Tolerance Can Lead to Prosperity

Op-ed in the Financial Times

August 18, 2004

Tolerance pays. This is the lesson emerging from a growing body of evidence on public attitudes toward globalization. The responses to the 2003 Pew Global Attitudes Project, in which 38,000 people in 44 countries were interviewed, and in smaller-scale surveys done by other groups, make fascinating reading. Public support for globalization was highest in Senegal, where 90 percent of respondents indicated that it was a good thing, while disapproval was greatest in Jordan where 64 percent registered opposition. Eighty-nine percent of Turks thought local culture should be protected from foreign influences, while less than half of the French felt this way.

More specifically, when asked whether they supported free markets, 95 percent of the Vietnamese interviewed said yes, with even more favoring stronger cross-border business ties. So much for creating the New Socialist Man.

At the other end of the scale, only 48 percent of Jordanians approved of growing cross-border commerce. Nearly two-thirds of Czech respondents were willing to see large inefficient factories close, but more than three-quarters of the Indians surveyed opposed such moves. Attitudes toward international economic institutions-the International Monetary Fund, World Bank, and World Trade Organization-varied widely as well: five out of six residents of Côte d'Ivoire thought the multinational institutions were a beneficial influence, while two out of three Argentines believed they had a negative influence, perhaps with reason.

Statistically, the patterns of these responses are correlated with economic performance. That relationship is unsurprising in and of itself. What is intriguing is that the pattern of responses is independently correlated with economic performance even when adjusted for fundamentals such as the level of per capita income and inflation. The responses seem to be telling us something beyond what can be explained by the fundamentals.

Perhaps the most surprising result is that attitudes towards homosexuality are highly correlated with economically relevant phenomena such as the ability to attract foreign investment and the level of sovereign bond ratings. The cross-national divergence on this issue is enormous, with 83 per cent of Czechs and Germans supporting societal acceptance of homosexuality, more than 90 per cent of the respondents in six countries opposing it, and three governments-
China, Egypt, and Tanzania-not even permitting the question to be asked.

The statistical correlation between tolerance of homosexuality and better than expected economic performance echoes similar results obtained previously for US cities, where a higher homosexual share of the population is associated with more high-technology activity. The question is why?

In both the US and international data, there is a correlation between acceptance of homosexuality and other characteristics such as acceptance of immigrants and the absence of a desire to protect traditional culture, which in turn are correlated with improved economic performance. It could be that attitudes toward homosexuality are part of a broader package of social attitudes towards difference and change, especially change that comes from nontraditional sources.

For potential investors, domestic or foreign, particular attitudes ought therefore to sound alarms. Public xenophobia may find expression in a mild form through unhelpful official behavior and, in the extreme, through attacks on foreign-affiliated facilities or staff. Examples range from the occasional vandalism of McDonald's outlets around the world or last year's rioting that destroyed $50 million in Thai-owned property in Cambodia to targeted attacks on foreigners, which have claimed more than 30 lives in Saudi Arabia this year.

For home-grown entrepreneurs, xenophobia should not be an issue (except, perhaps, for members of ethnic minority groups), but pervasive distrust of difference may inhibit innovators whose behavior deviates from social norms.

What would happen, therefore, if the people of countries such as India, Jordan, and Russia-which score poorly on the surveys' globalization questions-adopted more tolerant attitudes? The effect could be substantial: growth in foreign investment, improvements in borrowing terms, and increased risk-taking by local entrepreneurs.

Popular attitudes have real effects on economic outcomes. Tolerance affects the terms on which globalization proceeds. The question is how it can be fostered.

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Marcus Noland Senior Research Staff