A society’s values and beliefs matter for its economy

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And cultural change can unlock the economic potential of people and ideas. 

Make America great again is more than text on a red cap. It is an argument about the nature of American success: one which President Donald Trump elaborated on in racist comments last week. On July 21st he questioned whether four Democratic congresswomen, all non-white, were “capable of loving our Country”. The same day Stephen Miller, an adviser to Mr. Trump, said the president’s criticisms of America differed from those of his critics because he was defending the “principles of Western civilization”. The comments seemed to imply that American greatness is built on a cultural inheritance that some people cannot access, whether born in America or not.

Cultural arguments once loomed large in explanations of the ways in which countries differed economically and politically. Economists mostly abandoned such reasoning in the 20th century, not only because it provided cover for racists but also because of its lack of explanatory power. In 1970 Robert Solow, a Nobel prizewinner, quipped that attempts to explain growth with variables such as culture generally ended up “in a blaze of amateur sociology”. This position is changing, however, and not before time. A better grasp of how cultures work may be needed to understand modern political economy.

Taken from the economist