Social Capital and the Global Economy: A Redrawn Map of the World

Conventional maps of the global economy divide the major players into three groups: the United States and its partners in the North American Free Trade Agreement, the European Union (EU), and East Asia, led by Japan but with the four dragons (South Korea, Taiwan, Hong Kong, and Singapore) and the People's Republic of China catching up rapidly. This three-pronged geography is said to correspond to major divisions in the approach to political economy: at one pole lie Japan and the newly industrialized Asian economies, which have relied heavily on state-centered industrial policies to guide their development, while at the other extreme lies the United States, with its commitment to free-market liberalism. Europe, with its extensive social welfare policies, lies somewhere in between.

This familiar map, while not wrong, is today not the most useful way of understanding global economic geography. The most striking difference among capitalist countries is their industrial structure. Germany, Japan, and the United States were quick to adopt the corporate form of organization as they industrialized in the late nineteenth and early twentieth centuries, and today their economies are hosts to giant, professionally managed corporations like Siemens, Toyota, Ford, and Motorola. By contrast, the private sectors of France, Italy, and capitalist Chinese societies like Hong Kong, Taiwan, and the marketized parts of the People's Republic of China (PRC) are dominated by smaller, family?owned and ?managed businesses. These societies have had much greater difficulties institutionalizing large?scale private corporations; their relatively small companies, while dynamic, tend to fall apart after a generation or two, whereupon the state is tempted to step in to make possible large?scale industry.