Elites, Minorities, and Economic Growth

Published by EH.NET (May 2001)

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Elise S. Brezis and Peter Temin, editors, Elites, Minorities, and Economic Growth. Amsterdam: North Holland, 1999. x + 255 pp. $95 (cloth), ISBN: 0-444-82848-6.

Reviewed for EH.NET by Rick Szostak, Department of Economics, University of Alberta.

This book contains papers presented at a conference held at Bar-Ilan University in June of 1997. The conference, in turn, was inspired by a recognition that there has been very little research on the role of either elites or minorities in economic growth (though such a role often receives anecdotal treatment in general works). Moreover, the editors — Elise Brezis of Bar-Ilan University and Peter Temin of MIT — note that the literature which does exist is fragmented: not only do students of one society rarely draw parallels with elite or minority behavior elsewhere, but sociologists and economists approach these issues from different angles and thus rarely interact.

The editors/organizers are to be applauded for drawing together scholars from (at least) sociology, economics, and history departments. They could, though, have included information on the departmental affiliations of contributors. The reader is, instead, left to deduce which disciplinary perspective is at work in different chapters. The geographic range addressed is also fairly broad: Eastern and Western Europe and the Middle East are the subject of several papers, while North America and Southeast Asia are discussed one time each. Most of the papers deal with the twentieth century, but a handful investigate developments in the eighteenth or nineteenth centuries.

Sadly, the potential for comparative analysis is realized only in the introductory chapter. Rarely in later chapters do authors make even a passing reference to countries other than those they study, nor do they usually discuss how their analysis might benefit from the insights of other disciplines. Of course, this result largely reflects the limited scope and fragmentation of the pre-existing literature. One might have hoped, though, that interaction at the conference itself would have encouraged greater efforts at integration from contributors.

The editors’ introductory essay provides a good introduction not only to the book but also to the subject in general. After brief definitions of the relevant terms (a good strategy in an area ripe for semantic confusion), the editors discuss the key questions which motivate this collective inquiry. With respect to elites, we can ask how members are recruited into elites, how elite membership changes over time, how elite groups develop values, how powerful and united elites are, whether it is best to think in terms of one or diverse elites in particular societies, whether elites dominate democratic decisionmaking, and whether it is advantageous to have distinct economic and political elites.

With respect to minorities, the editors note that minority groups are often observed to play a disproportionate role in economic activity, but that we have not progressed beyond the broadest conjectures in attempting to understand why. While I agree with the editors, I wonder if a helpful first step in such a research agenda would be to attempt to quantify just how “surprising” this result is. There are, after all, lots of minority groups that either underperform or have no special success relative to their societies. Is the number of minority success stories (much) greater than we could expect tooccur randomly?

The editors review some of the possible explanations for minority success: that minorities have different values from the wider society; in particular that certain minorities which value Scripture may thus encourage literacy, education, and even rationality; that minorities may have strong kinship bonds — which will be especially important in societies where legal protections are weak and thus there are strong incentives to deal only with those one can “trust” [they could usefully have referenced here the work of Avner Greif on early modern ethnic trading groups in Europe and the Middle East]; and the possibility that minorities might be naturally rebellious and thus prone to economic and technological innovation. They note that countries which constrain minorities are usually close-minded in other ways [note that we might thus exaggerate the role of minorities in economic growth, by confusing correlation with causation]. They do not reprise the oft-heard argument that minorities might emphasize economic activity because they are barred from success in government, church, or military.

Beyond all of these questions of how elites and minorities function (and how minorities can become elites), there is the question of whether it matters. To what extent can the relative economic success or failure of countries be attributed to the nature of their elites and the behavior of their minorities? While I would urge scholars to appreciate the interrelated set of questions outlined by the editors, subscribers to this list will likely find the couple of papers which attack this last question of greatest interest.

As with any conference volume, there is considerable variety in quality and orientation in the sixteen papers. Some are largely speculative, and serve at best to raise questions for others to pursue. And some are concerned with the political influence of minorities and elites rather than their (related) economic influence. All naturally look at only a subset of the questions raised in the introduction. I will describe a handful of papers which might be of particular interest to list subscribers.

Peter Mathias asks how members of minorities can become members of elites. He notes that both religion and language can place powerful barriers between groups, and these in turn can create a strong sense of belonging among members of religious or linguistic minorities. He argues that business was much more risky at the time of the Industrial Revolution than today, and the incentives for dealing with members of one’s own (trusted) group much greater. Nevertheless, as members of minority groups succeeded economically, they faced incentives to assimilate into elite groups. Many descendants of Quaker industrialists did become Anglican, though Jewish families were much less likely to convert.

Eliezer B. Ayal studies the success of Chinese minorities in Southeast Asia. These groups arrived with little money, business experience, or education, but came to dominate large-scale business across the region. Ayal suggests that indigenous groups were “unsuited” to business, but does not at all explain why this might be. Ayal briefly reviews some of the possible explanations of minority success, adding one novel element: that colonial authorities actively sought to promote minorities to solidify their own power. Ayal argues that the Chinese business elite not only could not have been replaced by equally sagacious indigenous businesspeople, but that they encouraged political elites to pursue growth-enhancing policies; growth would thus have been much slower without these minorities. Critical of Malaysia’s attempts to favor Malay business since 1971, Ayal suggests that it would have experienced even more rapid growth otherwise. I would have liked Ayal to explore the relationship between economic and political elites in more detail. Are minority business elites more willing to cooperate with corrupt political elites (in return for protection)? Do the latter, like colonial governments, see some advantage in nourishing a minoritybusiness elite?

Peter Temin asks whether the recruitment of the American economic elite is as “democratic” as is commonly believed. He notes that Americans’ faith in democracy is rooted in a faith in economic mobility. Since Temin lacks evidence on the class of origin of Fortune 500 CEOs, he examines their education, gender, race, and religion. Here, too, the data are imperfect (Temin estimates an “upper bound” for Jews and Catholics by looking at surnames), but Temin’s results appear robust. He finds that the business elite is almost entirely male and white (there is one Asian and a handful of Hispanics; amazingly, given the prominence of multinationals on the list, there are almost no foreign-born CEOs), Protestant, and university-educated (with the Ivy League hugely overrepresented; Temin notes that entrance to such institutions decades ago depended more on family connections than SAT scores). [Temin does not, however, discuss the possibility that his results might reflect to some extent the tendency, noted by Mathias, for successful individuals to assimilate.] The American political elite — Temin looks at members of Congress — has become broadly representative of Blacks, Hispanics and Catholics, and women receive much better representation there than in the Fortune 500. However, the business elite is scarcely more representative of the population than it was a century ago. Temin takes the fact that CEOs are on average three inches taller than the rest of the population as further evidence that they came from a privileged background; a more powerful explanation may lie in the commonly observed (in psychological studies) fact that people tend to view the tall as more trustworthy and capable. Temin does not speculate on whether a wider appreciation of the narrow selection of the American business elite would decrease Americans’ faith in democracy. He does note that America is still a more mobile society than Europe. Americans might at least become more curious about the influence the business elite exerts on the political elite; recall Ayal’s discussion of how “minority” business elites can influence more representative political elites.

Joel Mokyr is one of the few authors to explicitly draw on the insights of a discipline other than his own: biology. Mokyr has long been advocating the application of evolutionary theory to economic history. In this paper he argues that technological innovation is effectively an act of rebellion against conventional wisdom and vested interests. He discusses the sorts of environments in which such rebelliousness is most likely to be approved. He argues that smaller societies, especially city-states, which are likely to be open to minorities, will be prone to encouraging this beneficial form of rebellion.

Finally, Francois Crouzet asks why a minority of family businesses are able to survive beyond the fabled third generation. He discusses several reasons why such dynastic survival is rare, including the economic and political challenges which any business will face over a period of a century or more, as well as the possibility of having too few or too many heirs. He notes that dynasties are more likely to survive in certain sectors: iron, brewing, pottery, chocolates, and banking (and textiles in France but not England). He conjectures that dynasties are most likely to survive in sectors that are viewed with respect by existing elites: the temptation to sell out and join the landowning class is thus reduced. I wondered also if continued family control might be especially beneficial in sectors where reputational effects loom large.

Rick Szostak is Professor of Economics at the University of Alberta. His research spans the areas of economic history, methodology, and interdisciplinary theory and practice. He has recently begun work on a manuscript that draws on each of these areas, tentatively titled “Exogenous Growth: Interdisciplinary and Historical Perspectives.” His books include The Role of Transportation in the Industrial Revolution (McGill-Queen’s, 1991), Technological Innovation and the Great Depression (Westview, 1995), Technology and American Society: A History (with Gary Cross; Prentice-Hall, 1995), Econ-Art: Divorcing Art From Science in Modern Economics (Pluto, 1999), and A Schema For Unifying Human Science: Interdisciplinary Perspectives on Culture (forthcoming, Susquehanna University Press).

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