Ethnicity plays an ambiguous role in the great transformation from societies that are rural and agrarian to those that are urban and industrial. On the one hand, ethnicity creates: by providing incentives that organize the flow of resources across generations, it provides the capital for urban migration and the acquisition of skills for industrial employment. On the other hand, ethnicity destroys: ethnic conflict leads to costly acts of violence. On the one hand, ethnic groups promote the forces of modernization; phrased more fashionably, they constitute a form of social capital (Coleman 1990; Putnam 1993). By promoting urban migration and education, they advance the private fortunes of their members. On the other hand, ethnic groups organize politically; occasionally they engage in acts of violence (as illustrated in chapter 9), destroying wealth and discouraging the formation of capital. Ethnic groups can thus both generate benefits and inflict costs on societies.

In advancing this first theme, this chapter advances a second: that the political dangers of ethnicity are imperfectly understood. Every modern industrial country contains urban centers in which politics are organized in significant part by ethnic groups. In the modern world, ethnic politics are normal politics. This being the case, ethnicity need not, in general, be feared. Clearly, however, ethnic rivalries can fuel political violence. To understand fully the significance of ethnicity, it is therefore important to identify the conditions under which ethnic competition can lead to political conflict.