Princeton, N.J.: Princeton University Press • 1993 • 258 pages • $24.95

It is a rare occurrence when a book appears that is destined to influence the study of the interrelationships of economics and politics for decades to come. Making Democracy Work is such a book, one that will no doubt become a classic in the social science literature and should be read by all economists.

In 1970, fifteen new regional governments were created in Italy and were given essentially the same powers and responsibilities.[1] By the 1990s these governments were spending nearly a tenth of Italy’s GDP, so that they were quite powerful structures. This creation of nearly identical governments offered Putnam the exceedingly rare opportunity to study something that resembles a controlled experiment in the natural sciences. The question Putnam asks about these governments is classically simple: Which of them worked best and why? Clearly there were differences in the Italian regions which contained these governments, especially differences in the history of the people of these regions. Did these differences matter?

Putnam measured the performance of the governments in various ways. Did the people find them comprehensive, reliable, and internally consistent? Did the governments conform to the objectives of their constituents?

What Putnam found was that the successful governments were located in areas where he also found a high degree of “civic tradition.” In areas in the south of Italy a powerful Norman kingdom had appeared around the eleventh century A.D. There a ruling tradition was established that, while enlightened in terms of religious toleration and other matters, had an autocratic, top down structure that promoted state monopolies and other mercantilist sorts of economic arrangements. In certain northern and central parts of Italy, on the other hand, there began to develop at about the same time a tradition of republican government featuring the involvement of large numbers of the members of the society.

The two types of government traditions, vertical in the south and horizontal in the north- central regions, produced very different kinds of civic traditions. The vertical tradition produced the lord, vassal, and serf style of relationship, while the horizontal tradition developed into guild, fraternal, and university relationships.

In the south, disputes tended to be settled by godfather-like figures who, in order to maintain their power, were not above causing trouble among people so that they could later be of use in settling the dispute. In the north-central regions, people tended to form mutual aid societies and other spontaneous kinds of organizations that promoted mutual trust and a team spirit for the solution of economic and social problems. Thus it is no accident that the banking community grew up around Florence in the north, comments Putnam, for the very word credit derives from credere, “to believe.” It is also no accident that the Mafia emerged as dominant in the south. However, the really striking economic difference between these regions did not come until the time of the Industrial Revolution, which took hold in the north-central regions of Italy and still languishes in the south. It is interesting to note that the civic differences between the regions remained more stable than the economic differences. While the civic regions became wealthier they also remained steadfastly civic. In Putnam’s words: “Like a powerful magnetic field, civic conditions seem gradually but inexorably to have brought socioeconomic conditions into alignment, so that by the 1970s socioeconomic modernity is very closely correlated with the civic community . . . . In other words, perhaps civics helps to explain economics, rather than the reverse” (pp. 153-4).

Interestingly enough, Putnam finds that organized religion, at least in Catholic Italy, is mainly an alternative to the civic community: the more people take part in religious activities the less they take part in government. Along similar lines, of course, Max Weber in his The Protestant Ethic and the Spirit of Capitalism (1904) felt that Catholicism was less conducive to business success than were certain forms of Protestantism. Yet, it may not be Protestantism versus Catholicism that is at issue here, but once again the vertical structure of the Church system. Historian Paul Johnson writes in his History of Christianity (pp. 313 if.) that entrepreneurs have historically been put off by highly structured Christianity of any kind and have tended to favor more loosely structured “primitive” churches or even solitary worship.

Putnam’s work should demonstrate to economists something that they have long suspected: economic development is path dependent. It matters a great deal how we got where we are. And, while only the radical fringe of the economics profession believes otherwise, this work makes it crystal clear that certain cultures and governments are more supportive of economic growth than others. In particular, the dangers are evident of replacing the decentralized government given to us by the founders of this Republic with a “more efficient” vertical structure. Further, since the inter relationships between the economy and government are glacial in their historic movement, Putnam’s work suggests that we should abandon any hope of quick cultural “fixes” in less developed areas and recognize as well that pro-growth cultures can be slowly eroded in ways that will become perceptible perhaps only centuries later. The importance of these findings for the battles of the culture wars yet to be fought is immense. []

Ben Bolch is Robert McCallurn Professor of Economics and Business Administration, Rhodes College, Memphis, Tennessee.

1.   Putnam actually studied twenty governments, five of which had been created somewhat earlier. However, all were close enough in structure to be included in the comparative work.