CAPITALIST IDEOLOGY: A GLOBAL ANALYSIS (1981-2014)

 Institutional frameworks that favor economic development have been analyzed at a global level by way of multiple indicators, such as those presented in the World Economic Forum’s Global Competitiveness Report. In particular, one of the Report’s sections, “goods market efficiency”, focuses on the conditions that facilitate the creation of a new enterprise, access to the international market and legal frameworks that favor competition. A similar perspective can be found in the Ease of Doing Business Index prepared by the World Bank, which attempts to quantify the business-friendliness of a country’s regulations. Additionally, The Economic Freedom of the World Index, sponsored by the Fraser Institute, measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and to compete, security of the person and privately owned property. 

On the other hand, the absence of institutional frameworks and practices that favor a competitive capitalist economy have been measured in statistics such as the “Crony Capitalism Index,” published by The Economist, and the “Corruption Perceptions Index,” published by Transparency International.  Privileged treatment by governments and regulatory bodies towards certain sectors of the economy create significant distortions in the market, losses in overall productivity, and ultimately a poorer population.

All of these studies show that a country’s prosperity is strongly correlated with a market-friendly institutional framework. But how do these frameworks develop?  What is the relationship between the existence of pro-capitalist institutions and the economic mentality of a society? 

It has been shown that the existence and extension of market-friendly institutional frameworks are interrelated with, and largely dependent on, the ideological beliefs held by a society. According to Michael Porter to achieve sustainable growth a society must have an archetype of productivity, including a comprehension of the factors that influence the efficiency of the economy. These factors include the existence of competitive markets, openness to globalization and international trade, an understanding that free markets benefit a majority of the society, and awareness of the pernicious effects of government favoritism (Porter, 2000). Porter argues that without this paradigm of productivity it is probable that an alternate view of prosperity takes root in a society, one which is favorable to the existence of noncompetitive rents, such as those granted by protectionist economic policies.

The optimal paradigm should not be confined to the upper echelons of a society but instead should permeate through its entirety, including the working class. Absent this diffusion, reforms favorable to a higher productivity will possibly face political opposition.

This project proposes to study the presence and degree of a market or capitalist ideology in different countries over the course of last three decades, via construction of a comparative indicator. The data to be used will be sourced from the World Values Survey, an international survey published in six editions between 1981 and 2014, which allows for the investigation of extant economic ideologies in a variety of countries. The Survey’s questionnaire includes multiple pertinent questions which reflect on the existence of a capitalist mindset, which can be defined as a favorable view of economic freedom, competition, private enterprise and free markets as creators of wealth. Although some components of the Survey have been used in studies which attempt to establish a relationship between culture and economic development, none of those studies have systematically investigated the question of a capitalist culture. Thus, we consider that our approach represents an original contribution which will permit a deeper understanding of a complex phenomenon. The precedent of this proposition is the investigation conducted by Carlos Newland, who analyzed the differences in economic ideologies between Latin American countries of Hispanic origin and countries with Anglo-Saxon cultural roots (Newland, 2017).

Our starting hypothesis is that the world’s most highly developed countries, ones with strong economic institutions, benefit from a “comparative cultural advantage” (Berger, 1990) with regards to their valuation of capitalism (countries such as the United States, New Zealand and Australia are included in this group). It is the economic culture of these countries that sustains the quality of their institutions and consequently their prosperity. Conversely, the economic cultures in countries such as Argentina and Russia are averse to free markets; in both cases, this culture is product of long statist traditions. In China and India, attitudes towards capitalism are ambivalent, at least in terms of how the private enterprise is valued. An interesting case is Chile, where an adequate institutional superstructure has generated important economic achievements. However, the country is coupled with an anti-capitalistic economic culture, which threatens the long run stability of its reforms. There is a worrisome trend visible in certain regions of the world (for example, Latin America and China), where the appreciation of capitalism has suffered during these first years of the new millennium.

The paper produced pursuant to this investigation will focus principally on quantifying both the level and the evolution of a capitalist mentality in a diverse selection of countries over the course of the last thirty years. Additionally, the paper will contain an analysis and explanation of variations encountered in the data.

Carlos Newland is Professor at ESEADE University and Torcuato Di Tella University in Buenos Aires. He holds a BA in Economics (Universidad Católica Argentina); a Master of Letters (University of Oxford), and a Dr Litt. in History (University of Leiden). He has been Claude Lambe Fellow (1990), De Fortabat Fellow at Harvard University (1999), and Guggenheim Fellow (2000). He has published articles in several journals on Economic History and Development, such as the Journal of Economic History, Explorations in Economic History, Desarrollo Económico, Revista de Historia Económica, Hispanic American Historical Review, and the Journal of Latin American Studies.

References

Peter Berger (1990), “Observaciones acerca de la cultura económica”, Estudios públicos: revista de políticas públicas, pp. 11-30.

Michael Porter (2000), “Attitudes, Values, Beliefs and the Microeconomics of Prosperity,” in Culture Matters: How Values Shape Human Progress, (L.E. Harrison, S.P. Huntington, eds.), New York: Basic Books, pp. 14-28.

Carlos Newland (forthcoming 2017), “Ideología económica: una comparación entre naciones hispánicas y anglosajonas”, Cultura Económica. Working paper (Spanish) at: https://eseade.wordpress.com/2016/09/08/ideologia-economica-una-comparacion-entre-naciones-hispanicas-y-anglosajonas/

Links to reports cited:

http://www.economist.com/news/international/21599041-countries-where-politically-connected-businessmen-are-most-likely-prosper-planet

http://www.doingbusiness.org/rankings

http://www.freetheworld.com/

http://www.worldvaluessurvey.org/wvs.jsp