Journal of Political Ecology: 
Case Studies in History and Society




VOLUME 9 (2002)

Ethnic Economies by Ivan Light and Steven Gold, Academic Press (2000), xiii+302pp.


Reviewed by Mohsen M. Mobasher, Department of Social Sciences, University of Houston/Downtown, Houston, TX.

The revival of small business in advanced societies of Europe and the United States has led to a revitalization of scholarly interest in the ethnic economy in recent years. These studies suggest that contrary to what was once predicted, small business self-employment in almost all sectors of the economy has not only persisted, but also continues to attract ethnic minority groups. In fact one general conclusion that can be drawn from the large body of recent research on ethnic entrepreneurship is that immigrant groups are heavily overrepresented in the self-employed business population. Ethnic Economies by Light and Gold is an attempt to provide some insight into the ways in which ethnic groups utilize ethnic, class, gender, and family resources in their entrepreneurial activities.

The authors’ starting point is the observation that although ethnic economies increase competition within and between ethnic groups, they also expand the job supply of the host society and contribute to the general welfare of co-ethnics economically, socially, culturally, and politically. According to Light and Gold, ethnic economies help co-ethnics to “maintain neighborhoods, support communal institutions, assist the indigent, train the recent arrivals, educate and protect children, build political power, and maintain cultural integrity” (p. X).

Light contributes to six of the book’s nine chapters, starting with the first chapter that deals with the conceptual analysis of ethnic economy and its theoretical roots in historical sociology - Marx Weber, and Sombart; African American economic thinkers, notably Booker T. Washington, and the Middleman Minorities literature. Light’s other chapters deal with the size of ethnic economies (Chapter 2); the economic advantages and rewards of ethnic economies such as wealth, income, employment opportunities, and accelerated economic mobility for participants (Chapter 3); utilization of cultural and material endowments of class resources by ethnic entrepreneurs in ethnic economies (Chapter 4); forms of disadvantage and their impact on ethnic entrepreneurship (Chapter 8); and credit issues in the ethnic ownership economy (Chapter 9). Gold provides the other 3 chapters, starting with the examination of ethnic resources and their role in shaping ethnic economies (Chapter 5). He then goes on to examine the vital roles of gender and family arrangements in ethnic economies (Chapter 6) and the broader relationship between the ethnic economies and ethnic communities (Chapter 7).

The introductory chapter is elucidating in that it identifies three related concepts of ethnic ownership economy, ethnic enclave economy, and ethnic-controlled economy. Although these three concepts are related and are derived from the core literature, but they reflect different aspects of the ethnic economy. Following Bonacich and Modell, the authors define ethnic economy as “any ethnic or immigrant group’s self-employed, its employers, their co-ethnic employees, and their unpaid family workers” (p.9). Although Light and Gold retain the content of Bonacich and Modell’s definition of ethnic economy, they change the concept’s name to “ethnic ownership economy” to distinguish between an ethnic economy that is based on property right and ownership and an “ethnic economy whose basis is de facto control based on numbers, clustering, and organization, the ethnic-controlled economy” (p.23). Whereas ethnic ownership economy consists of small and medium size businesses owned by ethnic or immigrant entrepreneurs and their co-ethnic helpers and workers, ethnic control economy Ethnic-controlled economy refers to industries, occupations, and organization of the general labor market in which co-ethnic employees (not owners) exert appreciable and persistent economic power. This power usually results from their numerical clustering, their numerical preponderance, their organization, government mandates, or all four. “Ethnic- controlled” economy is completely independent of the “ethnic ownership” economy. The participants of ethnic controlled economy exert control not ownership authority. Light and Gold believe that the ethnic-controlled economy permits co-ethnics to secure more and better jobs in the mainstream, reduce unemployment, and improve working conditions. Whereas the distinction between ethnic ownership economy and ethnic controlled economy is based on property right, the major distinction between ethnic ownership economy and ethnic enclave economy is spatial clustering of ethnic firms. Unlike the ethnic owned economy which might be evenly distributed among neighborhoods and industries, ethnic enclave economy is clustered around a territorial core. In addition to a locational clustering of firms, an ethnic enclave economy requires economic interdependency and co-ethnic workers, whereas ethnic owned economy requires none of these.

Common to all three of these concepts is the ethnic-based collectivism and its repercussions. Unlike those who argue that ethnicity is economically neutral and never confers economic advantage, Light and Gold assert that ethnicity is advantageous and “ethnic-based collectivism makes a difference to the economic status of immigrants and minority groups in the United States” (p.131). Their identification of three ethnic economies and their advantages for immigrants and minority groups not only diminishes the conceptual clutter in the ethnic economy literature, it also challenges the prevailing assimilation model’s economic theory that always assumed enhanced economic welfare for immigrants who were incorporated into the mainstream economy. The assimilation theory, Light and Gold claim, is too simplistic and ignores “all three ethnic economies in the interest of a homogeneous econospace within which uniform assimilation occurs at a constant speed, a Fordist image that has outlived its usefulness” (p.25). Light and Gold’s argument that ethnicity is economically advantageous is not new to sociology. However, the time is now right, given the widespread recognition of ethnic and immigrant entrepreneurship, for a full appreciation of contribution of ethnic resources to this trend.

Immigrants and ethnic minorities often rely on class and ethnic resources to establish an enterprise. Therefore, Chapters 4 and 5 of the book are devoted to the examination of class and ethnic resource utilization by ethno-racial and immigrant entrepreneurs. A main virtue of these two chapters is the emphasis on the mixture of both class and ethnic resources by ethno-racial and immigrant entrepreneurs in ethnic economies. Light and Gold point out that, although ethnic-only or class-only resource endowments are theoretical possibilities, there are no examples of class-only or ethnic-only resource-mobilizing entrepreneurial immigrant groups in the North American literature. The authors challenge the conventional Marxist view regarding class as the only factor that determines economic relationships and claim that “ethnic resources importantly contribute to entrepreneurship independent of class” (p.102). Light and Gold conclude that all ethnic economies in contemporary American and Canadian society “depend upon mixed class and ethnic resources” (p.105). The authors define class resources as “the vocationally relevant cultural and material endowment of bourgeoisies” (p. 84). Whereas the material side of class resources consists of such tangible components as property and wealth, the cultural elements of class resources include such intangible endowments as values, skills, attitudes, and knowledge that are transmitted in the course of socialization. A bourgeoisie usually has access to both cultural and material resources, but in some instances they are separated. For example, the pre-Mariel Cuban refugees who settled in Miami were from wealthy families in Cuba with a bourgeois cultural background. However, they arrived in Miami with impoverished material class resources.

Unlike class resources that lack ethnic or cultural character, ethnic resources are ethno-cultural in origin and are based on national and/or ethnic identity and affinity of a group. In chapter five which is jewel of the book, Light and Gold explore the contributions of ethnic resources to economic survival of ethno-racial and immigrants groups. Ethnic resources include shared values, skills, orientations, information, social ties, social relations, institutions, organizational techniques, Kinship and marital systems, trust, social capital, cultural assumptions, religion, language, rotating credit associations, entrepreneurial values and attitudes, reactive solidarities, acculturation lag, sojourning orientation, social networks, ethnic solidarity ideology, a middleman heritage, and underemployed and disadvantaged co-ethnic workers and other socio-cultural features of the whole a group that co-ethnics utilize to facilitate their building ethnic ownership economies. As elucidated in this definition, ethnic resources are characteristics of the whole group not just its bourgeois class or individual members. Unlike class resources that are available only to bourgeoisie, ethnic resources are shared collectively and have an influence upon behavior. Ethnic resources are utilized in all aspects of ethnic economies from raising capital, to recruiting labor, to dealing with customers and clients. Ethnic connections not only reduce the costs of doing business, they also provide investment capital, advice, raw materials, training, and access to clients. Moreover, ethnic networks provide job referrals and training for unskilled workers. In addition to providing capital, employment opportunities, and training, ethnic networks combined with ethnic notions of trust, cooperation, and shared fate, provide a basis for political activity among group members. In turn, through political activism ethnic groups “can win concessions from the government agencies and establish a common standpoint for addressing conflicts with opposing groups and interests” (p. 128). While a large part of Chapter 5 is devoted to the examination of the economic benefits of ethnicity, the latter section of the chapter presents an excellent discussion of the significant costs of ethnic resources for ethnic entrepreneurs and their co-ethnic employees.

Offering special favors and free or cheaper service to co-ethnics, hiring co-ethnics rather than workers from the general labor market who possess needed skills because of communal obligations, being ripped off by co-ethnics through fraudulent deals, and antagonistic competition with other co-ethnic entrepreneurs who rely on the same market for supplies, capital, labor, and consumers can limit business success for business owners within the ethnic ownership economy. Co-ethnic workers also encounter limitations and difficulties in ethnic economies, including low wages, long hours, and poor working conditions.

The study of ethnic economies and patterns of class and ethnic resource mobilization has focused primarily upon the activities of immigrant men. Only in recent years have the role of immigrant women and gender relations in the ethnic economies been studied systematically. In Chapter 6 Light and Gold look at the vital role of “gender and families in ethnic economies”. As the title of the chapter aptly indicates, family and gender factors determine patterns of economic integration of ethnic groups. As indicated by the authors, family and gender relations much like ethnicity are based on loyalty, intimacy, and shared destiny. Therefore, as collective entities with unique traditions and common goals, ethnic families, blur “the distinction between production and consumption, employer and worker, exploitation and self-interest, and public and private that underlie contemporary models of economic life” (p.131). Because ethnic families reject individualist, cost-benefit economic behavior, family workers bear the burden of difficult, sometimes exploitative, economic conditions that would not be tolerated by unrelated employees. Given the impact of gender and family on various aspects of ethnic economies, Light and Gold organize this chapter by utilizing three different levels of analysis. The first level is the macro or structural and focuses on the impact of such demographic factors as sex and age ratio; rates of marriage, divorce, and fertility; and household size on economic needs and outcomes of an ethnic group. Other macro factor that determines an ethic groups’ economic standing, Light and Gold note, is the legal status of foreign-born persons. Through a series of wide-ranging statistics collected by other researchers and government agencies, the authors explain, how the increase in labor force participation of ethnic and immigrant women, both documented and undocumented, has been a vital aspect for economic survival of ethnic groups.

At the second, or middle range, level factors that have an impact on an ethnic group’s economic standing include rates of entrepreneurship, job seeking and resource pooling strategies, inheritance patterns, cultural innovations and skills, and generational relations. Light and Gold’s analysis of the collective strategies for economic survival made by families or households and its interplay with the cultural norms regarding economic priorities and gender role; and transnational political, economic, cultural, and familial networks and links, forms one of the highlights of this chapter. Another highlight of this chapter is the examination of the economic contributions of women and other family members to the economic survival of family-based or home-based enterprises wherein women and children provide considerable unpaid labor. The last level of analysis, “micro dimensions,” looks at the growing body of scholarship on conflict, negotiation, exploitation, and frequent realignment within families and between gender groups. Central to the role of families and gender relations in ethnic economies at micro level of analysis is the notion that immigrant women have different opportunities and concerns, and deploy different resources to adapt, negotiate, and realign within both families and ethnic communities.

The ethnic economy literature has been relatively insensitive to the link between the ethnic economy and the ethnic community. Yet, ethnic economies provide ethnic communities with such benefits as job creation and assignment, loan funds, burial benefits, legal advice, allocation of social welfare, education, establishment of ethnic institutions and neighborhood, and communal leadership and advocacy. In return, the collective outlook, ethnic solidarity, ethnic inclusiveness, and mutual ethnic and moral obligations found in ethnic communities contribute to the creation of ethnic economies. Moreover, ethnic communities provide ethnic economies with labor, loan funds, and consumers. A major outcome of the symbiotic relationship between ethnic economies and ethnic communities that is explored in chapter seven is support for what Light and Gold call “ethnic self-help” activities and organizations. Ethnic self-help organizations or communal activities, the authors assert, have normally been supported by shop owners, doctors, artisans and other co-ethnic elite for the purpose of maintaining cultural traditions and practices and reducing dependency on external entities. The symbiotic relationship between ethnic economies and ethnic communities is not always positive. Ethnic communities can limit social, political, and economic options for their members and ethnic elites frequently manipulate co-ethnics for their own benefits. Nevertheless, benefits of ethnic economies to their communities are of great importance.

The explanations for creation of ethnic economies and higher rates of self-employment among some ethno-racial groups are explored in chapter eight. The premise of this chapter is that entrepreneurship in the ethnic ownership economies is the outcome of disadvantages in the labor market plus class and ethno-cultural resources such as social capital. Light and Gold distinguish between simple disadvantage and “resource-constraint variant” theory of entrepreneurship. Simple disadvantage theory argues that disadvantages in the labor market encourage ethno-racial groups to turn to self-employment without invoking resource disparities among groups. The resource-constraint version maintains, in contrast, that market disadvantage alone is insufficient to create entrepreneurship. Labor force disadvantages promote entrepreneurship among those groups with ethno-cultural and class resources than among those lacking them. “The resources provide the means, and the labor force disadvantage the motive. In the simple disadvantage theory, the disadvantaged have ample motive for self-employment, but they often lack the means, material and cultural” (p.210). This does not mean, however, that there are no entrepreneurial activities among those with no resources. As indicated by Light, those with no resources turn to self-employment in the informal economy and are excluded from mainstream self-employment. This is simply because of fewer demands for resources in the informal economy than the mainstream economy.

The book’s final chapter examines the “credit issues in the ethnic ownership economy”. Here, Light and Gold argue that the American financial institutions have failed to provide financial services to immigrants, to the poor, and to women, causing their ethnic economies to grow more slowly and preventing them from generating jobs that would otherwise be possible. This neglect, Light and Gold argue, is minimally related to social discrimination of the banking industry against immigrants, nonwhites, women, and inner city residents. “The main contributor is the high cost banks face when servicing these problem markets” (p. 225). Lacking access to the mainstream savings and credit, however, does not totally undermine ethnic economies. Immigrants, ethno-racial groups, and women, rely on two informal nonblank financial institutions for credit and loan to start a business; microcredit and rotating savings and credit associations (ROSACs). ROSACs are founded by a group of friends or members of an organization who pool their money together and give it to members to start a business or purchase consumer items. When all members have received the joint fund, the club is terminated, and a new one formed. ROSACs are found in Latin America, Central America, Africa, Asia, and the United States. Based on social scientists’ ethnographic evidence, Light and Gold claim that all contemporary immigrant groups in America that originated in the Third World have used ROSACs for financial needs. Microcredit agencies in the United States “provide credit to those who, lacking access to bank credit, are nonetheless capable of developing and maintaining their business with minimal support. The agency provides that minimal support and seeks to recoup the cost from user fees” (p.222). The key for both Grameen-style microcredit and ROSAC non-banking financial institutions to accomplish and enforce this feat is social capital. Whereas banks do not accept social capital as loan collateral, both microcredit and informal credit agencies “orient their entire strategy around social capital” (p.226). Given the major role of informal credit and microcredit agencies and their scarcity, relative to banks, Light and Gold conclude the chapter by indicating the need for a structural reform in American financial system which expands the role of informal credit and microcredit agencies and better serves the needs of the poor, of women, and of small business.

Together, these nine chapters paint a detailed picture of the economic adaptation of immigrants and ethnic minorities in America. The book enriches our understanding of the economic adaptation of immigrants and ethnic minorities in America. Ethnic Economies provides a compelling argument about the economic benefits of ethnicity and ethnic-based collectivism. With Ethnic Economies, Light and Gold provide a valuable addition to the growing literature on ethnic entrepreneurship. The only area that leaves one asking for more involves the overview of major theories and arguments that social scientists have developed to explain the entrance of ethnic minorities and immigrants into ethnic enterprise. The authors only discuss the resource-constraint variant of disadvantage theory for creation of ethnic economies. A review of other major theoretical perspectives that discuss transformations of Western economies and their impact on ethnic entrepreneurship (Light and Bonacich 1988; Waldinger et al. 1990, and Ward and Jenkins 1984,) and “interactive” perspective that focuses on the interaction between the opportunity structures of the host society and ethnic groups (Waldinger et al. 1990) would have enhanced the usefulness of this volume.

In sum, this book presents a vivid and exciting account of ethnic economies in American society, and its use would prove beneficial to scholars, educators, and policy makers alike. I strongly recommend this book to anyone with interest in immigration studies, race/ethnic relations, social inequality, and economic sociology. It contains an impressive array of descriptions and explanations of various immigrant populations and ethnic groups in America. Ethnic Economies is an outstanding work. It will undoubtedly add new dimensions and insights to our understanding of economic adaptation of ethno-racial groups in America. I look forward to using it in my classes.

References Cited:

Light, Ivan H. and Edna Bonacich
1988 Immigrant Entrepreneurs: Koreans in Los Angeles 1965-1982. Berkeley: University of California Press

Waldinger, R., Haward Aldrich, Robin Ward, and Associates
1990 Ethnic Entrepreneurs: Immigrant Business in Industrial Societies. Newbury Park: Sage Publications.

Ward, Robin and Richard Jenkis, eds.
1984 Ethnic Communities in Business: Strategies for Economic Survival. Cambridge: Cambridge University Press.