Psyflex | Group Dynamics

Do economies have a personality?

In other words, can we assign cultural and psychological traits to a country using economic data? It may sound weird but isn’t an economy representative of its people's culture?

So first, how can we measure culture? Many sociologists have studied cultural traits. Let's take a look at famous sociologist Geert Hofstede's 6 dimensions of national culture. They are individualism, masculinity, long-term orientation, power distance, uncertainty avoidance and indulgence.

If you are interested, you can compare any countries you like on his company’s website.

It shows, for example that America, with a score of 91 on the Hofstede grid, is the most “individualistic” country. According to his description, “individualism” refers to the sense that people are responsible for themselves and don’t need assistance from others. Individualistic people tend to say “I” more often than “we”. We can also see that America scores high in “masculinity”. One major aspect of masculinity is the desire to win. Masculine people enjoy competition. For them, it’s winning that’s important, not participation. Unsurprisingly, the US scores 62. Isn’t America known for its “winner” culture?

If we compare it to France, we can see that France is less “individualistic” but the score is still quite high with 71.

As for Masculinity, well, we could say that France leans more into the “feminine” side with a score of 43. Femininity is the aspect of assistance between people.

The study also shows that France has more of a long-term oriented culture (score of 63) whereas America is all about the “now” (with a score of only 26 in long term orientation).

For our current study, let’s stick to only 3 dimensions:

Individualism
Masculinity
Long-term orientation

So, before we look into the economic data of these 2 countries, we will build our hypothesis. The hypothesis will be to imagine, for each of these 3 cultural dimensions, what could be the impact on the main macroeconomic aggregates of the economy, say:

Consumption (C)
Government spending (G)
Investment (I)
Export (X) and Import (M)

We won't use total monetary value, but instead, we will use the % of GDP as it is more representative of what the country focuses on. And, by the way, all the economic data used in this study was taken from the World Bank figures for the year 2016.

So here’s our proposal:

a) If a country is highly Masculine, like America, then its people will be proud to be responsible for themselves and will not want assistance, so we may imagine that their Government Spending, as a % of GDP, would be low. As for a country that scores low in Masculinity, we may imagine that its Government Spending is high.

b) Long-term orientation: a country that scores high in long term orientation, like France, may end up having a high-level of Investment (I) whereas a country that scores low will tend to spend more money now and have a higher share of the GDP in Consumption (C).

c) Individualist countries may not want to be dependent on other countries and may not want to Import a lot. They may prefer focusing on exports. In fact, President Trump, with a philosophy of “America First” is really being individualistic. On the other hand, we may consider a less individualistic country like France to be less independent and more interdependent with other economies and have a higher share of Imports and Exports.

Our hypothesis would then be summed up in this table:

Let’s now take a look at data from the World Bank!

a) About America being more Individualistic and Masculine than France, our hypothesis was to think that their dependence on Government Spending would be lower than France. Well, we can see that America's Government Spending as a share of their GDP is twice less than France's. So, it does look like the macroeconomic aggregate data confirms our hypothesis.

b) With a Consumption of 68.8% of their GDP, America is more in the "now" (short term orientation) compared to France whose Consumption represents 13% less GDP than America's. By the way, America’s consumption is traditionally known to average 70%. We may then consider that America’s economy is powered by its internal consumption. Investment in America scores 19.69% of the GDP, which is less than France, in which investment represents 23% of their GDP, which doesn’t contradict our hypothesis because France scores higher than America at Long Term orientation.

c) As for their interdependence with other countries, we see quite a substantial difference between France and America as America’s Imports represent only 14.68% of their GDP whereas France’s economy is more dependent on other countries as their Imports represent 31.2% of their GDP.

Interestingly enough, the analysis of economic data didn’t contradict our hypothesis. Great! The economic data has confirmed our cultural hypothesis. So is an economy representive of its culture? Well, according to this survey, we could say that yes!

If you are interested in more insights of this sort, or if you want to debate this sort of research, please contact us! It will be our pleasure to be in touch with you!