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Global Development Issues 101: The Role of Culture and Institutions in Development


International development remains a central topic in academic dialogues, particularly when explored through the lenses of Public Administration and International Relations. This field delves into the delicate equilibrium between a country’s internal growth objectives and its external diplomatic engagements. The focus is on how nations aim to enhance their economic position and the quality of life for their residents, a reflection of their global stature and internal prosperity.

From an academic perspective, development is defined by the myriad ways nations navigate their economic and societal progress. Even though the importance of development is universally accepted, the outcomes are diverse across countries, and shaped by varying factors. This variance in outcomes underscores the multifaceted nature of the factors that underlie developmental stagnation for certain countries, while others grow and thrive.

To comprehensively apprehend the essence of development, an exhaustive exploration of its historical antecedents is essential. Additionally, a meticulous examination of classical developmental theories holds paramount importance. Furthermore, an acute cognizance of the strategies employed to address global challenges becomes indispensable in the context of mitigating issues such as poverty and inequality.

This 101 series consists of seven articles, each dedicated to exploring the concept of development, its various components, and its potential prospects for the future:

  1. Global Development Issues 101: Understanding of the Concept of Development

  2. Global Development Issues 101: Causes of Growth, Development and Stagnation

  3. Global Development Issues 101: Classical Theories on Growth and Development

  4. Global Development Issues 101: The Role of Governments in Economic Development

  5. Global Development Issues 101: The Role of Culture and Institutions in Development

  6. Global Development Issues 101: The Connection Between Gender Equality and Development

  7. Global Development Issues 101: Achieving Sustainable Development and the SDG


Global Development Issues 101: The Role of Culture and Institutions in Development

The preceding chapter in the Global Development Issues 101 series delved into the role of governments in economic development. Its primary objective was to examine the extent to which governments bear the responsibility for influencing development in their respective countries. The discussion underscored the significance of governments positioning themselves as the authoritative entities accountable for the governance of a nation (Rothstein & Teorell, 2008). This positioning implies that governments are not merely tasked with addressing societal problems but should actively strive to achieve good governance (Rothstein & Teorell, 2008). In the pursuit of good governance, certain crucial factors must be in place for governments to be successful. Foremost among these is the establishment of a democratic system, identified as the most essential prerequisite (Abdellatif, 2003; Ali, 2015). Democracy facilitates societal participation in political decision-making processes, fostering a proactive government that holds itself accountable for its actions and errors (Gyong, 2014; Ali, 2015). Additionally, governments operate within the framework of the rule of law, acknowledging wrongdoings while simultaneously upholding the rights and obligations of the population (Rothstein & Teorell, 2008; Gyong, 2014; Ali, 2015). Furthermore, transparency emerges as another imperative aspect, with governments obligated to reveal their actions and focus on preventing corruption (Ali, 2015). The ability to ensure good governance hinges on the transparency of the government, coupled with efforts to build consensus among the population (Ali, 2015). Therefore, the focal point of the previous chapter was to underscore the interplay between governments and good governance in the context of development, particularly economic development.

In examining the multifaceted landscape of development within a country, it is imperative to acknowledge that factors extending beyond the government wield substantial influence. There are other two elements that merit specific consideration. The first among these is institutions, typically originating from governments but approached independently in this chapter. Here, institutions are perceived as distinct entities with the purpose of upholding norms and regulations essential for societal functioning. The second influential factor is culture, encompassing a diverse array of behaviors, traditions, and other components that collectively shape the identity of a population. Culture assumes a significant role in development, acting as the force that molds specific patterns of action within a society. Consequently, beyond the governmental involvement, institutions and culture emerge as important factors shaping the development of a country. As a result, the subsequent article will delve into the roles of culture and institutions in Global Development. The exploration will begin with an in-depth analysis of culture and institutions, subsequently unraveling their respective roles and ultimate impact on the developmental dynamics of a nation.


Cultural Dimensions: Unveiling The Intersection With Development

In academia, the role of culture in shaping economic development has been a subject of debate (Guiso, Sapienza & Zingales, 2006). The nature of this discourse arises from the absence of a precise and universally agreed-upon definition of culture. However, over the years, increased research efforts have yielded more data on identifying and measuring the concept of culture (Guiso, Sapienza & Zingales, 2006). To address this ambiguity, this article adopts a more narrow definition of culture, aligning with the definition proposed by academic scholars Guiso, Sapienza and Zingales (2006), who define culture as "those customary beliefs and values that ethnic, religious, and social groups transmit fairly unchanged from generation to generation" (p. 23). While this definition might be more narrow, it encompasses the dimensions of culture relevant to its influence on development (Guiso, Sapienza & Zingales, 2006).

The exploration of the relationship between culture and development, and their reciprocal influences, unfolds through a series of three key steps (Guiso, Sapienza & Zingales, 2006). To begin, culture exerts a direct impact on the expectations of individuals and their preferences, shaping their priorities and influencing how they envision the fulfillment of those expectations (Guiso, Sapienza & Zingales, 2006). This initial step underscores the role of cultural values and norms in influencing the psychological arena, thereby guiding individual choices and behaviors (Guiso, Sapienza & Zingales, 2006). Moving forward, the second aspect involves recognizing that these culturally embedded beliefs and preferences have enduring effects on economic outcomes and, consequently, on overall development (Guiso, Sapienza & Zingales, 2006). The enduring impact of cultural factors on economic activities and societal progress underscores the long-term implications of cultural dynamics, positioning them as integral components in comprehending development (Guiso, Sapienza & Zingales, 2006). This recognition emphasizes the sustained role that culture plays in shaping the ongoing trajectory of economic and societal development (Guiso, Sapienza & Zingales, 2006).

Lastly, the third facet emphasizes an awareness that specific components within culture, such as religion and ethnic background, serve as lenses to narrow down research and facilitate explanations (Guiso, Sapienza & Zingales, 2006). Acknowledging the diversity within cultural frameworks allows for a more nuanced analysis, enabling researchers to explore how specific cultural elements contribute to or hinder development (Guiso, Sapienza, & Zingales, 2006). Through the exploration of these three key steps, this article aims to explain the connections between culture and development. It seeks to shed light on how culture shapes individual choices, influences economic outcomes, and contributes to the broader spectrum of development. It is essential to note that certain factors within culture, such as religion and ethnic background, are inherent variables that cannot be altered and may limit the scope of research (Guiso, Sapienza & Zingales, 2006). Regardless of the analytical approach taken, Meredith Ramsay, the author of the book Community, Culture, and Economic Development (1996) emphasizes that culture is key to understanding development. In her conclusion, she suggests that further research should be undertaken to understand the impact of these cultural elements on socio-economic policies (Ramsay, 1996). This understanding, in turn, has the potential to influence the overall development trajectory (Ramsay, 1996).

Starting with how culture shapes expectations and preferences, it becomes evident that culture is both a formative factor in the environment and a product of it (Ramsay, 1996; Guiso, Sapienza & Zingales, 2006). As individuals navigate their environment, they develop a set of beliefs and preferences influenced by various cultural factors. Furthermore, Ramsay (1996) emphasizes the inherent communal dimension of culture, noting that individuals within a community develop a shared set of distinctive values, social understandings, and policy preferences. This shared cultural context contributes significantly to their sense of security and certainty (Ramsay, 1996). As such, the direct impact of culture on preferences and expectations, as outlined by Guiso, Sapienza & Zingales (2006), underscores the importance of attending to this factor for a comprehensive understanding of local policy responses (Ramsay, 1996). Examining culture at the local level provides a nuanced perspective on how this set of preferences and expectations directly influences policies and, consequently, development. In smaller spaces, communities sharing cultural values tend to have similar priorities and expectations (Ramsay, 1996). This shared cultural context fosters communal ideas about progress, influencing decisions based on personal and collective needs (Ramsay, 1996).

Recognizing the direct impact of culture on preferences and expectations facilitates a deeper understanding of the lasting influence it exerts on policies and subsequent development (Guiso, Sapienza & Zingales, 2006). Local policies are intricately linked to their surrounding cultural milieu, shaping not only their formulation but also the outcomes of certain actions (Ramsay, 1996; Guiso, Sapienza & Zingales, 2006). Importantly, long-term policies on a broader scale are responses to these localized influences, shaped by the overarching influence of culture (Ramsay, 1996). This interplay between culture and policy is particularly evident in larger cities, as highlighted in a 2005 study by researchers from Erasmus University of Rotterdam, Van der Borg, Russo, Lavanga, and Mingardo. Their research emphasized that culture plays an important role, especially in urban settings (Van der Borg et al., 2005). Culture has evolved into a fully-fledged economic sector with significant ramifications for both the urban environment and national industries (Van der Borg et al., 2005). Notably, cities stand out as vibrant hubs of culture, boasting numerous spaces for representation, cultural production, and consumption (Van der Borg, et al., 2005). Consequently, policies are formulated in response to this rich cultural tapestry (Ramsay, 1996), impacting the economy on a substantial scale, given the integration of culture as a distinct economic sector (Van der Borg et al., 2005).

The role of culture in economic development is substantial, exerting both direct and indirect influences. However, its impact extends beyond economic enhancement, positioning culture as a crucial element contributing to a more balanced and sustainable development (Van der Borg et al., 2005). This contribution is particularly pronounced within communities, as emphasized by both Ramsay (1996) and Van der Borg et al. (2005). Communities, characterized by shared values and priorities, are integral components of the cultural landscape (Ramsay, 1996). In urban settings, these communities form multicultural environments, requiring a balance for overall development and improvement (Van der Borg et al., 2005). This balance extends to concerns of safety and social harmony among communities and others within the cityscape (Van der Borg et al., 2005). While certain cultures contribute to pride and personal development, planning and development efforts are essential to harmonize diverse communities within these urban spaces (Van der Borg et al., 2005). Therefore, cities positioned as cultural hubs, bear the responsibility of fostering creative facilities and formulating responses that enhance social, economic, and urban development (Van der Borg et al., 2005).

In light of these dynamics, the 2005 research from Erasmus University underscores the importance of considering culture as an economic asset for policymakers and politicians (Van der Borg et al., 2005). This recognition is especially crucial in cities where the convergence of different cultures can activate and boost local economies, presenting both challenges and opportunities for development (Van der Borg et al., 2005). Moreover, as culture is acknowledged as an economic asset, it intertwines with the identity of individuals and their communities (Ramsay, 1996; Guiso, Sapienza & Zingales, 2006). Culture, in this context, shapes not only how things are done in a specific location but also influences social interactions, production processes, and political dynamics (Van der Borg et al., 2005).

Building on this discussion, the exploration of the role of culture extends to a third area, as highlighted by Guiso, Sapienza, and Zingales (2006). Beyond shaping preferences and behaviors and exerting both direct and indirect influences on economic development, the presence of diverse cultures, particularly in urban settings, underscores the critical need to focus on specific cultural aspects in research endeavors (Van der Borg et al., 2005; Guiso, Sapienza & Zingales, 2006). Within culture, various factors may distinctly impact preferences, behaviors, and their subsequent indirect effects on development (Guiso, Sapienza & Zingales, 2006). Some factors, such as religion and ethnic background, may play a significant role and are less amenable to alteration (Guiso, Sapienza & Zingales, 2006). These factors stand out as identifiable variables under the broader umbrella of culture, thus facilitating more targeted and nuanced research (Guiso, Sapienza & Zingales, 2006). The acknowledgment of these specific cultural elements adds a layer of complexity to understanding the multifaceted interplay between culture and its impact on economic development.


Institutional Dimensions and Development: An Exploration of Their Interconnected Dynamics

As elucidated in the preceding chapter, the interplay between culture, governments, and development underscores their significance in shaping societal progress. This relationship is particularly pronounced in their joint capacity to influence and establish institutions (Coccia, 2019), an important aspect that merits in-depth exploration in the subsequent section. As articulated by an American economist Douglass North (1990), institutions can be defined as "the rules of the game in a society, or more formally, are the humanly devised constraints that shape human interaction… reduce uncertainty by providing a structure to everyday life” (North, 1990, p. 3). These institutions are not only built upon formal rules such as laws and constitutions crafted by governments but also encompass informal constraints like conventions and norms (Coccia, 2019).

In this light, institutions emerge as intricate systems, encapsulating not only the codified regulations but also the unspoken beliefs governing the expected behavior of society members. Moreover, they play a role in the management and organization of society itself (North, 1990; Coccia, 2019). This complexity underscores the dynamic nature inherent in institutions, portraying them as more than static frameworks but rather as dynamic scaffolding upon which societal interactions exist. In this metaphorical sense, institutions not only provide a structured order but also act as the supporting structure that shapes and influences everyday life (North, 1990; Coccia, 2019). These institutions themselves serve as a method to ensure the certainty of human actions, thereby reducing transaction costs (De Soysa & Jütting, 2007). Consequently, an exploration of the nexus between institutions and development delves into how these societal frameworks are influenced by culture and governments. These institutions, shaped by these influences, play a crucial role in either fostering or hindering progress on various developmental fronts.

In addition to their role in regulating individual behavior, institutions play a part in shaping the broader political and economic landscape, emerging as indispensable dimensions for comprehensive development (North, 1990; Coccia, 2019). The widespread recognition of their significance in the development process, as highlighted by Professor Louka Katseli (2003), resonates within scholarly discourse. However, this acknowledgment also unveils a critical gap in the analytical framework, leading to the formulation of vague policy recommendations (Jütting, 2003). This analytical gap, characterized by a lack of precision in understanding the nuanced roles institutions play in development, presents a challenge to the effective implementation of development initiatives (Jütting, 2003).

The absence of attention on refining and enhancing the analytical tools and frameworks impedes the formulation of precise and targeted policies (Jütting, 2003). This deficiency may consequently hinder the realization of development goals and the efficient use of resources dedicated to fostering societal progress (Jütting, 2003). Addressing this analytical gap becomes imperative to overcome the challenges in implementing successful development initiatives (Jütting, 2003). Renewing attention toward refining analytical tools and frameworks is crucial for gaining a more nuanced understanding of the multifaceted roles institutions play (Jütting, 2003). Additionally, this focus creates the groundwork for formulating informed and effective policy recommendations (Jütting, 2003). Bridging this analytical gap is, therefore, a foundational step towards fostering a more precise and impactful approach to development strategies.

It becomes imperative to acknowledge that, while inherently important, institutions must undergo proper regulation to instigate change (Jütting, 2003). This acknowledgment gains significance in light of extensive research consistently demonstrating a positive correlation between the performance and quality of institutions and the outcomes of development efforts (Jütting, 2003; Pande & Udry, 2005). In essence, the effectiveness of institutions in fostering development hinges on the meticulous and informed regulation of their functioning efforts (Jütting, 2003; Pande & Udry, 2005). Therefore, understanding and addressing this regulatory aspect becomes a cornerstone in the pursuit of comprehensive and impactful development strategies (Jütting, 2003). Furthermore, the existing body of research on this subject underscores a robust correlation between the quality of institutions and heightened economic growth (Jütting, 2003; Pande & Udry, 2005). Notably, this correlation gains significance when considering that institutional measures predominantly focus on the urban and formal sectors (Pande & Udry, 2005). The potential imbalance in economic growth, particularly in urban centers, can be attributed to inadequately regulated institutions of lower quality (Jütting, 2003; Pande & Udry, 2005).

Recognizing the dynamic nature of institutions, capable of adaptation to current circumstances (Pande & Udry, 2005), it is essential to acknowledge the dichotomy within this adaptability. While some institutions are deeply ingrained in indigenous social structures and resist change, research on informal institutions has been gaining prominence (De Soysa & Jütting, 2007). Informal institutions, unlike their formal counterparts, exhibit flexibility and are subject to change over time, becoming a component of the evolving landscape (De Soysa & Jütting, 2007). Traditionally, the focus of research in the field of institutions and development has predominantly centered on formal institutions (De Soysa & Jütting, 2007). However, scholars have begun recognizing the role of informal institutions in development, emphasizing their roots in and emanation from the culture of a society (De Soysa & Jütting, 2007). Despite the challenges of measuring informal institutions due to the multifaceted nature of cultural dimensions and the absence of strong policy-related measures, their significance lies in their inherent flexibility (De Soysa & Jütting, 2007). This adaptability makes them valuable mechanisms for addressing diverse societal needs and fostering development.

The significance of informal institutions is underscored by their adaptability, rendering them as mechanisms for conflict resolution (De Soysa & Jütting, 2007). Their flexibility not only facilitates conflict resolution but also enables substantial changes that are indispensable for development (De Soysa & Jütting, 2007). This adaptability allows them to provide a dynamic framework with rules that can be adjusted to meet evolving societal needs, contributing to the resilience and responsiveness required for progress (De Soysa & Jütting, 2007). Irrespective of the origins of institutions, the enhancement of their quality emerges as a crucial imperative for ensuring sustained economic growth (Jütting, 2003; Pande & Udry, 2005). Prioritizing improvements, regardless of historical roots, contributes to the creation of an environment conducive to economic development (De Soysa & Jütting, 2007). This approach establishes a more adaptive and effective institutional framework that aligns with contemporary challenges and fosters the conditions for ongoing growth and progress (Jütting, 2003; Pande & Udry, 2005). In essence, recognizing the adaptability of informal institutions and prioritizing improvements in their quality form a pivotal strategy for shaping a resilient and responsive socio-economic landscape (Jütting, 2003; Pande & Udry, 2005).


Cultural Dynamics and Institutional Influence on Development

The preceding sections of this article have focused on the individual roles of culture and institutions in the context of development. However, implicit connections between culture and institutions have emerged, warranting a more in-depth exploration of how these two elements synergistically influence development. To start, Douglas North (1990) provides a foundational understanding of institutions as systems that constrain human behavior. Informal institutions also wield significant influence in development, and their roots delve deep into cultural foundations (De Soysa & Jütting, 2007). North (1990) describes informal institutions as a "part of heritage that we call culture" (pp. 36-37), emphasizing the connection between informal institutions and cultural norms. Scholars concur that this link between institutions and culture is strong (North, 1990; De Soysa & Jütting, 2007). Both factors exert notable impacts on development, particularly within economic activities and society (De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). This relationship between culture and institutions forms a framework within which development occurs (Yerznkyan, Gassner & Kara, 2017). Understanding the connections and reciprocal influences of culture and institutions becomes important for developing comprehensive strategies that address the aspects of development society (De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017).

In their study on "Culture, Institutions, and Economic Performance" (2017), researchers Yerznkyan, Gassner, and Kara analyzed how culture and institutions collectively shape economic performance. The impact of these two influential factors, as highlighted by the researchers, can be analyzed in multiple ways (Yerznkyan, Gassner & Kara, 2017). One of these perspectives suggests that cultural differences play a role in contemplating socioeconomic reforms, with the strategies for these reforms intricately tied to the nature of economic systems (De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). These economic systems, in turn, rely on the existing institutions and the cultural milieu within a nation-state (De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). In the pursuit of necessary changes, the success of reforms hinges on aligning them with the preferences and expectations of the population, influencing both formal and informal institutions (De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). Strategic actions are taken to improve the overall situation in the country and stimulate economic growth (Yerznkyan, Gassner & Kara, 2017). Furthermore, the researchers posit that culture and institutions also have an impact by shaping economic behavior, extending beyond individual actors to encompass all economic phenomena, including governance (Yerznkyan, Gassner & Kara, 2017).

These cultural and institutional factors emerge as major determinants that explain even divergent paths of historical change, an observation integral to understanding the broader context of economic development (Yerznkyan, Gassner & Kara, 2017). Drawing on North's (1990) insights, institutions are seen as sets of beliefs heavily influenced by the cultural values prevailing at a given time (p. 6). This reciprocal relationship between culture and institutions becomes a significant force, with each influencing the other and often yielding profound consequences for development (North, 1990; De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). In essence, the intertwined nature of culture and institutions underscores their role in shaping economic outcomes and developmental trajectories.


The Impact of Culture and Institutions in the Context of Development

This article, within the broader framework of addressing Global Development Issues, has centered its attention on unraveling the complex interplay between culture and institutions in the context of development. Informed by academic research, culture is conceptualized as a set of beliefs and custom values that exhibit resilience across generations, displaying a reluctance to undergo rapid changes (Guiso, Sapienza & Zingales, 2006). The inherent lack of rapid adaptability requires structured systems to monitor human behavior, a need fulfilled by institutions acting as sets of beliefs that impose constraints on human behavior (North, 1990). Distinguishing between formal and informal institutions, the former is characterized by less flexibility, while the latter has gained increased attention in recent decades due to its close association with culture and inherent adaptability (North, 1990; De Soysa & Jütting, 2007). Informal institutions, integral to culture, serve as more adaptable mechanisms and have become subjects of heightened interest (North, 1990; De Soysa & Jütting, 2007). They play crucial roles in conflict resolution and facilitating structural changes, vital for development across social, economic, and political spheres (De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017).

Lastly, the imperative for structural changes, driven by the dynamics of culture and institutions, becomes evident as a key catalyst for improvement in development (North, 1990; Guiso, Sapienza & Zingales, 2006; De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). These changes, whether in the social, economic, or political realms, are essential for fostering progress (North, 1990; De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). Consequently, culture and institutions have gained prominence in research, offering explanations for changes and aspects previously overlooked in academic discourse (Guiso, Sapienza & Zingales, 2006; De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). The increasing prominence of these elements in research underscores their paramount role in elucidating the multifaceted nature of developmental processes (Guiso, Sapienza & Zingales, 2006; De Soysa & Jütting, 2007; Yerznkyan, Gassner & Kara, 2017). It entails a contribution to understanding the mechanisms driving societal transformations. This comprehensive exploration underscores the interconnectedness of culture and institutions, emphasizing their central roles in shaping the trajectory of development.

Bibliographical References

Abdellatif, A. (2003, May). Good governance and its relationship to democracy and economic development. In Global Forum III on Fighting Corruption and Safeguarding Integrity, Seoul (Vol. 20, No. May, p. 31).

Ali, M. (2015). Governance and Good Governance: A Conceptual Perspective. Dialogue (Pakistan), 10(1).

Coccia, M. (2019). Comparative institutional changes. Global encyclopedia of public administration, public policy, and governance, 1-6.

De Soysa, I., & Jütting, J. (2007). Informal institutions and development: How they matter and what makes them change. Informal institutions. How social norms help or hinder development, 29-43.

Guiso, L., Sapienza, P., & Zingales, L. (2006). Does culture affect economic outcomes?. Journal of Economic perspectives, 20(2), 23-48.

Gyong, J. (2014). Good governance and accountability in a democracy. European Scientific Journal, 7(26), 71-89.

Jütting, J. (2003). Institutions and development: a critical review. OECD Development Centre.

North, D. (1990). Institutions, institutional change and economic performance. Cambridge University Press, Cambridge.

Pande, R., & Udry, C. (2005). Institutions and development: A view from below. Yale University Economic Growth Center Discussion Paper, (928).

Ramsay, M. (1996). Community, culture, and economic development: The social roots of local action. Suny Press.

Teorell, J., & Rothstein, B. (2008). What is Quality of Government: A Theory of Impartial Institutions. GOVERNANCE: An International Journal of Policy, Administration and Institutions, 21(2), 165-190.

Van der Borg, J., Russo, A., Lavanga, M., & Mingardo, G. (2005). The impacts of culture on the economic development of cities. European Institute for Comparative Urban Research (EURICUR) Erasmus University Rotterdam, 1-395.

Yerznkyan, B., Gassner, L., & Kara, A. (2017). Culture, institutions, and economic performance. Montenegrin Journal of Economics, 13(2), 71-80.

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