The paradox of new traditional confucian economics in the two koreas

The New Traditional Economy Reconsidered

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The New Traditional Economy Reconsidered

Rosser and Rosser (1996, 1999) introduced the concept of the new traditional economy into the study of comparative economic systems. It extends the old institutionalist idea of the traditional economy as developed by Karl Polanyi (1944). This is part of a classic triumvirate of decisionmaking systems, of which the other two are market and command. Combining these with systems of ownership provided several of the major categories of economic systems considered in the world economy over time, with the basic split being between private and state ownership. Thus we can see the widespread market capitalism, with the other main categories being market socialism, command capitalism, and command socialism, which North Korea is the purest remaining example of in the world today, even as it has reduced that purity substantially by introducing market forces since the famines of the 1990s, particularly in agriculture. The general view has been that as economic development has occurred, the older traditional economies in which economic activity is embedded in a socio-cultural system or civilization have tended to fade away to be replaced by these other systems, although Ostrom (1990) and others have noted that systems of common ownership observed in many traditional economy may offer an alternative to the simplistic division between private and public ownership systems.

For Polanyi he saw the origins of these systems in early economies, following his substantivist approach to economic anthropology. This contrasts with the formalist approach (LeClair and Schneider, 1974) that in effect denied the usefulness of an institutionalist approach, seeing all systems as essentially forms of markets to be analyzed using conventional neoclassical economics. A society may look like it is following some traditional system or some command system, but really these forms are mere masks for the underlying supply and demand conditions in the economy. A response by the substantivists to this critique is to note that in certain primitive societies studied by anthropologists, such the Trobriand Islanders studied by Malinowski (1922), the ritual kula exchange is clearly distinguished from more straightforward market exchange, with the former clearly happening within a socio-cultural religious framework.

In the primitive economies considered by Polanyi, his original model for the traditional economy was household sharing, the model for the market economy was reciprocal exchanges, and the model for the command economy was the redistributive system, often associated with Big Man type systems. In these early economies the ownership systems tended to be various forms of commons, thus fitting into an Ostrom framework, although in the more extreme Big Man frameworks most goods may be the property of the Big Man to the extent that property is that well developed as an institution. It must be noted that his view of the historical sequence shifted somewhat over time (Polanyi, 1957) as he became aware of increasing evidence that reciprocal exchange systems probably predated the household sharing ones.

The new traditional economy essentially involves a revival of the traditional economy within a technologically advanced economy, the effort to embed a modern technologically advanced economy within a traditional socio-cultural structure. A characteristic common to many forms of it is to view society as a family and economic institutions also as families,5 a familistic groupism. In its form in Islamic economics (Rosser and Rosser, 1998) the new traditional economy is a global movement among Islamist political leaders emphasizing introducing Shari’a law codes into modern Muslim societies. This movement began with Maududi (1975 [1947]) in the newly independent nation of Pakistan, where there was a conscious effort to establish a modern Islamic state, even though its founder, Ali Jinnah, advocated an ultimately secular society. Elements of Islamic economics have spread to many nations, particularly the use of Islamic financial systems, with some such as Iran making more intensive efforts to follow Islamic law in economic and social life.

Another example that has not been able to impose its views fully is the Hindu economics movement in India (Rosser and Rosser, 2005), associated with factions of the Bharatia Janata Party (BJP). Based substantially on ideas expressed in the Hind Swaraj of Mohandas Gandhi (1958; Upadhyaya, 1965) , this movement has more recently come to consciously imitate that of the Islamic economics movement (Bokare, 1993), although with a more specifically nationalist element to it (Pattanaik, 1998). However, India remains probably the nation that contains within it the world’s largest ongoing old traditional economy in its rural areas, the Jajmani system of labor exchange associated with the Hindu caste system. That the caste system is not officially recognized and even legally discouraged, makes for a comparison with the Koreas, where the old Confucianism is officially discouraged also. But, the old traditional economy continues despite official opposition. However, in the Koreas their degree of technological advancement means that what is being opposed even as it continues to influence the current economic conduct must be viewed as having at least partly a new traditional aspect, in contrast to what goes on in rural India.

Other apparently new traditional movements have been perceived to exist in Judaism (Tamari, 1987; Neusner, 1990), Buddhism (Spiro, 1970; Keyes, 1993), and Sikhism (Oberoi, 1993). There have also clearly been such impulses within various branches of Christianity, with the Christian Democratic parties in Europe after World War II arguably representing such a movement for Roman Catholicism, although the Church has long issued proclamations regarding its views on appropriate economic policies, with some arguing that it was the origin of the idea of corporatism in political economy (Pryor, 1988). For its more recent positions, see Benedict XVI (2009), with his successor, Pope Francis I, emphasizing elements of this view that express concern regarding excessive materialism and income inequalities.6 While Protestant Christianity is often thought to simply support market capitalist ideas along the lines of Weber’s (1930 [1905]) The Protestant Ethic and the Spirit of Capitalism, some alternatives to this have also been formulated and advocated (North, 1987; Wallis, 1987).

However, it must be recognized that the most fully articulated, self-conscious, and successful in achieving power in several nations has been the Islamic economics version of the new traditional economy. While it arguably started with Maududi in 1947, it made little headway for several decades, only really picking up steam as oil money flowed more substantially into the Muslim heartland starting in the 1970s, which led to the beginning of an international Islamic banking movement backed by the Islamic Development Bank based in Saudi Arabia, and culminating in the Islamic Revolution in Iran. Since then there has been substantial development and growing influence of this movement (Siddiqui, 1980; Nasr, 1994), despite many contradictions and failures within it (Kuran, 2005).

Regarding the intersection of new traditionalism and new institutionalism, the obvious link is that shared cultural values and norms among economic agents can bring about lower transactions costs in their interactions, including if the norms involve economic conduct, even if some of these norms might appear to be inefficient on superficial consideration, such as the forbidding of interest in Islamic economics. Much of this reduction in transactions costs may be due to higher levels of trust (Fukuyama, 1995; Zak and Knack, 2001; Buchan and Croson, 2004; Putnam and Campbell, 2010). Clearly, the success or failure of new traditionalist movements that come to power depend on whether they succeed in reducing transactions costs, or do the doctrines and norms that are to be followed raise them and disable successful economic development?

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