Political correctness is good for business, say UBS economists

Complaints about political correctness could well point to

an economy's underlying health, according to new
research which examines the relationship between a
society's attitudes and its economic success.

'Any company that exhibits prejudiced behaviour is basically sending out a major 'sell' signal to all
concerned' Photo: Graeme Williams

By Emma Rowley
7:52PM BST 30 Jun 2011
Aside from the human cost of discrimination, there is an economic case to be made for an
open-minded acceptance of others' differences, analysts at UBS argue.
Prejudice - defined as a negative, generic and irrational attitude towards a specific group in
society - appears to be both a symptom and a cause of economic weakness, they found after
crunching data on competitiveness from the World Economic Forum and survey evidence of
nations' attitudes.
The economic cost of prejudice arises as certain members of society are prevented from using
their talents to their full, supressing innovation. That means prejudiced people effectively act

as 21st century Luddites, the modern day versions of the 19th century workers who protested
against the new machinery of the industrial revolution, the analysts believe.
Just as they [the Luddites] would go around smashing up machines they were scared of,
[prejudiced] people are effectively destroying human capital, said Paul Donovan, the UBS
economist leading the research. What would happen if the secret to energy effectiveness or
growing food productivity is locked up in the mind of somebody who is denied the
opportunity to develop because of prejudice?"
As examples of such destruction of "human capital", Mr Donovan pointed to Ugandas
expulsion of Asian workers and the loss of their professsional skillset in the 1970s, and - in
the UK - the tragic case of Alan Turing, the Second World War code breaker who killed
himself after being tried and convicted of being homosexual.
"Any society - or indeed, any company - that exhibits prejudiced behaviour is basically
sending out a major 'sell' signal to all concerned, Mr Donovan said.
The issue is becoming all the more pressing, according to the analysts, who see the world
entering an environmental credit crunch in which scare resources mean human ingenuity
will be the main driver of economic activity. A society which suppresses or ignores certain
members will therefore be hobbling itself in the global competition.
However, the aftermath of the financial crisis means that there is a risk prejudice is on the
rise, the team warned. People are becoming more nervous about their standards of living and
more aware of income inequalities, which were previously disguised by easy credit. In such
an environment, people may be more inclined to resent those they perceive as a threat to their
relative social position.
That means much-maligned "political correctness" could point to economic strength, if it
appears in the desired form.
Political correctness is a very loose term, said Mr Donovan. If we are looking at absolute
positive discrimination under political correctness, the view of an economist is that any
discrimination ... is economically damaging. If its about [promoting] opportunity because of
language and behaviour, then thats something than can actually foster economic growth in a
country."
The team looked specifically at the economic impact of racism, xenophobia, religious
intolerance and homophobia, although Mr Donovan cautioned that other forms sexism or
prejudice against people with disabilities were as pernicious. All prejudice, whether
discrimination by gender or disability, is equally detrimental to economic development, he
said.