Massachusetts Gov. Mitt Romney.
Republican presidential candidate and former Massachusetts Gov. Mitt Romney is seen on board his charter plane in Tel Aviv
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Culture vulture Photo by Reuters

It is thoroughly unpleasant and disagreeable task to defend Mitt Romney on the issue of economics and culture.

For one, he made his remarks at a Jerusalem breakfast shamelessly priced at $50,000 an omelette. For another, his choice for illustrating the role of culture was the example from hell – Israel versus the Palestinians. Then, he backed up his contention with wildly incorrect figures about Israel and Palestine and cited as an authority for his views an author (Jared Diamond), who quickly answered back that Romney clearly didn’t understand his book at all. Then you have the inchoate remarks about the role of “providence” in the economics of the Holy Land.

To quote: “As you come here and you see the GDP per capita, for instance, in Israel which is about $21,000 and compare that with the GDP per capita just across the areas managed by the Palestinian Authority, which is more like $10,000 per capita, you notice such a dramatically stark difference in economic vitality …. If you could learn anything from the economic history of the world it’s this: culture makes all the difference…. I recognize the hand of providence in selecting this place.”

Okay, okay, he is running for the White House and you won’t get there serving a toasted bagel and coffee for NIS 25 a head. Yes, he could have used Sheldon Adelson instead of Israel as his economic poster boy to demonstrate how the economic vitality of Las Vegas (Nevada’s GDP per capita is $39,813) is superior to that of properly Mormon Utah ($32,357), but that wouldn’t have played to his voter base. We’ll cut him some slack.

So, ignoring the speaker and the setting he chose to speak at, is it fair to say that culture plays the key role, or even a critical role, is economic development? And if it does, is that rule applicable in our little corner of the world? Should the International Monetary Fund hire fewer economists and take on more anthropologists?

From sex to suicide

Of course culture affects economics. No one would argue that it doesn’t affect politics, attitudes toward everything from sex to suicide, tastes in food and the status of women. It would beggar the imagination that suddenly some universal economic logic prevails when an ordinary Frenchman and Filipino decides how much to budget for his holiday or when policy makers at the French or Filipino Finance Ministries are deciding on fiscal policy.

It is a bit of a cliché, but the fact is Angela Merkel and German voters take a different attitude toward debt and inflation than the French and the Italians and their leaders.

In a given country, the same rules and regulations will govern businesses and consumers, but often have very different impacts in different regions of that country. Northern and southern Italy are both governed from Rome, which imposes the same economic policies across the country and if anything favors the south. Neither region has considerably more natural resources. Yet the cultures are very different - and the economic gap between the two is massive.

The problem is that culture is amorphous and ever-changing (which is why it would be useless for the IMF to employ anthropologists) and so is economics (which is why the economists they do have often make such a fine mess of things).

Almost everyone would agree about culture in flux; fewer would agree about economics, because the conventional attitude is that the world is slowly but surely on a long march toward capitalism and free markets, a system of rational economic thinking applicable at all times and all places. But the reality is that capitalism differs by time and place.

Take Israel. For the first 40 years of the state’s existence, capitalist prosperity was elusive and not just because of socialist policies. Industry was the acknowledged source of wealth but it depended on access to natural resources like oil and iron ore, mass production and mass consumer markets and, worst of all, on labor discipline and an attention to quality and consistency. Suddenly, things changed. The global telecoms markets were deregulated, and the Internet sprung up out of nowhere. A communications revolution was upon us and demand for a perpetually changing supply of new technology emerged. It turned out that small, start-up companies could not only compete in this market, they could run rings around some of the industry veterans.

Voila, the start-up nation. It wasn’t that Israel economically speaking was a better place to design semiconductors or develop enterprise software. Our engineers aren’t demonstrably better than, say, Germany’s. But there is an Israeli cultural zeitgeist that supports a cowboy culture of innovation and problem-solving that meshed perfectly with the times.

Israel’s GDP per capita is actually $31,000. The $21,000 Romney cited is closer to what the economies of Trinidad and Tobago or Poland generate. But Israel’s $31,000 figure is about average for the currently depressed European economies and could be better. The fact is Israeli culture is still no good at making things or marketing them, so Google is American and the iPhone was invented there and is built in China. America’s per capita GAP is $48,000-plus.

And what of the Palestinians? Mitt actually understated the gap between Israel and Palestinians wealth. Palestinian GDP per capita is closer to $1,500, which is just 5% of Israel’s.

Let’s separate Gaza from the West Bank (Hamas did, so why can’t we) because the embargo is without a doubt has strangled economic activity there. In the West Bank, Israel’s regime of roadblocks and closures do economic damage, too, but the question is how much.

In the West Bank, GDP per capita is $2,900. That is half or less of the level of its cultural cousins in Jordan ($6,000) and Syria ($5,100) and is a difference that can be reasonably be laid to the economic and political restraints of the occupation. But what about the wider gap between Israel and all three of them? Not only do Jordan and Syria have no occupation to contend with, they have some advantages that Israel doesn’t, such as access to Arab markets and capital, and in Syria’s case, a little bit of oil.

The crude answer to that $25,000 question? Culture.