Is there a relationship between societal tolerance and economic growth?
In his book “The Moral Consequences of Economic Growth,” Harvard economist Benjamin Friedman gives a number of examples over the past two centuries of how economic growth increases the sense of opportunity and possibility that leads to more tolerance, social mobility and a concern for fairness. In contrast, economic stagnation has historically led to xenophobia, trade protection and the political persecution of minorities.
There have certainly been exceptions to this trend. For example, in 1935 at the height of the great Depression, Social Security was enacted. And in the last three decades, there have been economic dips, but America’s march toward inclusion and tolerance has generally moved forward.
However, we need only look at our current landscape to ask: Is our recent recession and its lingering impact contributing to a growing intolerance that is being played out on the political and policy front?
If so, this should be a source of real concern, because it turns out that the more intolerant a society is, the harder it is to compete economically – leading to greater economic contraction that, in turn, leads to greater fear, frustration, and intolerance – which accelerates the economic downward spiral.
By contrast, a society that embraces diversity and tolerance has been shown to be more economically competitive. Ronald Ingelhart, a political scientist from the University of Michigan, has closely tracked the relationship between cultural values and economic growth and concludes that a nation’s attitudes toward diversity, immigrants and gay residents are key indicators of its capacity for long-term economic growth.
Throughout the 20th century, America’s significant competitive advantage was our ability to attract and retain the world’s best talent because of our country’s reputation as an open and inclusive nation. This also played itself out in Europe. In their paper “Cultural Diversity, Geographical Isolation, and Origin of the Wealth of Nations,” authors Quamrul Ashraf and Oded Galor write that before the Industrial Revolution (i.e., the agrarian age) communities that were more isolated thrived. However, as soon as industrialization kicked in, cities that had higher rates of collaboration, assimilation and cultural diversity flourished economically because of their ability to attract and harness talent, adapt to new technologies and stay on the cutting edge of innovation.
Best-selling author Richard Florida argues that creative people are critical drivers of economic growth. These creative types seek tolerant communities that will accept them. Conversely, communities that are less tolerant will struggle to attract creative talent. As Florida writes in his article “How Diversity Leads to Economic Growth,” “Economic growth and development has long been seen to turn on natural resources, technological innovation and human capital. But a growing number of studies, including my own research, suggest that geographic proximity and cultural diversity – a place’s openness to different cultures, religions, sexual orientations – also play key roles in economic growth.”
This is important context as we consider the kind of country and state we want to become. It is clearly not in our economic interest to pursue a path of intolerance and cultural exclusivity.
Fear and anger
In North Carolina, the fight about House Bill 2 puts this issue into focus. Global reaction against the bill has been swift. As recent articles have shown, companies are pulling back on locating or expanding in our state, conventions and events are being canceled, tourism is suffering, investments are in decline, companies say it will be harder to hire the best talent – and this is just the beginning.
In short, HB2 sends a signal that all are not welcome, and this is going to have significant short- and long-term economic consequence unless something is done about it.
This legislation, as well as other policies that foster exclusion, are often born out of a fear of the unknown. A recent Harris Poll, for example, shows that only 14 percent of Southerners personally know a transgendered person. Across the national political landscape, a fear of the unknown exacerbated by economic vulnerability is fueling angry divisions.
Let’s not give way to this fear and anger. As history shows, North Carolina benefits economically and as a citizenry when we are welcoming and inclusive.
Christopher Gergen is CEO of Forward Impact, a fellow in Innovation and Entrepreneurship at Duke University, and author of “Life Entrepreneurs: Ordinary People Creating Extraordinary Lives.” Stephen Martin, a director at the nonprofit Center for Creative Leadership, blogs at www.messyquest.com. They can be reached at firstname.lastname@example.org and followed on Twitter through @cgergen.