Monday, August 6, 2012

Mitt Romney & Fareed Zakaria on economics and culture.

            In my book “Sustainable Trade”, I argued that for a culture to be successful in today’s world, it either has to have the right cultural institutions, or the flexibility to adapt to constantly changing realities, by allowing for new norms to develop.  I believe that culture is a huge part of our ability to cope with new challenges.  In this case, culture can be summed up as regional, national or global depending on the issues we face.  The necessary aspects to successful cultural adaptation, as I see them are as follows: Identifying problems, without cultural prejudice, ability to reach consensus on a viable and appropriate solution, and the organizational capabilities to implement solutions.  Culture can be an impediment, or a benefit, depending on how much going through these steps come to be at odds with our cultural values.

            So given this belief I hold to, I find myself agreeing with someone who ordinarily I would find very little common ground with.  It is important to be able to do so and I believe it to be a cultural institution we are currently lacking, because as I stated in my book, there is no set of beliefs wrapped up in an ideology, which can ever have all the right answers.  So here I am agreeing partly with Mitt Romney’s statement made in Israel, in regards to culture and economic development.  He basically said that Jews are better adapted culturally than Palestinians, and it shows in their much higher level of prosperity.  I said I agree partly, because it is not fair to compare economically, occupier and the occupied.  In this case, the occupied Palestinians do face many additional barriers to development, aside from their own collective cultural abilities, and many of them can be tied to the occupation, and let us face it, exploitation.  Israel is currently colonizing parts of the West Bank, taking away opportunities from Palestinians, and they are also taking away some of their resources without compensation, such as water.  Very importantly, Israel controls their trade with the outside world.  So, Mitt Romney was disingenuous in his comparison, nevertheless I do agree with him on the basic premise that culture and economic development and success are tightly linked.  He just used an extremely bad example.

            The reactions to Romney’s statements varied widely.  Of note should be the reaction of the Palestinians, who called the statement racist, which I think is hardly helpful, because it stifles the conversation.  I believe we should be able to discuss most topics in a civilized honest manner.  Of course, Mitt Romney was not honest on this topic, like I already explained, so he is not very helpful either, but at least we can pcik up the conversation since he cast it into the spotlight, which is always a good thing, because we need to analyze such things and discuss them.  Then came Fareed Zakaria on his GPS show on CNN, where he argued that it is not culture but the adoption of capitalism that propelled Israel forward in the past two decades.  He also points out that cultures that were previously thought to be unable to progress such as Muslims and Africans now are among the fastest growing economies.  I do agree with Fareed that no culture should be written off.  Like I stated, as long as a culture can find enough flexibility to allow for some of the key ingredients of economic competitiveness and prosperity to take hold, they may prosper.  Furthermore, it is important to remember that circumstances change constantly, so certain cultures which managed to do well in the past and present may not have the right adaptations for the future.

            In the particular case of Israel and its relatively good economic performance in the past two decade, we cannot ignore what may have been the main factor, and that is the large Jewish immigrant inflow from Eastern Europe in the aftermath of the collapse of communism.  Both Fareed Zakaria and Mitt Romney ignored this important factor.  Tens of thousands arrived to Israel every year.  Most were young, and many were relatively well educated.  They created demand for goods and services, and contributed to economic development through their work and entrepreneurship.  So, where does culture fit into this?  In the case of Israel it is quite obvious really.  Jews developed a centuries old mentality of having to stick together, which if any other culture in the west would practice, we would call it racist.  They had to promote this in order to survive as a minority in other lands for many centuries.  So that provided the immigrant inflow, which was an opportunity created, thanks to cultural institutions.  Then they had to provide the mechanism that allowed for this opportunity to be optimized.  They probably would have had to shut the gates and keep all these immigrants out if it wouldn’t have been for their thousands of years of belief that the land, including the territories they occupy in the West Bank are theirs, given by god.  As such they failed to make peace.  Without the extra land in the West Bank, where hundreds of thousands of Jews moved, and without the extra water supplies available courtesy of the West Bank aquifers, which they use for their own needs, at the detriment of the Palestinians, they would have never been able to take advantage of the opportunity that presented itself in the shape of the collapse of communism[i].  The fact that they also adopted a more efficient path of growth through more market oriented ideas is also a testament to their ability to adapt culturally by accepting the need for change at the right time, when they were able to take advantage of this immigrant influx.

My case for culture as an important part of development:

            In my book, I used the case of post-communist East European countries as an example of cultural ability to adapt to new situations.  I pointed out that after more than two decades of post communist development, there is an unmistakable difference in the level of advancement between the mainly Catholic countries, such as Croatia, Slovenia, Poland, Slovakia, Czech Republic and Hungary, and the mainly Orthodox countries like Romania, Bulgaria, Serbia, Montenegro and Macedonia.  There is no overlap between the two groups I chose, when it comes to GDP per capita.  I excluded all former Soviet Republics from this comparison, but their inclusion would have had no impact on the results.  What I mean by saying that there is no overlap in per capita GDP is that, the richest Orthodox nation is poorer than the poorest Catholic nation according to IMF statistics.  Furthermore, the difference between the two is quite substantial, since it is the equivalent of about 1/3 of the richest Balkan Orthodox nation, Bulgaria, compared to the poorest Catholic nation Croatia.  Bulgaria’s GDP per capita (PPP) as of 2011 is $13,600, while Croatia’s is $18,200.  Using nominal values instead of Purchasing Power Parity (PPP), produces slight differences, but still does not offer an overlap situation between the two different groups.

            So can the difference in adaptation between the mainly Catholic and mainly Orthodox countries be attributed to anything else?  There is the financial situation at the starting point of 1990, where Orthodox Romania had the greatest advantage, since it had no government debt, as opposed to Catholic Hungary which was the most indebted, so no advantage to the Catholic group there.  Human and infrastructure capital is an important factor, but here too there are overlaps between the two groups.  Familiarity with the market economy goes to the former Yugoslav republics of Croatia, Slovenia and Serbia, so there is an overlap here as well, because Serbia is Orthodox, and it had an advantage over other Catholic countries, except for the ones I mentioned as also being Former Yugoslav.

            The only thing left then is culture, and here we have clear differences if we take two factors that seem to have a correlation with development.  The factors I identified were the Orthodox versus Catholic religion, where one is national and the other international, which led to a different development in national and nationalist identity.  I believe nationalism in both Catholic and Orthodox countries, is equally intense, but the flavor differs, thus it manifests itself differently.  The other factor that I believe made a big difference in culture is the Turkish Ottoman occupation in the region.  Here we see a correlation since the two Catholic countries that also experienced it, are also the poorest in the Catholic group, which are Hungary and Croatia.

            This clearly shows that the assumption voiced by Fareed Zakaria that culture does not play a role in development is false.  There would be too much coincidence which would have to be explained away, not to accept that in the case of Eastern Europe cultural factors played a role in development.  Now I want to be clear on the fact that this is just a snapshot in time.  We don’t know what the future holds.  It is possible that when it comes to the countries in Eastern Europe I looked at, there will be overlap at a future point in time, due to either changing circumstances that will render a past superior adaptation useless when it comes to the new factors, or the new factors will favor the cultural institutions of the ones that are currently at disadvantage.  There is also cultural evolution to consider.  Maybe an enlightenment-like wave of cultural change will grip the Orthodox countries in the region, while the Catholic countries will miss out.

Note:  The five countries to the left are all Orthodox Christian dominated states, while the six to the right are all mainly Catholic dominated states.  If you notice, there is no overlap in GDP per capita (PPP).  This would also hold true if we were to use nominal or real GDP figures.  Data is from the IMF as of 2011.  If we were to use CIA factbook, or World Bank data, results would be the same.


            I think it would be a dangerous mistake for us westerners to either accept Fareed’s take on culture and economics and assume it plays no role, or Mitt Romney’s assumption that some cultures are more superior to others, thus there is some sort of set destiny we can rely on.  We have to be careful to remain culturally relevant when it comes to adapting to circumstances.  If one would go ask a cultural anthropology professor to give a short description of culture as a concept, many will choose to answer by saying that it is an adaptation to a culture’s environment.  Some may be successful at dealing with new circumstances; some may be successful to re-adapting culture to the new circumstances, while others will stick to what they believe to the bitter end.  I think, given the West’s relative decline of the past two decades, it would be wise for us to put all our cultural norms, beliefs, and institutions on the table and subject them to an honest and thorough examination.  History and cultural anthropology teaches us that the alternative of closing our eyes and sticking with it to the bitter end can be quite bitter when the end comes near.



BBC report on Israel’s dependence on West Bank water resources.

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