Joking aside, the reason for the clinging behavior of fantasy has more to do with the heritage of colonialism than it does with anything else. The last 400 years of empires, scientific racism, hierarchical anthropology, and so on have created a deep link within our conscious and subconscious minds that privileges the West. At some point in our cultural history, we started calling some "ancient cultures" by a new name: "primitive." Thus, Rome became the pinnacle of the West, despite also being an "ancient culture," and all those non-Western cultures, from Africa to Asia to the Americas, became "primitive." "Primitive" ceased to mean "old, dead culture" and
came to mean "unsophisticated, lesser culture."
Note the problematic distinction made between these terms. How can an equally ancient culture be "superior" to other ancient cultures? What makes them superior? A hard question to answer. Some would suggest that the West appeared superior because it rapidly advanced while the rest of the world seemed stuck "in the past." There's not enough space to deal with such a questionable argument here, except to say that there might be good reasons for why some cultures did not "progress" the same way as others.
In contemporary anthropology, however, "primitive" represents the earlier forms of Homo Sapiens sapiens. The Cro Magnon. The first cultures. Rudimentary. But the wider culture has yet to catch on to this usage. Instead, anything "not West" is "primitive" and, therefore, "other." That stems from centuries of imperial rhetoric and Western superiority (a complex, really). Our culture is a product of being told we are special, and that everyone else strives to be like us, to take from us the modes of progress, and so on. The "primitive cultures" were simply "on their way to being advanced, Western ones."
From that perspective, it shouldn't be hard to imagine why the pseudo-medieval setting is the one that dominates fantasy, a generic tradition that began in the West and unfortunately remains there (with some exceptions). For all people in the West, the medieval period is the only medieval reference we can call "ours." This despite the fact that many people in the West have links to other cultures (often intimate links). While these exceptions certainly value non-Western cultures, they are up against a wall which tells them "our history [the West's] is most important, and so you should write analogues of it."
We are starting to see a serious push against this history. The "other" is creeping its way into the dominant discourse of the West, supplanting its authority to remind us that culture is mostly relative. It's a slow, drawn out process, just as imperialism and its cultural parasitism took decades to build and decades to tear down. That's the way it goes, though. When you build an immense hegemonic system of oppression, control, and assimilation, you can't expect tomorrow to be full of sun when we've only just started pulling its ropes on the horizon. At least we have an explanation for the obsession, though. And having that knowledge might be useful some day.
What do you all think? Which recent fantasy novels have you read that don't include Western settings? I immediately think of work by N. K. Jemisin, Nalo Hopkinson, and Karen Lord. Things I haven't read included Saladin Ahmed's Throne of the Crescent Moon, the numerous Philippine SF/F anthologies that Charles A. Tan reminds us about, and a number of interesting works mentioned on the World SF blog (are Lavie Tidhar's fantasy novels set elsewhere?). Let me know of some others. We could make a wicked list of fantasy set somewhere other than the West!
(Question provied by Mike Reeves-McMillan on Google+)