Introduction

The preceding chapter examined one important element in the breakdown of democracy and the rise of dictatorship – the possibility that democracy will become trapped in inaction. This chapter examines a second historically important element in the rise of many autocracies – ethnic conflict and nationalism. Again, the classic example is Nazi Germany, and again the analysis is conducted with special reference to it. Although the word is much bandied about, the concept of nationalism remains largely shrouded in mystery and it is little understood, especially from the point of view of rational choice. In this chapter I will therefore proceed step by step. I begin with an analysis of the economic value of ethnicity (explaining why people form ethnic groups), and I will then proceed from there to the connection between ethnicity and nationalism, and finally to that between nationalism and Fascism. I then try to analyze the origins of prejudice and hatred of other ethnic groups. Finally, I begin to address the most difficult question of all – how these attitudes could result in a willingness to take part in “crimes against humanity” or genocidal actions against minority ethnic groups – in this chapter, and to explore it further in the next one.

The next section of this chapter suggests that in both public and private life, one particularly cost–effective way to provide a foundation for exchange under many circumstances is to invest in ethnic networks or “ethnic capital.”