Want Faster Growth? Embrace Diversity

(Bloomberg Opinion) -- During the past four decades, the U.S. has become much more racially and ethnically diverse. The share of non-Hispanic white people residing in the country is now only 62 percent, while Hispanics and Asians together make up 22.5 percent. Since 2014, less than half of the kids born in the U.S. have been born to two non-Hispanic white parents. Some states, such as Texas, are already majority-minority.

This rapid demographic change, which is due both to immigration and to high fertility rates among Hispanic-Americans, has sparked unease and even fear among some, and probably contributed to the election of President Donald Trump. This heightened anxiety comes even as immigration from Latin America is declining and Hispanic fertility rates have fallen:

Meanwhile, about 39 percent of American-born Hispanic newlyweds and 46 percent of American-born Asian newlyweds marry people of other races (mostly whites) — a figure that will probably climb even higher in the years to come. Some of the children and grandchildren of those unions will probably identify as white. So the demographic decline of white America is probably overstated.

But overstated or not, demographic change presents a big challenge for the U.S., which already suffers from a history of troubled white-black race relations as a result of slavery and segregation. Not only can poor race relations lead to violence and discrimination, but they can also create dysfunctional politics and lead to economic underperformance. Evidence from developing nations shows that ethnic divisions, often created as a result of arbitrary colonial boundaries, tend to undermine the provision of public goods, making a country more likely to be poor.

That correlation isn't a law of nature, however. And so far, the U.S. has managed to overcome the challenges posed by increasing diversity. Diverse cities tend to spend as much or more than non-diverse cities, probably as a result of successful inter-ethnic coalition-building. The country's most diverse states, such as Texas and California, and diverse cities like Houston, Los Angeles and San Diego tend to be economic success stories (as well as having relatively low violent crime rates). Perhaps because of its liberalized economy, relative tolerance and history as a nation of immigrants, the U.S. has done better than most other countries at forging a functional, wealthy, peaceful diverse society. This uniquely accommodating attitude toward diversity is visible in surveys:

Still, as Trump's election and the attendant racial tensions have shown, creating unity from diversity is a constant uphill battle. In a 2012 experiment, political scientist Ryan Enos sent Spanish speakers to stand in a train station in Boston, and found that white Bostonians who heard them talking tended to express more negative views of immigration. Enos later wrote a book, entitled “The Space Between Us: Social Geography and Politics,” about how a large ethnic minority living close by can stoke racial tensions, especially in the presence of segregation.

So to deal with the challenge of diversity, it's crucially important to break down geographic barriers between racial groups. Fortunately, research offers a ray of hope that this can be done. The theory that extended contact improves attitudes toward other racial groups is supported by a large number of research studies. It looks like the famous line from the novel “To Kill a Mockingbird” — “most people are [nice] when you finally see them” — describes a real and powerful force that can change human beings' attitudes toward other ethnic, religious or racial groups. Thus, desegregation efforts should focus on producing long-term, repeated positive interactions between racial groups.

But how can this be done? In any even remotely free economy, people — especially wealthier people — will be able to choose where they live. That makes it hard to avoid voluntary segregation — even if people only slightly prefer to live near to their co-ethnics, it can lead to substantial neighborhood homogeneity over time. Giving poor people housing vouchers and strictly enforcing anti-discrimination housing and lending laws can help, but can't totally overcome the problem. Meanwhile, public-school desegregation via busing turned out to be politically difficult in most of the country.

More creative approaches are called for. One of these is dense urban development. Even as racial housing preferences nudge groups apart, the need to live and work in a shared space pushes them back together. Research shows that since 1990, white Americans have, on average, been moving to more racially diverse neighborhoods — and staying there. The country's urban revival is undoubtedly a part of this. So keeping that urban revival going, by allowing more housing development and building more public transit in diverse cities, is key.

Desegregating schools is another challenge. Offering tax breaks or financial incentives to public or private schools with diverse student bodies could help more kids grow up around Americans of other races.

A third desegregating force is the U.S. military. Serving together is probably a powerful way of creating lasting positive attitudes toward other races. Expanding the U.S. military, and implementing a program of national service, would help Americans realize that they're all on the same team.

Finally, college can be a potent tool for fostering long-term positive interracial contact. Expanding public universities, keeping student bodies diverse, using roommate assignments to encourage interracial contact, and banning or heavily discouraging racially exclusive parties would be key steps in making higher education a more powerful unifying force.

Diversity can create great challenges. But it also offers great opportunities — the promise of a larger, stronger, nation that is richer both in dollars and in cultural ideas. The U.S., despite its historical failings, is almost uniquely well-positioned to reap the benefits of diversity while overcoming the difficulties.

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

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