To understand the eurozone crisis, consider culture

By Séamus A. Power     
June 17, 2015

From: Magazine

Why did residents of Greece protest austerity, when residents of Ireland did not? Photo by Associated Press.

They call it the Kissinger Question. “If I want to call Europe, who do I call?” Henry Kissinger reportedly remarked in the 1970s, when he was US Secretary of State. At the time, there was no European Union, and there was far less economic, fiscal, and political integration than today.

If Kissinger was confused and ambivalent about the lack of centralized power in the European Economic Community, the precursor to the EU, one can only imagine his confusion with today’s expanded and crisis-ridden union.

The Kissinger Question is a good one. The expanding political and fiscal union in Europe, motivated by a desire not to repeat the mistakes leading to the two world wars, rests on centuries of interrelated but distinct national beliefs, values, desires, and morals—factors that lie at the foundation of economic practices. For example, the cultural psychological differences across the EU reveal some foundational issues at the heart of the current eurozone crisis. 

Economists give various explanations for the causes of the crisis—easy availability of credit, property bubbles, poor regulation, unscrupulous banking practices, people manipulating the system—but find it harder to explain the varying reactions to the crisis. The economies of Spain, Greece, and Ireland collapsed, but their residents reacted very differently. In the first two countries, austerity measures were met with large-scale demonstrations and riots. In contrast, the residents of Ireland did not take to the streets. This is where cultural explanations can complement our economic understanding of what occurred in the crisis.

The idea that culture matters in economics is not new. More than a century ago, Max Weber, the German economist and sociologist, documented in The Protestant Ethic and the Spirit of Capitalism the impact of religious values on economic prosperity. He examined how the Calvinist belief in predestination shaped attitudes to work, arguing that economic prosperity for believers signaled that they were predestined for heaven. For Weber, this new type of worker—hardworking, thrifty, honest—was the basis of modern capitalism. Over time, belief in predestination faded, but the spirit of capitalism was maintained.
There is also a long history of social scientists and economists dismissing culture’s importance to understanding economics. As the University of Chicago economist Steven Levitt has noted, “Historically, economics had been a discipline dominated by theory. The big advances had come from impossibly smart people writing down complicated mathematical models that generated abstract theorems about how the world worked . . . it just never occurred to us that we could run randomized experiments on real world people in real economic settings without these people ever knowing they were part of an experiment.”  When Lawrence Harrison, a former USAID mission chief in Central America, argued in his 1985 book, Underdevelopment is a State of Mind, that cultural values have hindered economic development in Latin America, Jeffrey Sachs of Columbia responded that “the cultural explanations of economic performance may be helpful in some circumstances, especially in accounting for resistance to capitalist resistance in the nineteenth century, but such explanations should also be tested against a framework that allows for other dimensions of society (geography, politics, economics) to play their role. Controlling for such variables sharply reduces the scope for an important independent role of culture.”

Summarizing the debate, the political scientist Samuel Huntington (a co-author with Harrison and himself a strong proponent of the importance of culture) later wrote, “The battle has thus been joined by those who see culture as a major, but not the only, influence on social, political and economic behavior and those who adhere to universal explanations, such as devotees of material self-interest among economists, of ‘rational choice’ among political scientists and of neorealism among scholars of international relations.”

The debate endures: similar divisions are evident in the analysis of the eurozone crisis. Cultural values and beliefs are often either totally neglected or treated as a variable, without in-depth understanding of their historical and moral roots, and the importance of such beliefs. But cultural beliefs help explain important differences in how countries responded to the 2007–10 global economic downturn.

Ireland’s response to austerity

The economies of Greece, Ireland, and Spain all collapsed in 2008. So why did residents of Ireland, unlike those in Greece and Spain, passively accept austerity measures for six years before finally protesting in late 2014, especially given Ireland’s long history of rebellion against authority?

My analysis of data obtained from the European Social Survey—which includes representative data from 28 European countries regarding social issues in two-year waves from 2006 to 2012—illustrates differences between Greece, Ireland, and Spain on several relevant issues. The financial constraints experienced by the three EU members were similar, but the responses to austerity measures were different. A cultural analysis can help account for these differences.

For example, residents of Ireland tended to disengage from potentially productive civic activity following the economic collapse prompted by the collapse of Ireland’s real-estate market in 2008. Most Irish residents did not contact their politicians, sign petitions, or attend organized protests. In contrast, residents of Greece and Spain increasingly took to the streets in demonstrations, some of which turned violent.

Intuitively this makes sense: residents of Greece and Spain were angry at the economic collapse, and took to the streets. By 2012 residents of Ireland were less satisfied with their government, the European parliament, their economy, and their politicians than were their counterparts in Greece and Spain. Yet Ireland’s Fianna Fáil government did not lose power until 2011, four years after the recession hit.

Despite being unsatisfied with their economic situation and their government; despite EU neighbors increasing their civic engagement to effect social change; despite a history of occupation met with rebellion, the Irish mutely accepted their imposed austerity. Why?

My research, based on a wide range of interviews and forthcoming in the journal Peace & Conflict, reveals three interrelated reasons given by this group for the passive Irish response to austerity. First, migration is a culturally legitimized and historically ingrained response to hardship for the Irish: when the going gets tough, the Irish hit the road. Second, a collective memory of the violence and social denigration in Ireland during “the Troubles” serves as a reminder of the futility of violence to solve social problems for the Irish. Third, the omnipresence of the culturally informed moral foundation that “you should reap what you sow” means the Irish are thought to accept austerity as a natural consequence for enjoying financial excesses during the economic boom years.

When the going gets tough

When faced with financial constraints, the Irish evoke culturally informed collective memories of migration during times of hardship. Nearly 10 percent of the Irish population has migrated since 2008. My interviewees saw this as a continuation of a culturally legitimized and historically ingrained response to hardship. Many migrants are young and left Ireland due to unemployment or underemployment. Although many are former construction workers, a significant portion are young professionals. Despite their education status, migration in times of economic hardship is a fundamental part of Irish culture. As one respondent said to me, “It is an established feature of Irish economic and social history since the 19th century that Ireland has experienced high levels of outward migration. Definitely Irish people are prepared to get up and leave if the economic situation is bad enough.”

Interviews with people in the public eye reveal a collective memory of the nearly 30 years of violence during “the Troubles,”  the conflict between predominantly Catholic republicans who wanted a united Ireland, and the predominantly Protestant unionists who wanted Northern Ireland to remain part of the United Kingdom. In contrast to the riots, murders, and bombings that characterized the island during those years, the Republic of Ireland is now a maturing democracy, according to interview subjects. They say this maturity is mainly reflected in voting rather than attending protests or rallying against agents of the state. They did their bloodletting at the ballot box, rather than on the streets, by comprehensively voting-in the opposition.

The idea that you should reap what you sow, echoed from Roman Catholicism, is one clear theme uniting respondents’ narratives. The Irish with whom I spoke overwhelmingly view their people as being partly responsible for the current economic situation. From this viewpoint, the Irish are atypical of many other EU residents. Although bankers, the government, financial regulators, and the EU were vilified for the financial crisis in Ireland, so too was the Irish public. My respondents said it would be illogical for the Irish to protest, because they share in the blame. They must suffer austerity as a consequence of enjoying financial excesses during the boom years. As one prominent and influential economic adviser told me,  “We are stuck with the world we live in. Within these confines there are lots of things we can do, and will do, and austerity is just a consequence of what we do. We suffer it with dignity, we suffer it in anger, or you suffer it in one way or another. The motivation is to whether you suffer it in silence or in rage. That is probably the key question.”

My interviews with unemployed Irish people revealed how they’ve internalized this idea. They often said they were partially at fault for their own negative financial and social situation. There is no motivation to protest when one feels culpable for one’s own social position.

Charlie, who finished school aged 18, was an unemployed former factory worker who was having difficultly repaying his mortgage when he was interviewed in the summer of 2014. He described how he and his wife went to a prominent Irish bank in 2006 to get a loan. The banker offered him a reasonable mortgage to buy his first home based on his salary, but Charlie lied, telling the banker that a competing financial institution was offering him a bigger loan. Fearing losing a new customer, the banker agreed to match the mortgage. In this scenario, there are several places where blame can be attributed. However, during the course of his story Charlie repeatedly illustrated the ways in which the fault lay with him. His current financial hardship, in his mind, is directly related to his lie—not to an irresponsible banker, an incompetent government, or a global financial downturn, but to his own actions. He does not protest because he feels culpable for his own situation.
Moreover, during the course of my interviews, several of these “unemployed” people revealed that they had jobs. Some worked on the black market, earning money on which they did not pay tax. Some said they were trying to live with dignity; others that they were entrepreneurs. Rather than fitting a prototypical model of creative, dynamic, ambitious business adventurers, many of my interviewees discussed starting businesses—a music school, private tutorials, an arts-and-crafts stall at markets—as necessary. They expected rewards from their hard work and enterprise.
This cultural psychological analysis of the Irish during the eurozone crisis indicates some of the ways in which economic reforms—such as harsh austerity measures—have been met with diverse and delayed responses from different EU countries.

Cultural, moral, and historical values are intertwined with economic policies. To understand the complexities of the ongoing eurozone crisis, we need to analyze culture, since culture and history shape how policies are accepted, rejected, or modified.

Séamus A. Power is a PhD student in comparative human development at the University of Chicago.

Works cited

Lawrence E. Harrison, Underdevelopment Is a State of Mind: The Latin American Case, New York: Madison Books, 1985.

Lawrence E. Harrison and Samuel P. Huntington (eds.), Culture Matters: How Values Shape Human Progress, New York: Basic Books, 2000.

Steven D. Levitt, ‘Foreword’ in Uri Gneezy and John List, The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life, New York: PublicAffairs, 2013.

Séamus A. Power, “A Violent Past but a Peaceful Present: The Cultural Psychology of an Irish Recession,” Peace & Conflict: Journal of Peace Psychology, forthcoming.

Jeffrey Sachs, Notes on a New Sociology of Economic Development, New York: Basic Books, 2000.

Max Weber, The Protestant Ethic and the Spirit of Capitalism, trans. Talcott Parsons, Norton Critical Edition, New York: Norton, 2009.