Business / The Role Of Culture In The Economic Development Of Countries

The Role Of Culture In The Economic Development Of Countries

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Autor:  anton  02 October 2010
Tags:  Culture,  Economic,  Development,  Countries
Words: 3338   |   Pages: 14
Views: 776

Introduction:

The role of culture in the economic development of countries is often overlooked by economists, yet it can significantly affect a country’s economic development. Culture generates assets, such as skills, products, expression, and insight that contribute to the social and economic well being of the community. I will show the benefit of culture’s impact on economic development through tourism, social capital, and corporate governance. In contrast, culture can produce negative outcomes in economic development. Cultural issues, such as gender inequality, lack of social capital, and diminishing cultural heritages, contribute to a downgrading economy.

To understand culture’s impact on a country’s economic development, it is important to understand what culture is: a system of values and norms that are shared among a group of people and that when taken together constitute a design for living (Hill 98). Furthermore, it is about the way the people live, and how the quality of their lives can be improved. It shapes “the way things are done” and our understanding of why this should be so. Culture is concerned with identity, aspiration, symbolic exchange, coordination, and structures and practices that serve relational ends, such as ethnicity, rituals, heritage, norms, meanings, and beliefs. It is not a set of primitive wonders permanently embedded within national, religious, or other groups, but rather a set of contested attributes, constantly changing, both shaping and being shaped by social and economic aspects of human interaction.

Economic development is fundamentally about enhancing the factors of productive capacity, such as land, labor, capital, and technology, of a national, state, or local economy, as stated by the U.S. Economic Development Administration. Economic development influences growth and restructuring of an economy to enhance economic well-being. We experience economic growth when our standard of living is rising. Rather than being a simplistic process, economic development typically is a range of influences aimed at achieving objectives like creating jobs and wealth and improving the quality of life. It incorporates coordinated initiatives targeted at expanding infrastructure and increasing the volume and/or quality of goods and services produced by a community. A common measure of economic development is a country’s gross national product per head of population (Hill 62).

Review of Key Arguments:

Cultural tourism is becoming an established part of national and local economic development programs across the world. Regions struggling to maintain a favorable balance of trade without the benefit of manufacturing industries sometimes find that tourism offers the only development option. A number of countries have diversified traditional tourism strategies to include the cultural experiences that tourists increasingly want. Tourism helps improve the local economy and people’s living standards. This is very important for the economic development in remote and disadvantaged areas. As much as 90 percent of tourism revenue produces social income through expenditure in trade services, entertainment, food, and transport (www.vov.org.vn). It also generates many new jobs with each person directly involved in tourism generally creating indirect jobs for another two people.

The development of sustainable tourism will attract more people to become involved in introducing new tourism products, protecting the environment, and preserving historical and cultural sites. Many localities are becoming increasingly aware of the contributions of tourism to the increase of their GDP growth, so they have produced various investment strategies for tourism development in their regions.

The strength of social capital, in the form of leadership, partnerships, and community spirit, is another important driver of economic growth and development. Social capital is a community’s human wealth: the sum total of its skills, knowledge, and partnerships. It is a powerful element for sustainable development because it ties together local capacity, indigenous knowledge and self-reliance rather than depending on external inputs. Social capital can improve access to resources, services, and opportunities. It can build trust, confidence, and reciprocity to ultimately promote local involvement, group action, and control. The process of cooperation when citizens are actively engaged in the development of their communities awards intangible rewards, such as joy, happiness, job satisfaction, affection, and social support.

At its simplest, culture is itself a form of social capital. When a community comes together to share cultural life, through celebration and intercultural dialogue, it is enhancing its relationships, partnerships and networks. In other words, it is developing social capital. Positive attitudes in terms of local behavior contribute to their general well-being. The factors that make up social capital play a decisive role in the better economic performance, better quality of government, and greater political stability of a country’s economic development.

Organizations are increasing their international and competitive business environments. As a result, the culture of an organization and the culture of the country where it is located have become increasingly important factors affecting organization performance. This in turn affects the economic development outcome of its host country. Governance is concerned with issues as diverse as administration, law enforcement, civic engagement, citizen participation, and promotion of equality. The concept of universal human rights ratifies the idea that everyone has fundamental rights and freedoms. Still, there is growing international recognition of distinctions between individual and collective human rights. Culture is a major factor influencing how governance and human rights are conceptualized and put into practice.

Corporate governance comprises a country’s private and public institutions, both formal and informal, which together govern the relationship between the people who manage corporations and all others who invest resources in corporations in the country. These institutions notably include the country’s corporate laws, securities laws, accounting rules, generally accepted business practices and prevailing business ethics. Although legislative and regulatory frameworks for culture are mainly invisible components of the socio-political environment, they have a profound impact on the development of a community, region, nation, and future generations. Corporate governance matters not only for the health of a country’s corporate sector, but it also matters for the country’s entire economy. Good corporate governance plays a vital role in underpinning the integrity and efficiency of financial markets. Poor corporate governance weakens a company’s potential and at worst can pave the way for financial difficulties and even fraud. If companies are well governed, they will usually outperform other companies and will be able to attract investors whose support can help to finance further growth. (www.OECD.org).

Corporate governance is about the way in which boards oversee the running of a company by its managers, and how board members are in turn accountable to shareholders and the company. This has implications for company behavior towards employees, shareholders, customers and banks. Good corporate governance plays a vital role in underpinning the integrity and efficiency of financial markets. Poor corporate governance weakens a company’s potential and at worst can pave the way for financial difficulties and even fraud. If companies are well governed, they will usually outperform other companies and will be able to attract investors whose support can help to finance further growth (www.OECD.org).

The quality of a country’s institutions of governance matters greatly for national development. The institutions of corporate governance serve two indispensable, and ultimately inseparable, objectives: enhancing the performance and ensuring the congruity of corporations. These objectives facilitate and stimulate the performance of corporations. They are the principal generators of economic wealth and growth in society, creating and maintaining a business environment that motivates managers and entrepreneurs to maximize operational efficiency, returns on investment, and long-term productivity growth. Corporate performance and congruity ensure conformance with investors, social interests, and expectations by limiting the abuse of power and siphoning off assets. They also regulate the moral hazard and significant wastage of corporate controlled resources. Without corporate conformance, the self-serving managers and other corporate insiders can be expected to impose these burdens on investors and society, inducing corporate discord as well as hindering its performance. On the other hand, they also establish the means to monitor managers’ behavior. This ensures corporate accountability and provides for the cost-effective protection of investors’ and society’s interests. Overall, they can be understood as serving to determine what society considers to be acceptable standards of corporate behavior and to ensure that corporations comply with those standards.

Gender inequality reduces economic growth, which is an important issue to the extent that economic growth furthers the improvement of well-being. However, it remains prevalent throughout the world. Gender inequality tends to lower the productivity of labor and the efficiency of labor allocation in households and the economy, intensifying the unequal distribution of resources (Gender Equality 1). Many multi-lateral development agencies recognize that development effectiveness can be enhanced by ensuring that gender perspectives, and attention to the goal of gender equality, are central to all their activities: policy development, research, dialogue, legislation, budgeting, and planning, implementation, and monitoring of programs and projects.

Gender, like race or ethnicity, functions as an organizing principle for society because of the cultural meanings given to being male or female. This is evident in the division of labor according to gender. In most societies, there are clear patterns of “women’s work” and “men’s work,” both in the household and in the wider community. In industrial countries, women in the wage sector earn an average of 77 percent of what men earn; in developing countries, they earn 73 percent (Gender Equality 4). The patterns and the explanations differ among societies and change over time. While the specific nature of gender relations varies among societies, the general pattern is that women have less personal independence, fewer resources at their disposal, and limited influence over the decision-making processes that shape their societies and their own lives. This pattern of disparity based on gender is a human rights and development issue.

With an increasingly global economy and the international flow of products, media images, and cultural images, almost all cultures are in a state of change. Images that shape changes in gender identities flow, not only from development programs, but from other sources as well; such as imported soap operas, Hollywood movies, pop music, and commercials. A basic principle of development cooperation strategies for gender equality is to broaden the decision-making processes so that women, as well as men, have full input into the definition of what is important and what needs should have priority. Mainstreaming gender inequality into the work of development agencies will allow the achievement of better results. Gender mainstreaming is a strategy or an approach to achieve the goal of gender equality. Most countries share the common goal of building a nation that encourages freedom of expression and diversity. Citizens who are secure in the knowledge that their own culture is unthreatened are stronger and more confident. Such confidence helps stimulate tolerance and respect for others, contributing to the improvement of gender inequality (www.un.org/osagi).

Social capital means the trust, standards, and mechanisms that are naturally created through social interaction promote compromise and cooperation. It is a relationship or network based on people. Apart from directly reducing the benefits of human interaction, the loss of social capital also indirectly decreases the economic benefits it brings. Without the trust, cooperation, and the visionary goodwill necessary to put financial capital to work, nothing can be accomplished. Rarely is development successful when it ignores culture, by doing so, it disconnects from the underlying values which drive social and economic processes.

Societies with weak or hostile public institutions, where fragile and isolated social networks (i.e. the result of oppression, civil war, or entrenched inequality), serve to undermine systems of law enforcement, lower social cooperation, and weaken the capacity to respond effectively to economic shocks. Additionally, societies that emphasize solidarity and identification with the community can produce ultra-nationalistic tendencies and intolerance with outsiders (Social Capital 7).

Economic globalization has brought cultural homogenization, dominated by the pressures of popular culture and a priority on wealth. In many areas, a result has been social displacement. Lack of continuity with traditions and perspectives that gave life meaning, and for many, a feeling of dislocation and alienation have lead some societies to react by turning inward toward isolation and exclusion. However, for development to be inclusive and sustainable, it must nurture the diversity of belief systems and traditions. These characteristics enhance people's self-images and give them confidence to act in their own interests while respecting and supporting the traditions of other groups.

Preservation and promotion of national identity, while simultaneously engaging in principles of cultural diversity, is an inherent contradiction that lies at the heart of many national cultural policies. Pressure to change this contradiction has become increasingly evident within civil society and the international community. Culture affects districts in terms of the environment for doing business because culture is a key resource for urban businesses. The National Conference of State Legislatures states that creative industries are the nation’s leading export, with more than $60 billion annually in overseas sales (4). Dependent upon culture itself, the degree to which a community is creative, open, and entrepreneurial is a key factor affecting the conditions within which the city economy operates. It influences all industries and, in many ways, determines a community’s prospect. A creative city depends on the extent to which networks of collaboration and trust have developed and its ability to harness its social capital by translating it into an open regulatory and incentives environment within which ideas, products and services can flourish and generate wealth and social cohesiveness.

The creative sector of a city is much more difficult to diagnose and influence where conventional, economic, and industrial development depends on natural resources, geography, and the availability of capital. Society’s culture and creativity along with its development are its primary resources. These resources require a good understanding of very different social and cultural practices, economic sectors, and production value chains. Industry sectors may require investment in areas such as arts, education, or social networks. These might seem quite distant from the creative industries and may not produce returns for years.

One benefit of increasing globalization is the emergence of new opportunities for cities to develop indigenous cultural economies that can compete internationally while safeguarding local identity and diversity. Compared with other parts of the economy, the creative industries tend to rely on individual creators or small companies, particularly at the upstream, origination end of the value chain. People drawn to the field are characterized by independence, self-reliance, and individualism. These traits ignite the essence of culture and contribute to cultural tourism, social capital, and ultimately economic development. However, these people tend to be single-minded and may be motivated more by the intrinsic interest and values of their work than by commercial imperatives. Consequently, their understanding of the opportunities that exist to exploit their work more productively, and of the demands involved, may be weak and diminish the prospect of economic development.

Suggestions for Further Actions

When we talk about culture, we often mean intellectual and creative products, including literature, music, drama, and painting. Yet, another use of culture is to describe the beliefs and practices of another society, particularly where these are seen as closely linked with tradition or religion. But culture is more than that: it is part of the fabric of every society, including our own. Culture is the whole complex of distinctive spiritual, material, intellectual and emotional features that characterize a society or a social group. It includes not only arts and letters, but also modes of life, the fundamental rights of the human being, value systems, traditions, and beliefs.

In terms of economic development, culture can create wealth or wreak havoc. Cultural tourism is becoming an established part of national and local economic development programs across the world. A number of countries have diversified traditional tourism strategies to include the cultural experiences that tourists increasingly want. In a globalizing world where each place begins to look and feel the same, cultural activities and products distinguish one from another and this difference is attractive to tourists. Increasing a country’s cultural tourism would, in turn, improve the local economy, provide more jobs, and enhance their overall economic development.

Today, culture remains on the borders of politics, despite the diversity of players now involved in cultural life. The challenge, especially perhaps for those outside the cultural sector itself, is to develop approaches that take into account the impact of culture on other sectors and their influence on it. A system to monitor developments and their interdependency would facilitate transparency in decision-making processes, regardless of function. The quality of corporate governance critically affects a country’s ability to achieve sustained real productivity growth and the success of its long-term development efforts.

Corporate governance plays an essential role in the long–term process of development of a country in that it has a central role to play in helping to increase the flow and lower the cost of the financial capital that firms need to finance their investment activity. The importance of this role has grown considerably in recent years as the needs of corporations for impervious finance has grown the capacity of traditional sources of such finance to supply those needs has greatly diminished.

Approaching culture as a guide in appreciating activities and programs aimed the reduction of gender-related inequalities places the values, beliefs and practices of society at the center of development efforts. In most countries, women continue to have less access to social services and productive resources than men. Changes and improvement in the situation of women are not dependent on a specific level of income or dominant religion. Changing social institutions that have been in existence for centuries requires an approach covering both the national and the community levels. Reforms need to take into account enforcement, as well as modification to legal structures. They should include incentives for potential allies in change and respect feasible sequencing.

Reducing the employment chances of women is likely to ensure that the average ability of the work force will be lower than in the absence of such gender inequality in employment. This, in turn, will reduce the growth of the economy. Moreover, artificial barriers to female employment in the formal arena may contribute to higher labor costs and lower international competitiveness, as women are effectively prevented from offering their labor services at more competitive wages.

The role of culture in the economic development of countries could be beneficial or harmful. However, acknowledging the importance of culture and its implications is fundamental for economic development. Countries need to support initiatives to protect and enhance material culture, creative expression, and community practices. These initiatives will contribute to increased cultural tourism, strengthened social capital, and gender equalities that will drive economic growth and development.

References

Hill, Charles W.L., Global Business Today. 3rd Ed. New York: McGraw-Hill/Irwin, 2004.

Kaufmann, Daniel, Aart Kraay, and Pablo Zoido-Lobaton. Governance Matters. The World Bank Development Research Group Macroeconomics and Growth and World Bank Institute Governance, Regulation and Finance, October 1999.

Organization for Economic Co-operation and Development. Improving Business Behavior: Why we need Corporate Governance. Oct. 2004. OECD.

The National Conference of State Legislatures. Cultural Policy Working Group. Investing In Culture: Innovations In State Policy. The National Conference of State Legislatures: 2003.

“Tourism sector plays key role in economic development.” Economics. Radio the Voice of Vietnam. 2004

United Nations. Office of the Special Adviser on Gender Issues and Advancement of Women. Gender Mainstreaming. United Nations: Oct. 2004

United States. Department of Commerce. Economic Development Administration. United States: May 2002.

Woolcock, Michael, and Deepa Narayan. Social Capital: Implications for Development Theory, Research, and Policy. World Bank, Jan 1999.

World Bank. Gender and Development Group. Gender Equality and the Millennium Development Goals. 4 April 2003



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