How Culture Gives the US an Innovation Edge Over China
Collectivist societies excel at production, while individualistic cultures nurture more invention.
Image courtesy of Brian Stauffer/theispot.com
For centuries, great powers have been looking over their shoulders, certain that somebody is gaining on them. In the late 1800s, Imperial Germany’s ascent unnerved Great Britain, the technology leader at the time. Today, alarm bells are ringing in Washington, D.C., where China’s rapid recovery from the coronavirus pandemic has cemented the notion that it will inevitably replace the United States as the world’s leading economic superpower. Some now speak of a Beijing consensus rather than a Washington consensus.
Both the Anglo-German and China-U.S. rivalries emerged during periods of rapid globalization and technological progress, as many have observed.1 Both pit a rising autocracy against an established democracy — so, not surprisingly, much of the discussion of China’s surge has focused on the relative merits of a state-led economy and a free market. However, arguments that China’s state-led economic policies are superior to the United States’ laissez-faire capitalism, or vice versa, tend to ignore context altogether. The countries’ economic models did not emerge in vacuums but rather evolved in societies with distinct cultural and psychological traits.
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Innovation and Individualism
Scholars have only recently begun to pay attention to the striking variation in psychology across societies. In his remarkable new book The WEIRDest People in the World, Harvard professor Joseph Henrich notes that people in the West evolved to become particularly individualistic and prosocial beginning in the Middle Ages.2 According to Henrich, their path to prosperity began with the Roman Catholic Church’s family policies (such as bans on cousin marriage), which inadvertently dissolved kinship institutions and made Europeans increasingly free both relationally and residentially. Released from family obligations, people chose their own friends, spouses, and business partners. That, in turn, opened the door for the emergence of institutions such as voluntary associations, guilds, universities, and charter towns, which expanded social networks and acted as collective brains.
As Western societies scaled up, populations became more diverse and innovative, spurred by psychological developments like greater interpersonal trust, less conformity, and less reliance on authority, which helped facilitate the flow of ideas. Today, Westerners in general, and Anglo-Americans in particular, remain relatively individualistic. Geert Hofstede’s widely recognized measure of individualism, based on questions about the importance of personal ambitions and achievements, confirms this; his work also supports the idea that East Asian societies are more collectivist.
References
1. M. Brunnermeier, R. Doshi, and H. James, “Beijing’s Bismarckian Ghosts: How Great Powers Compete Economically,” The Washington Quarterly 41, no. 3 (fall 2018): 161-176.
2. J. Henrich, “The WEIRDest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous” (New York: Farrar, Straus, and Giroux, 2020).
3. T. Talhelm and A.S. English, “Historically Rice-Farming Societies Have Tighter Social Norms in China and Worldwide,” Proceedings of the National Academy of Sciences 117, no. 33 (Aug. 18, 2020): 19816-19824.
4. F. Bray, “The Rice Economies: Technology and Development in Asian Societies” (Berkeley, California: University of California Press, 1994).
5. T. Talhelm, X. Zhang, S. Oishi, et al., “Large-Scale Psychological Differences Within China Explained by Rice Versus Wheat Agriculture,” Science 344, no. 6184 (May 9, 2014): 603-608; and J. Henrich, “Rice, Psychology, and Innovation,” Science 344, no. 6184 (May 9, 2014): 593-594.
6. C.B. Frey, C. Chen, and G. Presidente, “Democracy, Culture, and Contagion: Political Regimes and Countries Responsiveness to Covid-19,” Covid Economics 18 (May 15, 2020): 222-240.
7. Y. Gorodnichenko and G. Roland, “Which Dimensions of Culture Matter for Long-Run Growth?” American Economic Review 101, no. 3 (May 2011): 492-98.
8. L. Wu, D. Wang, and J.A. Evans, “Large Teams Develop and Small Teams Disrupt Science and Technology,” Nature 566, no. 7744 (February 2019): 378-382.
9. Y. Gorodnichenko and G. Roland, “Culture, Institutions, and the Wealth of Nations,” Review of Economics and Statistics 99, no. 3 (July 2017): 402-416.
10. G. Duranton and D. Puga, “Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products,” American Economic Review 91, no. 5 (December 2001): 1454-1477.
11. A. Gerschenkron, “Economic Backwardness in Historical Perspective: A Book of Essays” (Cambridge, Massachusetts: Belknap Press, 1962).
12. E. Sanger, “A High-Tech Lead in Danger,” The New York Times, Sunday, Dec. 18, 1988, sec. 3, p. 1.
13. P. Kennedy, “The Rise and Fall of the Great Powers: Economic Change and Military Conflict From 1500 to 2000” (New York: Random House, 1987).
14. D. Acemoglu, P. Aghion, and F. Zilibotti, “Distance to Frontier, Selection, and Economic Growth,” Journal of the European Economic Association 4, no. 1 (March 2006): 37-74.
15. H. Pitlik and M. Rode, “Individualistic Values, Institutional Trust, and Interventionist Attitudes,” Journal of Institutional Economics 13, no. 3 (January 2017): 575-598.
16. E. Mansfield, “The Speed and Cost of Industrial Innovation in Japan and the United States: External vs. Internal Technology,” Management Science 34, no. 10 (October 1988): 1157-1168.
17. Gorodnichenko and Roland, “Culture,” 402-416.
18. E. Mansfield, “The Speed and Cost,” 1157-1168.
19. C. Johnson, “MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975” (Stanford, California: Stanford University Press, 1982).
20. A. Arora, L.G. Branstetter, and M. Drev, “Going Soft: How the Rise of Software-Based Innovation Led to the Decline of Japan’s IT Industry and the Resurgence of Silicon Valley,” The Review of Economics and Statistics 95, no. 3 (July 2013): 757-775.
21. J. Studwell, “How Asia Works: Success and Failure in the World’s Most Dynamic Region” (New York: Grove Press, 2013).
22. K.B. Burchardi, T. Chaney, T.A. Hassan, et al., “Immigration, Innovation, and Growth,” working paper 27075, National Bureau of Economic Research, Cambridge, Massachusetts, May 2020.
23. B. Fallick, C.A. Fleischman, and J.B. Rebitzer, “Job-Hopping in Silicon Valley: Some Evidence Concerning the Microfoundations of a High-Technology Cluster,” The Review of Economics and Statistics 88, no. 3 (February 2006): 472-481; and T. Berger and C.B. Frey, “Regional Technological Dynamism and Noncompete Clauses: Evidence From a Natural Experiment,” Journal of Regional Science 57, no. 4 (October 2016): 655-668.
24. M. O’Mara, “The Code: Silicon Valley and the Remaking of America” (New York: Penguin Press, 2019).
25. E.F. Vogel, “Deng Xiaoping and the Transformation of China” (Cambridge, Massachusetts: Belknap Press, 2011).
26. China has shed more than 12.5 million manufacturing jobs in the past four years as jobs have moved abroad and robots have taken over much factory work. See R.Z. Lawrence, “China, Like the U.S., Faces Challenges in Achieving Inclusive Growth Through Manufacturing,” China & World Economy 28, no. 2 (March-April 2020): 3-17.
27. R. Franck and O. Galor, “Flowers of Evil? Industrialization and Long Run Development,” Journal of Monetary Economics, forthcoming.
28. P. Ngai and J. Chan, “Global Capital, the State, and Chinese Workers: The Foxconn Experience,” Modern China 38, no. 4 (July 2012): 383-410.
29. F.R. Campante and D. Chor, “‘Just Do Your Job’: Obedience, Routine Tasks, and the Pattern of Specialization,” discussion paper ERIA-DP-2016-35, Economic Research Institute for ASEAN and East Asia, Central Jakarta, Indonesia, March 2017.
30. D.B. Fuller, “Paper Tigers, Hidden Dragons: Firms and the Political Economy of China’s Technological Development” (Oxford, United Kingdom: Oxford University Press, 2016).
31. S.J. Wei, Z. Xie, and X. Zhang, “From ‘Made in China’ to ‘Innovated in China’: Necessity, Prospect, and Challenges,” The Journal of Economic Perspectives 31, no. 1 (winter 2017): 49-70.
32. L. Wei, “China’s Xi Ramps Up Control of Private Sector. ‘We Have No Choice but to Follow the Party.’” The Wall Street Journal, Dec. 10, 2020, www.wsj.com.
33. “China’s Uneven High-Tech Drive: Implications for the United States,” ed. S. Kennedy, PDF file (Washington, D.C.: Center for Strategic & International Studies, February 2020), www.csis.org.
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