers and rival companies, thought to have a stake besides the owners. There is an intellectual current elevating community and society over individual engagement and personal growth, which springs from antimaterialist and egalitarian strains in Western culture. There is also the "scientism" that holds that state-directed research is the key to higher productivity. Equally, there is the tradition of hierarchical organization in Continental countries. Lastly, there a strain of anti-commercialism. "A German would rather say he had inherited his fortune than say he made it himself," the economist Hans-Werner Sinn once remarked to me.

That last italicized line is truly extraordinary.  And I think speaks volumes.  It is not that it is so bad to inherit wealth  -- it is lucky, but not shameful.  But the belief that making a fortune, especially in a functioning market economy, is shameful is really beyond the pale.

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Mike Rappaport


Here is another article on wealth and culture, which says things that are obvious but often blocked by political correctness.

Posted by: GK | Feb 15, 2007 7:49:47 PM

What seems to me extraordinary is that you see the statement A German would rather say he had inherited his fortune that say he made it himself as extraordinary.

The sentiment in not so much an expression that the Germans don't want to work hard - the Germans are historically legendary for their diligence and thoroughness - rather it is based in the pervasive class consciousness that still pervades Europe in general and Germany in particular. It expresses the sense that to come from inherited (preferably landed) wealth suggests noble status, whereas to have made one's own fortune suggest at best a kleinbuergerliches background. (And, Kleinbuerger is every bit as insulting in German as petit bourgeois is in French or English). England may be a 'nation of shopkeepers' but what Englishman would not prefer to be a peer? Maggie Thatcher was always sniffed at by the right people because she was a 'grocer's daughter'. In Germany, the aristocracy is a bit less out in public, but they're still around, and being in the Almanac de Gotha is probably still better socially than having 100 million euros.

Posted by: Cato Renasci | Feb 15, 2007 9:02:41 PM

I wonder to what extent those attitudes reflect a growing realization that their society does not reward (nor wish to reward) those job characteristics. It's not just socialism and the high taxes. It's the attitude that the "drones" are society's nobels and the ambitious and daring are the economic "slaveholders".

Posted by: mikem | Feb 15, 2007 9:35:27 PM

As my Russian immigrant friends enjoyed relating...

The German farmer looks down the road at his rich neighbor's house and exclaims, "You son of a bitch! If I have to work my whole life and my wife too and even if it kills us, one day we will be as rich as you."

The Russian farmer looks down the road at his rich neighbor's house and exclaims, "You son of a bitch! If I have to work my whole life and my wife too and even if it kills us, one day you will be as poor as us."

Posted by: Charlie | Feb 15, 2007 9:43:43 PM

If I had inherited a fortune (which I have not, nor will ever), and were asked for an explanation, I would regard the inheritance as more embarassing than, oh, saying I had obtained it by theft or embezzlment, and would attribute it to the latter two.

Posted by: David Hardy | Feb 15, 2007 9:58:04 PM

But not too ashamed to take the money, eh?

Posted by: mikem | Feb 15, 2007 11:00:41 PM

Inheritance in the US is seen as undeserved or 'bad' wealth. Working for it is seen as deserved or 'good' wealth. Generally. Heck, even Paris Hilton hustled and marketed herself to grow from a mildly wealthy blonde twit to an enormously wealthy blonde twit.
OK, Paris aside, there is great pride in proclaiming ones modest roots. Everyone is given a different lump of clay at birth- it is what you do with it that counts.

Posted by: M in Iraq | Feb 16, 2007 12:31:46 AM

Indeed, I noticed that despite their claimed progressivism, the British chattering classes lost no opportunity to sneer at Margaret Thatcher as "a greengrocer's daughter." I found that interesting; in the U.S. such people might think so but would be hesitant to say it, and she would make a point of it.

Posted by: Alex Bensky | Feb 16, 2007 5:07:10 AM

There was a documentary that aired a while back (on HBO I think) made by one of the Johnson kids, I think - of Johnson & Johnson fame/fortune. The guy filmed his friends and interviewed them and and showed them doing their normal things. One of the guys he interviewed was some rich aristocrat in his late 20's from Europe. The guy was talking about how vulgar he thought it was that in America everyone always asked "What do you do" as a introductory question. He said he was quite proud of the fact that he did, in fact, nothing.

That always suck with me.

Posted by: epoh | Feb 16, 2007 8:47:30 AM

In Blackadder III, when Edmund is looking for a French aristocrat down on his luck, he encounters the Comte de Frou Frou and asks, "Wouldn't you like to make some money?" To which Frou Frou responds, "No, I would rather that other people made money and gave it to me."

Old habits die hard.

Posted by: charles austin | Feb 16, 2007 11:41:20 AM

I have a Swiss roommate, and the other day I mentioned to him that Credit Suisse had hired an American as CEO. He remarked something to the effect of "You can run the company, we would rather sit back and collect the money." I was not surprised, however, because he is something of a contrarian.For example, he has maintained in conversation that nominal GDP per capita is a truer measure of a country's wealth than purchasing power parity, solely because Switzerland has a higher nominal, but lower real, GDP than the US.

Posted by: USD Law Student | Feb 19, 2007 8:25:50 AM