SYNOPSIS:

The Social Virtues and the Creation of Prosperity

By Francis Fukuyama

Free Press. 457 pp. $ 25

The economist Robert Solow, who pioneered the modern theory of economic growth, conceded that efforts to explain long-run disparities in economic performance, such as Britain's loss of world industrial leadership, usually end in a "blaze of amateur sociology." Francis Fukuyama's new book about the "creation of prosperity" cuts to the chase: It is amateur sociology throughout.

The thesis of Trust may be stated as a syllogism. Economic success, Fukuyama argues, depends on the ability of a society to create large-scale organizations. The ability of such organizations to function effectively, in turn, depends on "trust," the shared expectation that members of a group will act in the group's interest rather than in a shortsighted, selfish, opportunistic manner. But although trust is essential to economic success, it must arise from non-economic forces -- from "spontaneous sociability" that has its roots in the nature of family ties, religious community and so on. Thus Fukuyama asserts what he calls the "improbable power of culture in the making of economic society." It's an appealing thesis, especially when compared with the ideological posturing that these days passes for economic debate. It is certainly refreshing to have someone suggest that the roots of Japan's industrial power lie neither in boring macroeconomic indicators nor in the machinations of the Ministry of International Trade and Industry, but rather in the habits of association that Japanese form when studying archery, flower-arranging and the tea ceremony. Fukuyama's argument also provides an occasion for a nice Cook's tour of world cultures, with capsule accounts of family life and the role of religion in half a dozen societies.

And yet while the book is fun, it is ultimately unconvincing at several levels.

In the first place, the dichotomy between self-interest and cooperative behavior is a false one, or at least not as simple as he makes out. It seems incredible to me that anyone could write a would-be scholarly book on trust without so much as mentioning Robert Axelrod's classic The Evolution of Cooperation; but it seems that Fukuyama is unaware of the huge interdisciplinary literature -- spanning economics, biology and political science -- about how self-interested agents can evolve cooperative norms of behavior.

Moreover, each link in the asserted association between culture and trust turns out to be more than a bit slippery. For example, Great Britain -- a nation permeated by private associations that promote everything from gardening to drinking real ale -- for some reason does not rate a chapter in this book, but passing references indicate that somehow class divisions mean that in Britain spontaneous sociability does not produce the right kind of trust. How can we tell when an abundance of voluntary associations is good for the economy, and when it is not? Apparently only after the fact.

What about the link between trust and large-scale organization? Fukuyama notes that both South Korea -- which he considers a low-trust society -- and high-trust Japan are characterized by huge industrial groups and that in both cases these groups were initially fostered by government policy. But he asserts that in Japan this policy worked because it reinforced a natural tendency, while in Korea the creation of these groups (called chaebol) represented the artificial imposition of large-scale organizations on a society that would otherwise have created only small family firms. This may be right, but one wonders whether so flexible a theory is not capable of accommodating virtually any observation.

Finally, there is a huge irony in Fukuyama's choice of countries to describe: Since all of them are, in fact, economic success stories, it is impossible for him to offer any evidence of the asserted connection between "social virtues" and prosperity. Low-trust France has about the same living standard and rate of growth as high-trust Germany; Taiwan, with its notable scarcity of large firms, has almost precisely matched the overall performance of South Korea, with its chaebol. The author is clearly aware of this problem. By the end of Trust the initial forceful claims have been watered down to assertions of memorable vagueness: In the future "the impact of cultural differences in the propensity for sociability will have a large, but at the moment indeterminate, impact on economic life."

How can this be? One reason is that large-scale firms are much less important than Fukuyama seems to think. There is a revealing howler early in the book, when he writes of the "giant corporations that employ the vast majority of American workers"; in fact, not even one American in seven works for a company with more than 10,000 employees. This is disturbing: If the author is neither perceptive enough about his own country to sense that Corporate Man is a small minority group nor careful enough to check such a basic fact, how much reliance can we place on his assertions about other cultures and economies?

Fukuyama's book is fun to read, and he tells interesting stories. But as a grand thesis about the sources of economic success, it fails to inspire, well, trust.

Originally published, 8.27.95