Culture Eats Capital

The Case of Historical Yoruba Entrepreneurialism

“Culture doesn’t just adapt to institutions. Culture builds them.” - Garett Jones

For years, Feyi and I have been engaged in an informal debate: the not-so-straightforward relationship between culture and economic development. It often begins with something from the headlines, like the widespread and endless menace of internet fraud in Nigeria and how, over time, it has become disturbingly normalised in parts of society. My instinct has always been to frame it in economic terms.

Persistent poverty, chronic unemployment, and a frayed social contract, I argue, have created the conditions where such behaviours can flourish. Feyi is less forgiving. He points to other countries just as poor, where cultural norms still enforce a strict moral boundary around certain acts. To him, no amount of economic growth or job creation will be enough without a stronger norm that frowns upon fraud and criminal behaviour. However, the implications of this debate extend beyond any singular positive or negative trend.

ChatGPT's rendition of "Ma Fi Sia Pa Won" - a phrase composed/popularised by the Juju singer Segun Johnson. It is usually sung in praise of a raucously joyous and dancing patron of the musician, and the phrase loosely translates to "killing them with steeze" or, as Johnson himself has said, SIA stands for “Steeze Intensified with Attitude”

Culture and Institutions

The culture of a society has a significant influence on how institutions evolve and long-run economic development, which I think is very underrated. Scholars have long debated whether culture shapes institutions or the other way around. A more nuanced view suggests they are mutually constitutive, locked in a feedback loop of norms, incentives, and expectations. Societies often settle into what Roland Bénabou and Jean Tirole described as social equilibria - stable patterns of belief and behaviour where cultural norms reinforce institutional rules, and vice versa.

In such configurations, norms and beliefs about concepts like generosity or thrift, cooperation or rent-seeking, can become self-reinforcing, making it hard for societies to shift course even when circumstances change.

Culture and Economic Development

Interaction between culture and institutions is not only about stability; it also shapes how economies grow and change over time. As Yuriy Gorodnichenko and Gerard Roland argue, culture does not simply sit alongside institutions as an inert background condition. Rather, it actively influences how institutions work even after they are stable, and how societies respond to them. For example, in cultures with strong individualist orientations, the institutions tend to promote economic freedom, property rights, and the rule of law, which foster innovation and entrepreneurial risk-taking.

By contrast, in collectivist cultures, these same institutions often underperform, held back by social expectations of conformity and redistributive norms that discourage individual accumulation. The result is a complementarity where cultural values amplify, or dampen, the ability of formal rules to drive development.

What is Culture?

Culture can be an elusive concept, often stretched to mean a myriad of things. It requires some bounded framing for it to be usefully studied. In this essay, I lean on the framing offered by Guiso, Sapienza, and Zingales, who define culture as the set of inherited beliefs and values that influence how individuals perceive the world and make decisions. Beliefs - like trust in strangers or expectations of fairness - are transmitted across generations and often persist even when people migrate or encounter new institutional arrangements. Values, such as attitudes toward thrift, work, and redistribution, shape everyday economic choices and aggregate outcomes like national saving rates or support for welfare systems.

These cultural traits, while evolving slowly, act as a stabilising force in society, reinforcing or constraining the effects of institutional reforms.

Culture Eats Capital

I was prompted to write about this subject because I came across an interesting and highly relevant paper recently by Professor Ayodeji Olukoju, called Accumulation and Conspicuous Consumption: Yoruba Entrepreneurs and the Dilemma of Development. The study examines why, despite impressive episodes of entrepreneurial vitality in southwestern Nigeria, a sustained indigenous capitalist class failed to emerge. Olukoju’s argument moves beyond simple explanations of internal cultural deficiencies or external economic exploitation, proposing instead a complex interaction of cultural, structural, and historical forces. As he observes, "the cultural context was as important as the constraining structure of British colonialism in explaining the underdevelopment of indigenous entrepreneurship".

At the centre of this cultural dynamic was a deeply ingrained ethic of redistribution and public generosity. Among the Yoruba, entrepreneurial success was measured not merely by the accumulation of wealth but by its visible deployment in sustaining social networks and communal obligations. Entrepreneurs were expected to finance lavish ceremonies, support extended kin, and employ relatives - actions that conferred legitimacy and status as bòròkíní or gbajúmọ̀ (celebrities and people of high status and visible wealth). These expectations created "anti-entrepreneurial societal obligations" that diluted reinvestment capital. Attempts to resist such obligations often invited reputational damage or even accusations of witchcraft. In one striking example, Olukoju recounts how Chief Daniel Taiwo (sound familiar?) refrained from foreclosing on defaulted loans "for fear of alienating public opinion and losing followers".

Colonial economic structures compounded these cultural pressures. British policies privileged expatriate capital, restricted African access to credit, and confined indigenous entrepreneurs to subordinate economic roles. This created a fragile environment for African enterprises, heavily dependent on state patronage and vulnerable to political shifts. Even when Yoruba businesses achieved remarkable success, they often disintegrated within a generation. As Olukoju notes, "acquisitions were frittered away in conspicuous consumption and disputes within polygynous families destroyed whatever prospects there were for business continuity".

During our eight-week read-along and review of Antony Hopkins’ Capitalism in the Colonies, Feyi made the poignant observation about the recurring cycles of wealth destruction in Nigeria, where fortunes amassed in one era are quickly swept away in the next. He attributes this pattern to the country’s dependence on resource rents - whether slaves, palm oil, or crude oil - without innovation or value addition. In his view, this extractive model has stifled the emergence of enduring, intergenerational wealth. My complementary observation was that colonial trade policy, geared toward free trade rather than industrialisation, left African entrepreneurs without the institutional support needed to build an indigenous industrial base. The export economy flourished in primary commodities, but there was little incentive or capacity to transition into higher-value production.

Both perspectives lean heavily on structural explanations, but Olukoju’s study adds an important cultural dimension. Even where entrepreneurs succeeded, capital was often diverted away from reinvestment into socially expected displays of wealth and kinship-based redistribution. These cultural logics, coupled with colonial economic design, created a context in which wealth accumulation and entrepreneurial continuity were perennially fragile.

It might appear that Feyi has won this debate. After all, Professor Olukoju’s paper carefully demonstrates how cultural expectations of redistribution and conspicuous consumption constrained the accumulation of capital and the continuity of enterprise. Culture can maintain a stranglehold not just on social behaviour, but also on economic outcomes.

However, I have one last ace. History suggests culture is not immutable. Structural economic changes can rewire the incentives and power relations that sustain particular cultural norms. In Britain, the Industrial Revolution gave rise to new social groups - industrialists and manufacturers - whose economic fortunes were decoupled from slavery. With their wealth tied to production and trade rather than human bondage, and their values shaped by dissenting religious traditions and Enlightenment ideals, they became powerful agents of moral reform. Their ascendance altered the ideological terrain, enabling abolitionist movements to gain traction where previously they had been marginal.

How Culture Changes

There is an important lesson for contemporary Nigeria. Structural transformation - anchored in industrial diversification and innovation - can create a similar realignment of economic and cultural incentives. A shift from extractive resource dependence to productive, value-adding sectors would empower new elites whose legitimacy rests not on redistribution or proximity to rents, but on the reinvestment of wealth and institutionalised business continuity.

In such a scenario, cultural norms around wealth could evolve, making frugality, long-term planning, and enterprise succession not socially costly but socially rewarded. Culture shapes economics, yes - but in the long run, economics can also reshape culture.