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Will Tolerance Help RI’s Economy?

Saturday, January 08, 2011

 

Lincoln Chafee says Rhode Island needs to be more tolerant of gays and immigrants—but will it really help the state economy recover, as the Governor suggested in his inaugural speech?

“Rhode Island today must be as welcoming to all as Roger Williams intended it to be,” Chafee said in his address. “Mark my words, these two actions will do more for economic growth in our state that any economic development loan.”

The idea sparked a spirited debate among economists and other local experts interviewed by GoLocalProv yesterday. Some said the two simply have nothing to do with each other while others said Chafee’s comments have a sound basis in economics and social science.

Economic Development: ‘It’s not touchy feely’

University of Rhode Island economist Leonard Lardaro doesn’t put too much stock in what he suggests is an overly simplistic idea. “I think Rhode Island has always been kind and hospitable,” Lardaro said. “To base an economic strategy on that thing?—I wouldn’t hold my breath.”

The former state economic development chief, Joseph Paolino, also doubts tolerance makes a difference in the economy. “It’s not touchy feely good, all that stuff,” Paolino said. “It’s more determined by the bottom line, dollars and cents.” Taxes, regulations, good schools, access to capital, and quality of life—those are the things that really matter, he said.

Some may scoff at the idea, but David Blanchette, a business professor at Rhode Island College, says there is science to support it. “Economic development is dependent in part on human labor, and that labor can be more productive where creativity and cooperation are engendered,” he said. “Economic development is also dependent in part on freedom of choice, and those choices and opportunities are broadened in a climate of social tolerance.”

Blanchette concluded: “In sum, while social tolerance is entwined in a complex myriad of factors impacting economic development, the evidence suggests that it may play an important role in facilitating a nurturing environment for economic development, both in terms of productivity and consumption.”

Bryant University economist Edinaldo Tebaldi agreed. “I do think that human capital is the key ingredient for long term growth. And a more open and tolerant society attracts skilled people as well as “average Joes,” which increases the overall stock of human capital in the economy,” Tebaldi told GoLocalProv.

Nazi Germany, Saudi Arabia economic success stories

Retired Brown University economist Allan Feldman questions the connection. “My guess would be that there is probably not too much correlation between economic growth and places being liberal and tolerant,” Feldman said.

A modern-day example is Saudi Arabia, which broke the record for GDP growth in the 1970s and was ranked in 2011 as the 21st most competitive economy in the world. “At the same time they’re one of the most intolerant places in the world,” Feldman said.

History is replete with other examples of intolerant countries doing well economically. Nazi Germany, for example, experienced economic growth but was one of the most intolerant societies in history. Then there are those European countries that embraced the so-called Protestant work ethic after the Reformation—giving birth to modern capitalism. “Certainly that was no society that welcomed gays and was tolerant in any way,” Feldman said.

History certainly has plenty examples of the opposite too. Holland, for instance, historically was a more open and tolerant society and was an economic powerhouse. “My guess is—mixed bag, no correlation,” Feldman concluded.

Creative types drawn to tolerant cities

In the United States, creative individuals who drive economic growth tend to be drawn to cities and urban regions that are more tolerant towards gays and more accepting of ethnic and racial diversity, according to University of Toronto theorist Richard Florida, who spelled out his ideas in the book The Rise of the Creative Class.

The argument, however, may be falsely assuming that tolerance is the reason those cities draw the creative types, according to Lardaro. He says it is more likely that cities have become magnets for creativity because they are also centers of higher education.

The members of the so-called creative class include designers, artists, software developers, and entrepreneurs, according to Brown University sociologist John Logan. Some might move to a more liberal city because they are the direct targets of homophobia or racism, he said. But others simply prefer to live in a place where there is an atmosphere of tolerance. “These are phenomena that are significant to how people make choices about where they will live and where they will not live and these choices are important to economic development,” Logan said.

Logan also praised Chafee for sending a message that Rhode Island will be more welcoming to immigrants. “Modern research shows that … first, immigrants go to places with growing economies and second, they support these economies,” Logan said. Public policies aimed at illegal immigrants, he added, could be perceived as a sign that an area is hostile to all immigrants—driving away more educated foreigners.

But Lardaro says there is such a thing as being too accepting of immigrants. “If you’re too welcoming, you might become a magnet for entitlement spending,” he said.

Where did Chafee come up with the idea?

Chafee spokesman Mike Trainor said the Governor’s ideas about the connections between tolerance and economic development were his own, describing them as "one of his core beliefs." He said Chafee did not consult with an economist in crafting that section of his speech.

“It’s his personal belief, not based on any data that I’m aware of,” Trainor said. “Not only is it right, but it could enhance the economic development climate.”

 

 

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