Sunday, September 11, 2011

Ethnic Diversity & Public Investment

Pictured Above: Harvard Economist Alberto Alesina

I find it fascinating that so many liberals are so focused on celebrating and promoting diversity, yet so few show an interest on exploring its concrete social and economic impact. I am not troubled by their conclusion, because indeed it could be argued that the United States' increasing diversity offers us net benefits. My concern is that anyone who only presents the benefits of a phenomena, without making an effort to identify possible cons and costs, is either guilty of negligence or intellectual dishonesty. Before we continue, I must emphasize that we are not seeking to assess the relative worth or social and economic impact of any particular group; rather, the essential question is how (if at all) does (relative) homogeneity and diversity impact the economic and social welfare of a nation?

In his work, Ethnic Diversity And Economic Performance, Harvard Economist Alberto Alesina  analyzed data from rural and urban settings in both "developed" and "underdeveloped" nations and sought to determine real and measurable economic pros and cons of diversity. He starts by proposing that while diversity does not appear to effect economic outcome in the private sector, it does lower the willingness or ability of communities and nations to invest in the public good. In the book "Fighting Poverty in The US and Europe: A World of Difference", Alesina and his co-author Edward Glaesser expands upon this research and conclude that: 

"the redistribution gap between the United States and Europe could best be explained by America’s greater ethnic heterogeneity and more conservative political institutions. Countries with more ethnic diversity generally spend less on social programs."Or, more specifically, in more homogeneous communities and nations, tax payers are generally more willing to contribute a higher portion of their wealththe most homogeneous. And predictably, as the aforementioned European nations have become more diverse, the willingness of the electorate to support the welfare state has declined, as demonstrated by the surge in conservative parties in recent years.

When I presented these findings to a progressive associate of mine, his response was "that's atrocious, they should support social welfare, regardless of how diverse their nations have become...a Swede should should consent to high taxation regardless if the beneficiaries are Swedes or Somalis!" I wholeheartedly agree, however as any economic will tell you, good government policy cannot be based on how people should behave, but how they do behave. Progressives should take heed, because it would appear that over the long run, the two social goods they support, diversity and a generous welfare state, may not be fully compatible. 

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