Friday, August 03, 2012

Yes, Culture Is A Factor

While visiting Israel, Republican presidential nominee Mitt Romney remarked that Israel was economically  more successful  than the Palestinians and other similar Arab nations because of cultural reasons.

This was criticized by many commentators, including Steve Chapman . However, he relies heavily on the straw man argument that culture is the only factor determining economic success. If that had been the case, economic policy debate would have been irrelevant and no differences would have existed between say mainland China on the one hand and Taiwan, Hong Kong and Singapore on the other hand, or between North Korea and South Korea or previously between East Germany and West Germany. So clearly economic policy and other non-cultural factors matter

That doesn't however mean that cultural factors are irrelevant. Just because other factors like genetics and the amount of exercise are also relevant factors for weight doesn't mean that eating and drinking habits are irrelevant, and similarly just because some non-cultural issues also matter doesn't mean that cultural factors are irrelevant.

Is it really a coincidence that majority Chinese Singapore has a bigger GDP than Malaysisa  (only 24% Chinese) despite having a 5 times smaller population, while Indonesia (only 3.7% Chinese) whose population is more than 8 times bigger than Malaysia's only has a GDP that is less than 4 times bigger? Or is it really a coincidence that Israel is the only rich economy in the Middle East without significant amounts of oil in the ground, so rich that its GDP is larger than that of Egypt despite the fact that Egypt's population is 10 times bigger? Clearly some cultures, mainly Western and certain East Asian ones (Japanese, Korean, Chinese), are more succesfull in creating an advanced economy than others.

Chapman blames Israeli security based  restrictions on the Palestinians for their poverty. But while that, and the conflict in general, is no doubt bad for the Palestinian economy (the conflict is also bad for the Israeli economy as they are boycotted by the Arab world and most other Muslim countries), that is only a small part of the explanation considering how Egypt and other non-oil producing Arab countries (who doesn't face these restrictions) are also far poorer than Israel.