The spirit of Thaksin's capitalism

6 march 2004

Early last year, both Thaksin and his chief adviser, Pansak Vinyaratn, referred several times to a book by Professor Liah Greenfeld called The Spirit of Capitalism: Nationalism and Economic Growth. In Asia Times, Pansak called it "particularly interesting, a fascinating study". Thaksin cited it in speeches and interviews.

This was unusual. The book is not about business, technology or futurology - the prime minister's usual literary tastes. Rather it is a history book that is long, detailed and heavy. Why did it attract their attention?

Greenfeld's book is an update of the great sociologist Max Weber's idea that Protestant Christianity was the "spirit of capitalism". Weber argued that the individualism and work ethic in Protestantism provided the mental environment in which British entrepreneurs created the industrial revolution and the first economic super-power.

Greenfeld changes this a bit. She argues that nationalism not Protestantism is the "spirit of capitalism", the spur to economic growth. In five countries studied, entrepreneurs and others were inspired to work and innovate in order to make their countries great.

Apart from being academic and heavy, the book's argument is rather vague. Exactly how nationalism spurs capitalism is not so clear. So why were Thaksin and Pansak so fascinated? Maybe three reasons.

First, the book offers a guaranteed short cut to economic take-off. If a country can stir up nationalism and focus it on the economy, then it will leap into the developed world. Greenfeld argues this is a law of history: "Where nationalism embraces economic competitiveness, the 'take-off into sustained growth' can be expected to take place within a generation."

Second, the book says that this leap is not driven by big social, economic or material forces like classes, elites, technology or even entrepreneurship. Rather, it is driven by the will of a few enthusiasts and visionary leaders.

In Germany, the nationalist economist, Friedrich List, harried the leaders into adopting innovative policies, and then committed suicide in despair just when the policies were starting to bite. In Japan, the Meiji bureaucrats looked on economic competition as a new form of warfare. These visionaries not only had the ideas to make capitalism take off, but also a contagious enthusiasm that ensnared their countrymen.

Third, the book shows that countries can set off on a nationalist path to economic growth but still fail if they allow other priorities to get in the way.

Greenfeld divided her five examples into three variants - two of which succeed and one fail. The first group is Britain and the US. Britain was the first country to undergo capitalist transformation. In this case, nationalism worked hand-in-hand with Weber's Protestant individualism. Much the same model was transferred by British emigrants to the USA. But these were special cases. Britain was the first take-off, and the US had massive untapped natural resources.

France, the second variant, started off well. It became nationalistic in competition with Britain and the economy started to grow. But when it came to the crunch, the French decided that they valued things like democracy, human rights, freedom of speech, and culture more than economic growth for the sake of the nation. So France was only reasonably successful. It never made it into the front rank of great economic powers.

The third variant is Japan and Germany. Here the leaders managed to commit the country to the idea of economic growth as a form of national competition, of war by other means. The Germans became nationalistic in competition with Britain, the Japanese in opposition to colonialism. Yukichi Fukuzawa wrote "The world as it presently stands may aptly be called the world of business and war." Authoritarian governments persuaded or forced their people to sacrifice individual benefits for the sake of national growth. Japan and Germany leapt into capitalism and the first rank of the world's economies.

In France, growth was hobbled by individualism and love of freedom. In Japan and Germany, these tendencies were kept firmly under control by nationalistic authoritarianism. This seems to be the idea that Thaksin was trying to express in several speeches probably inspired by Greenfeld:

"Let me repeat again that sometimes we think individualism is what makes us triumph, but it is only a short term victory which brings defeat in the longer term. So we have to think and act in unison, by thinking of the common interest as the overriding principle. Nationalism is the heart of success under capitalism. For capitalism to succeed, the people in the country must be nationalistic. Individualism is highly dangerous to capitalism."

Of course, this picture rather conflicts with the image that Thaksin has usually projected of himself. He has made the autobiography of his early business life into a tamnan about the rewards for a daring individualist entrepreneur. Now he seems to be saying that such individualism is alright for him but not for the rest of the country.

Perhaps we can now see the attraction of this heavy book for the Thaksin entourage. It promises there is a historically automatic route to capitalist "take off" based on nationalism: "Nationalism was like the magic wand that changed Cinderella's pumpkin and mice into a gilded coach-and-four." This nationalism starts from a reaction against outside interference - just like Thailand's experience in the crisis. Key to success is a handful of visionary leaders - like you know who. The only danger is when the society (like France) decides it values democracy and freedom. Perhaps this explains a little of why this government is so frightened by media freedom, real democracy, human rights and other classic liberties.

Perhaps the Thaksin entourage did not notice that the German and Japanese histories led directly from nationalism to dictatorship, and from economic competition as a form of warfare to the most destructive wars in the history of mankind. Probably Thaksin and Pansak were skimming Greenfeld's book rather quickly (both misspell her name), and maybe they missed these bits.