Mitt Romney told Jewish donors Monday that their culture is part of what has allowed them to be more economically successful than the Palestinians, outraging Palestinian leaders who suggested his comments were racist and out of touch with the realities of the Middle East. His campaign later said his remarks were mischaracterized.

“As you come here and you see the GDP per capita, for instance, in Israel which is about $21,000 dollars, and compare that with the GDP per capita just across the areas managed by the Palestinian Authority, which is more like $10,000 per capita, you notice such a dramatically stark difference in economic vitality,” the Republican presidential candidate told about 40 wealthy donors who ate breakfast at the luxurious King David Hotel.

Romney said some economic histories have theorized that “culture makes all the difference.”

“And as I come here and I look out over this city and consider the accomplishments of the people of this nation, I recognize the power of at least culture and a few other things,” Romney said, citing an innovative business climate, the Jewish history of thriving in difficult circumstances and the “hand of providence.” He said similar disparity exists between neighboring countries, like Mexico and the United States.

Palestinian reaction to Romney was swift and pointed.

“It is a racist statement and this man doesn’t realize that the Palestinian economy cannot reach its potential because there is an Israeli occupation,” said Saeb Erekat, a senior aide to Palestinian President Mahmoud Abbas.

“It seems to me this man lacks information, knowledge, vision and understanding of this region and its people,” Erekat added. “He also lacks knowledge about the Israelis themselves. I have not heard any Israeli official speak about cultural superiority.”

As criticism mounted while Romney traveled to Poland, campaign spokeswoman Andrea Saul said: “His comments were grossly mischaracterized.” The Republican’s campaign contends Romney’s comparison of countries that are close to each other and have wide income disparities – the U.S. and Mexico, Chile and Ecuador – shows his comments were broader than just the comparison between Israel and Palestine.

While speaking to U.S. audiences, Romney often highlights culture as a key to economic success and emphasizes the power of the American entrepreneurial spirit compared to the values of other countries. But his decision to highlight cultural differences in a region where such differences have helped fuel violence for generations raises new questions about the former businessman’s diplomacy skills.

As he has at home, Romney in Jerusalem cited a book titled, “Guns, Germs and Steel,” that suggests the physical characteristics of the land account for the differences in the success of the people that live there.

“And you look at Israel and you say you have a hard time suggesting that all of the natural resources on the land could account for all the accomplishment of the people here,” Romney said, before citing another book, “The Wealth and Poverty of Nations,” by former Harvard professor David Landes.

This book, Romney said in Jerusalem, concludes that “if you could learn anything from the economic history of the world it’s this: Culture makes all the difference. Culture makes all the difference.”

The economic disparity between the Israelis and the Palestinians is actually much greater than Romney stated. Israel had a per capita gross domestic product of about $31,000 in 2011, while the West Bank and Gaza had a per capita GDP of just over $1,500, according to the World Bank.

Romney, seated next to billionaire casino owner Sheldon Adelson at the head of the table, told donors that he had read books and relied on his own business experience to understand why the difference is so great.

His comparison of the two economies did not take into account the stifling effect the Israeli occupation has had on the Palestinian economy in the West Bank, Gaza Strip and east Jerusalem – areas Israel captured in 1967 where the Palestinians hope to establish a state.

In the West Bank, Palestinians have only limited self-rule. Israel controls all border crossings in and out of the territory, and continues to restrict Palestinian trade and movement. Israel annexed east Jerusalem in 1967, but has invested much less heavily there than in Jewish west Jerusalem.

And although Israel withdrew from the Gaza Strip in 2005, it continues to control access and has enforced a crippling border blockade since the Islamic militant Hamas seized the territory in 2007.

It’s true that Israel has logged tremendous achievements, said Abraham Diskin, a political science professor at the Inter-Disciplinary Center outside of Tel Aviv. But “you can understand this remark in several ways,” he added. “You can say it’s anti-Semitic. `Jews and money.'”

The World Bank and the International Monetary Fund repeatedly have said that the Palestinian economy can only grow if Israel lifts those restrictions.

“It’s Israeli occupiers and Palestinians under occupation, and that’s why Palestinians cannot realize their potential,” Erekat said.

The breakfast with top donors – including Adelson, New York Jets owner Woody Johnson and hedge fund manager Paul Singer – concluded Romney’s visit to Israel, the second leg of a three-nation overseas tour designed to bolster his foreign policy credentials.

Standing on Israeli soil for the first time as the GOP’s presumptive presidential nominee, Romney on Sunday declared Jerusalem to be the capital of Israel and said the U.S. has promised never to “look away from our passion and commitment to Israel.”

The status of Jerusalem is a critical issue in peace talks between the Israelis and the Palestinians.

In Israel, Romney did not meet with Abbas or visit the West Bank. He met briefly with Palestinian Prime Minister Salam Fayyad.

Romney’s campaign says the trip, which began in England last week, is aimed at improving the former Massachusetts governor’s foreign policy experience through a series of meetings with foreign leaders. The candidate has largely avoided direct criticism of U.S. President Barack Obama while on foreign soil.

The Jerusalem fundraiser, however, was a political event that raised more than $1 million for Romney’s campaign. It marks at least the second finance event during his tour. The first, in London, attracted about 250 people to a $2,500-per-person fundraiser.

Both presidential candidates have aggressively courted American donors living abroad, a practice that is legal and has been used for decades.

Romney’s declaration that Jerusalem is Israel’s capital was in keeping with claims made by Israeli governments for decades, even though the United States, like other nations, maintains its embassy in Tel Aviv.

His remarks on the subject during a speech drew a standing ovation from the audience, which included Adelson, the American businessman who has promised to donate more than $100 million to help defeat Obama.

Adelson was among a several donors who flew to Israel for a day of sightseeing with Romney in addition to private meetings with top Israeli officials.

Romney flew to the Middle East from Britain, where he caused a stir by questioning whether officials there were fully prepared for the Olympic Games. A stop in Poland will complete his trip.

Four years ago, Obama visited Israel as a presidential candidate, part of a five-nation trip meant to establish his own foreign policy credentials.

A goal of Romney’s overseas trip is to demonstrate his confidence on the world stage, but the stop in Israel also was designed to appeal to evangelical voters at home and cut into Obama’s support among Jewish voters and donors. A Gallup survey of Jewish voters released Friday showed Obama with a 68-25 edge over Romney.

Romney and other Republicans have said Obama is insufficiently supportive of Israel.

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Associated Press writers Amy Teibel in Jerusalem and Steve Peoples in Washington contributed to this report.