UK: AN ESSENTIAL CONDITION OF SUCCESS. - Norman Stone, professor of modern history at Oxford, looks at the social basis of capitalism, and considers the relevance of religion, family traditions, demographics and military power.

Last Updated: 31 Aug 2010

Norman Stone, professor of modern history at Oxford, looks at the social basis of capitalism, and considers the relevance of religion, family traditions, demographics and military power.

Trust: The Social Virtues and the Creation of Prosperity

By Francis Fukuyama

Hamish Hamilton; 457pp; £25

Americans, with that salesman's self-confidence of theirs, like big, explain-it-all books. Francis Fukuyama made his name a few years back with one such. The End of History had a deliberately provocative title which introduced common sense backed by interesting and wide-ranging illustration. With the Cold War over, it said, the ideology of liberalism had won, and every country - once past a certain level of prosperity - would go for free markets and democracy.

That was the optimistic text of the late 1980s. The '90s are less rosy, with many of us worrying about the social base of capitalism. Fukuyama's new book, Trust, looks into this. In some countries, especially the Far Eastern ones that are the talk of every business lunch, boom continues without social problems. America, also booming, has social problems by the dozen. Middle-class fortresses have to be erected against barbarians. Business costs have shot up because of the need to insure against attacks from lawyers who have turned 'rights' into a protection racket. There is the story of the woman who put her poodle into the microwave to dry it off after a shower. She left it in so long that it exploded, then sued the microwave makers - and won.

People talk weightily about the social values behind capitalism. Fukuyama takes one of these for the central chapters of his book. Given trust you can settle things with a telephone call. In its absence you have lawyers spinning very fine print out of their glutinous stomachs and mafias murdering each other in the night. However 'who you trust' is not simple. In some places religion matters, as in early America where sectarians could do business with fellow-sectarians.

This leads Fukuyama into a lengthy description of the role of religion in the development of capitalism. Why are Protestants, on the whole, better at capitalism than Catholics? He extends the question to Shintoism and Confucianism. Religion and family go together, and it is on family that he concentrates. In Chinese and southern Italian societies the family is all-important. Its members are the only people you trust so firms remain small. They are often very successful but there is no real teamwork beyond the family. If larger firms are required, the state has to create them.

There has only been one case of a seriously rich Chinese business in the US. An Wang stepped off a plane from Shanghai; Wang Laboratories did very well in computers, then old An appointed young Wang over the heads of better qualified people and Wang Labs nearly went under. Japanese companies don't operate in this way, says Fukuyama. Family ties are much weaker but the social under-pinnings are so strong that teamwork develops, with obvious advantages for big business.

Fukuyama's comments on other countries do not carry the conviction of those on America and Japan. There is nevertheless an illuminating comparison of French and German ways: the Germans good at teamwork, the French incorrigibly family-minded, to the point where the state has to do things because businessmen will not take risks. On Britain, Fukuyama lapses into cliche. Time was when you could say that the English were wrecked as an industrial people because their industrialists preferred to be country gents, perpetuating class divisions. An American, Martin Wiener, wrote a book to this effect 25 years ago, and we said 'amen'. With the '80s the flexibility of British society produced a less gloomy passage. But we can forgive Fukuyama his remarks on Europe. If he sees the Far East and America as the places of the future, and the EU as a backwater, he's not alone.

Like The End of History this book has a rather misleading title. It contains much interesting speculation and promising guidelines for future enquiry, but it is not as good a book. Its mis-statements are more serious. For instance, it quite overrates the prowess of the German economy in modern times, failing to mention Harold James's The Depression in Germany. There is no mention of Emmanuel Tod's L'invention de la famille, a wonderful book about European family types and their relationship to economic development. Tod deals in detail with a subject almost completely ignored by Fukuyama - the position of women. And if you are talking family, you have to talk about women.

There are several more huge omissions. In the 18th and 19th centuries (and in the later 19th and early 20th in Continental Europe) peasants upped sticks and arrived, in their millions, in towns. Many of them had skills. With them came boom. The process is now happening elsewhere, even outside my window in Ankara as I write, with new buildings springing up all around. Turkey, from this perspective, seems set to join the economic front-runners. If and when it does, I hope Fukuyama will make up for another omission - any discussion of the place of Islam in his scheme of things. Islam gets a bad press, but as I look at the Anatolian peasants I wonder. Whatever the case, the flight from the land deserves far more space than it gets.

There is yet another omission - the therapeutic value of a well-tempered kick in the pants. This came, directly or indirectly after 1945, from the US. Get defeated and move up the ladder 12 places. Fukuyama fails to discuss this phenomenon, but the beneficent influence of America must be one of the great themes of modern history. Now why America? Here we're back to that leathery old Puritan momma, and another circular argument. Fukuyama gives me a taste for them.

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Compiled by Bookwatch.

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