So now some more serious discussion emerges on Israel’s comparative economic performance after Mitt Romney’s culture comment, and Jordan Weissmann in The Atlantic highlights four concrete reasons behind Israel’s success:
- Learning from hyperinflationary disaster: …”crafted a grand bargain that slashed government spending, massively devalued the currency, and severed the tie between wages and prices. It also set new rules for a more independent central bank. “
- Welcoming talented immigrants: …”Between 1990 and 1997, more than 710,000 Soviet immigrants landed in the country, boosting the working age population by 15 percent.”
- Building policy to support venture capital: …”program convinced foreign venture capitalists to create funds in Israel by lowering their taxes and promising to match part of the money they raised from investors. In doing so, it set in motion a virtuous cycle that created a thriving, independent venture capital market that was backing hundreds of startups a year by 2000″
- NGDP targeting:…”where a central bank picks an annual growth figure, and tries to hit it whether through inflation, or by expanding the real economy. The idea is to prevent private debts from crashing the economy by making sure incomes steadily rise, even if real growth slows down a bit. “
So far, so plausible. But where Weissmann goes wrong is in glib dismissal of the cultural underpinnings of these very steps, and in seeing culture as being comprised of far too few axes of action. There is a problem with the word culture in these discussions, in that the assumption seems to be limited to attitudes to the market, and socio-ethnic matters that scare people away from discussion. But this, below, is precisely wrong:
But unless you lump your feelings about about government spending as a percentage of GDP, public-private partnerships, and NGDP targeting under the header of culture – and who knows, you might – then that’s only part of the explanation. Rather, Israel’s government has gotten better over time at learning when it needs to get out of the way, and knowing when it needs to step in and lend the private economy a hand, when it needs to tackle a problem like inflation, and when a little bit could be good for growth. It’s figured out how to be flexible.
These concrete policy steps and the feelings behind them, the attitude to private-public partnerships, and the willingness of a political class to be flexible, do represent aspects of a progress-prone culture. Take just some considerations in the culture of worldview:
It shows a willingness to embrace rationality and pragmatism, and to further material pursuits. In contrast to a theocratic or religiously dominated culture which expressly devalues the material and rational.
It shows a belief in the capacity to shape our own destiny, rather than a fatalistic worldview.
It shows a future time orientation and willingness to take pain today for gain tomorrow, and a view that gaining wealth is a positive sum game in which everyone can benefit.
It shows a commitment to practical rather than ideological knowledge.
It shows an openness to innovation and willingness to rapidly adapt to it.
I could go on and list all 25 of Harrison’s taxonomy of axes of culture (see Page 8 at link). And to pick out how Israel embraces the progress-prone aspects of that taxonomy on perhaps 20-21 of them. This model is far from validated, still controversial and associated with a particular geo-political view, and is indicative only. But it is sufficient to show that the four policy actions Weissmann lists above are rooted in cultural norms and social attitudes.
Those decisions and actions, and their realisation by Israeli society, also represent attitudes to work and achievement, frugality, investment, the nature and purpose of education, the role of risk and competition, the rule of law, migrants, merit, the radius of trust and the role of authority and elites, and so on.
None of those four decisions were made in the absence of these sorts of social and cultural tendencies. The success of those four decisions did not arise in the absence of these sorts of social and cultural tendencies.
Yes, Romney made a trite comment. There is plenty more to say about economic success in Israel or anywhere else. But don’t define culture so narrowly that you actually miss the point of how economies and societies work, and how much real cultural analysis can contribute to development economics and to the struggling discipline of macroeconomics.