Already a Bloomberg.com user?
Sign in with the same account.
As reported today in the New York Times, Mitt Romney offended Palestinian leaders on Monday with his suggestion that cultural differences explain why Israelis are more economically successful than Palestinians. In trying to tamp down the controversy, Romney’s people offended Mexicans by saying culture also explains why the U.S. is richer than Mexico.
Leave it to others to discuss whether the Republican candidate’s remarks needlessly antagonized Palestinians and Mexicans, with whom he may need to work if he’s elected president. For economists, the question is whether he’s right or wrong on the facts. Does culture explain economic differences? It seems like a logical conclusion, but on closer inspection the answer is “no.”
Take the Palestinians of the West Bank and Gaza. Are they poor because their culture is not conducive to economic success? No. Many Palestinian Arabs have made big successes in business as immigrants to the U.S. And Arab citizens of Israel are far more economically successful than their brethren in the territories. Much like the U.S., Israel has developed a set of institutions such as rule of law and free enterprise that provide economic opportunity for immigrants (true, mostly Jews) from vastly different cultures, ranging from Yemen to Russia to Ethiopia. The Palestinian Authority still lacks those institutions and is further burdened by restrictions imposed by Israel to prevent cross-border terrorism.
What about Mexico, which Romney also cited for supposed cultural problems? Mexico is cited to make a point exactly opposite Romney’s in Why Nations Fail, a new book by MIT economist Daron Acemoglu and Harvard political scientist James Robinson. (I reviewed Why Nations Fail for Bloomberg Businessweek). They open their book with a scene from the U.S.-Mexican border, observing that the people on both sides are culturally and ethnically almost identical. The ones on the American side are richer because they benefit from a financial and legal system that makes it easier to get ahead.
I wrote to the authors for their thoughts on Romney. Acemoglu wrote back from vacation in Turkey, pointing me to an item on the Cheap Talk blog Monday that’s kind of similar to this one. (It recommends that Romney read Why Nations Fail.)
“But more seriously,” Acemoglu added, “Israel is so much richer than other countries in the area because it was founded by people with high human capital bringing in technology from Europe, and has been integrated into the world economy, continuing the process of technology transfer throughout the last several decades. The reason why this better technology and better human capital has not benefited Palestinians next door clearly has to do with institutions and with Israel’s policies (blockades but more importantly its understandable unwillingness to invest in the West Bank and Gaza). So it’s much more institutions, human capital and technology with clear historical roots rather than some sort of Palestinian or Arabic culture holding these places back.”
Robinson also wrote back in a similar vein. His key sentence: “Mitt is confused.”
Why Nations Fail says that entrenched elites hold people down. “Those who have power make choices that create poverty,” write Acemoglu and Robinson. “They get it wrong not by mistake or ignorance but on purpose.” That serves to explain the chronic allegations of corruption of the Palestinian Authority, which harms the people it is supposed to represent. At a U.S. House of Representatives hearing in July, Council on Foreign Relations Senior Fellow Elliott Abrams testified that “corruption is an insidious destroyer not only of Palestinian public finance but of faith in the entire political system.”
In attributing Palestinians’ and Mexicans’ economic difficulties to culture rather than bad government, Mitt Romney is blaming the victims.