America’s Debt Ceiling Crisis & the emergence of Virtual Ethnic Groups

The Editor

The Economist Newspaper
London

31 July 2011

 Sir,

 America’s Debt Ceiling Crisis & the emergence of Virtual Ethnic Groups

The evidence is clear. Typically, multi-ethnic societies are at a competitive disadvantage relative to their homogeneous peers. Diversity can result in malign ethnic competition for control of state power and resources. Ethnicities may seek their interests in a manner that results in adverse social and economic outcomes for the State as a whole; leading to multi-person prisoners’ dilemmas as described by Robert J. Aumman (cited by Vivian Walsh in 1994):

“The universal fascination... is due to its representing, in very stark and transparent form, the bitter fact that when individuals act for their own benefit, the result may well be disaster for all.”

In 2005, Alberto Alesina and Eliana La Ferrara indicated how this can happen. First, individuals may attribute positive utility to the well being of members of their group and negative utility to that of members of other groups. Second, it may be more efficient for individuals to “transact preferentially with members of one’s own type…”. Third, diversity can impact on the “production function” e.g. through an inability to agree on common public goods and public policies. Fourth, whilst the production of pure public goods may be lower in a fragmented society, the public provision of private goods (PPPG) – targeted to benefit specific individuals and groups – may be higher.

Martti Siisiäinen, writing in 2000, hinted at the solution i.e. a multi-ethnic social contract:

“Well-functioning modern societies have to have a value basis that is based on the voluntary regulation of social relations between persons who are foreigners to each other”.

Failing such societal trust, they risk the creation of vicious cycles featuring:

“…distrust, breaking of the norms of reciprocity, avoiding one's duties, isolation, disorder and stagnation. The result is the development of a “non-civic community” ”.

We have long struggled with these challenges in multi-ethnic Sierra Leone.  America, diverse from its foundations, had an effective social contract founded on the experience that the historically dominant WASP culture would serve the economic well-being of all groups.

In recent decades, and sharply since 2000, that societal trust has been eroded. We have seen astonishing levels of PPPG in cleverly legal disguises; contributing to the financial crisis of 2008 et seq. Now, America is characterised by virtual ethnic groups (tea party vs liberals, pro-lifers vs pro-choicers etc) who define themselves by their implacable distrust of other groups. The sense of common purpose has vanished. The debacle over the raising of the debt ceiling, no matter how it is resolved, is unlikely to be the last symptom of the decline of Pax Americana.

Yours faithfully,

Omodele R. N. Jones

CEO, FJP Development & Management Consultants
Freetown, Sierra Leone.
Note: WASP – White Anglo-Saxon Protestant