Trust: The Social Virtues and the Creation of Prosperity [Paperback]

Many commentators have tried to evaluate the importance of culture in determining national economic success. Fukuyama claims to have identified the key, performance-determining, aspect of national culture, namely, the level of trust present in a society. He maintains that culture is of critical importance to everyday economic life and that only high trust societies can create the kind of large scale business enterprises that are needed to compete in today's global economy.

The culturalist view of history attributes the success of Japan and later of other East Asian countries such as China, Hong Kong, Malaysia, Singapore, South Korea and Taiwan to their common Confucian traditions and their concomitant cultural characteristics. However, the traditional drawing of distinctions between Eastern and Western cultures is seen as too simplistic by Fukuyama, who points out the many differences inherent in East Asian societies. He points out not only the differences between Japan and China, but also those between China and Chinese societies abroad such as Taiwan and Hong Kong. This attention to detail and depth of analysis is one of the strengths of Fukuyama's study.

To date, the debate on this topic has centred around culturalist explanations of the economic success of the Asia-Pacific Region, but Fukuyama has gone further by attempting to apply his thesis to all developed economies; Chinese, European, North American, Japanese and former communist. Fukuyama, following Weber, sees the earlier economic success of Western Europe as culturally determined, namely as a logical result of the Protestant work ethic.

Fukuyama sees three types of trust; the first is based on the family, the second on voluntary associations outside the family, and the third is the state. Each of these has a corresponding form of economic organisation; the family business, the professionally managed corporation and the state-owned enterprise, respectively. Societies in which family ties are strong (and thus ties outside the family relatively weak) have great difficulty creating large professionally managed corporations and look to the state to perform this critical economic function. Societies with high levels of trust, and many voluntary associations can create large economic organisations without state support. Fukuyama cites China, Italy, France and South Korea as societies with a strong role for the family and weak voluntary associations, while Japan, the United States, and Germany are said to have strong and plentiful associations beyond the family. The detail with which Fukuyama supports each of these examples is truly impressive and betrays the depth of research that undoubtedly went into writing this book.

Overall Trust: The Social Virtues and the Creation of Prosperity has to be considered a highly original work which has and will continue to raise significant interest. While many will dispute Fukuyama's main contention that significant comparative advantages arise from differences in levels of trust between countries, he offers a great deal of evidence to support an argument which is certainly correct at an intuitive level.

I found this book to be quite fascinating. I must admit that I am not an expert on economics, but I found the author's arguments quite convincing. His examination of various countries explained a lot of things that I have noticed before, but he succeeds in putting it all into a whole new paradigm. I highly enjoyed this though-provoking book, and recommend it to everyone!

Francis Fukuyama's book comes as a sequel to his magnum opus 'The End of History and The Last Man' which made waves in academic circles. In this book he claimed that after the demise of communism, history had virtually come to a halt - income the free market concepts like de-regulation, liberalization and free competition and all others exeunt.

In his latest book, he adds another ingredient for the making of a successful society - social capital. The author gives the idea of trust. According to him trust is the expectation that arises within a community of regular, honest, and cooperative behaviour, based on commonly shared norms, on part of other members of that community.

He divides societies on the basis of the quantum of trust that exists therein. China, France, Korea and Italy are low-trust societies whereas Japan, Germany, America are high-trust.

He starts from social set-up and correlates it with the industrial structure a society may evolve for itself, and tells how the former determines the position of a country in the global diversion of labour. Though people may interact through contract lams but if they trust each other the cost may be effectively reduced. Similarly if an economic turmoil hits a country, a socially well knit society may cope with it more hard-nosily. Also a high-trust society is more capable to form large organizations. For instance, the Japanese keiretsu networks help each other out when in distress.

As such he does not make a case for 'cultural determinism' that certain societies are bound to succeed while others to fail and falter. In his own words "there is no necessary trade-off between community and efficiency but those who pay attention to community may indeed become the most efficient of all."

With minor exceptions the book makes an interesting reading, intelligent in content and thought-provocative, indeed a marvelous piece of value-added research.