As the world moves toward a world economy it becomes necessary to look to macro level theories to explain the global situations. When one looks to the economic structure of different societies and their ability to form large corporations necessary to compete in the world economy, theories need to explain why some societies efforts work better than others. The explanation of differences between the core and periphery nations becomes important and needed in order to predict what societies have a better chance to become large corporate economic powers. If a theory can be used to explain the differences in the larger macro area, then it would seem to have great importance for new post-modern industrial sociology. If that same theory can also be used to look at the differences within societies, it's importance would then be of double significance and lend important support for the theory.
Francis Fukuyama (1995), in his book "Trust," sets out what appears to be a macro level theory of economic conditions. The theory looks at the amount of trust a society displays in terms of non-kin relationships--defined as voluntary associations. Fukuyama proclaims the amount of trust developed in non-kin relationships is the key to allowing a society to develop the large economic corporations and businesses that are essential in the world market. He argues that certain societies display differing levels of the trust needed to form these associations. Once he develops this relationship--that of trust and large corporate development--he moves on to examine relationships within the U.S. society, depicting why, using the same theoretical reasoning, certain groups have or have not been able to economically succeed within the U.S. society at large.

On the macro level Fukuyama divides societies into two categories. First are those societies he considers to be of low-trust. Societies such as China, Korea, Italy, and France are considered by Fukuyama to exhibit low levels of non-kinship trust. Second, he looks at what are designated as high-trust societies, such as Japan, Germany, and the United States. Fukuyama sets out the reasons for these societies differing levels of non-kinship trust. Using concepts such as beliefs and values held by the society, Fukuyama describes the way those values and beliefs affect the formation of the society into high- or low-trust societies.

On the micro level Fukuyama looks at the economic development of two groups within the U.S. Immigrants from the Asian countries are compared to the plight of African Americans on their status within the social stratification system. Using the same idea of trust of non-kinship relationships, he points to the ramifications of voluntary associations used to strengthen the plight of each group.

The purpose of this theory sketch is to show the causes of the level of economic corporate development of a society using the theory as set out by Fukuyama in his book. The paper will also show the relevant causes at both the macro--using his low-trust and high-trust societies--and the micro levels--comparing the immigrants from Asian societies and African Americans--the theory sets out. The paper is solely based on the work of Fukuyama and this authors interpretation of that work.
 
 

As the world moves toward a world economy (Kerbo, 1996), it becomes necessary to look to macro level theories--those that look at societies--to explain the global situation. Francis Fukuyama has set out one of the newest and most intriguing of these theories. Fukuyama (1996) looks at the cultural differences to see if these factors play a role in the society's economic development.

There are differences in how nations will develop in the new world economy. Although capitalism is thriving around the world, many nations seem to be better adapted for joining the world market place (Grieder, 1997). With the "One World" perspective of Grieder, cultural differences affect its ability to compete in the "new world" system.

As a predictor of its ability to compete, Fukuyama sets out a theory of the economic development based on the amount of trust each society has in voluntary associations. According to Fukuyama, "One of the most important lessons we can learn from an examination of economic life is that a nation's well being, as well as its ability to compete, is conditioned by a single, pervasive cultural characteristic: the level of trust inherent in the society" (1996: 7). While the theory is macro in its conception of the world market, Fukuyama also tests the theory in a micro level setting. After looking at low-trust and high-trust societies, he applies the same theory to a comparison of minority groups in the United States.

Fukuyama develops a theory of trust based on the cultural habits affecting the amount of family exclusiveness. This family exclusiveness affects how open the family structure is and the amount of non-kinship interaction among the members of the society. Fukuyama notes that those societies-or groups, such as minority groups within a society-having high levels of family openness also allow more non-kin interaction within the society.

He then posits that the amount of non-kin interaction allows for differing amounts of trust in voluntary associations. Those societies that have low-levels of non-kin interaction have low levels of trust in voluntary associations, while those with high-levels of non-kin interaction will have high levels of trust in voluntary associations. Fukuyama believes that the amount of trust in voluntary association is the key to the development of the large economic corporations needed to create economy of scale and economic stability. Those who have high levels of trust are better able to form large corporations needed to compete.

Another way nations can develop large corporations is through government sponsorship. If a state steps in and provides strong sponsorship of the corporations, either by forming and running the corporations or by support through government policy, the society can develop large corporations needed to compete in the world marketplace.

Fukuyama develops the theory of trust based on the assumption that humans are rational thinking and self-serving. He notes that as far as the utilitarian approach is used, it only is able to explain human behavior about eighty percent of the time. In other words, while Fukuyama believes humans are self-serving about 80% of the time and human actors act in an illogical or self-defeating ways about twenty percent of the time. This twenty-percent, Fukuyama believes, is due to the cultural habits of the society.

One of the main concepts Fukuyama uses to explain these cultural differences is the amount of social capital each individual within a society is able to acquire. Social capital is defined by Fukuyama as: "The ability of people to work together for common purposes in groups and organization" (p 10). Social capital can be divided into two main areas. First is the "familistic" association. As the name implies, this type of social capital involves the family group and the amount of trust the family has for its members as well as the amount of trust the family places in outsiders.

The second type of social capital is what Fukuyama calls "voluntary associations." Since this type involves voluntary membership, it implies more trust in strangers or non-kinship relationships. Fukuyama believes that as a nation is better able to place trust in outside kinship relationships, the better the nation is able to form economic corporations and businesses that can better compete in the outside world.

Fukuyama defines culture as "inherited ethical habits" (p 34). Fukuyama believes that the choice each rational actor make are controlled and influenced by the habits of the society. For example, the practice in China of dividing the inheritance of the family among all the male members of the family is not a rational way of ensuring the family business will continue and prosper. In this sense then, the cultural habits of the Chinese society influence its ability to compete in the global market.

Another important concept to the theory of "trust" is the idea of size of the economic corporations of the nation. Fukuyama looks at the extent of non-kin relations to determine the size of the society's ability to create large corporations. The theory posits that if a nation does not have trust in non-kinship relations, it will be limited in its ability to form large-scale multinational corporations needed to compete in the global economy. Fukuyama does not deny that a society can have numerous small businesses in its economic system--such as Hong Kong or Taiwan. Indeed, these smaller, family owned corporations can and do compete in the world economy and some are very successful. The point Fukuyama looks at is the amount of trust in non-kin relationships is the key to the development of large corporations.

Voluntary associations are groups of non-kin peoples coming together to work toward a common goal. Fukuyama recognizes the need for these types of groups in order to develop strong, large-scale corporations. The idea that a nation must be "communitarian" in nature does not preclude the development of voluntary associations. In fact, while the United States may be perceived as a very individualistic society, it consists of many voluntary associations--maybe more so than more communitarian societies like Japan and Germany.

One final concept needs discussion. Fukuyama does insist that nations can develop large-scale corporations through the intervention of the state. Fukuyama sees the state as a means to develop corporations by supporting the businesses through government policy and financial help. In the theory of trust, those societies with low-levels of trust may still be able to develop large corporations through government intervention and support.
 

Using the concepts set up above, Fukuyama looks at the size of corporations in several low-trust nations. China, according to Fukuyama, is a low trust nation due to the ethical philosophy of Confucianism. Confucianism puts the family and family ties above all else in the Chinese society. Distrust of non-kin relationships allows Chinese people to develop many small family owned business that are very successful, yet does not allow the continuation of these businesses into large corporate companies.

The "Buddenbrooks" phenomena describes how the very successful family business is not able to sustain itself over the years. Part of the belief in Confucianism is that the sons of the family--regardless of how many there may be--are entitled to share in the inheritance of the family. Since each must share equally, when the founding father passes away the business is then divided among the sons. Each son is then faced with rebuilding a smaller business into a success. Thus the cultural habits of the Chinese society keep the economic structure on a small scale.

Italy is another of the low-trust societies mentioned by Fukuyama. Italy is also a family based low-trust society. Italy also provides and interesting test of Fukuyama's theory within a society. In the southern area of Italy, the residents do not have non-kin trust. This came about as a result of the change from the agrarian society to the industrialized nation. Many of the poor southern farmers were forced off their land and have developed a distrust for not only government, but anyone who is not a family member. In the northern, more industrialized portions of Italy the level of non-kin trust is much higher and the residents are better able--due to the higher level of trust--to work together. So, according to Fukuyama, the southern sectors of Italy do not have the capacity to develop large-scale corporations to compete in the global economy, while those in the North are able to come together and compete on a world-wide basis with other corporations.

France, another low-trust society according to Fukuyama, differs from both China and Italy in that while the family unit is strong in France, it is not seen as the most important unit of cohesion. France is dependent on the state to step in and provide for the needs of the people. While in China and southern Italy the people have a distrust of outsiders, they also have a distrust of government. In France there is a strong inclination to allow the government into the business affairs of the nation. Many young people aspire to become bureaucrats in France in order to better the nation. While the track record of the French government may not have a lot of success stories, they have produced several large-scale government run corporations. What is missing in France is the development of intermediate voluntary associations. In France the people either trust their immediate family or the government, but do not join together to form the middle range of business ventures that develop into private owned corporations.

The last low trust nation, according to Fukuyama, is also an example of the state induced economic growth. Korea has developed many large-scale multinational corporations much like those of Japan. Fukuyama points out that Korea, much like France, is missing the middle range of business owned by private individuals. The Korean people have low involvement in non-kin relationships thus creating a state supported economic system and support for the large corporation.
 

Fukuyama describes the three major economic systems of the global market, Japan, Germany, and the United States as high-trust societies. Each of these nations have in common, according to Fukuyama, the presence of non-kin relationships needed to form large-scale corporations. While Japan and the United States are thought by many to be the extreme ends on the capitalist continuum, Fukuyama believes they share--along with Germany--many of the voluntary associations that lead to the development of trust in non-kin relationships.

Japan is thought to be a very socialist or communitarian society. While it is true the Japanese do have cultural habits that promote the growth of the whole, they also demand of their population a sense of belonging to more than just a family structure. The Japanese also have a form of Confucianism as a leading moral guide. But unlike the Chinese, the Japanese have modified the belief system to include changes in the patrilineal system followed by China.

First the Japanese system allows for the adoption of those from outside the immediate family. This would not be possible under the Chinese system. By allowing the adoption of outside, non-kin the Japanese have developed a system of passing on a successful business to someone outside the immediate family. A second development leading to economic growth was the adaptation of leaving the inheritance to only the oldest son. This change in philosophy keeps the successful Japanese businesses from being broken apart, like those affected by the "Buddenbrooks" phenomena mentioned earlier.

While the corporations of the Japanese are fully supported by the government, they are privately held. The government does sponsor tariffs and regulations protecting the new emerging corporations from competition of other world market players. The structure of these corporations is much like the structure of U.S. businesses, yet hold a Confucius standard of family togetherness at the same time. People working in the larger corporations hold lifetime employment (this may be changing, See Grieder, 1997) that helps the level of trust in those outside the family unit. An important factor in the development of the Japanese economic system is the amount of non-kinship interaction of the working people of Japan. The Japanese, according to Fukuyama, have developed a large system of voluntary associations in order to help their society succeed in the global economy.

Germany, in response to the aftermath of World War II, uses a government sponsored system of co-determination to develop voluntary associations. Co-determination allows workers and management of the large-scale corporations to work with each other toward a common goal. This produces a high level of social capital and the corresponding level of trust needed to produce large-scale corporations.

One of the key factors leading Germany toward large economic development is its sense of national unity. The people of Germany have the desire for their small family operated businesses--of which there are many--to become competitors in the world market. Unlike the United States population who fear large monopolies, the Germany people realize the need to compete with other nations and have other controls in place to regulate the large monopolies other than anti-trust laws.

The United States, the last of Fukuyama's high-trust societies, has many voluntary associations allowing for trust of non-kin. While thought of as individualistic in nature, the U.S. economy does rely on the trust in others to fulfill their contracts. Without this basis of trust, the business interactions individuals enter into would not be possible. Like Japan and Germany, workers trust that those they work with/for will fulfill the obligations set out by business arraignments.
Outside the business world, the citizens of the U.S. encourage their members to also join many voluntary associations. Professional people join organizations that promote their interests, people join church groups that reflect their religious interests, and parents are encouraged to join associations that keep them in contact with the schools their children attend. According to Fukuyama all of these groups help develop a sense of trust in people outside the family unit. The amount of trust in the family unit is still very high, despite the smaller size of the family since industrialization.
 

On the Macro level, Fukuyama points that most societies have strong support for family unity and high levels of trust in family kinship. One factor determining the strength of any theory is its ability to be used in more than one setting, the more general the theory, the more the theory is able to explain (Gottredson and Hirschi, 1989). Fukuyama stretches the reliability of his theory of trust when he looks to the affects of "trust" at the micro level setting within the U.S. society.

Whether from a high- or low-trust society, the Asians who immigrate to the U.S. bring part of their culture with them. Fukuyama believes that the success of the Asian immigrants parallels the amount of success in their country of origin. When looking to the development of these minority groups in the U.S., Fukuyama notes that those who have the most success in the U.S. are those coming from countries that have high-trust levels. Thus, Fukuyama predicts that those from Japan, a high trust society, and Korea, a low trust/high government sponsorship society, will have more success in the formation of corporations than those of low-trust countries such as China, with only strong trust in the family.

Fukuyama compares the success of the Asian immigrants to the plight of African-Americans. African-Americans, according to Fukuyama, have lost their ability to trust in non-kinship relationships due to many factors. First, the effects of slavery itself are not conducive to the development of trust. Being forced to a strange land and owned as a piece of property, according to Fukuyama, hindered the ability of the first African-Americans.

Second, Fukuyama believes that when the African-Americans were brought to this country as slaves, they were stripped of the cultural past. By splitting up different tribal members, for security reasons, the African-Americans were not allowed to practice any of the past tribal customs. Slaves were not allowed to intermingle with other slaves outside their plantations and this did not encourage the development of trust in outsiders.

Third, Fukuyama notes that even families were split up during the slavery era. This hinders the development of trust in even the most basic unit of survival, the family kinship bonds. Having to start over developing trust in even the family unit, to say nothing of non-kin relationships, has stunted the development of the African-Americans ability to develop an economic base.

Describing the differences in the two sets of minorities--African-Americans and Asian-Americans--Fukuyama describes how the Asians have used their past cultures to develop and succeed in American. Asian still have strong family ties and are more community or national oriented. The look to others of their own culture for help when the come to the U.S. This produces a tight-knit enclave for the immigrants to establish themselves in. The African-Americans do not have this strong sense of family unity or national culture left to draw on or aid in their development.

When the arrive in this country, many Asian groups set up a system of banking to help the newer immigrants finance businesses. Again, without the cultural background to draw on, the African-Americans do not have this type of system to help develop economic growth. (This has not always been the case, as during reconstruction a system of black banks did develop for a short period, but was later torn apart by whites.)

One last area of interest to Fukuyama is the amount of solidarity among the Asians and the lack of solidarity of the African-Americans. Fukuyama believes that the Asians approached the U.S. culture from an economic standpoint, going to work to establish their economic foothold in American culture, while the African-Americans have tried to work through the political arena to produce recognition for their group. Having a strong cultural background and sense of community toward their own people, has allowed the Asian cultures to establish themselves in the business world and through this established position a higher position in the U.S. society.
Fukuyama would insist that the amount of kinship and non-kinship trust displayed by the Asian-Americans is much higher than that shown by the African Americans. This, according to Fukuyama's theory would explain the differences found in the two groups as far as their economic development, or lack of development by African Americans.
 

Fukuyama has provided an explanation of the ability of nations and groups within those nations to form the large corporations that he feels are needed to compete in the global economy. He provides examples from each of the differing levels of trust, showing that, at least on the surface, his theory does hold some explanatory power, while leaving some areas open to further explanation. What is needed now is comprehensive study of the theory to establish its validity.

Fukuyama does not, for example, provide an explanation of how a culture is developed. He notes that ethical habits are established from their culture, which may imply that the amount of trust humans have in nature allows for the creation of those very ethical habits. This begs the question, "Which comes first, trust in non-kin relationships or cultural habits allowing the development of trust in non-kin relationships?"

What is needed now is accurate measurement of the variables Fukuyama has set out. With further research and measurement of cultural habits leading to the amount of non-kinship trust, one can test the theory across many nations. With the measurement of trust in nations, one can then compare the levels of trust in any given society and the size of that nations economic corporations.

For a graphic view of my exposition of Fukuyama's theory CLICK HERE.