Culture and Development

Economists have long looked at the different factors affecting economic growth. Papers have looked at the importance of factors, such as labor, education and capital on growth and prosperity. Research has also looked into the importance of past and present institutions on growth. There is even some research on the impact of religion on growth.

There is still little research on the role of culture and norms on economic growth. Different cultures can instill different kinds of values in a person, and so, on the aggregate, they can have macroeconomic consequences. For example,

(i) societies that do not allow women to undertake economic activities because of orthodox cultural norms may not enjoy the desired rate of growth; even though the laws may treat men and women equally;

(ii) societies whose norm is for children to take care of the elders may not see much accumulation of retirement savings by the current working age population (in stocks/bonds and other assets), and that could affect asset accumulation and production in a country;

(iii) cultures that look down upon a certain caste, ethnic group or occupation (such as domestic help) may reduce the growth potential of the stigmatized group, and even if the laws mandate equality of all, cultural norms may prevent people from following the laws.

More research should be done to examine the link between culture and growth. Culture seems to be a slow-moving variable, and so, the impact of past culture could affect present growth, even if physical factors that affect economic growth are present in the country.

Chaotic Development in Developing Nations

I am visiting Bangladesh after 10 years. It is evident that there has been substantial development in different spheres of life. New buildings have sprouted all over the country, the roads are clogged with cars and casual observation shows that people are not deprived of food. Roads that used to be silent by 8 pm are teaming with business activities even in secondary and tertiary cities and towns. People are earning more, and consumerism is taking a strong foothold in the country. 

All these do lead to development. However, as one peels the layers away, the development model seems chaotic. Yes there are laws and policy framework in place to assist industrialization and human development, but development is not happening in an orderly fashion. Factories, residential units, offices and stores all are in the same location, and sometimes, even in the same building (indicating a lack of zoning). Factories and houses are also being built on prime agricultural lands. Pollution reduces the quality of life of urban dwellers. The healthcare system is inadequate to provide affordable and quality healthcare to the masses. The question is, when will such chaotic development eventually make way to orderly development, where the overall quality of life is enhanced?

While it is true to some extent that every country faced some degree of chaotic development (think the socio-economic consequences of the Industrial Revolution), one can only hope that developing countries eventually will find the way to create orderliness out of the current chaos. Rising incomes is important, but along with that, one should also hope to enjoy improvements in all spheres of human development.