The Hidden Drivers of Economic Growth: Institutions, Culture, Trust... ...and food systems.

This article is the first in a series exploring the agricultural roots of modern economies and the factors driving economic growth. Throughout history, humanity’s progress—particularly in terms of economic expansion—has been closely linked to technical advancements in agriculture. The Neolithic Revolution, the Agricultural Revolution of the 18th century, and the Green Revolution of the 20th century all exemplify how transformations in food production have shaped societies, economies, and institutions.

Yet, in today’s world, agriculture is often taken for granted. It has been deliberately marginalized—both in terms of its share of GDP and employment and in political and public discourse. As we navigate a volatile global landscape marked by climate change, biodiversity loss, resource depletion, and socio-political instability, it is critical to intellectually and politically reinvest in agriculture. A resilient food system is not just a necessity for survival but a key driver of economic progress, social stability, and sustainability.

How far can GDP mirror real growth?

Traditional economic theories, particularly those rooted in neoclassical models, have long emphasized capital accumulation and labour supply as the primary drivers of economic growth. Robert Solow’s growth model (1956) formalized this view, positing that increases in capital and labour lead to higher output, with technological progress acting as an exogenous force propelling long-term growth. While this framework has been instrumental in understanding macroeconomic trends, it overlooks the broader social, institutional, and informational structures that shape economic performance. Solow himself described the “total factor productivity”, ie the part of growth which can’t be explained by both capital and labour, the “measure of our ignorance”.

Institutions and Economic Growth: Beyond Capital and Labour

Douglass North (1990) unveiled part of this ignorance by highlighting the role of institutions—formal rules (laws, regulations) and informal norms (social expectations, trust)—in shaping incentives and reducing transaction costs. His work demonstrated that economies with robust institutions, well-defined property rights, and an independent judiciary tend to experience sustained growth, while those plagued by corruption, weak governance, and legal uncertainty stagnate.

The economic divergence between North and South Korea illustrates the profound impact of institutions. Despite sharing a common history, geography, and cultural roots, North Korea’s centralized, repressive regime has led to chronic economic underperformance, whereas South Korea’s market-friendly policies, innovation ecosystem, and legal protections have propelled it into the ranks of advanced economies (Acemoglu & Robinson, 2012).

In addition to institutions, economic prosperity depends on the circulation of information, which enhances market efficiency, drives innovation, and supports effective governance. Open information networks are essential for technological progress, fostering creative destruction and economic dynamism (Schumpeter, 1942). Stiglitz (2002) highlights how information asymmetries can distort markets, making transparency vital for resilience. Societies with greater information flow experience higher innovation rates and productivity growth (Romer, 1990). Furthermore, as Sen (1999) demonstrated, democratic institutions and free media prevent economic disasters by enabling rapid crisis response and ensuring government accountability.

Culture, Values, and Economic Development

Beyond institutions, cultural and societal values fundamentally shape economic behavior. Max Weber’s seminal work, The Protestant Ethic and the Spirit of Capitalism (1905), proposed that the cultural traits of thrift, discipline, and long-term planning fostered economic dynamism in Northern Europe. While later research has nuanced Weber’s claims, the broader idea that cultural attitudes influence economic outcomes remains robust.

Oded Galor (2022) extends this perspective by linking cultural evolution to human capital formation. Societies that emphasize education, gender equality, and social mobility tend to generate higher long-term economic growth by fostering innovation and expanding the productive workforce. The Nordic countries exemplify this phenomenon: their commitment to education, egalitarian policies, and social trust has resulted in resilient, high-income economies with strong welfare systems.

Trust, in particular, is an undervalued yet crucial driver of economic success. Francis Fukuyama (1995) argued that high-trust societies tend to have more efficient markets and stronger institutions, as lower transaction costs facilitate economic exchanges. Empirical studies confirm that countries with higher levels of interpersonal trust, such as Sweden and Japan, exhibit stronger economic performance and lower levels of corruption (Knack & Keefer, 1997).

Conversely, when trust erodes, economies suffer. Esther Duflo and Abhijit Banerjee (2019) further emphasize the importance of trust in policy implementation, showing that development interventions are most effective when they align with local norms and involve community participation.

The Agricultural Foundations of Economic Growth

As much as institutions, culture, education, and trust shape economic growth, all these elements are intrinsically linked to how societies have historically produced, stored, transformed, distributed, consumed, and discarded their food resources. Since food has been the primary resource for most of our history, its collective management has driven most of our economic, social and political trajectories. Agriculture is not merely a sector of the economy; it is the backbone upon which civilizations have built their institutions, norms, and economic systems.

Despite its fundamental role in shaping civilizations, agriculture has been progressively sidelined in modern economies. Over the past century, its share of employment and GDP has dramatically declined due to industrialization and urbanization. In high-income countries, agriculture now accounts for less than 2% of GDP, and in many developing nations, smallholder farmers struggle under economic pressures from global supply chains and trade policies (World Bank, 2022).

This decline is not just economic but also political. Agricultural policy debates are increasingly absent from public discourse, and decision-makers have deprioritized investments in sustainable food production. This neglect is occurring at a time when the global food system is facing unprecedented challenges: climate change, water scarcity, soil degradation, and biodiversity loss. According to Röckström et al. (2009), industrial agriculture is the leading driver of planetary boundary transgressions, contributing to 30% of global greenhouse gas emissions, 80% of deforestation, and widespread nitrogen and phosphorus cycle disruption.

The health impacts of modern food systems are equally alarming. The Lancet (2019) estimates that unhealthy diets contribute to over 11 million premature deaths annually. Ultra-processed foods, excessive meat consumption, and monoculture-based agricultural practices are not only harming human health but also degrading the environment (WHO, 2021). If left unaddressed, the failures of modern food systems will exacerbate global crises, from malnutrition to social unrest.

Rebuilding Sustainable Food Systems for the Future

If we are to navigate a volatile, uncertain, complex, and ambiguous world, our priority must be to reconstruct resilient and sustainable food systems. The current global food system faces unprecedented challenges—climate change, biodiversity loss, soil degradation, and social inequality (FAO, 2021). Addressing these challenges is not simply a matter of agricultural policy; it is a cornerstone of long-term economic stability and societal well-being.

Future articles in this series will explore in detail how each factor—institutions, culture, education, inclusion, solidarity, and trust—is interwoven with the history and future of food systems. By understanding the agricultural underpinnings of our economies, we can better prepare for the challenges ahead and build a world where economic growth is not only sustained but also equitable and ecologically sound.

References

• Acemoglu, D., & Robinson, J. A. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Publishing.

• Banerjee, A. V., & Duflo, E. (2019). Good Economics for Hard Times: Better Answers to Our Biggest Problems. PublicAffairs.

• de Vries, J., & van der Woude, A. (1997). The First Modern Economy: Success, Failure, and Perseverance of the Dutch Economy, 1500-1815. Cambridge University Press.

• Diamond, J. (1997). Guns, Germs, and Steel: The Fates of Human Societies. W.W. Norton & Company.

• FAO. (2021). The State of Food Security and Nutrition in the World. Rome.

• Fukuyama, F. (1995). Trust: The Social Virtues and the Creation of Prosperity. Free Press.

• Galor, O. (2022). The Journey of Humanity: The Origins of Wealth and Inequality. Bodley Head.

• Knack, S., & Keefer, P. (1997). Does Social Capital Have an Economic Payoff? The Quarterly Journal of Economics, 112(4), 1251-1288.

• North, D. C. (1990). Institutions, Institutional Change, and Economic Performance. Cambridge University Press.

• Röckström, J., et al. (2009). A Safe Operating Space for Humanity. Nature, 461(7263), 472-475.

• Romer, P. M. (1990). Endogenous Technological Change. Journal of Political Economy, 98(5), S71-S102.

• Schumpeter, J. A. (1942). Capitalism, Socialism and Democracy. Harper & Brothers.

• Scott, J. C. (2017). Against the Grain: A Deep History of the Earliest States. Yale University Press.

• Sen, A. (1999). Development as Freedom. Oxford University Press.

• Stiglitz, J. E. (2002). Globalization and Its Discontents. W.W. Norton & Company.

• Temin, P. (2013). The Roman Market Economy. Princeton University Press.

• The Lancet. (2019). Food, Planet, Health: The EAT-Lancet Commission on Healthy Diets. The Lancet Commission.

• Weber, M. (1905). The Protestant Ethic and the Spirit of Capitalism. PUF.

• WHO. (2021). World Report on Diet and Health. Geneva.

• World Bank. (2022). Employment in Agriculture (% of Total Employment). Retrieved from [[https://data.worldbank.org]]