If I promise not to make a habit of it, can I defend Mitt Romney? Although his remarks in "the capital of Israel" have caused derision, there's one point he makes that deserves respect. This is that "culture makes all the difference" to a nation's prosperity.
Leave aside the empirical evidence he provides; Israel and Palestine are only two data points with many confounding factors. This point is true (allowing for overstatement) and important. For example:
- A culture of trust and trustworthiness can promote growth by overcoming problems of asymmetric information and incomplete contracts.
- Heng-fu Zou has shown how the "spirit of capitalism" - a desire for wealth in itself, independent of the consumption it gives - can help explain cross-country differences in growth rates. "It Is a mistake to totally ignore the cultural elements in economic growth and development" he says.
- Guido Tabellini has shown how nations and regions where people are more likely to respect each other tend (pdf) to grow faster.
- Gerard Roland and Yuriy Gorodnichenko have shown that "individualistic culture has a strong causal effect on economic development."
On average, religious beliefs are associated with ‘‘good’’ economic attitudes, where ‘‘good’’ is defined as conducive to higher per capita income and growth...Christian religions are more positively associated with attitudes conducive to economic growth.
And here's (pdf) Robert Barro and Rachel McCleary:
We find that economic growth responds positively to the extent of religious beliefs, notably those in hell and heaven, but negatively to church attendance.
But of course, religion is not the only source of culture. Another source is history. Nations or regions with a history of slavery or genocide have tended to grow more slowly even in decades afterwards, because such episodes destroy trust or bourgeois virtues.
Now, Mitt Romney no doubt regards the vicissitudes of distant history not as accidents but as the "hand of providence". Unless there's some evidence I've overlooked, I suspect this is another example of the just world illusion.
I say all this because there are two large groups of people are who are prone to error here. On the one hand there are the (dwindling) number of economists who think that long-run growth is a matter of technocratic fixes, of establishing the right policies and institutions. On the other hand, there are politicians who think that culture can be changed by talk and wishful thinking. The truth is more interesting than either group realizes.
In this context, underneath the imbecilities, Romney has, perhaps inadvertently, blurted out something important.