08 August 2012

Romney's Misread on Culture's Impact

Presidential candidate Mitt Romney delivered remarks in Jerusalem last week where he touched on the issue of development. Specifically, he pointed to culture being a key driver in a nation succeeding by pointing towards evidence from The Wealth and Poverty of Nations by David Landes and Guns, Germs and Steel by Jared Diamond.

Here is what Romney had to say (emphasis added):
I was thinking this morning as I prepared to come into this room of a discussion I had across the country in the United States about my perceptions about differences between countries. And as you come here and you see the GDP per capita for instance in Israel which is about 21,000 dollars and you compare that with the GDP per capita just across the areas managed by the Palestinian Authority which is more like 10,000 dollars per capita you notice a dramatic, stark difference in economic vitality.

And that is also between other countries that are near or next to each other. Chile and Ecuador, Mexico and the United States. I noted that part of my interest when I used to be in the world of business is I would travel to different countries was to understand why there were such enormous disparities in the economic success of various countries. 

I read a number of books on the topic. One, that is widely acclaimed, is by someone named Jared Diamond called ‘Guns, Germs and Steel,’ which basically says the physical characteristics of the land account for the differences in the success of the people that live there. There is iron ore on the land and so forth. 

And you look at Israel and you say you have a hard time suggesting that all of the natural resources on the land could account for all the accomplishment of the people here. And likewise other nations that are next door to each other have very similar, in some cases, geographic elements. 

But then there was a book written by a former Harvard professor named ‘The Wealth and Poverty of Nations.’ And in this book Dr. Landes describes differences that have existed—particularly among the great civilizations that grew and why they grew and why they became great and those that declined and why they declined. And after about 500 pages of this lifelong analysis—this had been his study for his entire life—and he’s in his early 70s at this point, he says this, he says, if you could learn anything from the economic history of the world it’s this: culture makes all the difference.

Culture makes all the difference. And as I come here and I look out over this city and consider the accomplishments of the people of this nation, I recognize the power of at least culture and a few other things.
The remarks are important in terms of how Romney understands economic development and what makes for a successful nation. The books affirm his belief that the United States is so successful because of the culture that can be captured in the American dream. Less successful nations are restrained by their culture. It all falls under a belief in the just world fallacy.

Romney's point of view is problematic for numerous reasons. However, it is the misrepresentation of his own thesis to the books that stands out most. Jared Diamond was so bothered by Romney's characterization of his book that he took to the NYT to set the record straight.
My focus was mostly on biological features, like plant and animal species, and among physical characteristics, the ones I mentioned were continents’ sizes and shapes and relative isolation. I said nothing about iron ore, which is so widespread that its distribution has had little effect on the different successes of different peoples.
That’s not the worst part. Even scholars who emphasize social rather than geographic explanations — like the Harvard economist David S. Landes, whose book “The Wealth and Poverty of Nations” was mentioned favorably by Mr. Romney — would find Mr. Romney’s statement that “culture makes all the difference” dangerously out of date. In fact, Mr. Landes analyzed multiple factors (including climate) in explaining why the industrial revolution first occurred in Europe and not elsewhere. 
Just as a happy marriage depends on many different factors, so do national wealth and power. That is not to deny culture’s significance. Some countries have political institutions and cultural practices — honest government, rule of law, opportunities to accumulate money — that reward hard work. Others don’t. Familiar examples are the contrasts between neighboring countries sharing similar environments but with very different institutions. (Think of South Korea versus North Korea, or Haiti versus the Dominican Republic.) Rich, powerful countries tend to have good institutions that reward hard work. But institutions and culture aren’t the whole answer, because some countries notorious for bad institutions (like Italy and Argentina) are rich, while some virtuous countries (like Tanzania and Bhutan) are poor. 
A different set of factors involves geography, which embraces many more aspects than the physical characteristics Mr. Romney dismissed.
Diamond proceeds to lay out factors including latitude, access to the sea and history of agriculture. He then comes down harshly on Romney for trying to take a complex issue and boil it down to fit into the word 'culture.'

Romney also gets his numbers wrong in terms of per capita GDP in Israel and Palestine. The Washington Post reports, "According to the World Bank, Israel’s GDP per capita is $31,282, compared to about $1,600 for the Palestinian areas."

That still leaves the issue of Landes and Romeny's desire to understand development through the context of culture. Acemoglu and Robinson take to their Why Nations Fail blog to show how their research has debunked the culture thesis.
Mitt Romney is instead taking his cue from David Landes. But as we show in Why Nations Fail, cultural differences cannot explain differing levels of prosperity. Deng Xaioping didn´t change Chinese culture after 1978 to make the economy grow, but he did change economic institutions a lot. Indeed, many cultural differences we see are the outcomes of different institutional choices. This is surely the case between North and South Korea, for example. After all, does Mitt and David think that there were huge cultural differences between the north and the south of the 38th parallel before the separation of Korea into two?

Of course the difference between Israel and Palestine is not the same as the two Koreas. It was created by the migration of Jewish people, mostly after World War II. Many came from much more developed parts of the world than Palestine which had endured centuries of debilitating Ottoman and then British colonialism. They brought more advanced technologies and high levels of human capital, which in themselves were the result of the institutions and incentives that they faced. As Maristella Botticini and Zvi Eckstein point out in their book The Chosen Few: How Education Shaped Jewish History, the origins of these very high human capital levels are in the historical adoption of institutions in Jewish society. This is where the roots of Isreal’s current prosperity lie. They have further been strengthened by Israel’s integration into the world economy, which has enabled it to continue the process of technology transfer and encouraged trade and investment.
Faced with the potential Romney presidency, these comments during the campaign do matter. If in charge, he will make decisions that can impact the direction and shape of how the US distributes aid.

Photo: Mitt Romney in Jerusalem. (Reuters)