OPINION: Prejudice is bad for business and the economy

by Paul Donovan | UBS
Monday, 2 November 2020 08:46 GMT

A demonstrator wearing a rainbow face mask and holding a LGBT Pride flag looks on during a protest against the murders of transgender people in Colombia, in Bogota, Colombia July 3, 2020. REUTERS/Luisa Gonzalez

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* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

The Luddites of this industrial revolution seek to destroy human capital through prejudice

Paul Donovan is chief economist of UBS Global Wealth Management. His book "Profit and Prejudice: The Luddites of the Fourth industrial Revolution" will be published by Routledge on 6 November.

Members of the LGBT+ community are under attack. There has been a 20% increase in reports of LGBT+ hate crimes in the UK in the past year. In the U.S., the FBI has reported rising hate crimes based on sexuality. Changes in the U.S. Supreme Court have led to fears that marriage equality may be reversed. Local governments have declared almost a third of Poland to be "LGBT-free zones".

This rise in prejudice is rooted in the changing economics of our times. We are living through one of the most dramatic periods of economic and social upheaval in history. Some people's incomes and social status will rise, but others will experience a fall. That relative decline – doing worse when your neighbour is doing better – encourages prejudice.

The increasing complexity of the world may make it harder for someone to understand why their income or status has changed. People crave a simple answer. Finding a scapegoat – a social group to take the blame – creates a deceptively simple explanation for economic pain. Narratives such as, "It is not my fault I lost my job; that other person took it" comfort those left behind by change.

The LGBT+ community is an obvious target for prejudice. Estimated at between 8% and 10% of the global population, it is large enough to be seen as a threat, but small enough to persecute. Many of the improvements in LGBT+ rights have been recent. Economic nostalgia – wanting to go back to "the way things were" – easily links to a desire to reverse social change.

Prejudice has a terrible human cost. But it can also cause enormous economic damage. Economic success in the years ahead is not about technology. Economic success is about how you use technology. So how do we use technology correctly? By having the right person in the right job at the right time.

Rejecting the right worker for a job because they are open about who they love is a losing strategy, economically. Prejudice will still do economic harm if someone is not out at work. The added stress of having to disguise who you are to colleagues means less productive workers. Out or not, prejudice against the LGBT+ community weakens economic performance.

Prejudice also stops diverse thinking. For a company, this can be fatal in a period of structural change. When established ways of doing business are being turned upside down, having only one way of thinking will miss both opportunities and risks. Challenging established thinking is what generates success in an industrial revolution.

The way we use technology can help fight prejudice, but it can also make it a lot worse.

Modern communication helps people feel less isolated – important for minority groups like the LGBT+ community. It helps organise protests – if you want to boycott a company that does not support LGBT+ rights, there is an app for that.

Social media also brings non-LGBT+ people into contact with the community, and personal contact is a powerful force for defeating prejudice. But extreme prejudiced groups are also a minority. The technology that helps the (minority) victims of prejudice also makes it easier for their persecutors to find each other and work together.

The changes of the fourth industrial revolution can raise our living standards. We can emerge with greater economic and environmental efficiency. But the upheaval is also dangerous.

In the first industrial revolution, the Luddites smashed the physical capital of machinery, because they saw it as destroying their status. The Luddites of this industrial revolution seek to destroy human capital through prejudice.

Economics is not the main argument against prejudice, but it does make a powerful case. Ultimately, the message is simple: prejudice is bad for business and the economy.

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