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Cultural factors in national economies Cultural factors in national economies
by Joseph Gatt
2021-01-23 10:57:53
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I've discussed financial and logistic factors in national economies at length.

Today there's something that I want to discuss which is cultural factors in national economies.

Traditional economic theory has it that economic agents “trade” together and exchange money for goods.

If only it could be that simple. If only it could be that any economic agent A could trade any good to economic agent B for money.

econoi0001_400It's not that simple.

First off, a lot of national economies have something of a caste system. In countries like India, the caste system is overt. In the Middle East, Latin America or other Asian nations, the caste system is a bit more covert.

That is in most nations you need to be a “somebody” to do business. Being a “somebody” means being a “man” (very important, women are not allowed to make purchases in many economies). It also means you need to be a “general's son” or a “rich man's son.” Or you need to be from a “good family.”

So when I'm doing business around the Middle East or Asia or Latin America or even the former Soviet Union, a lot of my partners will be making small talk where they will discuss the fact that they are from good families, that their parents went to elite universities, that their fathers are powerful people, and that their entire family married into powerful families.

So when it comes to big business around the world, there is a caste system of sorts. Only the “Brahmans” or the “powerful castes” are allowed to do big business.

What does this mean at a macroeconomic level? It means 99% of the population is left out of the economic system, either used as disposable workers, or forced into unemployment.

It means that if you are an outcast (like me) no amount of intellect, genius or ability will gain you respect or will enable you to get your break in the economy.

It also means that those small businesses that know what they are doing and become promising businesses will be sabotaged by the business Brahman castes.

Other cultural factor in the economy: behavioral factors. In a lot of countries, there's a culture of “sharing” and “giving” and “charity” and “helping the poor.”

So a lot of times, when you set up businesses in developing countries, your business partners are going to ask for charity, and your clients will be asking for donations.

Because the culture of giving and donating is so ingrained in those cultures, a lot of times developing economies resort to behaving like in the colonial culture to avoid being forced to give or to share.

So for example, in North Africa, you're going to have grocery stores where the owner will wear a suit and refuse to speak any other language than French or English. Speaking Arabic means they will be forced to be hospitable and to give to the poor, so they resort to behaving like the French or British.

Same thing in India, Pakistan and Bangladesh where a lot of small businesses will use English and nothing else in business transactions. Using Hindi or Urdu or Bengali or Gujarati means they will be forced to do business in vague terms and to give away lots of concessions, so they use English.

Even Japan, Korea and China, countries where traditionally the older and more powerful can get away with obnoxious behavior, including not paying for stuff. So in those countries some companies and organizations are trying to use English to prevent the elders from engaging in such behavior.

Other important cultural aspect: the rigidity of organizations. Because traditional Middle Eastern or South Asian or Soviet culture is based on “good relations” and “cordiality” and “respect” this means that at a lot of companies and organizations people show up, do nothing all day, and collect their paychecks.
So you have a culture where organizations borrow colonial organization tactics, but use them a lot more rigidly. In Europe, working with colleagues means talking about business in cordial manner. In developing countries, working with colleagues means criticizing colleagues for not talking about business. But when the colleagues want to talk about business, the local cultural frame of mind shoots back, and both colleagues will feel uncomfortable discussing business, because charity is the way to go in Islam or Hinduism.

Perhaps a final important factor would be the price factor. In developing nations, you will need your business to survive for many, many years before your clients get used to paying you the full price.

A lot of times, in developing cultures clients will test the idea of trying to get as much as they can for free. Clients will suggest a “credit” system or a “debt” system, but neither the client nor the business owner will negotiate the terms of the debt. So when the business owner wants to get his rightful money back, clients will claim that there was no debt in the first place.

An example I could work with is elderly ladies in a lot of Middle Eastern countries who refuse to pay for their taxi rides. Because elderly ladies are considered “mothers” or “grandmothers” in the Middle East and are owed utmost respect, a lot of times taxi drivers can not help but allow the “mother” or “grandmother” a free ride, even though, deep down inside, they resent the fact that they weren't paid for the service.

So how do you fix these cultural inadequacies to a capitalist economy? You could use the media for one thing. Education is another good way to instill a culture of paying for what you purchase. And you need a team of local people to study local business practices, and to come up with suggestions that businesses should follow for optimal business practices.

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