According to Will Kymlicka in his book Contemporary Political Philosophy from 2002 the debate on multiculturalism has gone through three stages. As Angela Merkel, the German Chancellor, points out we might have entered in 2010 a 4th stage.
The debate began in the 1970s and 1980s with an approach that divided the main liberal culture into individualism and collectivism, where the minority groups were identified as communitarian groups.
It turned out that this was an unhelpful way of characterizing the problem since most members of the typical ethnocultural minority does not have problems with liberal values and individual autonomy. In fact, Kymlika says that:
"...the overwhelming majority of debates about multiculturalism are not debates between a liberal majority and communitarian minorities, but debates among liberals about the meaning of liberalism."
Instead a "liberal culturalism" position was reached where minorities exist within the liberal state sharing most of their values and adding cultural attributes to this that don't interfer with liberalism. This was my own position before I read Kymlicka's book.
Now, the third stage is multiculturalism as a response to nation-building, ie promoting integration into what is called a societal culture. The ethnocultural minority was treated with 'benign neglect' originally but now was supposed to integrate into society via nation-building.
It seems like benign neglect of various cultural attributes and integration did not work and when Merkel says that multiculturalism has failed she might mean that benign neglect and wishful thinking about an automatic integration based on common sense did not work.
What Kymlicka avoids talking about at length is that some minority groups are conservative in their ways and impose illiberal ways on their members. Others prevent their children from studying and thus getting a proper chance of integrating. Another problem is the moral right of telling people to follow the Swedish Law in a more and more rule based society. Personally I think it would be very difficult with varying types of legal systems operating at the same time.
The major issue then is what might work since the present approach have failed? The common language clause seem for most people a self evident requirement but ethnocultural minorities are apparently living in such ways that they are not motivated. Therefore I have no idea what the 4th stage of multiculturalism might be.
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