Nonlinear Bad Arguments

Is there an emerging caste system in the West? This provocative thesis was advanced by the writer Arctotherium in Aporia Magazine a few months ago. For "nonlinear ethnic niches," such as Cambodian-run donut shops and Indian-run motels, are supposedly "turning back the clock 700 years" and reversing "centuries of social progress towards impersonal cooperation and economic progress toward larger, better integrated markets."

Fortunately for Americans, such a horrifying vision is backed up by little more than bad analogies and unsupported speculation. This essay will critique Arctotherium's essay, which is a sadly typical example of Online Right pseudo-intellectualism.

Nonlinear Ethnic Niches

First, what's a "nonlinear ethnic niche?" Arctotherium quotes a 1999 New York Times article to explain the phenomenon:

America's motels constitute what could be called a nonlinear ethnic niche: a certain ethnic group becomes entrenched in a clearly identifiable economic sector, working at jobs for which it has no evident cultural, geographical or even racial affinity.

I don't mean Italians owning pizzerias, or Japanese people running judo schools. I mean, to use an obvious example, the Korean dominance of the deli-and-grocery sector in New York -- a city where the Chinese run most laundries and Sri Lankans, in case you didn't know this, run most porn-video stores. Or the Arabs in greater Detroit, who have a stranglehold on gas stations, or the Vietnamese who monopolize nail salons in Los Angeles. Farther afield, I could mention London's taxi drivers, sharp-tongued in their big black cars, many of whom are Jews from the city's East End; or the security guards outside New Delhi's more affluent residences, virtually all of whom are Nepalese; or the prostitutes in the United Arab Emirates, who are so often women from Russia.

How do these niches get established? Arctotherium claims that the most important advantage is access to cheap credit from within their groups. Another advantage is that family members are willing to work for low wages.

You might think this is just capitalism in action: businessmen find ways to reduce capital and labor costs and then pass those savings on to the consumer. And Arctotherium agrees, though he claims this only works in the short-term:

In the short run, consumers benefit, because the lower costs from cheaper financing and labor get passed on. But in the long run, they are harmed because the lack of competition reduces innovation—businessmen protected within their ethnic niche can rest on their laurels.

Here's where you start to see the pseudo-intellectual nature of the argument. You have here a hypothesis of a two-stage progression of those niches, which you should be able to test against data. Recall that the NYTimes article that appeared to coin the phrase was from 1999 - this is not a new phenomenon. You could chart market concentration against price to the consumer over time, showing examples of the two-stage process. You could then develop a theory and use it to predict which "niches" currently in stage 1 will develop to stage 2.

Arctotherium does none of that. He simply tells his audience that these "niches" are bad over the long term. With no timetable, the theory cannot be falsified, as any evidence for beneficial effects can be dismissed as "short-term benefit." The closest thing to evidence he provides is the claim that Cambodian donut shop owners in Southern California "are notoriously conservative and invest and innovate very little," but he doesn't provide any evidence that this produces higher prices or worse selection than in areas where the Donut shops are not run by Cambodians.

Theoretical Objections

Bereft of empirical evidence, Arctotherium presents theoretical reasons to believe nonlinear ethnic niches are harmful:

18th and 19th century nation-builders (from Bismarck to Alexander Hamilton to Pyotr Stolypin to Meiji Japan to Napoleon) were obsessed with creating national markets, the bigger and more homogenous the better. Breaking down internal barriers to trade allows for more competition and greater economies of scale, thereby boosting national prosperity and national power.

It also breaks down internal divisions within the nation, allowing it to be more united in the face of outside threats. Most relevant discussion concerns political barriers, such as internal tariffs (which can be removed through legislation), or physical barriers, such as mountains (which can be removed through infrastructure). Yet cultural barriers (especially language) have the very same effects{snip}

The fallacy here is that the immigrants do not assimilate Americans into their culture. If there are 300 million Americans and a bunch of niche-creating immigrants arrive, that market of 300 million Americans is still there. Since, as Arctotherium notes, the children of such groups often leave their "niches" (more on that later), they serve to increase the size of the "culturally American" market.

Arctotherium cites a study that more ethnic diversity in America is associated with more small firms and fewer large firms. He doesn't consider the obvious explanation for this: most non-whites in America are black or Hispanic, whose IQs are lower than whites on average. He is well aware of such differences and selectively forgetting about them strikes me as very dishonest. Anti-immigrant arguments very often do this, placing all "non-whites" into the same bucket and then telling us to draw conclusions about "non-white" immigrants from "non-white" Detroit. But even if he could prove that Cambodians, Chaldean Catholics, and Gujarati Patels will never create large, dynamic firms like Tesla or Apple, it still wouldn't imply what he's telling you it implies. Suppose Bill Gates moves his maid into his mansion. The "per capita" wealth, intelligence, and innovativeness of the house will plummet, yet no real decline has occurred. Likewise, immigration of untalented groups does nothing to dismantle the firms already present in America or prevent the children of Americans from creating new ones.

In one of the many contradictions of Arctotherium's post, he simultaneously claims such ethnically-based firms are bad because their pathologies cause them to fail to grow, and that if not stopped they "can take over the entire economy, spreading their pathologies to sectors far more important than Dunkin' Donuts." He warns that we risk a situation like that of India, where rampant caste discrimination leads to economic inefficiency:

{snip}About 40% of Indians are willing to forgo money equivalent to 10 days wages just to avoid doing non-caste-appropriate tasks for 10 minutes.

Something similar occurs in capital markets, with caste members refusing to lend to non-caste members, leading to cases where entrepreneurs of the locally-dominant caste in a certain niche are far less capital efficient than their out-caste competitors but never get outcompeted—causing persistent capital misallocation. See Munshi (2017) for an example of this in the Tirupur knitted garments industry.

This sounds suspiciously reminiscent of "systemic racism," but even if it's all true, it isn't explained why Americans can't respond by not doing business with such inefficient, dysfunctional firms.

Arctotherium claims that "middleman minorities" are not conducive to economic development. He gives the examples of Eastern Europe, the Ottoman Empire, Southeast Asia, and India, which stagnated in comparison to Northwestern Europe, which had middleman majorities. While Eastern Europe and the Balkans stagnated compared to Northwest Europe, so did Russia proper, Iberia, China, Korea, and Japan. The two wealthiest countries in Southeast Asia, Malaysia and Singapore, are the two most heavily Chinese. One can also look at the countries of Southern Africa, where previously ruling white settlers became "middleman minorities" upon independence and whose expulsion in Mozambique and Zimbabwe led to poverty and collapse.

Our Noble Gas-Station Jobs!

For generations, working-class Americans have worked hard to allow their children to escape the working class. White collar work was better not just because of the superior pay and working conditions, but also because of prestige. The nonlinear ethnic nichers are no exception. Arctotherium claims that "second- and third-generation co-ethnics often leave." The low prestige of these jobs "comes across very strongly in the history of the Cambodian donut niche I've been relying on: several owners express contempt for the industry but say it's good money."

The high demand for prestigious, white-collar work has resulted in a class of people who aspired to such work, acquired the necessary educational credentials, and then found they couldn't get hired. Much of politics is downstream of this problem, with wokists telling the female and non-white members of this class they're entitled to jobs that "privileged white men" are unfairly hoarding. Arctotherium has a different solution:

{snip}small business ownership (especially franchises) was one of the classic paths of upwards mobility for Americans. As ethnic networks take over more and more sectors, this gets closed off, leaving only the incredibly overcrowded path of college and a professional career. The historic American love of economic independence through ownership is dying.

Just as wokists declare that it's a problem that female and non-white children can't see themselves "represented" in positions of power, Arctotherium declares that it's a problem that American children can't see themselves managing a 7-Eleven in the middle of nowhere or opening up a donut shop at 5:30 in the morning:

{snip} This is psychologically self-reinforcing: the more dominant a group is within its niche, the less likely outsiders are to imagine themselves entering it and the more likely insiders are to imagine themselves staying put.

Imagine you're a white woman, "cross-pressured" by your race and gender. One tribe says, "see that white man who's the CTO, I'll give you his job." Another says, "see that Indian who runs a dry cleaner, I'll give you his job." If you're going to embrace an ideology based on envy and zero-sum thinking, the former will be more attractive.

Arctotherium might respond that his vision is more realistic than the wokists'. It'd be nice if we could all be tech billionaires, but we can't. Indeed, his vision is very realistic. It's so realistic you don't even need to make any policy changes at all. College-educated Americans who can't get that interview with the law firm already work as owners/managers at Pizza Hut. If you're reading this, you're probably a college-educated American, and you've probably met such people. You didn't think, "oh man they were so lucky to get that opportunity, I thought that was taken over by the nonlinear ethnic niche." Promising college-educated Americans such jobs will go over as well as presenting a kid on Christmas with a gift-wrapped toy he already owns and doesn't play with anymore.

The American Right is associated with a great many things: capitalism, whiteness, Christianity, American patriotism, individual liberty, limited government, traditional family values, and a strong national defense. Increasingly, it's associated with the promise of low-status jobs most people don't want: restaurant management, factory labor, and even jobs held by illegal aliens. Take Secretary of Labor Lori Chavez-DeRemer, who said the following:

FOX: I think American citizens are willing to do the jobs that illegal immigrants are willing to do.

LORI CHAVEZ-DeREMER: Americans are willing to do the job. What we have to give them is the opportunity to have those jobs.

I don't intend to strawman Arctotherium, who would probably say that such jobs should be automated. But even intelligent people can find themselves subconsciously affected by rightoid brainworms, in this case the backward-looking Rightoid vision. How great it will be if we're "trad," marry young, don't divorce, and have a lot of kids, live in small towns, and work in the fields and factories and gas stations like in the golden age of the 1950s. It doesn't appeal to those who aspire to move to San Francisco and start a 100-million-dollar tech company. It doesn't appeal to the anti-intellectual low-class people who spurn higher education: they want to be athletes, musicians, actors, and social media influencers, not sit behind the counter at the gas station. And it doesn't appeal to actually-existing trad Americans, who understand that far from being trad, the working-class has higher rates of bastardy, divorce, obesity, drug abuse, and other social maladies.

Why Not Compete?

What is to be done? Arctotherium's solution, of course, is immigration restriction. Whether or not this is a good idea, it doesn't seem likely anytime soon, and there's no more immediate, practical solution. The essay's final paragraph is typical of far-right pessimism and helplessness, for we'll just have to sit around waiting for Daddy Government to save us:

The bad news is that this breakdown only happens if immigration is stopped. As long as migration from the old country continues, ethnic networks maintain their sense of apartness from broader American society and can continue to dominate their niches and take over ones. There is no upper limit to this process. Until that changes, India awaits.

As a thought experiment, suppose that Arctotherium is correct about these niches. Should we despair? Not at all. If the Greater Detroit Arabs are running a gas station cartel and gouging the consumer, you could find evidence of this, take it to ExxonMobile and propose they make a boatload of money by undercutting the "cartel." Does anyone think a company that figures out how to extract oil from beneath a mile of ocean would struggle with distributing gas in an urban area? They might hire you for your demonstrated business prowess, or they might steal your idea and tell you to take a hike. Either way, the cartel is undermined. Even if you don't want to personally open a donut shop, maybe your cousin is open to the possibility, and you can encourage him to do so thinking he'd probably outcompete the nepotistic Cambodians who are hostile to innovation.

Arctotherium's complaints about nonlinear ethnic niches parallel those that blacks have long made against businesses in their neighborhoods owned by whites, Jews, or Asians. He doesn’t note these parallels, probably for the obvious reason. While blacks have promoted “black-owned businesses” as an alternative to the allegedly exploitive and racist White/Jewish/Asian businesses, no such high-agency behavior is likely to be forthcoming from the far-right. Aporia readers aren’t living in the ghetto and struggling to afford groceries at the Korean-run grocery store, they’re white collar guys who may be looking for a reason to oppose all immigration, which leads them to overlook the fact that Arctotherium’s essay provided no real evidence.

Aporia Magazine has a lot of enemies: the woke Left that would like to shut it down for exploring race and intelligence and a not inconsiderable portion of the Right for whom it's guilty of the unpardonable sins of "eugenics" and thinking the Earth is more than six thousand years old. Given that, I'm not sure why it wants to pick a fight with the Cambodian whose sin is not being innovative enough with his donut machine.

Well, actually, I do have a theory. The same low-agreeableness personality trait that made Aporia writers open to heretical views on HBD also predisposes them to pick fights with potential neutrals and allies. They can then use HBD as a ready-made explanation for their marginalization: people Fear The Truth. It may be that people are turned off by hyperbolic crap about how Chinese-owned dry cleaners represent a new caste system.

One could imagine the American Right attempting to ally with nonlinear ethnic nichers. They have little tolerance for crime, no white guilt complex over slavery, natural hostility to the "LGBT-inclusive curriculum," and no desire to use anti-discrimination law to force their way into American institutions. And if the issue is that white nationalists don't want them intermarrying with whites and diluting the white gene pool, their ethnic separatism can make them allies on that front, too. Thankfully, the mainstream GOP is smarter than the far-right, and Asians moved significantly toward the Republican Party in the 2024 elections. Let's hope Republican politicians continue in blissful unawareness of "nonlinear ethnic niches."