This is the thirteenth in a series of posts discussing themes from The Aid Trap by Glenn Hubbard and William Duggan. In Chapter 5, the authors refer to the “widespread notion” in many poor countries that business cannot work there because it runs counter to their ancient culture. The authors refute this suggestion by pointing to a number of disastrous government decisions and aid projects (as opposed to cultural factors) which they say are responsible for Africa’s current troubles.
However, the authors do not really explore whether cultural issues may be contributing factors to business inefficiency. For example, Africans typically have a strong sense of responsibility towards extended family. While this is a great strength, it does mean that money earned by one person gets distributed to many people, making it difficult to accumulate substantial capital for business investment.
Cultural attitudes to gender and polygamy may be relevant factors in the spread of AIDS, and a high percentage of sick people in the workforce is not good for business. Cultural traits such as a high level of respect for leaders, an aversion to confrontation, and a willingness to forgive, are great strengths from a moral point of view, but they may make it difficult to prevent grand corruption, which effectively drowns business.