The diaspora of ethnic economies: beyond the pale?

• Author: Cao, Lan

TABLE OF CONTENTS INTRODUCTION I. A COMPARATIVE LOOK AT GOVERNMENT-MANDATED PREFERENTIAL POLICIES A. Minority Preferences in Majority Economies 1. The United States 2. India B. Majority Preferences in Minority Economies 1. Malaysia 2. Nigeria II. PREFERENCES FOR "ONE'S OWN" A. The Ethnic Economy Generally 1. Introduction 2. Defining Characteristics 3. The Ethnic Enclave Economy 4. Ethnic Niches B. The Boundary: Disadvantage and Reactive Solidarity 1. Introduction 2. Boundaries, Social Capital, and Ethnic Economies III. DIFFERENT APPROACHES: BEYOND THE PALE? A. Beyond the Pale: The Applicability of Antidiscrimination Laws B. Beyond the Pale: Government Action C. Beyond the Pale: Nongovernmental Actions Beyond the Reach of Law CONCLUSION Category One Cases Category Two Cases Category Three Cases INTRODUCTION

Governments around the world have at different times adopted various race-conscious policies for various reasons. These policies generally fall into three categories. First, in the United States, for example, the Jim Crow system was used systematically to reinforce racial preferences in social, political, and economic life, to favor the white majority and exclude the black minority. This system can be characterized as one designed to further majority preferences in majority economies, (1) that is, a system where the dominant majority not only controls the economic and political system but also has instituted racial preferences for its own majority members. Today, in the United States, governmental policies work in the reverse, as "compensatory preferences" to blacks and other designated minorities, to offset majority advantages and historical wrongs. India similarly pursues preferential policies for its untouchables. This second type of racial policy is aimed at implementing minority preferences in majority economies, to benefit minority groups in economies dominated by majority members. By contrast, in countries such as Malaysia and Nigeria, governments institute ethnic preferences to favor politically dominant (though economically weak) majority groups and to restrain minorities deemed by these governments to be "too" economically powerful. At various times in Europe, similar treatment was directed at the Jewish minority. (2) This third type of policy institutes majority preferences in minority economies, that is, economies "controlled" by minority groups.

What the United States calls "affirmative action" today is but one instance of similar actions undertaken historically and presently by governments around the world. In developing countries in particular, these forms of "affirmative action" to boost certain governmentally designated ethnic minority groups have been urged as crucial to the reduction of ethnic conflicts and consequently, to the success of law and development projects--on the ground that the institution of markets and democracy cannot be undertaken without taking into account the distinctive environment of developing countries, specifically the prevalence of ethnic divisions and tensions. (3) No doubt the rationale offered by the governments involved whenever ethnically targeted preferences are adopted varies depending on the objectives set by these governments, the philosophical and political rationale behind these programs, and the history of the countries themselves. There are, however, common threads that run through the three categories of preferential programs briefly mentioned. Whether called "discrimination" or "white supremacy," "affirmative action," or "compensatory preferences," "Northernization" (as pursued in Nigeria) or Malaysia's "sons of the soil" preferences, they are essentially designed to achieve a governmentally designated objective. In other words, the essence of these different programs is the institution of "government-mandated preferences for government-designated groups" (4) to correct continuing group disparities and ethnic stratification.

With the abolition of Jim Crow preferences in the United States, Category One preferential policy is no longer practiced by any government in the world and has no serious scholars advocating on its behalf in standard scholarly journals. Categories Two and Three continue to be pursued in many countries and have provoked both passionate support for and opposition to governments' use of race or ethnicity as a basis for governmental objectives. Almost wholly ignored in the debate on preferential policies, however, both in developing and developed countries, is the type of preferential policies practiced not by the government but by private groups to favor members of their own ethnic or racial groups--"[t]he spontaneous preferences of particular individuals and groups for 'their own kind....'" (5) The proliferation of ethnic economies in the United States and other countries, whereby disadvantaged groups that cannot compete successfully in the mainstream economy turn inward to leverage their group affinities and establish an economic base for the group, can be explained by reference not to government-mandated preferences but rather to their own preferences for members of their own groups in their pursuit of entrepreneurship. This particular sort of preferential policy is the focus of this Article.

Assume that a small Korean-owned cleaning business relies on word of mouth to find suitable employees in order to save on advertising and other search costs. This Korean-owned business may be located in a Korean ethnic enclave of Korean restaurants, groceries, laundries, wig stores, and other Korean-owned shops. (6) As a small business, many of the company's employees are members of the owner's family. As part of the Korean ethnic economy, the cleaning business can also find, at low or no cost, Korean employees if the owner needs to hire from outside his or her own inner circle. (7) The owner may also prefer to hire other Koreans, or engage in lending and other preferences favoring other Koreans, because of shared language, culture, kinship, community, or a sense of mutual trust. An ethnically homogenous work force thus is created. An ethnic economy thus is reinforced and perpetuated.

Assume also that a black-owned business in Harlem engages in similar business practices, hiring African-American workers from the neighborhood rather than those from other ethnic groups. Or that this black-owned business has successfully established linkages with other clusters of black-owned firms, (8) buying from and selling to one another and generating a positive ripple effect for the black community. (9) Similar stories about ethnic solidarity and "fraternal and communal sentiments" (10) abound throughout the United States and in many countries around the world, sometimes resulting in the establishment of a distinct type of ethnic economy, the ethnic niche--the clustering of ethnic entrepreneurs in the same occupations and industries. (11) Indians (12) and Pakistanis, for example, own a large proportion of gas stations and budget motels in the United States and newsstands in New York City. (13) The diamond industry is dominated by Orthodox Jews who rely on ethnic networks to further economic exchanges. (14) Cambodians and Vietnamese in California own a disproportionate number of doughnut shops and nail salons, respectively. (15) Koreans own a large number of green groceries in New York City and wig stores nationwide. (16) Arabs own grocery stores in Chicago, as do Lebanese Muslims in Detroit and Toledo. (17) Soviet Jews operate half the taxicabs in Los Angeles. (18) In the developing country context, the Chinese in Malaysia, Thailand, the Philippines, and other Southeast Asian countries dominate certain lines of commerce, as money lenders, labor contractors, shopkeepers, and brokers, and like the Jews in Europe, became known as "middleman minorities," because of their "middle," "go-between" positions between producer and consumer, owner and renter, elite and masses, employer and employee. (19) As noted, "[c]apital and labor are often organized along ethnic lines. Fukienese entrepreneurs in Hong Kong, Malays. lee clerks in Bombay, and Ibo plantation laborers in Equatorial Guinea were all mobilized into their economic activity on the basis of ethnic affinity." (20)

These minority groups have established an ethnic economy in different countries, often by relying on group cohesiveness and homogeneous networks to create economic benefits for group members. (21) To the extent that they are created by immigrants, some ethnic economies may also benefit from the diaspora's linkages that continue to be maintained, culturally and economically, with homeland institutions. (22) Sociologists have noted the tendency to equate members of one's ethnic group with that "inbred group of near or distant kinsmen whom one knows as intimates and whom therefore one can trust. One intuitively expects fellow ethnics to behave at least somewhat benevolently toward one because of kin selection, reinforced by reciprocity.... Fellow ethnics are, in the deepest sense, 'our people.'" (23)

The existence of the ethnic boundary, delineating insiders and outsiders, with preferential policies favoring "us" and excluding "them" has been and remains an established fact of life. To the extent that such old-fashioned preferences exist in developing countries, it is presumed that they are transitory and that the advancement of modern capitalism will make such practices obsolete. (24) To the extent that such ethnic preferences are practiced by ethnically homogeneous groups in modern, economically developed countries such as the United States, they tend to be viewed as particularly anomalous; they are thus rarely acknowledged openly, overshadowed by the prevailing ideal of liberalism and its emphasis on diversity, universalism, and assimilation. (25) In the United States, in the case of African Americans in particular, "[t]o even admit that Afro-Americans have a business tradition...