He's obviously talking about differences which are small by human standards. The rest of the paragraph:
> If you want to know who someone in former Yugoslavia hates, don’t look at the Indonesians or the Zulus or the Tibetans or anyone else distant and exotic. Find the Yugoslavian ethnicity that lives closely intermingled with them and is most conspicuously similar to them, and chances are you’ll find the one who they have eight hundred years of seething hatred toward.
Of course if you mean smaller differences that weren't in part ultimately caused by proximity, there aren't any, but that's almost tautological.
The article compared "South African whites and South African blacks". It sounds like you're comparing Afrikaners and the English?
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The article links "narcissism of small differences" to the wikipedia page which says:
> [It] is the idea that the more a relationship or community shares commonalities, the more likely the people in it are to engage in interpersonal feuds and mutual ridicule because of hypersensitivity to minor differences perceived in each other.
I don't think this even slightly describes the "outgroup conflict" in South Africa. Furthermore, I think that Scott using this as an example minimizes the sources of conflict, e.g. Apartheid, because the rest of the article is solely about outgroup hatred.
People towards the upper side of a social hierarchy, who are not seriously discriminated against tend to find it very easy to discuss discrimination in the abstract, as a kind of intellectual game of chess.
The game's a lot less abstract for the pawns on the board, though.
If you accept the paradox of tolerance, then the truly intolerant are the ones you should not tolerate. Taken to its extreme, you can apply the paradox of tolerance to shun anybody that does not conform to ideological purity.
There is a balance to be found between the two extremes.
Or does it only become a problem with it becomes some amount that's disproportionate to the damage that is allegedly avoided, as a consequence of those actions?
[1] If you believe any non-zero amount of damage is inappropriate, could you provide me with a single example of social progress[2] (or hell, any human, legal, or moral system) that was made with zero amount of collateral damage?
[2] Unfortunately, we have in the past, and currently live in a society where people need to scream, and shout, and break things for even the grossest injustices against them to be taken seriously. It's a natural consequence of self-interested democracy.
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Digression, this is a pretty audacious way to minimize Apartheid.
> South African whites and South African blacks ... So what makes an outgroup? Proximity plus small differences.
Every single human conflict can be described as "small differences" because humans are very similar to each other. Also, it's harder to be in conflict with people far away from you.