Republican US presidential candidate says he believes “culture” has made Israel more successful than occupied Palestine.

Palestinians have accused US Republican presidential candidate Mitt Romney of racism after he suggested disparities between the Israeli and Palestinian economies had cultural roots while not mentioning Israel’s occupation of the West Bank and blockade of Gaza.

In a speech to fundraisers in Jerusalem on Monday, Romney, who is on a foreign tour, said Israel’s gross domestic product was about twice that of the Palestinians, “a dramatic, stark difference in economic vitality”. The actual gap is greater.

Romney made the remarks in the context of juxtaposing two books he said had informed his thinking: Guns, Germs and Steel by Jared Diamond, which argues that geography primarily decides a society’s success, and The Wealth and Poverty of Nations by David Landes, which argues for the importance of culture.

“If you could learn anything from the economic history of the world it’s this: culture makes all the difference… recognise the hand of providence in selecting this place,” Romney said.

Saeb Erekat, the chief Palestinian negotiator in the peace process, told Reuters that Romney’s comments amounted to “a racist statement that shows a lack of knowledge”.

Romney said Israel’s GDP per capita was $21,000, while for Palestinians it was $10,000, though the US Central Intelligence Agency estimates Israel’s is $31,400 and the Palestinians’ about $2,900.

“Everyone knows that the Palestinians cannot reach their full potential given the Israeli restrictions imposed on them,” Erekat said.

Romney made no reference to the tight control Israel has held on most of Palestinian territory since occupying it in the 1967 war. Israel controls the borders of the West Bank and allows thousands of Israelis to live on illegal settlements inside Palestinian territory. It also harshly restricts the movement of Palestinians inside and outside the West Bank.

In Gaza, where Israel has withdrawn settlements, an air and land blockade has hamstrung development.

Romney was speaking at an event where he reportedly raised more than $1 million for his campaign.

He did not travel to the West Bank during his two-day stay in Israel, finding time only for a brief meeting with Palestinian Prime Minister Salam Fayyad. He later flew to Poland on the last leg of his international tour.

The controversy he kicked up among Palestinians followed irritation in Britain last week when he questioned London’s readiness to stage the Olympic Games.

‘Undermining peace process’

Palestinians also accused Romney of undermining peace prospects in a speech he made on Sunday, when he called Jerusalem “the capital of Israel”, ignoring their own claims to the city and most world opinion.

“We condemn his statements. Those who speak about the two-state solution should know that there can be no Palestinian state without East Jerusalem,” Erekat said. “What this man is doing here is just promoting extremism, violence and hatred, and this is absolutely unacceptable.”

Israel seized eastern Jerusalem in 1967 and annexed it as part of its capital in a move never recognised internationally.

A United Nations Security Council resolution condemns a 1980 Israeli law that declared Jerusalem its “complete and undivided” capital.

Most countries, including the United States, have not recognised Israel’s declaration and have kept their embassies in the coastal city of Tel Aviv. Previous US presidential candidates, including Barack Obama in June 2008, have referred to Jerusalem as Israel’s capital ahead of elections, only to row back when taking power and suggest the issue should be resolved by negotiations.

A senior aide to Palestinian President Mahmoud Abbas, Nabil Abu Rdeineh, said Romney’s statements were unhelpful, stood in the way of a peace settlement and “contradict the previous positions held by the American administration”.

Palestine Liberation Organisation secretary-general Yasser Abed Rabbo said: “American policy makers must abandon hypocrisy and stop attempting to gain votes at the expense of the Palestinian people’s rights.”

In an interview with CNN, Romney refused to be pinned down on whether he would recognise Jerusalem as Israel’s capital if he beats Obama and wins the White House.

“A nation has the capacity to choose its own capital city, and Jerusalem is Israel’s capital,” he said.

Pressed on whether he would make the move on becoming president, Romney said: “I’m not going to make foreign policy for my nation, particularly while I’m on foreign soil. My understanding is the policy of our nation has been a desire to move our embassy ultimately to the capital.”

Seeking American Jewish and fundamentalist Christian votes, Romney has criticised Obama on Israel, alleging last year that the president had “thrown Israel under a bus” in pushing hard for a two-state solution between Israel and the Palestinians.