How tradition shapes capitalism all over the world

Sunday greetings. I’ve been away within the United Arab Emirates this previous week, so I’ve referred to as upon some specialists to help me with this version.

In my Vietnam dialectic, I discussed the customarily under-appreciated position of tradition in shaping how economies develop.

So this week, I requested teachers and journalists to elucidate how norms and values have influenced capitalism in 4 nations from throughout the cultural spectrum: China, India, Sweden and the US.

Tradition issues

First, some background. Maybe probably the most broadly learn work on the hyperlink between tradition and financial outcomes comes from Max Weber. In The Protestant Ethic and the Spirit of Capitalism (1904) the German sociologist argued that values practised by reformist Christians — together with onerous work, self-discipline and frugality — paved the way in which for the emergence of capitalism within the west.

However most nations have now accepted some position for personal enterprise of their economies (albeit to differing levels). And cultural norms have formed the way it has developed.

Asia, for example, typically has extra collectivist and hierarchical social constructions than within the west. Thomas Talhelm, an affiliate professor on the College of Chicago, has linked this to the prevalence of rice agriculture within the east. He posits that its excessive labour depth relative to wheat farming required farmers to create interdependent working customs, forming the idea of tighter-knit social constructions.

Dutch social psychologist Geert Hofstede created a solution to categorise cross-cultural variations utilizing six dimensions, primarily based partly on surveys of IBM staff.

Beneath are scores for every dimension in a couple of chosen western and japanese nations, utilizing survey and analysis information collated by The Tradition Issue Group (take a look at its nation comparability device right here).

Asian nations have a tendency to attain greater for traits related to paternalism, long-termism and group than within the west:

Parag Khanna, writer of The Future is Asian, explains that these traits underpin the area’s usually technocratic, socially conservative and blended capitalist techniques:

“Inter-generational accumulation of private wealth in family businesses (which may be reinforced by a deferential culture), has seen the rise of dynastic corporate structures, where there has been little need to follow the path of publicly listing companies to raise capital. And, what Western analysts have come to view as a “weakness” of many Japanese economies — low market capitalisation and buying and selling volumes — is seen by Asians as a supply of power: long-term strategic orientation, stability, and even immunity from market pressures.”

Past these broad western and japanese cultural traits, there are refined combinational variations between nations in every area.

Let’s start with China, which scores excessive in values linked to thrift and respect for hierarchy. Keyu Jin, professor on the London College of Economics, explains how that is embodied in guanxi — a time period used to explain one’s skill to attract on networks:

“Guanxi isn’t everything in China — but without it, you won’t get far. It’s not just about contracts. It’s trust, reputation and reciprocity — the unwritten code of relationships in Confucianism. Need a top doctor, a fresh grad job, or even a better quarantine hotel? Guanxi helps.

In business and finance, it’s even bigger. In a country where permits, licences and funding are controlled by local governments, guanxi is the ultimate shortcut.

It’s not just for billionaires. Parents cosy up to teachers, real estate developers befriend village chiefs, and plenty of loans are secured over dining and wining with mid-level bank staff. Deftness and persistence is key. Many of China’s top tech entrepreneurs started with nothing but mastered the art of connection.

Guanxi has evolved. It’s no longer just relationships — it’s “guanxi+” — the place mutual worth creation is essential. Companies that need authorities backing have to deliver funding, jobs and innovation to the desk. DeepSeek could not have began with guanxi, however shifting ahead, its success ensures it’ll safe the most effective situations to navigate world competitors. As we speak, it’s not simply who that issues, however what you’ll be able to provide.”

Subsequent, to India. Like China it values social hierarchy, however scores stronger on traits linked to driving fast outcomes. This underpins India’s jugaad, explains Jaideep Prabhu, professor of enterprise and enterprise at Cambridge Choose Business College:

“Jugaad — the ability to find ingenious, affordable solutions despite severe constraints — has shaped India’s economy ever since independence.

This mindset initially fostered innovation across various sectors. Tata Motors’ Nano, once marketed as the world’s cheapest car, aimed to provide affordable four-wheel transportation to millions. And the Mitticool, a low-cost biodegradable clay refrigerator, offers an eco-friendly alternative to the conventional fridge.

As India’s economy has grown, the concept of jugaad has evolved into more structured “frugal innovation.” This strategy maintains the core ideas of resourcefulness however applies them to create scalable, high-quality options at inexpensive costs. For example the Chandrayaan-3 moon mission price round $75 million, considerably lower than comparable missions by different house businesses. India’s Digital Public Infrastructure additionally exemplifies the nation’s skill to create high-tech, scalable options.”

Subsequent, the US, which scores excessive for individualism and valuing solo achievement. Right here’s Adam Chandler, writer of 99% Perspiration, on the nation’s “hustle” tradition:

“The word hustle has taken an expansive journey in the US, evolving to a doctrine of basic endurance in a country with a thin-by-design social safety net. American Hustle culture grew out of a fascination with social mobility and has drawn millions from around the world to pursue their own American dream.

Hustle initially moved beyond its connotations [of] grit and hard work to embody a scheme or a sleight of hand. This version of hustle identified a way to survive, implicitly against the long odds imposed by external forces like oppression and economic exclusion.

As financial precarity has subsumed more would-be strivers, this interpretation of hustle has been more widely adopted. The hustle now appears as a call to be resilient or self-reliant; as a commodity that fetishises overwork and infuses it with good cheer as a cultural guideline that connects long hours with the need to play hard or indulge in high-priced self-care. 

Speaking in Nebraska in 2005, former President George W Bush met a divorced mother of three who told him that she worked three jobs to get by. “Uniquely American, isn’t it?” he instructed her. Sadly, anger is now additionally catching up. A 2023 Gallup ballot discovered that 39 per cent of Individuals believed that they had been failing to get forward regardless of working onerous.”

Lastly, Sweden. Just like the US it ranks excessive for valuing private freedom, however locations significantly much less emphasis on particular person achievement. Right here’s how lagom encapsulates that, by way of Andreas Bergh, an economics professor at Lund College.

“The Swedish word lagom is often translated as ‘just the right amount’. It goes back to Viking culture, where there was a custom of passing a communal drinking horn around. Each person had to drink ‘just enough’, ensuring that everyone could have their share. The practice of lagom embodied the principle of social trust and considering the collective good rather than individual excess. It helped Swedes act as a team and co-ordinate their behaviour.

On a private level, lagom encapsulates a philosophy of avoiding extremes. Rather than pursuing excess, Swedes strive for harmony. On a political level, the culture of lagom and the ability to act collectively paved the way for an expansion of the welfare state that ensures no one has too much or too little.

It’s prevalent in business and consumer behaviour too. For instance, the minimalist, functional design of Ikea is a prime example of lagom at work. Ikea’s products emphasise practicality, simplicity and affordability, aligning with the Swedish desire for moderation and balance in everyday life. Lagom also plays a role in Sweden’s corporate culture, where work-life balance is prioritised.”

“Culture” is multi-layered, and doesn’t all the time sit neatly in distinct classes. Nonetheless, Hofstede’s framework provides us a helpful means to conceptualise beliefs, preferences and values. In any case, historical past and geography mould societal behaviours in ways in which affect how establishments and companies function — and the way economies develop.

Tradition isn’t every little thing. However in a world that dangers turning extra insular, it’s vital to do not forget that world capitalism — from Ikea to DeepSeek to Tata — is extra than simply the commerce of products and expertise, but additionally an publicity to new methods of considering and doing.

Ideas? Message me at freelunch@ft.com or on X @tejparikh90.

Meals for thought

New analysis from the Federal Reserve Financial institution of New York finds that American imports from China have decreased by a lot lower than reported in official US statistics within the aftermath of tariffs over latest years. The implication is that American customers may face bigger penalties from Donald Trump’s newest amplification of the commerce conflict.