I was on a panel on Sunday with Presidents Putin of Russia and Nazarbayev of Kazakhstan at the St. Petersburg International Economic Forum. The following is the text of my speech:I would like to begin by thanking the organizers of the St. Petersburg International Economic Forum for inviting me, and giving me the opportunity to address this extremely distinguished audience. I’m not sure why I am on a panel with two presidents—I am not president of anything, not even of a small university. But it is certainly a great honor to be asked to join in a discussion with Presidents Putin and Nazarbayev.The topic for today’s panel is “Competitive Eurasia: Space for Trust.” I don’t want to address the specifics of political and economic arrangements in this region. I don’t feel it is my job to give advice to anyone here as to how to organize themselves. Rather, I want to put the discussion of regions and economic integration in the larger context of broader developments in world politics.THE CLASH OF CIVILIZATIONSMy starting point for my analysis will be Samuel Huntington’s thesis concerning the “clash of civilizations.” Prof. Huntington was my teacher at Harvard University and remains a friend of mine, but I disagree with aspects of this thesis in certain important respects.Huntington argued that, after the Cold War, world politics would be dominated not by conflicts between rival ideologies, but by conflicts between civilizations and cultures. He believed that the power of culture trumped the the integrating forces of globalization, and that people’s loyalties would ultimately be communal, based on ties of religion, ethnicity, and shared history. According to Huntington, the values of the Western Enlightenment like democracy and individual rights were simply projections of the values of Western Christianity, but that other cultures with other values would create different types of institutions. Russia, incidentally, was relegated under this scheme to a civilizational space separate from that of Western Europe, defined by its Orthodox religious traditions.Many people have argued that the clash of civilizations hypothesis has been proven right by recent events. There has been a broad rise in religion and religious identity. This has been particularly notable in the Muslim world with the emergence of radical Islamism, but the religious revival has also been evident in South Asia, Latin America, the United States, and Russia itself. Much of the current turmoil in the Middle East is the byproduct of religiously-grounded terrorism and American reaction to it after September 11. Elsewhere, as in East Asia, old-fashioned nationalism is on the rise.Hence the issues raised by the clash of civilizations thesis is relevant to the topic of this panel. When we think about regional integration, do we set the boundaries of cooperation according to cultural factors, or do we follow the dictates of economic rationality? Are there natural political spaces of trust created by cultural factors, or are we integrating on a more global and universal basis?ONLY HALF RIGHTI both agree and disagree with Samuel Huntington’s Clash of Civilizations thesis. I agree that cultural factors have become the prism through which many people see international affairs today. On the other hand, I believe that this point of view underestimates the integrating forces driving global development, and the way in which the modernization process forces a convergence of institutions and approaches to governance.Samuel Huntington is right that culture and cultural identity are not going to disappear, not now or in the foreseeable future. People will remain primarily defined by nation, tradition, culture, and local community. Globalization will not produce cultural uniformity throughout the world, nor should it. Among other things, it would be profoundly undemocratic if global economic forces stripped local communities of their ability to decide how to structure their common political life.I also agree that countries will have to find their own routes to modernity. The specific paths that Europe, the United States, Japan, Russia, and other countries are all different. Modernization and development are ultimately brought about by people who live in a given society, and not by outsiders. Countries can learn from one another, but their ability to shape outcomes in foreign lands is usually very limited. This is something that the United States has painfully learned over the past four years in Iraq.The question we need to address, however, is whether we are taking different paths to the same end point—an endpoint of a single modern civilization—or whether we are all heading to fundamentally different places.It is my view, contrary to that of Huntington, that modernization itself in the long run requires the convergence of many types of institutions, regardless of our cultural starting point. And economic integration between states is most productive, and results in the most durable forms of trust, when it is based on transparent, rule-bound institutions.DEVELOPMENT OF THE MODERN STATEThe starting point of any country’s development is the state. The German sociologist Max Weber defined the state as a monopoly of legitimate force over a defined territory. But while the state begins with coercion, the miracle of the modern state is its ability solve the paradox of power. That is, a state has to be strong enough to enforce laws and provide for order, and yet it has to constrain its own exercise of power if there is to be long-run economic growth.I believe that many people in the West wrongly downplayed the importance of the state in the period following the end of the Cold War. The trend towards liberalization following the end of communism and the disappearance of the former Soviet Union was understandable, given the fact that states had everywhere grown too strong and sclerotic, not just in the former Soviet Union but in other developed countries as well. In the process of adjustment, however, countries often went too far in cutting back critical state functions and capacity. Thus throughout many parts of the post-Soviet space, there was a general weakening of state authority.Indeed, it is state weakness that lies at the root of the lack of economic growth in many parts of the developing world. All societies need order, rule of law, a government that provides basic public goods, and a reasonably fair distribution of resources. If rulers cannot govern effectively, if they are highly corrupt and divert public resources to private ends, if they behave in arbitrary ways, then they will undercut the savings and investment needed for long-term growth. It is therefore not a surprise that by the end of the 1990s, better governance and more competent states became the order of the day.How does a modern state achieve good governance? The latter is not a gift given by rulers to the rules. It ultimately has to be based on accountability mechanisms that ensure that the rulers are truly serving the interests of the ruled, and not just their own, or those of their friends and families. It is for this reason that the World Bank for some years has been emphasizing greater accountability as the key to better governance.Governments can be held accountable in a number of ways. The most familiar are those vertical accountability mechanisms known as elections. But there are also mechanisms of horizontal accountability, wherein the different parts of the government have different interests and functions, and monitor each other’s performance. Parliaments and courts, independent of the executive, are crucial in this regard. Furthermore, there are mechanisms of vertical accountablity that lie outside the formal political system. Accountability requires institutions that provide transparency regarding the behavior of the rulers; bad governments seldom report on their own failures and transgressions. It is for that reason that you need a media that is independent of government influence, and a civil society that is able to monitor the performance and behavior of the state.Thus modern states are in the end as notable for the constraints that they put on themselves, than for their ability to concentrate power. I would note in passing that the governance requirements for resource-rich countries is much more stringent than for countries that do not have natural resources, given the distributional conflicts and opportunities for corruption that resource rents encourage. All of this is, to repeat, necessary in the long run to promote good economic governance and growth. In the end, you only get long-term growth through investment, and you only get investment with stable property rights, and a rule-bound environment in which businesses can operate.TRUST IN REGIONAL AND INTERNATIONAL RELATIONSYou may wonder why I have spent so long talking about national-level institutions for a panel devoted to the question of “Spaces for Trust in Eurasia.” The reason is that trust between nations, or in global business, depends on the nature of the legal and institutional frameworks within which businesses have to operate.Trust can arise from one of two sources. The first is cultural, where individuals trust one another because they share the same culture, values, traditions, and history. In all societies, trust begins with family and kinship, and then only slowly radiates out to a broader range of social groups.The second form of trust is based on shared interests. This kind of trust can exist between complete strangers, strangers who have nothing in common culturally and may operate in completely different parts of the world. This kind of trust is based on institutions.Of the two forms of trust, the cultural version is clearly the most natural and widespread, but it is also more primitive. All human beings organize themselves into primary social groups or cultural communities; we fall back on such groups in times of trouble or crisis. The second form of trust expands the potential radius of trust indefinitely. It is more durable because it is based on self-interest, and it is the basis of modern economic interdependence. Trust becomes increasingly anchored in self-interest rather than culture as countries modernize. Globalization provides the opportunity to expand markets far beyond the limits of one’s own cultural community, requiring development of an impersonal, structured institutional framework by which trust can emerge between complete strangers. The whole apparatus of modern law and mechanisms mandating transparency in corporate and state governance is designed to get around the need for culturally-based trust.Let me give you one example. Businesses in China and in Chinese-speaking societies were traditionally structured around the family. Confucianism is an ideology that puts family relations at the center of morality. This meant that trust in China was often reserved for relatives or close personal friends; it was very difficult to trust strangers or enter into business relationships with someone to whom you were not related.While this kinship-based form of social capital worked for a while, it was also very limiting. It meant that family-owned businesses could not grow into large, professionally-managed companies. And it engendered high degrees of nepotism, corruption, and incompetent management, problems that came to light during the Asian crisis of a decade ago. So the next stage in East Asia’s economic development was to replace business relationships built around personal relationships with ones anchored in formal legal and economic institutions.When we talk about what kind of trust will emerge in Eurasia in the coming years, then, we face the same sorts of choices. Trust can be based on cultural affinity and shared history, or it can be based on mutual self-interest and institutions. There are many political reasons for which countries decide to align with one another on grounds of cultural, ethnic, or historical commonality. But economic rationality demands that trust be based on more impersonal criteria, regarding the degree to which a country’s institutions are law-governed and transparent.To conclude: I believe the clash of cultures perspective gets things only half right. There is indeed a retreat, in many parts of the world, into cultural stereotypes, identity politics, and politicized religion. But there is another dynamic that has continued unabated over the past several hundred years, towards the development of modern states that can both deploy power, enforce rules, and yet constrain themselves at the same time. And we are seeing the gradual emergence of an international order based on institutions and rules, though this project is in a much less developed state. Political integration in the global economy will be more durable and productive of shared prosperity to the extent that it can be based on interests rather than passions, and institutions rather than culture. This is not a Western perspective, it is a global one.Thank you very much for your attention.
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Published on: June 11, 2007In St. Petersburg with Putin