Michiel's Blog

Free market democracy as engine for ethnic fire

I listed the most relevant quotes from a thought-provoking article that I found here, by Amy L. Chua, Professor of Law at Yale Law School.

There exists today a phenomenon - pervasive outside the west yet rarely acknowledged, indeed often viewed as taboo - that turns free market democracy into an engine of ethnic conflagration. I am speaking of the phenomenon of market-dominant minorities: ethnic minorities who, for varying reasons, tend under market conditions to dominate economically, often to a startling extent, the indigenous majorities.

Market-dominant minorities can be found in every part of the world. The Chinese are a market-dominant minority throughout southeast Asia. Whites are a market-dominant minority in South Africa - and, in a more complex sense, in Brazil, Ecuador, Guatemala and much of Latin America. Indians have historically been a market-dominant minority in east Africa, the Lebanese in west Africa and the Ibo in Nigeria. Croats were a market-dominant minority in Yugoslavia, as Jews are in post-communist Russia (six of the seven biggest "oligarchs" are of Jewish origin). India has no market-dominant minority at the national level but plenty at the state level.

Market-dominant minorities are the Achilles heel of free market democracy. In societies with such a minority, markets and democracy favour not just different people or different classes but different ethnic groups. Markets concentrate wealth, often spectacular wealth, in the hands of the market-dominant minority, while democracy increases the political power of the impoverished majority. In these circumstances, the pursuit of free market democracy becomes an engine of potentially catastrophic ethnonationalism, pitting a frustrated indigenous majority, easily aroused by opportunistic politicians, against a resented, wealthy ethnic minority. This conflict is playing out in country after country today, from Bolivia to Sierra Leone, from Indonesia to Zimbabwe, from Russia to the middle east.

Since 11th September, the conflict has been brought home to the US. Americans are not an ethnic minority. But Americans are perceived as the world's market-dominant minority, wielding disproportionate economic power. As a result, they have become the object of the same kind of popular resentment that afflicts the Chinese of southeast Asia, the whites of Zimbabwe, and the Jews of Russia.

Global anti-Americanism has many causes. One of them is the US-promoted global spread of free markets and democracy. Throughout the world markets are perceived as reinforcing US wealth and dominance. At the same time, global populist and democratic movements give strength and voice to the impoverished masses. The result is that Americans have directed at themselves what the Turkish writer Orhan Pamuk calls "the anger of the damned."

For globalisation's enthusiasts, the cure for group hatred and ethnic violence around the world is more markets and more democracy. Together, markets and democracy will gradually transform states into a war-shunning, prosperous community, and individuals into liberal, civic-minded citizens and consumers. Ethnic hatred and religious zealotry will fade away.

I believe, rather, that in the numerous societies around the world that have a market-dominant minority, markets and democracy are not mutually reinforcing. Because markets and democracy benefit different ethnic groups in such societies, the pursuit of free market democracy produces highly combustible conditions. In absolute terms, the majority may or may not be better off - a dispute that much of the globalisation debate revolves around - but any sense of improvement is overwhelmed by its continuing poverty relative to the hated minority's economic success. More humiliating still, market-dominant minorities, along with their foreign investor partners, invariably come to control the crown jewels of the economy, which are often symbolic of the nation's patrimony and identity - oil in Russia and Venezuela, diamonds in South Africa, silver and tin in Bolivia, jade, teak and rubies in Myanmar.

Introducing democracy under such circumstances does not transform voters into open-minded co-citizens in a national community. As America celebrated the spread of democracy in the 1990s, the world's new political slogans were these: "Georgia for the Georgians," "Eritreans out of Ethiopia," "Kenya for Kenyans," "Kazakhstan for Kazakhs," "Serbia for Serbs," "Hutu Power," "Jews out of Russia."

The backlash against a market-dominant minority typically takes one of three forms. The first is a backlash against markets that seem skewed in favour of the market-dominant minority. The second is an attack on democracy by forces favourable to the market-dominant minority. And the third is violence, sometimes genocidal, against the market-dominant minority itself.

Zimbabwe illustrates the first kind of backlash - an ethnically targeted anti-market reaction. For many years, Robert Mugabe has encouraged the violent seizure of 10m acres of white-owned commercial farmland.

Watching Zimbabwe's economy take a free fall as a result of the mass land grab, the US and Britain, together with dozens of human rights groups, urged Mugabe to step down and called for "free and fair elections." But the idea that democracy is the answer to Zimbabwe's problems is naive. Perhaps Mugabe would have lost the 2002 elections in the absence of foul play. But even if that is so, it is important to recall that Mugabe himself is a product of democracy. The hero of Zimbabwe's black liberation movement and a master manipulator of the masses, he swept to victory in the elections of 1980 by promising to expropriate white land. Repeating that promise has helped him win every election since. Moreover, Mugabe's land seizure campaign was another product of the democratic process.

Rather than a backlash against the market, in some cases there is a backlash against democracy. The world's most notorious cases of "crony capitalism" have all involved partnerships between a market-dominant ethnic minority and a co-operative autocrat. Ferdinand Marcos's dictatorship in the Philippines sheltered and profited from the country's wealthy Chinese before he was driven from office in 1986. And the bloody tragedy of Sierra Leone's recent history can be traced in significant part to the regime of President Siaka Stevens, who converted his elective office into a dictatorship during the early 1970s and formed an alliance with five of the country's Lebanese diamond dealers.

The third and most ferocious kind of backlash is majority-supported violence aimed at eliminating a market-dominant minority. Three recent examples are the ethnic cleansing of Croats in parts of the former Yugoslavia, the attacks on the Chinese minority in Indonesia and the Tutsi slaughter in Rwanda. In each case, democratisation released long-suppressed hatreds against a prosperous ethnic minority.

By the 1990s, per capita income in northern Yugoslavia was three times that in the south. The sudden coming of electoral democracy helped to stir ancient enmities. In Serbia, Slobodan Milosevic swept to power in 1989. In a famous speech delivered in March 1991 - including an allusion to Croat and Slovene market dominance - Milosevic declared: "If we must fight, then my God we will fight. And I hope they will not be so crazy as to fight against us. Because if we don't know how to work well or to do business, at least we know how to fight well!"

The anti-globalisation movement asks for more democracy. But unless democratisation means more than unrestrained majority rule it can be short-sighted, even dangerous. The fall of Suharto's Indonesian dictatorship in May 1998, for example, was accompanied by an eruption of anti-Chinese violence.

It is ethnicity, however, that gives the combination of markets and democracy its special combustibility. Ethnic identity is not a static, scientifically determinable status but shifting and highly malleable. In Rwanda, for example, the 14 per cent Tutsi minority dominated the Hutu majority economically and politically for four centuries, as a kind of cattle-owning aristocracy. But for most of this period, the lines between Hutus and Tutsi were permeable. The two groups spoke the same language, intermarriage occurred, and successful Hutus could "become Tutsi." That ceased after the Belgians arrived and, steeped in specious theories of racial superiority, issued ethnic identity cards on the basis of nose length and cranial circumference. The resulting sharp ethnic divisions were later exploited by the leaders of the Hutu Power movement, especially after US and French pressure to democratise in the early 1990s.

Ethnic identity is rarely constructed out of thin air. Subjective perceptions of identity often depend on more objective traits assigned to individuals based on physical features, language differences, or ancestry. If you tell black and white Zimbabweans that "ethnicity is a social construct" you will not be taken seriously. Moreover, there is zero intermarriage between blacks and whites in Zimbabwe, just as there is almost no intermarriage between Chinese and Malays or Arabs and Israelis.

In the many countries that have pervasive poverty and a market-dominant minority, democracy and markets - at least in the raw forms in which they are currently being promoted - can proceed only in deep tension with each other. In such conditions, the combined pursuit of free markets and democratisation has repeatedly catalysed ethnic conflict in highly predictable ways.

In The Coming Anarchy, Kaplan contrasts Lee Kuan Yew's prosperous, authoritarian Singapore with the murderous, "bloodletting" democratic states of Colombia, Rwanda, and South Africa, and condemns America's post-cold war campaign to export democracy to "places where it can't succeed." This is a refreshingly unromantic view, but ultimately unsatisfactory. As one writer has observed, "If authoritarianism were the key to prosperity, then Africa would be the richest continent in the world." Ask (as some do) for an Augusto Pinochet or an Alberto Fujimori, and you may get an Idi Amin or a Papa Doc Duvalier.

The best economic hope for developing and post-communist countries does lie in some form of market-generated growth combined with some form of democracy, with constitutional constraints, tailored to local realities. But if global free market democracy is to succeed, the problem of market-dominant minorities must be confronted.

The most obvious step is to try, in consensual ways, to dilute the market dominance of certain groups. In South Africa or Latin America, for example, educational and other opportunities for the indigenous majority should be strongly backed by the international community. Yet research suggests that spending on education, if not accompanied by major socioeconomic reforms, produces few benefits.

To level the playing field in developing societies will thus be a painfully slow process, taking generations if it is possible at all. More immediate measures will be needed to address the potentially explosive problems of ethnic resentment and ethnonationalist hatred that threaten these countries. Western-style redistributive programmes - progressive taxation, social security, unemployment insurance - should be encouraged, but, at least in the short run, have limited potential. There simply is not enough to tax, nor a reliable transfer mechanism. Other possibilities include the idea of Peruvian economist Hernando de Soto (in The Mystery of Capital ) to give the poor in the developing world formal, legally defensible property rights to the land they occupy but to which they very often lack legal title. This would make it easier for them to join the market system.

For better or worse, the best hope for global free market democracy lies with market-dominant minorities themselves. Or at least they are in the best position to address today's most pressing challenges. To begin with, it must be recognised that some market-dominant minorities engage in practices - bribery, discriminatory lending, labour exploitation - that reinforce ethnic stereotypes and besmirch the image of free market democracy. In Indonesia, Suharto's "crony capitalism" depended on a handful of Chinese magnates and fuelled huge resentment of the Chinese community generally.

More positively, if free market democracy is to prosper, the world's market-dominant minorities must begin making significant and visible contributions to the local economies in which they are thriving.

The argument of this essay is about unintended consequences, not about apportioning blame. The results of democratisation in Indonesia have been a disaster. But if forced to place the blame somewhere, I would point to 30 years of autocracy and crony capitalism under Suharto. Similarly, in Iraq, with its complex mix of religious and ethnic groups, popular democracy might produce undesirable results. But that is not the fault of democracy. If anything, the blame rests with Saddam Hussein's regime which fostered divisions of various kinds. This does not, however, alter the fact that given the conditions that exist in many postcolonial countries - created by history, colonialism, divide and rule policies, corruption, autocracy - the combination of laissez-faire capitalism and unrestrained majority rule can have catastrophic consequences.