We’ve heard lots of arguments for same-sex marriage over the past few months, but what about the economic one, asks David McWilliams?

Today at the launch of Fine Gael’s Yes campaign in the forthcoming referendum, the Taoisacah called on the people of Ireland to “open their hearts” to marriage equality. However, we have heard precious little from our politicians about the economics of gayness. This is odd, given the prevalence of a type of ‘tyranny of economics’ in public discourse, where the legitimacy of every political proposition hinges on passing the narrow “but is it good for the economy” test.

Recent economic research in the US reveals that a leading indicator of future wealth of a city or region is a strong and open gay scene. The reason is very simple: there is, and has always been, a strong correlation between tolerance and wealth. The more open, tolerant and irreverent a society and the more foreigners and non-mainstream people living in it, the more effervescent the economy.

In the modern world – where open racism or sectarianism is frowned upon – homophobia is one of the last bastions of intolerance, and so, a good way to measure the broad-mindedness of the region, is to look at how its legislation affects LGBT people.

Soft Economic Power

The American academic Richard Florida has identified a new class he calls the ‘Creative Class’, who work with the creative side of the brain. He believes, and with some compelling evidence, concludes, that the US cities with a high proportion of these types – artists, writers, software engineers, architects, designers and the like – are the cities with the strongest growth rates, the highest standards of living and the most satisfied citizens. In contrast, cities with a much higher blue-collar population are much more susceptible to competition from the third world, particularly China.

The more jobs they lose, the more introspective they become, and the more the Creative Class of these cities flees to other much more attractive places where the arts and café society are flourishing. Therefore, the very essence of the city – its architecture, restaurants, art galleries, open spaces, public parks – its essential feel – is part of the selling package for the economy of the region.

In the past, hard economic power – such as steel and coal reserves, large populations and/or political or military might – mattered. Today, what matters is soft economic power, which captures such ephemeral concepts as the feel of the place, the culture, the experience, the mix of people and the lifestyle.

For high-wage countries like Ireland, the way to stay ahead of the game is to invest heavily in its vibe. In the US, there is a strong positive link between the Creative Class and the Gay Index (the concentration of gay people and the relative tolerance of legislation in a city or state). The reason for this is that gay people are much more likely to feel comfortable and settle in tolerant cities and these places are much more likely to display soft economic power.

LGBTs – the last outsiders

LGBTs are the last outsiders and it has long been noted that outsiders have always created disproportionate economic wealth. Take, for example, the history of the ultimate medieval outsiders – the Jews.

Up until the 15th century, Sicily had it all going on. It was rich, sophisticated, tolerant, mixed, multilingual and important. He who controlled Sicily controlled the Mediterranean, and he who controlled the Mediterranean, controlled the world. Then, in 1492, it all went pear-shaped.

The island was under the control of the crown of Castille and when Ferdinand and Isabella ordered the expulsion of all Jews and Moors from Spain, Sicily had to follow suit. Jews had played a disproportionate role in trade as well as in the professions, particularly those of medicine and pharmacy. As in Spain, Jewish astronomers had used their knowledge of the stars to guide Sicilian adventurers for years.

In 1515 the Jews were all expelled, and within a few years what had been left of Sicilian trade collapsed to almost nothing. Sicily went into an economic tailspin. Without the Jewish traders (who had formed only a tiny percentage of the population), no one traded. Without trade, there was no cash and without cash, there were no jobs.

About 200 years later, Charles II realised that he had to do something about the plight of Sicily. So what did he do? He imported Jews! In 1740, he allowed Jews to return unconditionally. Unfortunately, those who did return found the locals severely hostile and scarpered quickly. Sicily continued to underachieve economically.

Intolerance and economic restrictions

The economic lessons are straightforward. A society intolerant of outsiders will tend to be one which is not curious about other things, where debate is stifled, questioning smothered, cronyism reins, local big-wigs go unthreatened and a small coterie of insiders stitch up the economy. The treatment of the Sicilian Jews has proved to be a good pointer to all these other economic restrictions that intolerance brings.

Back then Jews were the outsiders; these days LGBT people are the outsiders. In fact, many would argue that gays are the new Jews. In the US, the correlation between states that still have homophobic legislation (mainly the poorer southern states) and economic underachievement is startling. In contrast, those with tolerant legislation are booming.

Clearly, it is impossible to disentangle chicken and egg, but the observation alone, coupled with the unambiguous lessons from history regarding tolerance and wealth should give us food for thought.

The smart successful economies of the next 20 years will be those that foster the right conditions for the creative class to flourish. So as we approach the same-sex marriage referendum, let’s not be oppressed by the red mist of past intolerance but rather be enticed by the prospect of future prosperity.

David McWilliams is an economist, writer, broadcaster and journalist.  He initially worked as an economist with the Central Bank of Ireland, UBS bank and the Banque Nationale de Paris. Follow him on Twitter here.