The Past Speaks

A Trump supporter holding up a sign reading “Deplorables and Alt-Right Unite”. 4 March 2017, 13:28

Image source:  Wikimedia Image Commons 

The economist and Bloomberg columnist Noah Smith has published a thoughtful, erudite, and nevertheless frustrating piece about ethnic heterogeneity and the Alt-Right. What’s missing from Noah Smith’s analysis of the Alt-Right? A recognition of the important role of business in promoting harmony in divided societies!

For those who don’t know him, Noah (no relation to me) is a rising force in economics more generally and the economic blogosphere more generally. His worldview is centre-left, which is near the centre of gravity in the economics profession nowadays, but he differs from most of his fellow economists and indeed most academics in that he is sympathetic to nationalism and efforts to promote stronger national identities. (He recently advocated the re-introduction of universal military service in the United States on the grounds that the common experience of service in uniform would create a greater sense of social cohesion). My reading of the situation is that Noah is an old-fashioned liberal nationalist of the FDR and JFK school. That makes him stand out, since most economists (and social scientists more generally) are socialised into a very different way of thinking about nations that corresponds to Angus Deaton’s term cosmopolitan prioritarianism. Another ways in which  Noah’s perspective on social and political issues is distinctive in that it is informed by the time he lived in Japan, which gave him a perspective on European and US politics that is quite rare in the academic blogosphere.

Anyway, his recent blog post on diversity is fascinating because Noah, who is a card-carrying social scientist, engages with the arguments of the more intellectual wing of the Alt-Right, the cluster of anti-immigration, anti-liberal movements that contributed to the electoral success of Donald Trump and which is allied with xenophobic, anti-immigrant political parties in Europe. As Noah notes in his post, while many on the Alt-Right are stupid, others construct semi-intellectual arguments to support their content that the United States would be a better society if it were a more racially and religious homogenous society (i.e., a society in which non-whites were a much smaller percentage of the population than they are right now). The Alt-Right have been able to cite some academic studies that purport to show that increased ethnic and racial diversity in a country can create social problems by reducing levels of social trust.

The meta-historical narrative that informs such studies holds that the countries of north-western Europe were able to construct generous welfare-states in the first half of the twentieth century because they then were homogenous. In other words, wealthy taxpayers in Sweden didn’t resent fiscal transfers because the recipients looked and sounded like them, at least in 1950. This reading of history suggests that political support for such welfare states has recently been undermined by immigration, which made these societies more ethnically diverse and thus more like the US, a country with a far weaker welfare state. Some people attribute the low levels of social spending in the US to its diversity and the unwillingness of wealthy people, who are mainly white, to pay for recipients who are disproportionately non-white. (Concerns that too much diversity was incompatible with the welfare state convinced David Goodhart, an erstwhile British social democrat, to embrace the cause of restricting immigration).  Some alt-right people speak of turning the United States into a “white Japan” by which they mean an ethnically and racially homogenous society that is characterized by high rates of trust and social cohesion. This particular variant of the alt-right philosophy doesn’t say that one race is superior to another, merely that the world is a better place when communities are homogenous.  Noah reports that a section of the alt-right

want to live in a place where only white people are allowed. They want the dream of a half-remembered, half-imagined 1950s Southern California – the clean streets, the nice lawns, the dependable white neighbors who tip their hat and say hi to you as they stroll down the lane.

The Alt-Right has latched on to the research that stresses the costs of diversity. Noah methodologically deconstructs this line of argumentation by drawing on a range of social scientific research that seeks to measure the costs and benefits of diversity in terms of social trust and social cohesion indicators. To his credit, Noah looks at research produced by non-economists, including

1. Arecent study in Southern Californiafound that ethnic diversity is associated with decreased crime and higher home values2. A

   study in Britain showed no relationship between ethnic diversity and trust.3. A

   study in Europe found a positive long-term effect of diversity on trust.4. A

   2014 literature survey finds that “ethnic diversity is not related to less interethnic social cohesion.”5. A

   2008 study in Europe found that ethnic diversity didn’t decrease social capital.6. A

   2007 study in Britain found that the negative effect of diversity on social cohesion disappears after controlling for economic variables.7. There’s also a big literature on

   diversity and group decision-making, most (but not all) of which concludes that ethnic diversity makes groups smarter.

Noah blows the Alt-Right out of the water here, in my view. Noah concedes that while, yes, in certain cases a rapid and poorly-managed increase in diversity can indeed result in falling levels of generalised trust, high levels of ethno-racial diversity in a community can, in fact, be consistent with high trust.  In his view, the key variable is how well diversity is managed and the nature of the institutions in newly diverse societies. (I totally agree with this viewpoint). He then begins to discuss what these institutions might be.

It’s at this point that I start to disagree with what Noah is saying since it he appears to be ignoring the research in many disciplines, including IR, politics, and now management, on how capitalism can allow different groups to cooperate and live in in peace. There is a vast literature on the capitalist peace or commercial peace. Some of this literature is on inter-state conflict, while others papers are on intrastate conflict. I’ve contributed to this literature in a modest way (see here). I’ve also blogged about new research, especially in management, that has documented ways in which capitalism helps to promote peace and inter-ethnic cohesion. (see here, here, and here). I’m currently working on a paper on this subject that uses data from Canadian business history. I’ll be presenting this paper at a conference in Toronto in September that will mark the 150^th anniversary of the Canadian Confederation.

Noah writes:

as time goes on, the previous inhabitants and the newcomers get used to each other. This process is accelerated by integrating institutions like public schools, colleges, and the military, and is complete once intermarriage is widespread. 

Notice what is missing from Noah’s list—business corporations and the other institutions associated with the market economy! Noah’s list is about public-sector and non-profit institutions. Of course, these institutions do promote cohesion (think of the role of the IDF in integrating Ashkenazi and Sephardic Jews), but public-sector organizations can’t be the whole story. The old Soviet Union had public schools, colleges, and army units where people of different ethnicities mixed, and were indoctrinated with rhetoric about the unity of the world’s workers, but ethnic animosities nevertheless persisted. Noah’s list of integrating, pacifying institutions is sadly incomplete. I’m inclined to think that Noah’s decision to omit business institutions from this list of integrating factors may be related to his centre-left political views. There were certainly many US economists, particularly those of the generation taught by Milton Friedman, who went to great lengths to note the benefits of all things related to the market and to denigrate the state.  I suspect that Noah Smith, who is reacting the excesses of libertarian market-worship, may be committing the opposite error in failing to note in this paragraph the very important role that commercial activity and a vibrant private sector play in promoting peace.

I would call on Noah Smith and other progressives to reflect more about the positive role of business in promoting ethnic harmony. Thinking about the potential role of business in combating xenophobia and ethnic animosity is the first step towards having a conversation about the social responsibilities of business leaders in the face of the Alt-Right.