Daily Telegraph, UK
March 21 2004

What masons share with the mafia

Why is it that some groups seem to do well in business while others
fail to make economic progress? In many parts of the world,
particular minorities dominate commerce, and often form a political
elite too. Is it culture, religion or history that gives them the
upper hand? Or simply a supreme self-confidence bred from past
success?

In many cases, capital, education and connections are sufficient to
give certain ethnic minorities the necessary advantages. In Brazil,
which has the worst distribution of wealth in the world, less than
0.01 per cent of the population owns the vast majority of the land
and controls the levers of power.

These whites effectively operate economic rule over a peasant
population – most of whom are descendants of slaves. A strong sense
of inferiority and lack of resources prevent the common masses in
Brazil from making real progress.

Similarly, in the Philippines the ethnic Chinese make up less than 1
per cent of the population but control a large proportion of the
country’s assets. They have worked hard, helped each other, learned
how to borrow and raise investment, and how to influence political
decisions. They intermarry and have retained a somewhat separate
culture.

There is a similar concentration of wealth among the Chinese in
Indonesia, and the pattern is repeated to a lesser extent in
Malaysia, Thailand and Vietnam.

The same phenomenon of an economically dominant minority occurs in
other countries: Indians in Kenya, Lebanese in Sierra Leone and
Gambia, and whites in South Africa. In some cases, immigrant
entrepreneurs have settled, developed successful enterprises and
gradually overwhelmed local competition.

In others, certain tribes have inherited the fruits of colonialism
and racist political systems. Such profoundly imbalanced societies
are fundamentally unstable and can suffer damaging class warfare.

The rapid spread of democracy and globalisation has only exaggerated
the discrepancies between such ethnic groups. The rule of Winner
Takes All tends to apply in such developing economies. This can lead
to a backlash from the disenfranchised majority, as has happened in
Zimbabwe against the white farmers, and against the Chinese minority
in Indonesia.

In both cases the ethnic violence and destruction of property have
dramatically increased poverty and failed to solve the problem of
inequality.

Of course there are networks that try to use their advantages in
every society – be they masons, old Etonians or the mafia. Such is
human nature. But in a democracy the most successful elites do not
form a closed organisation: they integrate with the majority and
share the fruits of progress.

Such policies can be imposed, as with the black economic empowerment
rules in South Africa. Or the “weaker” majority can be
institutionally protected, as they are in Malaysia.

But such solutions only work properly with huge investment in
education for the poor. And some analysts maintain that
entrepreneurial instincts cannot be taught – they are simply
ingrained in some civilisations and not others.

Moreover, the track record of affirmative action programmes is mixed
at best – rather like punitive taxation on the rich.

Perhaps intensive research into what makes ruling elites rise to the
top would yield useful lessons in trying to help the disadvantaged.

Why, for example, have Lebanese, Jewish and Armenian diasporas spread
all over the capitalist world and done so well? Hard work, good
credit and a strong family structure have helped – but there must be
more.

And why did the Ugandan Asians who arrived in Britain after Idi Amin
ejected them in the 1970s prosper, when some other immigrants have
not? These are difficult but important questions, which need answers
if dangerous inequalities are to be addressed.

Of course each winning culture will have its own formulas, but there
must be common features across these groups. Why do Koreans – around
0.1 per cent of New York’s population – dominate the neighbourhood
retail trade there? It cannot just be luck.

More serious work needs to be done to discover the secrets of
entrepreneurial groups, so that their techniques can be copied among
the less well off. Such efforts might go some way towards rebalancing
the odds between the winners and losers in the game of global
capitalism.

– Luke Johnson is chairman of Channel 4 and Signature Restaurants