Economic Growth Remains One Way Out of Historical Tensions

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One tired cliché is that those who do not learn from the past are doomed to repeat it. The implication is that we should remember every historical event and process and cumulate them. While there is wisdom in not throwing away historical knowledge embodied in traditions that are passed on to us, there is also wisdom in knowing when to let go. This is especially true as the past has a large set of historical sore spots and recriminations from one group against another, sore spots and recriminations that are largely uninformative about how to best move forward.

As an economist, I have to provide an answer that will make the non-economist sigh: Economic growth is the way to let go of some of the deadweight that history forces us to carry. 

Go ahead, sigh! But before you do, I urge you to consider the following examples.

The economic literature on conflicts suggests that there is such a mechanism in general. Economic growth is tied to lower probabilities of civil wars and inter-country conflicts. We also know that economic downturns fuel racial animus within countries. For example, one article found that areas in the US that were most affected by the Great Recession were those that saw the largest increases in racist internet searches and hate crimes against black Americans. We also have evidence from Europe that downturns fuel populism (i.e., generally tied with anti-immigrant feelings) and distrust.

There are also some localized examples that confirm these broad findings: the French-Canadians in Quebec and the different religious groups of Northern Ireland. In the former case, there had been long-lasting tensions with the richer English-speaking majority. In the 1960s and 1970s, this led to actual terrorism whereby one group abducted a British diplomat and killed a provincial cabinet minister. Ethno-linguistic tensions, by that point, were high. The French-Canadians (who are mostly in the province of Quebec), however, experienced major economic improvements in the subsequent period. Today, there exists no significant economic differences between the two groups. Whereas there are still tensions today, intergroup trust runs very high and has gradually improved since 1965. A somewhat similar story can be told for Northern Ireland, which many Irish nationalists wanted to be ceded by the United Kingdom. Longstanding historical tensions gradually dissipated as Ireland became the Celtic Tiger (experiencing phenomenal rates of economic growth and high living standards). The topic of reunification faded, and tensions are far lower now than before.

One reason behind these examples could be that growth has a direct effect. When the future looks bright and living standards are rapidly improving, old grudges and tensions lose their relevance. We end up forgetting them because the things ahead look so much more enticing. The relative cost of letting go of certain historical pieces of knowledge falls with economic growth.

Another reason is that growth unlocks some political options. As economist Ed Glaeser pointed out in his “political economy of hatred,” the “supply of hatred is a function of the degree to which minorities gain or lose” from the policies advocated by the different political actors. Those gains and losses are affected by economic growth which, in turn, means that there is a growing pie. And that growing pie for everyone implies that there is no negative-sum game. Negotiations between parties in a long-lasting political conflict might be likelier (and so would their successful conclusion) if everyone believes that one will not come out worse off (as a negative-sum game would imply).

Are you rethinking that sigh? I hope you are! Economic growth may not be the cure-all solution. It does not act as an arbiter of past injustices. It does not right historical wrongs. It does, however, make it easier to move on and make them irrelevant to our everyday lives. Economic growth makes it easy to simply let go.