The Destructive Dynamics of the Small Minority

NYTimes  |  Most Americans assume that democracy and free markets go hand in hand, naturally working together to generate prosperity and freedom. For the United States, this has largely been true. But by their very nature, markets and democracy coexist in deep tension.

Capitalism creates a small number of very wealthy people, while democracy potentially empowers a poor majority resentful of that wealth. In the wrong conditions, that tension can set in motion intensely destructive politics. All over the world, one circumstance in particular has invariably had this effect: the presence of a market-dominant minority — a minority group, perceived by the rest of the population as outsiders, who control vastly disproportionate amounts of a nation’s wealth.

Such minorities are common in the developing world. They can be ethnic groups, like the tiny Chinese minority in Indonesia, which controls roughly 70 percent of the nation’s private economy even though it is between 2 percent and 4 percent of the population. Or they can be distinct in other ways, culturally or religiously, like the Sunni minority in Iraq that controlled the country’s vast oil wealth under Saddam Hussein.

Introducing free-market democracy in these circumstances can be a recipe for disaster. Resentful majorities who see themselves as a country’s rightful owners demand to have “their” country back. Ethnonationalism rears its head. Democracy becomes not a vehicle for e pluribus unum but a zero-sum tribalist contest. This dynamic was also at play in the former Yugoslavia, in Zimbabwe, in Venezuela and in virtually every country where there has been a market-dominant minority.

For most of our history, it seemed as though we were relatively immune to dynamics like these. Part of the reason is we never had a market-dominant minority. On the contrary, for 200 years, America was economically, politically and culturally dominated by a white majority — a politically stable, if often invidious, state of affairs.

But today, something has changed. Race has split America’s poor, and class has split America’s white majority. The former has been true for a while; the latter is a more recent development, at least in the intense form it has now reached. As a result, we may be seeing the emergence of America’s own version of a market-dominant minority: the much-discussed group often referred to as the coastal elites — misleadingly, because its members are neither all coastal nor all elite, at least in the sense of being wealthy.

But with some important caveats, coastal elites do bear a resemblance to the market-dominant minorities of the developing world. Wealth in the United States is extraordinarily concentrated in the hands of a relatively small number of people, many of whom live on the West or East Coast. Although America’s coastal elites are not an ethnic or religious minority, they are culturally distinct, often sharing similar cosmopolitan values, and they are extremely insular, interacting and intermarrying primarily among themselves.

They dominate key sectors of the economy, including Wall Street, the media, Hollywood and Silicon Valley. And because coastal elites are viewed by many in the heartland as “minority-loving” and pro-immigrant, they are seen as unconcerned with “real” Americans — indeed as threatening their way of life.