WHY JEWS DO WELL IN AMERICA: HIGH TRUST GENERAL POPULATION —“Israel is a low t

WHY JEWS DO WELL IN AMERICA: HIGH TRUST GENERAL POPULATION

—“Israel is a low trust society. I caught a lot of flack for this in the comments, but I stand by this statement. There is an enormous literature tracing the effects of trust and cooperation on firm size and GDP. In general, where social trust and cooperation is low — corruption is higher, and firms tend to be small-scale organizations built on kinship links. Managers must actively monitor their employees, rather than being able to scale up.

Somewhat surprisingly, Israel stands out as a country with high IQ but low levels of trust. Some 56% of Israelis report that you cannot trust others, which is a figure comparable to other low-trust societies like South Korea or Italy.

One manifestation of this is that there are very few large Israeli firms. Teva, a generic drugs manufacturer, is a notable exception. By contrast, high-trust Switzerland is home to several national superstars like UBS, Novartis, TAG Hauser, etc. Israel’s economy is dominated by small-scale firms, many of which are founded by people who formed close bonds in the IDF. Even in America, there are host of large Jewish-founded firms, like Google.

Of course, a lack of large, productive multinationals may play a role in explaining Israel’s relatively poor economic performance. Firms with scale and branding are able to tap into the tail ends of a “smiley curve” economy by focusing on the value-added activities of branding, design, and distribution. Smaller firms operating in heavily competitive industries, by contrast, earn few economic rents.”—