[In the following review, Gewen offers unfavorable evaluation of Trust.]

Not since Ray Bolger went dancing down that yellow brick road has there been a more popular straw man than Francis Fukuyama. In a sense, it's his own fault: By titling his provocative 1989 article “The End of History?” and then repeating the phrase in his 1992 book, The End of History and the Last Man, Fukuyama gave every lazy editorialist and Op-Ed writer in America the chance to pontificate about how wars and other disasters were going to continue to plague humanity despite the collapse of the Soviet Union. “Contrary to Francis Fukuyama, history has not come to an end,” the pieces usually began, before going on to talk about Bosnia or Rwanda or whatever, and though they made Fukuyama famous, they probably left those people who had not bothered to read him with the impression that he was a complete idiot.

In fact, he is a highly intelligent and erudite man who, in his article and book, was attempting to extract some philosophical implications from the West's victory over the Soviet Union. Liberal democracy, he said, had proved superior to every competing ideology and was spreading around the world. Atavisms like ethnic nationalism and militant Islam were still possible—and tragic—choices in some regions, but Western principles of liberty and equality represented the highest level of social thought, indeed the “end point of man's intellectual evolution.” Civilization had progressed to the stage where “all of the really big questions had been settled.”

Fukuyama conceded that serious internal problems remained in the democracies. These, he maintained, were due to a failure to implement Western ideas, not to shortcomings in the ideas themselves. Anticipating the criticism that was sure to come, he stressed that his arguments had a worthy pedigree, deriving from Hegel (as well as Hegel's French proselytizer, Alexandre Kojeve). They were certainly open to question, whatever their source, but they deserved more than a thousand flicks of the editorial wrist.

Now, undaunted, Fukuyama is back with Trust: The Social Virtues and the Creation of Prosperity. He is just as wide-ranging, just as abstract and contemplative as before; only this time it is not Hegel he is serving up, it is Max Weber. In his new book Fukuyama takes issue with neoclassical economics, insisting that the rational, calculating, profit-seeking “economic man” beloved by Milton Friedman and his ilk is a distortion of reality, an incomplete picture of why human beings behave the way they do. People do not look simply to maximize utility, he says; they act for a whole host of reasons—many grounded in culture, belief and tradition—that cannot be fit into the economists' models (one of the book's chapters is called “The Spiritualization of Economic Life”).

Perhaps as a concession to the dismal scientists, Fukuyama does try to quantify these reasons, and he comes up with figures of 80 per cent for rational self-interest and 20 per cent for culture and habit. The numbers are silly, but the key insight is not. The author correctly warns that economists and, more important, societies as a whole ignore the nonrational origins of human motivation at their peril.

In particular, Fukuyama argues, successful nations—as measured by their economies—require a significant degree of trust. “Spontaneous sociability is critical to economic life because virtually all economic activity is carried out by groups rather than individuals.” Trust not only enables persons to come together to solve problems, it gives them the flexibility to reorganize themselves to deal with the novel and the unexpected. “People who trust each other and are good at working with one another can adapt easily to new conditions and create appropriate new organizational forms.” Trust also allows societies to form relatively large productive units to take advantage of economies of scale.

Some of the strongest pages of the book detail the economic inefficiencies caused by a lack of trust (and it is no accident that these will sound familiar to most Americans). Crime rises, requiring more investment in police and prisons. Law suits proliferate, making attorneys happy but sending insurance rates through the roof and imposing a tax on consumers. Corruption drains resources. In labor relations, every detail of the work process has to be contractually spelled out because neither side is willing to give the other any breathing space. “There is usually an inverse relationship between rules and trust,” Fukuyama writes. “The more people depend on rules to regulate their interactions, the less they trust each other, and vice versa.” Clearly, it seems, countries with high levels of trust are likely to do better in the global rat race than those with low levels.

The bulk of Trust is taken up with comparisons of different societies, and no one can accuse Fukuyama of not doing his homework. He examines trade unions in the United States and Germany, small business in France and Taiwan, family life in China and Japan. He tells us about samurai ethics, Sicilian sharecroppers, Christianity in South Korea, Frederick Taylor's management theories, and the size of Roger Smith's bonus after he practically drove General Motors off the road in the early 1980s. Mainly, Fukuyama draws distinctions between high-trust nations like Japan and Germany and low-trust ones like China, South Korea, France, and Italy.

Rather surprisingly, he finds that societies with strong family structures tend to develop low levels of trust, “because unrelated people have no basis for trusting one another.” In China, for instance, and in places influenced by Chinese culture such as Singapore, Taiwan and Hong Kong, businesses function successfully at a Mom-and-Pop level, yet they never expand into large-scale enterprises since the owners are unwilling to place responsibility in the hands of managers who are not related to them. A company may survive into a second generation, when the sons take it over, and sometimes into the third generation, but it falls apart after that. Fukuyama notes that one consequence of this “Buddenbrooks phenomenon” is a dearth of recognizable Chinese brand names.

In a trust society like Japan, by contrast, family ties are much weaker and the impulse to reach out beyond next-of-kin much stronger. Voluntary associations in Japan are common, whether in archery or finance, and loyalty to the group is esteemed. Because their culture encourages large bureaucratic units run by professional managers, the Japanese were quick to adopt the corporate form of organization developed in the United States, and to make the most of it. The result has been all of those familiar names—Toyota, Mitsubishi, etc.—that have given American businessmen and a succession of American Presidents fits.

So far, so convincing. But as Fukuyama extends the argument to encompass France, Germany, Italy, South Korea, Taiwan, Hong Kong, and a large part of Latin America, he gets into trouble. South Korea, he tells us, is a low-trust society influenced by Chinese culture. Yet it has huge business organizations that are, if anything, more concentrated than those in Japan. How come? Because, Fukuyama remarks, the government has stepped in to create an economy based on the Japanese model, and it has succeeded splendidly, even if the Koreans don't much care to associate with one another. Untrusting South Korea is booming.

Or take Italy, another low-trust land. Sure enough, families are tight and businesses are small there; and in the south the economy is languishing. In central Italy, however, thousands of family enterprises are busily churning out shoes, machine tools and apparel for a highly competitive international market. Fukuyama observes that a lack of trust limits the size of these firms—none will ever become General Motors—yet why should the prosperous shoemakers of Tuscany care? Small can obviously be better, especially in labor-intensive industries with rapidly fluctuating consumer demand. And when Fukuyama concludes that “smallness of scale is … no more of a constraint on aggregate gross domestic product growth in Italy … than it is in Taiwan or Hong Kong,” a reader begins to wonder just how important trust is anyway.

Matters are not helped when Fukuyama goes on to point out that high-trust nations have their downside. Tolerance and openness do not come naturally to them. “The egalitarianism in communally oriented societies,” he explains, “is often restricted to the homogeneous cultural groups that tend to comprise them and does not extend to other human beings, even if they share their society's dominant cultural beliefs. Moral communities have distinct insiders and outsiders; insiders are treated with a respect and equality that is not extended to outsiders.” Fukuyama reminds his readers—if they need reminding—that high-trust Germany and high-trust Japan became notorious in the past for their treatment of conquered peoples and other “inferiors.” Apparently it is the rule-bound societies, that is to say the low-trust ones, that accept differences among groups and adhere to universal codes of law protecting everyone.

Where does the United States fit in? Is it a high-trust or a low-trust country? According to Fukuyama it is a high-trust society on its way to becoming a low-trust one. There is all that crime, all those law suits. He also cites statistics showing that Americans are not the joiners they once were. The Lions, the Elks, the Masons, the Boy Scouts, and the American Red Cross have all lost members over the last 20 years. Parent-teacher associations have seen their rolls drop from 12 million in 1964 to 7 million today. And individuals apparently feel the difference. In 1960 a survey asking whether “most people” could be trusted elicited a “yes” from 58 per cent of the participants; in 1993 only 37 per cent answered affirmatively.

Fukuyama offers several reasons for this decline, ranging from the community-destroying effects of capitalism to the rise of the welfare state; most of his causes are drawn from the standard neoconservative litany (even if he does have to tap dance around a bit while bemoaning the weakening of the American family). The crucial question is whether any of this is pertinent. It would be nice, of course, to be able to leave our homes unlocked when we go out or to walk through our parks at night, but Fukuyama has been taking economic well-being as his standard, and by that measure the level of trust in American society appears largely irrelevant.

Compared to most other countries, the high-trust ones included, we seem to be doing all right. Fukuyama himself says: “From the perspective of the middle of the last decade of the 20th century, the economic prospects of the United States look very good indeed. … There have been few other periods in recent decades when American economic prospects looked brighter.” Maybe they would look even more promising if we all became Elks and attended our local PTA meetings, but that is an awfully tough case to make.

In the end, a reader of Trust is likely to be somewhat puzzled. Low-trust societies are supposed to produce small enterprises—yet South Korea's are enormous. Low-trust societies, it is implied, do less well than high-trust ones—yet South Korea and central Italy are humming away, and the United States, declining on every sociability graph, is poised to take off once again economically. No doubt if he had wanted to, Fukuyama could have trotted out a few high-trust societies whose cupboards are bare. Britain, perhaps? Ireland? Egypt, maybe? Surely, they are out there. To his credit, he is honest with his evidence, and does not shrink from any of the exceptions or counterexamples to his thesis.

Actually, Fukuyama is so honest that by the final pages of his book he is left practically without any conclusion at all, as if the study he had undertaken to produce had turned out to be contradicted by the facts he accumulated. Limply, he writes: “What we can say is that the impact of cultural differences in the propensity for sociability will have a large, but at the moment indeterminate, impact on economic life.” Max Weber would have done better.