culture and economic behavior

NORC at the University of ChicagoThe University of Chicago

Culture and Economic Behavior: A CommentaryAuthor(s): Seymour Martin LipsetSource: Journal of Labor Economics, Vol. 11, No. 1, Part 2: U.S. and Canadian IncomeMaintenance Programs (Jan., 1993), pp. S330-S347Published by: The University of Chicago Press on behalf of the Society of Labor Economists andthe NORC at the University of ChicagoStable URL: http://www.jstor.org/stable/2535178 .

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Culture and Economic Behavior: A Commentary

Seymour Martin Lipset, Hoover Institution and

George Mason University

The Donner Foundation-Fraser Institute Income Maintenance Study Con- ference in Canada and the United States has produced a series of papers written by economists concerned with different aspects of the subject. Presumably, the rationale underlying commissioning papers dealing with the same institutions and behavior in the two countries is to produce comparative analyses focusing on the sources of difference between the two North American societies or, conversely, demonstrating that they are highly similar.

In this comment, I would like to point out some of the things we know about the variations in culture and economic behavior. The concluding section deals with materials reported in this Journal. Since the authors have primarily dealt with data from their own countries, they have for the most part not given much consideration to the ways in which differences in the value systems and culture or noneconomic institutions in the two societies have affected income maintenance behavior. I hope my discussion here will point out some of the comparative directions that might be pursued in future analyses of the same economic institutions in cross-national per- spective.

Cultural Differences

There can be little doubt, as I have tried to demonstrate in my book, Continental Divide (Lipset 1990), that Canadian culture and political institutions differ considerably from those of the United States. Ironically, the first comparative observation that I found pointing out such differences was voiced by a man well known as an economic determinist, Friedrich Engels. In writing his impressions of a brief visit to North America in 1888, Karl Marx's great collaborator emphasized the sharp variations be-

[Journal of Labor Economics, 1993, vol. 1 1, no. 1, pt. 2] (? 1993 by The University of Chicago. All rights reserved. 0734-306X/93/1 101-0023$01.50

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Commentary S331

tween the values and behavior of the Americans and Canadians, the latter in his judgment resembling Europeans. He reported a lesser rate of economic development north of the border, noting that in Canada "one imag- ines that one is in Europe again. . . . Here one sees how necessary the feverish speculative spirit of the Americans is for the rapid development of a new country." He pointed to the "economic necessity for an infusion of Yankee blood," not capital, if Canada were to grow (Marx and Engels 1953, p. 204 [emphasis added]). Engels sounds more like a Weberian than a Marxist; that is, he emphasized that economic growth is a function of values conducive to rational accumulative behavior more than to variations in economic resources. Engels was so convinced of this that he advocated the incorporation of Canada into the United States as a way of fostering its development.

In light of the recent moves toward a three-nation (Canada, Mexico, and the United States) free-trade agreement, which will involve some ad- mixture of the cultures and economies, it is interesting that Marx himself explained the economic backwardness of Mexico in cultural terms. He was in favor of the United States taking over the entire country, noting "the waste" of California in the hands of "lazy Mexicans." According to Marx, the way to accelerate economic progress in Mexico was to place the whole country in the hands of the "industrious Americans" (Moore 1974-75, p. 135). The leftists, who oppose a North American free-trade pact because it may "Americanize" their societies, will be surprised to learn that Marx and Engels would have approved of it since they believed that the American culture was much more conducive to industrial growth than the cultures of Canada and Mexico.

The cultural differences between Canada and the United States remain, even though both countries have changed dramatically in both structural and demographic terms since Engels's day. The northern country has been, and still is, a more class-aware, elitist, law-abiding, statist, collectivity- oriented, particularistic (group-oriented) society. South of the border, re- bellion against elitist, monarchical, strong state institutions were important motivating forces in the launching of the American Revolution. The United States has continued to be the extreme example of a classically liberal society, one that rejected the assumptions of the alliance of throne and altar, of ascriptive elitism, of noblesse oblige, of communitarianism. The social aspects of the eighteenth-century separation were then reinforced by variations in literature, religious traditions, political and legal institutions, and socioeconomic structures.

This social diversity can be illustrated by the way the two peoples reacted to efforts to change their systems of measurement and currencies. Two decades ago, Canada and the United States decided to give up miles and inches, ounces and pounds, in favor of the metric system. Since they are on the same continent, the two governments agreed to do this together.



S332 Lipset

They told their citizens that as of a given date the metric system would be legal. The old system could also be used for 15 years, after which time only the metric system would be used. As is obvious to anyone who crosses the border, the numbers on Canadian roads mean different things from those on American highways. One says "90 per hour" is the limit, meaning kilometers; the other says "55," meaning miles. The weather is reported in Fahrenheit south of the border and Celsius north of the border. Ca- nadians were told to go metric, and they did; Americans were told to go metric, and they did not.

Similarly, the two governments proposed elimination of the dollar bill, given inflation, and replacement by a dollar coin, with the two-dollar note being the most widely used unit of paper currency in circulation. Today there is no dollar bill in Canada, only a coin, referred to as the "loony." In the United States, dollar coins can be found only in Las Vegas and Atlantic City, while the two-dollar bill is abundant only in Thomas Jef- ferson's home, Monticello, because his picture is on it.

Canadians show much more respect for the state than Americans do. One country was born out of a revolution that ultimately enshrined popu- lism. The other evolved out of the conditions of a counterrevolution, which preserved a monarchically legitimated society. The founding document of the Americans, the Declaration of Independence, speaks of "life, liberty and the pursuit of happiness," thus emphasizing individualism. Canada's first Constitution, the British North American Act, emphasizes "peace, order and good government" as its objective. The Constitution of the United States was established by "We, the People" and ratified by the various states. The Constitution of Canada was ratified in Britain by Par- liament and proclaimed by the queen. The American Constitution contains a Bill of Rights, which fosters a concern for personal rights and litigiousness. The Canadian one emphasizes group rights, stemming from the need to protect the French Canadian minority. The country did not adopt a Bill of Rights-the Charter of Rights and Freedoms-until 1982. Americans, consequently, are much more litigious and individual-rights oriented than are Canadians. There are many more lawyers per capita in the United States than in Canada. Americans not only are much more likely to sue the government, they also show a greater propensity to sue each other. Per person, there are five times as many medical malpractice suits in Amer- ica as in Canada.

Obedience to law and authority is a deeply entrenched tradition north of the border. Canada is the only country on earth with a policeman, the Mountie, as its symbol. When the Royal Canadian Mounted Police had their hundredth anniversary, there was a national birthday party. It is hard to imagine an equivalent celebration for the Federal Bureau of Investigation or any other police force in America. When Sitting Bull and the Sioux defeated Custer and the American troops at Little Big Horn, they retreated



Commentary S333

north across the Canadian border and surrendered to six Mounties. The Indians knew that the queen's treaties were kept. The treaties south of the border were not since authority there was responsive to popular pressure at the local level. Systematic comparative studies of the frontiers in the two countries, particularly of mining camps, indicate that there was much more violence, crime, and vigilantism in California and Alaska than in British Columbia and the Yukon. Again, the Mounties were able to preserve authority north of the border, while local police were unable to do so to anywhere near the same extent in the United States. The people descendant from revolution continue to live in a more crime-ridden society with higher rates of deviance. There are proportionately many more murders and crimes of violence in the United States than in Canada.

The American political tradition, as various historical studies have emphasized, is classical liberalism-Whig in the eighteenth- and early nineteenth-century term. It suspects and fears the state. The American Con- stitution and Bill of Rights were established deliberately to constrain governmental power, to make the executive ineffective, subject to controls from the houses of Congress and the courts. The Canadian tradition is Tory and monarchical, approving of a strong state, with an executive that almost invariably has its way with Parliament.

These differences have affected more recent events. The Tory tradition in Canada has helped to legitimate the welfare state and the rise of a strong social democratic party, the New Democrats, which currently governs Ontario, the wealthiest and most populous province, as well as British Columbia and Saskatchewan. In the 1988 federal election, Conservative Prime Minister Brian Mulroney, running for reelection, referred to the welfare state as "Canada's sacred trust." Toryism-that is, statism, noblesse oblige-remains strong among the Canadian Conservatives. The classically liberal Whig tradition in the United States frustrated efforts to build a socialist party and has fostered much greater opposition to the welfare state in the public mind than exists anywhere else. The American labor movement, both in its moderate form as the American Federation of Labor (AFL) and in its revolutionary class-conscious form as the Industrial Workers of the World (IWW), rejected socialism as a goal. Both were antistatist. The AFL was syndicalist; the IWW was anarchosyndicalist. From their earliest days, the Canadian union organizations have been much more approving of socialist and labor party political objectives. Since the 1930s they have been considerably involved with social democratic parties.

The variations that stem from the contrasting histories, institutions, and traditions between the two countries are not just political. They are reinforced by their different religious institutions. The United States has been a sectarian country. Canada has been a church country. The overwhelming majority of Americans have belonged to the sects, the denominations, primarily Methodist and Baptist, but also hundreds of others. Sectarians are



S334 Lipset

described in Britain as "dissenters"i or "nonconformists"; that is, they dissent from the established Church of England. The sects were, and are, voluntary institutions. The churches in Canada and Europe have been state supported. Alexis de Tocqueville (1948), visiting America in the 1830s, was struck by the greater vitality of religion in the United States than anywhere in Europe (still true as regards fundamentalist beliefs and church attendance) and credited the phenomenon to the fact that religion was voluntary in the United States. American denominations have had to compete like business for customers, for supporters, for income. Unlike the churches, they were and are largely congregational; each unit is on its own. There is no hierarchy that controls from the top and tells ministers and parishioners what to believe, among the sects.

Roman Catholicism, the dominant Canadian religion, is supported by over half the population, while the Church of England is an important minority in Anglophone society. Both have a stratified state church background. Their hierarchical character reinforces the traditions of monarchical Tory political institutions. Harold Innis underscored the source of Canada's religious orientations when he wrote that "a counter-revolutionary tradition implies an emphasis on ecclesiasticism" (1956, p. 385). Most provinces in Canada continue to give support to religious institutions, particularly schools. As in other countries, both traditionally established groups, the Church of England and the Roman Catholic church, endorsed the political and social orders up to the end of World War II. Conversely, south of the border sectarianism has reinforced individualism, including a greater propensity for conscientious objection in wartime, than has occurred in Canada or elsewhere. Sectarians are expected to develop and follow personal moral codes and not to obey hierarchical authority or the state.

Given the disparate orientations of the two countries, even Canada's numerous sectarians differ greatly from those south of the border. Unique in the Christian world, they joined together in the United Church of Can- ada, an oxymoron for sectarians, who normally split, divide, fragment, and bitterly fight each other. Certainly, sectarian conflict has characterized the religious scene in America.

Sectarianism has been linked by Max Weber (1935) and others to individualism, hard work and achievement orientation, economic rationality, an emphasis on profit and, hence, to the greater early success of capitalism in certain Protestant areas. The norms of the churches-Catholic, Anglican, Lutheran, and others-have placed much more emphasis on communitarianism, charity, and obedience to religious and state authority.

Similar arguments have been adduced by various political analysts, including Pierre Trudeau (1960, p. 245), to the effect that Catholicism and hierarchical church structures have been antithetical to democracy. They point to the fact that democracy has been much more likely to arrive and to be institutionalized earlier in Protestant countries with their greater



Commentary S335

emphasis on individualism than in Catholic ones. Trudeau argued in 1958 that one of the reasons Quebec, as of that time, had not developed stable democratic institutions comparable to those in Anglophone Canada was that Quebec was Catholic and its people were more socialized to accept authoritarian relationships than the Protestant majority in the English- speaking provinces.

Writing in the late 1950s, in an effort to explain why Quebec was economically less developed than English-speaking Canada, I, too, drew on Weber's thesis in dealing with French-Canadian behavior. Quebec's economy had up to then been dominated by English-speaking, largely Protes- tant, entrepreneurs. Drawing on the literature dealing with the economic failures of Latin America, I noted that "an analysis of French-Canadian businessmen, based on interviews, reports their value orientations in terms reminiscent of studies of Latin American entrepreneurs" (Lipset 1988, p. 89). Quebec is certainly Latin and Catholic (if these terms have any general analytically descriptive meaning), but it obviously has not had a plantation economy. Scholars once pointed to the differences in the economic development of the two Canadas as evidence that Catholic values and social organizations are much less favorable to economic development than Prot- estant ones have been. As S. D. Clark (1962, p. 161) has reasoned, "In nineteenth-century Quebec religion was organized in terms of a hierarchy of social classes which had little relation to the much more fluid class system of capitalism, and sharp separation from the outside capitalist world was maintained through an emphasis on ethnic and religious differences."

The dysfunctional influence of cultural factors on English Canada's and Quebec's economic development in contrast to the situation in America could be seen strikingly in comparisons of their educational systems. The American one was structured to produce people trained to take advantage of an emerging industrial and commercial civilization. The Canadian system had been more elitist than functional, more like those in the traditional aristocratic and church societies than that of the United States. Until the 1960s, proportionately many fewer Canadians graduated from high school than did Americans. Even now, a much smaller proportion of Canadians than Americans attend a college or university. Beyond this is the fact that American educational institutions have been differentiated for generations to include course work that prepares people for the business and tech- nological worlds. The Canadian ones were much more geared to humanistic education, which did not prepare people for business. Comparison of En- glish with French-Canadian education shows that, prior to the Quiet Rev- olution of the 1960s, they differed the way the United States and English Canada varied. The French-Canadian system was proportionately smaller and much more humanistic in content than that of English Canada. Until recently, there was comparatively little opportunity for Francophones to be trained as engineers or in business courses.



S336 Lipset

In pointing to the impact of cultural forces, structural differences should not be ignored. Structural explanations of the early American affluence include the advantages of occupying a smaller, albeit more habitable, land- mass with enormous agricultural, animal, and mineral resources and a more clement climate. The much greater size of the American market has given business in the United States a considerable advantage over that of its neighbor. These factors are strongly related to the differing economic situations of the two countries. Business in the United States has been ecologically and demographically advantaged compared to that in Canada. Similarly, Quebec has been in a weaker position vis-a-vis English Canada. Consequently, Canada has emphasized the need for government capital and other public assistance to establish and maintain business and industry in a large country with a relatively small population.

The cultural interpretation points to the congruence, noted by Weber (1946), between the ethoses of Protestant sectarianism and capitalism, as related to the presence of a harder-working, more capital-maximizing population south of the border. In harmony with Weber's (1935) thesis, Canada, as noted, has been less Protestant sectarian than the United States and has developed more slowly. The Weberian logic also suggests cultural reasons for the relatively tardy economic development of Catholic Quebec as compared to the predominantly Protestant provinces.

The cultural differences are reinforced by cross-national stereotypes presented in fiction and popular magazines that portray Canadians and Ca- nadian entrepreneurs as considerably less aggressive, less innovative, less risk taking than their American counterparts. Public opinion surveys indicate that these stereotypes correspond to actual national traits. Gallup polls taken in 1973 inquired: "Some people are attracted to new things and new ideas, while others are more cautious about such things. What's your own attitude to what's new?" Almost half the Americans (49%) said they were "attracted" to newness; only 13% replied "more cautious." Among the Canadians, however, more than one-third (35%) gave the latter response, while 30% reported being drawn to new things or ideas. In line with these results, cross-border surveys taken by Goldfarb Consultants, a leading Canadian market research firm, in 1982 in the United States and in 1983 in Canada, found that more Americans (69%) than Canadians (60%) agreed with the statement, "I am always willing to try new things or products." The same surveys also reported that Americans were much more likely than Canadians to say, "I work well under pressure," by 70% to 53%.1

Economic Behavior and Institutions Drawing in large part on works by students of invention, Herschel Har-

din, a Canadian student of North American economic development, con-

' All survey and poll data reported here that are not specifically referenced are from the files of the respective agencies.



Commentary S337

cludes that private enterprise in Canada "has been a monumental failure" (1974, pp. 102-5) in developing new technology and industry. Canadian business has rarely been involved in creating industries to process inventions by Canadians, who have had to go abroad to get their discoveries marketed. The Science Council of Canada (1972), dealing with impediments to innovation, emphasizes the "prudence" of Canadian entrepreneurs as a major obstacle. Charles McMillan, recently an advisor to Prime Minister Mul- roney, noted, while still a professor of business, "The Canadian record of diffusion of existing technology in various areas of secondary manufacture remains relatively poor, and the traditional management values and or- ganizational processes act as deterrents to making product innovation a major corporate strategy" (1978, p. 45).

The differences also show up with respect to investment strategies, savings, insurance purchases, use of credit, and consumer behavior. Canadian economist Jenny Podoluck reports: "Investment is a much more significant source of personal income in the United States than in Canada. Capital investment is necessary for economic development, but the risk involved has generally not appealed to Canadians" (Hiller 1976, p. 144). Americans have been more disposed to put their money in stocks. As of 1986, 13% of adult Canadians were stockholders; the corresponding figure for Amer- icans in 1985 was 20%. Needham-Harper market research, finding small but consistent differences, reported in 1986 that Canadians are somewhat more likely than Americans to say that "when making an investment, maximum safety is more important than high interest rates" (83% to 78%).

Compared to their southern counterparts, Canadian investors and financial institutions are reported to be less disposed to provide venture capital. According to the Science Council of Canada, they "tend consistently to avoid offering encouragement to the entrepreneur with a new technology- based product . . . [or to] innovative industries" (1972, pp. 123-24).

Canadians have long sought opportunities for safer investment south of their border: "When Canadians have invested, the risky new Canadian enterprise has not been as attractive as the established American corporation" (Hiller 1976, p. 144). Kenneth Glazier (1972, p.61) seeks to explain the phenomenon:

One reason is that Canadians traditionally have been conservative, exhibiting an inferiority complex about their own destiny as a nation and about the potential of their country. . . . President A. H. Ross of Western Decalta Petroleum, Ltd., Calgary, in a recent annual report, said that most of Western Decalta's exploration funds are "from foreign sources because the company has not been able to find enough risk capital in Canada."

Thus, with Canadians investing in the "sure" companies of the United States, Canada has for generations suffered not only from a labor drain and a brain drain to the United States, but also from a considerably larger capital drain.



S338 Lipset

This pattern is not new. The economic historian R. T. Naylor (1973, p. 241) notes of the pre-World War I period: "Financial capital moved from Canada to the U.S., industrial capital back to Canada. Canadian funds went to support American stock exchanges or into corporate bonds.... Canada in effect ended up 'borrowing' back its money in the form of direct investments by American firms" (p. 246). The large Canadian insurance company Sun Life "generally preferred American investments to Canadian ones" and "Canadian brokers dealt more heavily in American than in Canadian stocks" (p. 252).

If one controls for the sizes of the two populations and per capita gross national products, it is clear that Canadians invest much more money south of the border than Americans send north, a tendency that has grown greatly since the 1960s. One-fourth of the 100 largest foreign investments in the United States, as of 1986, were by Canadian companies. Even more striking is the finding in a U.S. Commerce Department survey of the total value of direct investments in the United States that "traced assets to their ultimate owners. Britain ranked first in 1986 with $133.8 billion, followed by Canada with $129.5 billion, Japan, $96.7 billion, Switzerland, $79.5 billion and then the Netherlands, with $68.4 billion." The Wall Street Journal (1989), when reporting these data, noted some doubt that the Dutch involvement was as great as indicated since the figures included many "foreign companies that aren't Dutch, particularly Canadian companies, [which] channel their direct investment in the U.S. withholding taxes" (emphasis added). Allan Gotlieb (1991), Canadian ambassador to the United States during the 1980s, has suggested that Canada may therefore be the largest foreign investor in the United States.

The overall situation has changed drastically in the past 2 decades. Al- though Canada is one-tenth the size of the United States in population, the ratio, in absolute terms, of American investment in the north to Ca- nadian investment in the south decreased from five to one in the early 1970s to three to two as of the early 1980s to par or above by the latter years of the decade. Prior to the recession at the start of the 1990s, more Canadian capital was moving to the United States than was being invested by Americans in Canada. Overall, too, Canadian direct investment abroad has been greater than the amounts foreigners put into the country. In an effort to reduce the outflow, the Trudeau government instituted regulations to permit Canadians to deduct 20% of the dividends of Canadian-owned companies for income tax purposes and to require pension funds and after- tax retirement savings to be put primarily into Canadian investments. (These rules have been left in force by the Conservative government of Brian Mulroney.)

Given improvements in the patterns of economic growth and in the ratio of foreign to domestic direct ownership, and given Canada's increasing assumption of an international role as an exporter of capital, it is puzzling that the public opinion and aggregate data still indicate that Canadians



Commentary S339

are more prudent than Americans. The record, however, is clear and consistent. Reviewing the evidence from opinion poll and aggregate data in 1988, Goldfarb Consultants comments, "Canadians are more security conscious, have a 'rainy-day' mentality, are more heavily insured and bigger savers than U.S. residents" (Lipset 1990, p. 126). The former show up as significantly higher than Americans on an ''uncertainty avoidance index' in a study of the employees of the same multinational corporation (Hofstede 1984, pp. 121-22). The Science Council of Canada reports that Canadians save more than their neighbors to the south, that a greater "part of these savings go into bank deposits, pensions, and life insurance," and that Ca- nadians proportionately have "much more life insurance in force" than Americans (1972, p. 123). At the end of 1982, the average Canadian had $22,060 in life insurance, compared to $19,291 for the average American. According to the American Council of Life Insurance (1985, pp. 4, 47), the ratio of life insurance in force to national income in 1984 was 7%

higher in Canada than in the United States. From 1980 to 1988, the house- hold savings rate in Canada was more than twice that in the United States for all years but two, when it was almost at that ratio (e.g., in 1988, it was 8.9% to 4.9%). New York Times chronicler of Canadian society Andrew Malcolm, noting "that there are today [1988] six million more savings accounts in Canada than there are people," explains the phenomenon by the assumption that "adversity is instinctively anticipated" north of the border, an attitude that "has produced a kind of self-fulfilling pessimism"3 (1988, pp. 1, 18).

Cumulative evidence drawn from opinion polls reinforces the aggregate findings indicating the greater economic prudence of Canadians. In 1986, Needham-Harper market research found 10% more Americans than Ca- nadians making use of bank or credit cards. A year later, Decima and Cambridge Research Incorporated reported comparable results to the question, "If you needed to make a major purchase in the next month, how willing would you be to make that purchase using credit?" Forty-five percent of Americans replied that they would be "very willing" to use credit compared to 34% of Canadians. The findings of surveys taken in 1968, 1970, and 1979 make it evident that these differences go back at least to the late 1960s (Arnold and Tigert 1974). So, too, as of 1970, Americans were more likely than English-speaking Canadians (46% to 39%) to report having borrowed ''money from a bank or finance company" during the past year. Canadians were more inclined to "like to pay cash for everything [they] buy" (80% to 72%) and to say that "to buy anything, other than a house, on credit is unwise" (61% to 50%). A marketing executive in the automobile industry reported in the early 1970s that the advertising used in his field varied across the border since the "Canadian buyer is much more cost conscious . . . than the American" (Arnold and Barnes 1977, pp. 13-14). Goldfarb Consultants reported the same difference at the end of the 1980s.



S340 Lipset

The reduction of the productivity gap between Canada and the United States and the considerable growth of formerly less developed Catholic European and east Asian economies suggest either that the cultural explanations of difference in national economies are wrong or that new factors should be entered into the explanations. Essentially, the Weberian approach (to identify a body of analysis by many with one name) seems to help account for variations in the timing of takeoffs-earliest and fastest in the Protestant, especially the sectarian, areas. But as Weber himself suggested, once economically functional behavior is institutionalized in capitalism and industrialism, it does not require the Protestant ethic or its equivalents to keep going or to improve. Similarly, as the cultures of capitalism and industrialization diffused, they were absorbed in the non-Protestant countries of Europe as well as in east Asia, where some scholars argue that aspects of the Confucian ethic, comparable to the Protestant one with respect to a this-worldly orientation to work and rationality, helped to give them hospitality (Jacobs 1958).

Developments in Canada are especially intriguing since from the 1970s on it has approached the American level of productivity and wealth more closely than any other industrialized society. Yet, as abundant opinion and aggregate savings and insurance data document, the economic cultures continue to differ. Canadians are still more prudent than their southern neighbors. This conundrum is difficult to explain. Perhaps caution and savings pay off, much as they have done for the Scottish diaspora in England and overseas. Or perhaps the relevant factor is not differences between national populations as the presence within a less achievement-oriented society of a venturesome minority, large enough to take advantage of economic opportunities.

Analyses of entrepreneurial backgrounds in Latin America, which, as noted earlier, have had values antithetical to sustained economic development, have found that members of minority groups, often recent immigrants, have formed a considerable section of the business elite. Studies in Mexico, Argentina, Chile, Brazil, and Colombia have all indicated that the business leaders come disproportionately from minority backgrounds; that is, they are not descended from natives of the Iberian peninsula (Lipset 1988, pp. 107-11).

However, it is not simply minority status that is related to economic success. As Weber noted, many minority groups have not shown such propensities. The Catholic minorities in England and other Protestant countries were much less likely than the general population to engage in entrepreneurial occupations. Weber particularly pointed to the greater business accomplishments of the Protestant majority as compared to the Catholic minority in Germany. The key factor, as he indicated, is the value systems of the various groups involved. It is where the predominant values of the host culture are in large measure antithetical to entrepreneurial orientation that minorities do best. Where national values support economic



Commentary S34 1

development, the Weberian emphasis on values implies that the innovative business elite will be drawn from "in" or "from" majority group member, not from minorities or immigrants (Weber 1935, pp. 38-46).

Examination of the characteristics of business leaders in the United States bears out these assumptions. The economic elite of the United States from the Civil War to World War I were almost entirely of native American Protestant background, unlike the business elite in Latin America, only 10% of whom were foreign born or the children of immigrants. Although the percentage of high-level entrepreneurs of non-Anglo Saxon, non-Pro- testant, and immigrant parentage has increased over the years, they have always remained lower than their proportion of the population as a whole (Lipset 1988, p. 113).

Canadians have long noted the disproportionate role of persons of Scot- tish background in the entrepreneurial ranks. In central Canada, they are heavily of Calvinist origins, the religious background that Weber argued was most conducive to hard work and rational accumulation of capital. Their presence in the Canadian business elite seems more striking than in the American, but there are no hard data on the subject.

Although proportionately smaller in population than in the United States, Jews, who resemble Calvinists in commitment to rationality, hard work, and achievement orientation, seemingly play a more significant role in the Canadian business elite, at least at the very top. Nine wealthy family groups control a major segment of the shares on the Toronto Stock Exchange; three of them are Jewish, and another is of Jewish background. Two of these four families emigrated to Canada after World War II. Nine of the wealthiest 32 families in Canada have similar religious origins (Lipset 1990, p. 135).

Intra-Canadian comparisons are also congruent with the cultural thesis. Canadian data, as noted, indicate a low representation of French Canadians in the economic elite, even within Quebec, until after the political changes of the 1960s. Canadian sociologist John Porter (1965, pp. 286-89) has pointed out that the gap among elites was primarily in the economy. Fran- cophones did quite well in other structures, such as politics and the intel- lectual world. Their weakness in industrial roles, prior to the Quiet Rev- olution, which changed the educational system, the role of the church, and the values of the society in Quebec, pointed to dysfunctional effects on economic behavior of cultural elements comparable to those that characterized Latin America.

The differences in national values may also be determinative of the major variation in the cross-border strengths of trade unions. As of the end of the 1980s, roughly 16% of employed Americans belonged to labor organizations, while over one-third of Canadians did (Chang and Sorrentino 1991, p. 50). The explanations for the variations in union strength vary primarily between emphasis on the effects of dissimilarities in values and of political structures, in this case labor representation legislation. British



S342 Lipset

labor economist Henry Phelps Brown (1983) points out that "the strong tradition of Toryism in Canada laid its stress on solidarity and against individualism and the fissiparous impact of market forces. Here it found common ground . . . with the propensity of the worker to organize for the protection of the conditions of his working life" (1983, p. 240).

Canada, with its Tory and modified socialist tradition, is much more inclined than America to use the state in the economy. As of 1988, 29.9% of the Canadian work force was employed by government, compared to 16.3% south of the border (Troy 1990). Many polls indicate that Canadians and Americans differ with respect to orientations toward competitiveness and government ownership. Two opinion research groups, the Roper Or- ganization of the United States, and CROP (Centre Recerche de l'Opinion Publique) in Canada, undertook surveys focusing on these issues in 1976. They inquired as to which policy, public ownership or antimonopoly, might be the "best way to get good quality at reasonable prices" in four industries-auto, oil, steel metal, and chemical. Averaging the separate responses for each industry indicates that Americans were more disposed than Canadians by 26% to 10% to favor the anti big business, pro competitive free-market position of "break large companies into smaller companies." Conversely, advocates of economic reform in Canada were more favorable toward partial or total governmental ownership by 21 % to 13%. Six surveys conducted between 1977 and 1987 by the Contemporary Re- search Centre in Canada and the Opinion Research Corporation in the United States also indicate that Americans are consistently more likely than Canadians to believe "many of our largest companies ought to be broken up into smaller concerns." Averaging the responses over the 10- year period reveals 52% of respondents south of the border and only 43% in the north supported the policy.

That Canadians are less hostile than Americans to big business may seem surprising given the greater strength of socialist movements north of the border. But left-wing groups have not focused on the greater concentration of capital in Canada as an evil to be constrained. For the Tory-socialist tradition, bigness is simply not the problem it is for the libertarian- Whig one.

Tory-socialist sentiments may, however, be reflected in cross-national poll results revealing that Canadians are somewhat less friendly than Americans to private enterprise. From surveys conducted in the early 1980s, Goldfarb Consultants reports that on a 10-point scale, Americans ranked the importance of a "commitment to the free enterprise system" one point higher (8.0) than Canadians (7.0). In the same period, two sociologists, Eric Wright and John Myles, asked a battery of four questions evaluating the role of corporations, private ownership, and the profit motive. On

2 These data have been made available for secondary analysis by Erik Olin Wright.



Commentary S343

average, Canadians were more likely than Americans (62% to 52%) to endorse antibusiness statements.

The Income Maintenance Studies

How do these variations between Canada and the United States relate to the studies reported in this Journal? As noted at the beginning of this comment, for the most part these analyses are not comparative and do not seek to link noneconomic characteristics of the two countries to the behavior that they are trying to explain. There are, however, a number of differences reported in the articles that appear for the most part to be congruent with the assumptions made here about variations between Can- ada and the United States.

The evidence is clear-cut. Canadian income maintenance systems arc more inclined to be governmental rather than private activities. They arc more prone to be universalistic, to apply to everyone rather than only tc some of the more deprived. Thus, Derek Hum and Wayne Simpson (in this issue) report that Canadian program responses to income security risks are sometimes superior to those available in the United States, thai is, more generous. Dennis Maki (in this issue, p. S150) points to "differences in eligibility criteria between the two countries" with respect to disability insurance. Disability pensions in Canada are less likely to be based on health criteria than in the United States. Second, he as well as Charles Murray (in this issue) emphasize the relative universality of the Canadian system of public medical care, compared to the United States. These differences, as Maki notes, can influence the way in which disability pensions affect labor force behavior. In discussing welfare and the family, Douglas Allen (in this issue, p. S203) also indicates that "welfare in Canada has been universal, open to anyone who [is] poor, while in the United States assistance has always gone only to various categories of the poor."

The material on workers' compensation again points out the differences between the two countries. Workers' compensation is almost entirely governmental in Canada, while it is a private insurance system in the United States. This produces different problems in the two countries. Thus, Chris- topher J. Bruce and Frank J. Atkins (in this issue, p. S58) note:

Whereas the setting of benefit levels has been one of the most important workers' compensation policy issues in the United States, in Canada that honor has belonged to the establishment of experience rating. That this issue would be of greater relevance to public policymakers in Canada than in the United States arises naturally from the differences between the two countries in their delivery systems. Whereas most workers' compensation in the United States is provided by private carriers, who establish their own premium-rating structures, all workers' compensation in Canada is provided by government-operated Workers' Compensation Boards, whose premium-rating procedures are established by government directive.



S344 Lipset

In discussing workers' compensation south of the border, they ask, though they do not answer, interesting questions with respect to the effect of cultural differences on the same institution in the two countries. First, they note that the presence of lawyers is positively associated with the frequency of insurance claims adjustments. That is, lawyers interested in maximizing their own income are more eager to press for quick settlements of cases and therefore to induce claimants to undervalue their claims. Since reliance on lawyers is much greater in the United States than in Canada, Americans should settle more quickly and receive less, assuming all else is equal, which, of course, it is not.

Second, Terry Thomason and John F. Burton, Jr. (in this issue), discuss cheating-that is, false reports of nonwork injuries. Their analysis is logical and consistent, though not comparative. Given what we know about the differences between Canada and the United States, it would seem sensible to assume that Americans are more likely to make false reports than Ca- nadians. However, there is no evidence to test this assumption.

The analysis that could give the most grist for comparative examination of the cheating phenomenon is "The Economic Effects of Unemployment Insurance in Canada," by David Green and W. Craig Riddell (in this issue). They emphasize the "moral hazards" (pp. S98-S100) created for the jobless by the need to secure income. There is evidence from American sources that cheating to secure unemployment insurance (UI) does occur. Some workers have been able to obtain two or more social security cards under different names. They can collect unemployment insurance under one while working under the other. Given the greater propensity of Amer- icans than Canadians to violate the law, the former should be more likely to find ways around the rules governing receipt of unemployment insurance. It is puzzling, therefore, that unemployment insurance expenditures have been much greater in Canada than in the United States on a per capita and even, since 1983, on an absolute basis. As a percentage of the gross national product, Canada spends more than four times as much as the United States (see Green and Riddell, in this issue, table 3, p. Sill). This difference may relate to Canada's social democratic orientation for, as Green and Riddell (p. S109) point out, "Canada's total labor market program expenditure doesn't appear unusual compared to most European countries," which also have large welfare programs. The United States, of course, is well below European nations and Canada on this measure. Hence, the variation in unemployment insurance costs resembles the differences in propensity to spend on welfare in both societies.

Although Green and Riddell (in this issue) are hesitant about coming to any definitive explanation of this large cross-national variation, they emphasize that "the major difference between the two countries is related to the likelihood of an unemployed worker receiving UI" (p. S 114). The ratio is over three to one in favor of Canada. This discrepancy is in part



Commentary S345

related to the fact that "workers who quit their previous job are less likely to be eligible for Ul benefits in the United States. . . . Clearly much of the higher Ul expenditure in Canada can be attributed to the fact that an unemployed Canadian worker is three to four times more likely to receive UI than his/her American counterpart" (p. S 115). As noted, these findings coincide with the varying cross-border willingness to spend on welfare, to the fact that Canadians, particularly in recent years, have been very much more generous than Americans.

In sum, a number of the articles presented here assume or document the fact that Canada is much more welfare oriented than the United States, that the government plays a larger role in income maintenance programs than it does in America. Canadians are able to get more benefits more easily in a more universalistic fashion. All of these are congruent with the cross-national differences in political and social values discussed above. Unfortunately, the data available for research in these areas do not permit a direct testing of hypotheses about the implications of such cultural variations for income maintenance behavior. All that I can do here is suggest that cultural differences as well as institutional variations are important and that economists should pay more attention to the noneconomic literature.

References

Allen, Douglas W. "Welfare and the Family: The Canadian Experience." In this issue.

American Council of Life Insurance. Life Insurance Fact Book, 1985. Wash- ington, D.C.: American Council of Life Insurance, 1985.

Arnold, Stephen J., and Barnes, James G. "Canadians and Americans: Im- plications for Marketing." In Problems in Canadian Marketing, edited by Donald Thompson. Chicago: American Marketing Association, 1977.

Arnold, Stephen J., and Tigert, Douglas J. "Canadians and Americans: A Comparative Analysis." InternationalJournal of Comparative Sociology 15 (March-June 1974): 68-83.

Brown, Henry Phelps. The Origins of Union Power. Oxford: Clarendon Press, 1983.

Bruce, Christopher J., and Atkins, Frank J. "Efficiency Effects of Premium- setting Regimes under Workers' Compensation: Canada and the United States." In this issue.

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Glazier, Kenneth M. "Canadian Investment in the United States: 'Putting Your Money Where Your Mouth Is.' " Journal of Contemporary Business 1 (Autumn 1972): 56-68.



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Gotlieb, Allan. "I'll Be With You in a Minute, Mr. Ambassador." Toronto: University of Toronto Press, 1991.

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Porter, John. The Vertical Mosaic: An Analysis of Social Class and Power in Canada. Toronto: University of Toronto Press, 1965.

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Troy, Leo. "Is the U.S. Unique in the Decline of Private Sector Unionism?" Journal of Labor Research 11 (Spring 1990): 111-43.

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