A Critique of Trust: The Social Virtues and the Creation of Prosperity by Francis Fukuyama
...caused China to be a country full of small, family-owned, short-lived companies that are not prosperous over any significant period of time. I agree with Fukuyama’s assessment of the situation in China. When children are brought up, they are, Fukuyama tells us, taught that their family is the most important thing in life. As everyone else in China is taught that as well, Chinese people will as a result naturally rely upon and trust members of their own family much more than others they come in contact with. If someone is brought up with the understanding that family is all that matters, it makes sense then that that person will have to assume that everyone outside of their family must feel the same way regarding their own respective families. Anyone they come in contact with outside of their family will then automatically be untrustworthy when compared to family members. It will have to be assumed that they are only looking out for their family’s well being since family trumps all other duties. This kind of lifestyle would naturally lead to a low-trust type of society. This will obviously lead to the situation in which the only people you trust in doing business with are members of your family; and that is exactly what has happened in China. Fukuyama argues that the culture of a society is hard to change, which causes, in China’s case, a perpetuation of low-trust, family only ties leading away from prosperity. This argument is easily understood and supported by Chinese society today. The Chinese are reluctant to trust anyone outside of the realm of family, so even when they do build up enough wealth to be significant, they readily pass along the money to the only people they trust—family. The money never gets outside of the family to be combined with the resources of other individuals or families in order to create bigger business or to capitalize on economies of scale of any kind. Fukuyama’s analysis makes sense—If you don’t trust anyone but your family, you’ll never be able to have more than a family business. As I mentioned earlier, Fukuyama states that the level of trust in a society is the result of events in the society’s history. If this were true, then something in China’s history would have to explain their lack of trust outside of the family. Again, Fukuyama hits the nail on the head by pointing out that the early Chinese landscape plagued with overpopulation, resource scarcity, and untrustworthy government officials would likely lead to a low-trust society. China was becoming overpopulated, and there was fierce competition over land, but there were no set property rights. Also, the government taxed arbitrarily, drafted men for work, and provided little or no return for money and service. In an environment such as this, it is no wonder that people had to cling to their families in order to not be eaten alive. This propensity to cling to and trust only close family members is obviously a result of the early political and social environment of the country. Because of resource scarcity, people were being taken advantage of by their government as well as their neighbors. During this time, they were not able to trust anyone but family. Although the political and legal framework environment has changed for the better, the culture of family-only trust is one that has proven much more difficult to change. As mentioned earlier, social capital is not something that a society can acquire overnight. Here, Fukuyama shares his knowledge of China to present an entirely logical argument for the reason that China has been a country with such minimal prosperity, especially when compared with Japan. Another of the main low-trust societies that Fukuyama talks about in his book is Italy, particularly southern Italy. Southern Italy has been plagued by an impoverished people and a lack of any big business with economic strength and prosperity. Fukuyama points to a low degree of trust and social capital as the reason for southern Italy’s precarious position, and I agree with him. Southern Italy is full of unsuccessful, small, family run businesses, and they have been unable to move into a prosperous situation. Fukuyama implicates the early predominant form of agricultural labor in southern Italy as the culprit of their social trust, and his argument makes logical sense. In southern Italy, the form of agricultural labor that was prevalent was simply day laborers. It would follow, then, that for many generations, people were brought up farming day to day with no long-term relationships and simply working individualistically. This type of work became engrained in the people of southern Italy, and it would make sense that they learned to be non-reliant on others. This non-reliance and individualism precipitates low levels of social capital and hence trust. Because of something that was faultlessly engrained generations ago, I can agree that trust does not exist in today’s society. Without trust, people in southern Italy will undoubtedly be unwilling and unable to work together and prosper in economies of scale. Central Italy is situated just above southern Italy, and they, however, seem to have successful businesses. Here, Fukuyama accurately points again to the farming history as the reason for this high level of social capital. Apparently, in central Italy, sharecropping was the prevalent type of agriculture. It makes complete sense that this sharecropping facilitated long-term relationships with individuals outside of one’s family, and likewise resulted in the buildup of social capital. Here again, Fukuyama demonstrates logical and believable evidence that trust is something that happens as a result of historical circumstances, and this trust will lead to successful social capital. When farmers had to rely on others and rely on long-term relationships, they unknowingly were accumulating social capital. Sharecropping built relationships, knowledge of the benefits of relationships and the propensity to build relationships. Central Italians would then naturally pass down this capital to their ancestors for years to come, who would then be able to utilize this sociability to cooperate with outsiders to be successful in business. The only piece of Fukuyama’s puzzle that seems to go unaccounted for is his reason for the way that people farmed to begin with. He says that in southern Italy, people were day laborers, and it makes sense that day laborers would not have much of a use for social capital. He also says that central Italy had a sharecropping structure, and if the reader just starts analyzing from that point, Fukuyama’s reasoning for social capital is completely sound. Fukuyama does not, however, offer up any explanation for the difference in farming structure of the two regions of Italy. One could argue that the reason for southern Italy’s use of day laborers was because the laborers had no spontaneous sociability to begin with and were unable to take advantages of the relationships of sharecropping. This could lead one to the conclusion that the amount of trust caused farming methods rather than vice versa. Even so, the fact remains that the low trust areas of Italy can not seem to create successful businesses, and I completely agree with Fukuyama in this assessment. People in southern Italy don’t trust anyone outside of their close knit group, and no matter what the reason, this is an obvious inhibition to working with others to significantly grow an enterprise. France is another of Fukuyama’s examples of low-trust societies. According to Fukuyama, “Private firms in France over the past 150 years have never been leaders in new organizational forms, nor have they been noted for their large scale or ability to master complicated processes”(4). I agree with Fukuyama that France is a country with a low level of social capital, which causes this disappointing level of economic strength. Anyone that has been to France knows that they are not friendly, social people. They are infatuated with social classes, and social stigma. This would certainly cause them to have trouble forming trusting work relationships. By being socially picky, they limit themselves to who they befriend and hence work with. By limiting opportunities, for work relationships, they are unable to cooperate and prosper. France has no significant big businesses, and I can easily trace back the origins of the French people’s lack of spontaneous sociability that logically explains their position as second tier in our world economy. The reason that I agree with Fukuyama’s argument is because it makes perfect sense. The French do not spontaneously socialize well at all, which causes them to have a weak economy. We already understand that a country that does not spontaneously socialize will not prosper. But to understand why the French in particular do not have this necessary social capital, the reader must ask why. Fukuyama’s analysis makes perfect sense. Why don’t the French spontaneously socialize? Because they don’t like face-to-face relationships, and they have a preference for centralized authority. Why? Because they are accustomed to large social class divisions that prevented people from working with one another. Why? Because the French monarchy controlled every aspect of people’s lives and the tax system made everyone aware of their differences and jealous of each other’s privileges. This obviously caused multi-level social class distinctions in which people only associated with others in their class. The French government was too involved in businesses, and as a result, was the only successful business. There was an intense desire of the middle-class to become a government figure. France has remained a class-ridden society, and these aristocratic tendencies have blocked most all spontaneous sociability resulting in a low-trust type of society. Fukuyama is entirely logical in his argument that because of France’s history of social class divisions, they are extremely slow to develop prosperous, large-scale cooperatives. It is extremely difficult to build a company when you have a serious hang-up about working with someone else because they might be in a different social class than you. High-Trust Societies High-trust countries endowed with social capital and spontaneous sociability, according to Fukuyama, are the economic powerhouses of the world. I agree with this assessment of our world by Fukuyama. When people readily and efficiently work with strangers, they will undoubtedly be able to accomplish more than those that insist on working alone or with only family groups. When an individual opens up to people outside of his or her family, a whole new world of possibilities arises. If one insists on working only with family members, then they will be forever limited to the efficiencies that family cooperatives can bring. I would suspect that often times, families get into a particular business and naturally pass that business down to subsequent generations resulting in everyone having similar business knowledge within that particular family. In contrast, if people are willing and able to look outside of the family for partners, they will much more easily and readily find successful cooperatives. It is a big world, and people will benefit by taking advantage of each other’s knowledge and the momentum produced by two heads working together as opposed to one. Japan is the first of the high-trust societies analyzed by Fukuyama. Japan has high levels of trust within its society, and this high level of trust, according to Fukuyama, has propelled Japan to one of the top three economies in the world today. I, once again, agree with Fukuyama in his argument that trust and social capital are the reasons for Japan’s success. The Japanese have been able to go outside of their families, trusting others, and build long-lasting loyal relationships. The Japanese keiretsu is the ultimate example of high levels of trust in their society. Through keiretsu, companies have long-standing relationships with other companies in which they trust one another to act in a way that will benefit both parties. Since Japanese people are trusting, they have benefited from cooperation. In Chinese society, because of only trusting family members, this system would not work. Each Chinese company would be afraid that the other company was taking advantage of the relationship and only looking out for number one. Trust alone, in this sense, has allowed Japanese firms to surpass Chinese firms. I agree with Fukuyama’s analysis that high levels of trust have allowed Japanese firms to successfully implement professional management. Japanese companies saw the benefits of a professionally managed company, and since Japan is a trusting society, they were able to take advantage of this opportunity for efficiency and hire outside management. Since Japan trusts outsiders, they were able to hire outsiders, who as discussed earlier will likely be able to provide the most benefit. The only real question left to answer and explain, then, is why Japan has such a high level of social capital. Fukuyama logically explains that this is because “The Japanese early on developed the habit of associating in ways that were not based on kinship”(5). Here again, I must agree with Fukuyama’s assessment. The logical reasoning behind this is because Japanese clans, in feudal times, united around loyalty to a particular feudal lord. This loyalty thus caused them to develop a range of non-kinship based associations. Because of this acceptance of non-kinship based associations, adoption of nonbiological outsiders is both widespread and relatively easy in Japan. This adoption of nonbiological outsiders undoubtedly is what fueled Japan’s willingness to hire outside professional managers for their companies. The Japanese went outside of the family for family-like relationships, so it just follows that they’ll easily go outside of the family for business relationships. Here again, Fukuyama has masterfully illustrated that a society’s history is what causes it to be trusting and hence successful. Another good argument that Fukuyama makes for Japan’s successful spontaneous sociability is that Japanese families were smaller than Chinese. Fukuyama accurately attributes this to the fact that only the eldest son actually got control of the inheritance. This too makes sense. If the older son gets the money, the other sons will have to go out and work and start their own family. With a small family, it would certainly prove difficult to operate autonomously. As a result, the Japanese household was forced to go outside itself in regular economic dealings. Here, I agree that Japan’s high trust society is a result of its long ago history, which results in today’s successful economy. The high degree of trust and spontaneous sociability has obviously allowed Japan to become a major world power. They trust one another which allows them to efficiently work together, save time, reduce transaction costs and do and create much more than societies in which the levels of trust are less abundant. Germany is the next world power that Fukuyama successfully categorizes as a high trust societ...