Francis Fukuyama. 1995 "Social Capital and the Global Economy."

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Francis Fukuyama models of market-oriented development. The neoclassicists, for their part, argue that Asian development happened despite state intervention, and they point to failures on the part of Japans Ministry of International Trade and Industry and other planning ministries. What both sides in this debate miss is the role of culture. For all their awareness of the peculiarities of Asian development, the neomercantilists are as universalistic in their poHcy prescriptions as the neoclassical economists. They argue that Americas unwillingness to implement an Asian industrial policy is harming its global competitive position. It is clear, however, that both the need for an industrial policy and the ability to implement one effectively are dependent on cultural factors like social capital. Japan, Germany, and the United States have robust private sectors able to generate large-scale organizations spontaneously; China, Italy, and France do not, so it is perfectly natural there that the state should step in to promote this kind of organization. The ability to manage state-owned corporations or to distribute subsidies effectively is also very much dependent on culture. Asia is distinctive because many ofthe states there have succeeded in shielding their public authorities from pressure to maintain employment or direct subsidies toward politically influential sectors, something that has eluded public bureaucrats in much of Europe and Latin America. One therefore cannot argue for or against industrial policy on abstract grounds; its chances for success depend on the specific cultural, political, and historical environment in which it is implemented. We are at the end of a prolonged period in which modern states have been key promoters of economic growth and social transformation. No one would deny that in the past, state intervention in the modernization process has been effective. National governments have abolished entire social classes; engaged in land reform; introduced modern legislation guaranteeing equality of rights for ever larger circles ofthe population; built cities and encouraged urbanization; educated populations; and provided the infrastructure for modern, complex, information-intensive societies. This institution-building, however, has reached a dead end with the establishment of liberal democratic political institutions and capitalist economic structures throughout the developed world. While institutional differences between different parts of the developed [102] FOREIGN
Social Capital and the Global Economy world remain, their scope has narrowed considerably over the past couple of generations as the socialist alternative collapsed and nations became ever more interdependent through trade and investment. The essential meaning of the end of history is not that turbulence has ceased or that the world has become completely uniform, but rather that there are no serious systematic institutional alternatives to liberal democracy and market-based capitalism for the world's most advanced countries. Put another way, social engineering, while at one time the key to progressive government, has today reached a dead end. The most important factors affecting the real quality of life in such societies lie safely beyond what national governments can affect in positive ways. For while state power can effectively undermine civil society by uprooting neighborhoods, abolishing communities, and creating perverse incentives that destabilize two-parent families, it is much less able to promote strong bonds of special solidarity or the moral fabric that underlies community. Institutional convergence has not, however, meant an end of significant differences between modern societies. In the post-Cold War world, the most important distinctions between nations are no longer institutional but cultural: it is the character of their civil societies, the social and moral habits that underlie institutions, that differentiate them. In this respect, Samuel Huntington has been quite right to assert that culture will be the key axis of international differentiation—though not necessarily an axis of confiict. The traditional argument between left and right over the appropriate role of the state, refiected in the debate between the neomercantilists and neoclassical economists, misses the key issue concerning civil society. The left is wrong to think that the state can embody or promote meaningful social solidarity. Libertarian conservatives, for their part, are wrong to think that strong social structures will spontaneously regenerate once the state is subtracted from the equation. The character of civil society and its intermediate associations, rooted as it is in nonrational factors like culture, religion, tradition, and other premodern sources, will be key to the success of modern societies in a global economy. ^ FOREIGN AFFAIRS- September/October ig% [ 10 3 ]
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Francis Fukuyama. 1995 "Social Capital and the Global Economy."

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