Summary:
After spending enough time in the US, one gets used to the self congratulatory view among Americans about the benefits of free markets and democracy. Since free markets and democracy have made them into a superpower (and kept them there), they assume the same applies to other countries. In their naivete, they proceed to implement those policies using the economic levers they have at their disposal (foreign aid) and are shocked to discover democracy and free markets have resulted in even more anti americanism than before. This book provides an explanation of why the combination of free markets and democracy as sold by Western nations is a recipe for disaster to any country that decides to move forward with it. This book was written right after US went into Iraq and its advice on looking at free markets and democracy as less than ideal solutions could have done wonders for US if only it had been followed. The glaring omission in the whole book is the one about South Asia - Sri Lanka and Pakistan make cameo appearances in their treatment of Tamils and Sindhis respectively but India is completely left out. Considering the crazy quilt of differences in India (language, class, religion, caste) it might have muddled the message that the author was trying to convey through the book. There is good coverage of Indian expatriates in this book because they are market dominant minorities in East Africa. It is also a devastating critique of the lack of historical knowledge and humility of Western advisers when they provide the free market and democracy prescription without understanding their own countries' history with both free market and democracy. It becomes malpractice when those Western nations recommend a prescription of free markets and democracy in their most extreme forms. The author is also curiously optimistic about the backlash against free markets and democracy in US itself. Granted, there is no market dominant minority in US as whites comprise around 80% of the population and are also the economically dominant ethnic group. She lays out her reasoning with respect to US but then points to the economic and political success of immigrants in US as a reason why US wont have a backlash against free markets and democracy.
Analysis:
This book was published in 2004, right after US barged into Iraq under the guise of Weapons of Mass Destruction and stayed on for promotion of democracy and free markets. To me, the US invasion of Iraq represented the moment its global influence on the world turned into a dark force. The dotcom bubble and Enron shenanigans showed an US economy that was over reliant on debt and ponzi schemes for growth. The trouble with 2000 presidential election results showed the political class in US to be bereft of moral scruples. The US invasion of Iraq showed the exposed underbelly of US military - in each of these domains, US vulnerability was primarily because of inexplicable decisions that US made, not because of an inherent weakness in US. What was restricted to a few sectors in 2000 (High tech, Energy) spread across every sector of the US economy during the 2008 recession.September 11 attacks, as heinous as they were, caused US to swing blindly in retribution, playing into the hands of Islamists. Its military operations in Afghanistan were fully justified (considering the Osama Bin Laden was holed up there). US then proceeded to fritter away any goodwill and sympathy it had from September 2001 attacks by attacking Iraq. I am always wistful about the counterfactual - if US had managed Saddam Hussein through inspections and incremental tightening instead of indulging in an orgy of violence under the cover of (invisible) weapons of mass destruction.
Free markets and democracy promotion have been part of US foreign policy for a long time. While free (as opposed to regulated) markets have been shown to be an empty suit repeatedly, that has not stopped Western experts (IMF, World Bank, US) from parroting its benefits to non Western nations (and sometimes tying aid to implementation of free market reforms).The author traces the devastating impact of these twin pillars of US foreign policy on non Western nations. She defines them as follows:
Market Economy (Free Markets) - Broad spectrum of economic systems based primarily on private property and competition, with government regulation and redistributive policies (varying from substantial (US) to extensive (Scandinavian countries).
Democracy - Primarily refers to US driven efforts in non Western nations, focused on immediate elections and universal suffrage
Ethnic identity - Subjective and primarily refers to group identification (race)
The preeminent proponent of US drive to implement free markets and democracy has been Thomas Friedman and it is in that context, she addresses their impact on non Western nations. She walks through multiple case studies of the twin devils of free markets and democracy promotion and discusses how they have led to increasing ethnic violence in those nations. While she is a supporter of both free markets and democracy, her beef is with the approach of US (and other Western nations) foreign policy that advocate both of them at the same time. In each of those cases, she identifies an affluent ethnic minority (that she refers to as market dominant minority) living among a poor native majority - some examples are Chinese in Indonesia, Indians in East Africa. In her telling, free markets benefit the market dominant minority while democracy benefits the poor native majority. By implementing them at the same time, it puts both of them in collision course with each other and when ethnic hatred enters into the picture (because of differing ethnicities, wealth levels, education etc.,.), it is a recipe for disaster. The market dominant minorities control the economic levers as they are the ones most conversant with trade and foreign investment. The poor native majority looks at the success of the market dominant minority and feels itself shut out from the benefits of free markets.
It uses the tool that its numerical superiority provides, democracy to counter the influence of market dominant minority. This approach benefits demagogues who can appeal to the grievances of the poor native majority with promises of booting out the market dominant minority and capturing the benefits for the poor native majority. Well meaning activists from Western world spouting anti-globalization rhetoric do not help the matters either - to them, democracy is the panacea that heals all and do not take into account how much ethnic hatred can derail fruits of democracy. She also expounds at length on the hypocrisy of US (and Western nations, through their lackeys at IMF and World Bank) that demand immediate opening of free markets with least amount of regulations (laissez faire) while following the opposite prescription in their own countries - An example would be the successful antitrust case that US mounted against Microsoft as a monopoly. She calls for humility on the part of US (and Western nations) when pushing for free markets and democracy understanding that the success of free markets and democracy was the result of a long and hard fought struggle in every developed country. She splits the book into 3 sections - the first section details the economic realities of globalization for a select number of non Western nations, the second section explains the political consequences of globalization in those countries and the third section provides suggestions and remedies.
Economic realities of globalization:
British colonialism (as with European colonialism elsewhere) benefited some ethnic minorities to the detriment of the poor native majority in their colonial possessions. In Burma, with support from British colonialists, Indian capitalists became economically successful, resulting in periodic ethnic riots by Burmans that killed Indians in large numbers. The Indian community has now been reduced to small numbers and has been replaced by Chinese capitalists and their success has made them the target of Burmans. British colonialists have been replaced by the Burmese Junta (SLORC) (even though Aung San Suu Kyi recently took over power from them). US boycotted Burma on account of its human rights violations and China stepped into the vacuum and has completely dominated the trade in Burma. Because of SLORC's need for money, Chinese have been able to import Chinese workers from the mainland, shutting out ordinary Burmans. As a result, Burmans see their country's natural resources being traded away to China along with its economic benefits.
The open markets favored by the Junta has resulted in price increases of consumer goods further increasing the hostility of the Burmans towards the Chinese. What happened in Burma has been replicated across South East Asia (Philippines, Vietnam, Malaysia, Indonesia, Thailand). Thailand, Malaysia and Indonesia have some Indian traders but the market dominant minority in all these countries happen to be Chinese. Every year, IMF and World Bank dutifully puts out a report card on the progress countries have made under globalization. In the eyes of the poor native majority in these countries, the beneficiaries have been the Chinese and corrupt native politicians. Across all these countries, Chinese are driven to succeed in trade in their adopted homelands and practice frugality, hard work, willingness to delay gratification and an intense desire to accumulate wealth as an end in itself. Their success has ensured their control over any foreign investment made in these countries.
In South America, Europeans forcibly took over the land and resources from the native Indian majority, leaving them destitute. The economic power garnered by Europeans and their descendants (mixed race or mestizos) has ensured a privileged position for them. In recent times, there have been political challenges to their economic power from leaders who used the numerical advantage of the poor Indian majority - Evo Morales in Bolivia, Hugo Chavez in Venezuela etc.,. These leaders proudly flaunt their Indian heritage that attracts the poor Indian majority to their side. Historically, Indians in South America have always been entrepreneurial. But the control of economic levers rested in the hands of Europeans and mestizos which shut them out of the benefits of economic growth in their own countries. Globalization has benefited the European descendants disproportionately as they have proven to be natural allies of foreign investors and Western aid agencies (in terms of language, race and class). Constant denials of Europeans in South America notwithstanding, there is an underlying hierarchy of ethnic groups among the population that starts with Europeans and mestizos at the top and ends with the ethnic groups of the poor Indian majority at the bottom. Across, Mexico, Bolivia and other South American countries, skin color demarcates the powerful (whites and mestizos) from the powerless (Indians). The poor Indian majority also suffers from a massive inferiority complex because of their defeat at the hands of the Europeans(even if that defeat came about because of persistent cheating and underhandedness on the part of Europeans). To add insult to the injury, recently migrated ethnic groups like the Lebanese and Jews have made enormous strides in dominating South American trade. While that has loosened the stranglehold of land owning European and mestizo families across South America, it has only resulted in the poor Indian majority looking up at a different ethnic group living a prosperous life in their midst. The exceptions to the dominance of market dominant minorities in South America are Argentina, Uruguay and Chile and those countries have much smaller Indian population (which points to the smashing success of Europeans in completely driving out Indians from those countries). Brazil stands out from other countries in South America primarily because there are a lot more people of African ancestry compared to other South American countries. Even there, economic power safely resides in the hands of people with lighter skin while pushing people of African ancestry towards the slums or favelas.
The market dominant minority in Russia are the Jews and the author treads carefully considering the rabid anti-semitism prevalent in Russia. Western economic advisers pushed Russia to become a free market democracy after the implosion of USSR. Towards the end of USSR, Gorbachev allowed small scale businesses to open up and they were dominated by Jews (mainly because Jews had the commercial wherewithal from running illegal contraband businesses during Communist era even though the illegality of those businesses was primarily because they happened in a communist state. In a capitalist state, those businesses would have been legal). By 2004, 6 out of 7 oligarchs in Russia were Jewish. That has led to anti-semitism coming to the fore as poor native Russians are exposed to the wealth of the Jewish oligarchs. As is the case with other countries, the recipients of these anti-semitic attacks are usually poor people in the market dominant minority rather than the affluent.
South Africa is a textbook case of a market dominant minority (Boers and British) holding an inordinate amount of economic power among the poor black majority. It was a shock for me to see houses in well off suburbs of Johannesburg look like walled off fortresses. Apartheid, a conscious approach that kept black South Africans uneducated and disenfranchised, helped cement the economic dominance of the white minority. Because of apartheid, whites did not face any competition (other than among themselves) while leaving black South Africans to make do with minimal amount of resources. Between the whites and blacks were an intermediate level occupied by Coloreds (people of mixed African and European descent) and Asians. While they were not relegated to absolute poverty like their black compatriots, they were still treated as inferior to whites. With the end of apartheid, South Africa has made enormous strides in improving the economic prospects of its black citizens but because they started from the bottom, the country still has long ways to achieve an equitable distribution of resources. Similar to South Africa, Namibia has a market dominant minority (whites) among a poor black majority. Germans colonized Namibia in the 1890's and after Second World War, South Africa annexed Namibia and settled the land with white settlers. It has free markets and democracy and one of the highest levels of income inequality, with whites owning majority of the land and blacks remaining as poor subsistence farmers.
Zimbabwe is a similar story as well. British colonized Zimbabwe (which was known as Rhodesia, after Cecil Rhodes, a charlatan of the highest order) and their withdrawal was followed by Ian Smith's apartheid regime. In the mid-1970's, Robert Mugabe overthrew the apartheid regime but could not make a dent on the economic dominance of whites. In 1980, Robert Mugabe promised black Zimbabweans that he intended to redistribute lands under whites to blacks. Under fierce opposition from Great Britain and Western world, he agreed to a 10 year moratorium on the land redistribution (in fairness, Britain's protests look hypocritical since it was they who took away the lands from black Zimbabweans in the first place and put Zimbabwe on path to apartheid). Robert Mugabe following through on his electoral promises to the black majority has resulted in Zimbabwe economy cratering as Western world resolutely opposes his actions. In East African countries, Indians are generally the market dominant minorities whereas Lebanese are the market dominant minorities across West African countries. Indians have also been targets of ethnic riots because of their financial support of corrupt politicians in return for economic dominance. Within different African countries, there are also market dominant minorities among black Africans themselves - Kikuyus in Kenya, Ibo in Nigeria and Cameroon. Their path to economic dominance is paved with frugality, hard work, entrepreneurial dynamism and a not insignificant portion of political power (for example, Jomo Kenyatta, the first President of Kenya was a Kikuyu and Kikuyus dramatically improved their economic standing during that time).
Political consequences of globalization:
US (and Western world) has taken the lead in championing political liberalization, majoritarian elections and empowerment of civil society in non Western nations. That has been driven by the underlying assumption that economic and political liberalization are complementary to each other. When it does not work that way in reality, it pits political democratization against economic liberalization. Economic liberalization increases the power of the market dominant minority whereas political democratization tends to favor the poorer native majority. When the politicians whip up nativist frenzy to capture votes, the market dominant minority can become the target of the poor native majority's ire. The clash manifests itself in 3 ways:
Backlash against markets:
Zimbabwe under Robert Mugabe is a textbook case of backlash by the democratic majority (black Zimbabweans) against the market dominant minority (white Zimbabweans). In 1990's, when Mugabe's political position weakened, whites moved to take advantage by supporting the free market espousing Movement for Democratic Change (MDC). Mugabe decided to use the race card to consolidate the black support behind him. In 2000 election, he explicitly campaigned on returning land to blacks and cemented his power. After winning the election, he and his party, Zanu-PF, moved to confiscate lands belonging to whites, in the process wrecking Zimbabwean economy and sending inflation soaring to stratospheric levels.
Nationalization of key industries has been another favorite of the political class when it wants to strip economic power from the market dominant minority. The underlying assumption behind US (and Western world) has been that nationalization is an intermediate stop to the final destination of communism. The Cold war blinders that gave rise to that view has stayed on resulting in US and Western world misdiagnosing the impetus behind nationalization in non Western nations. In actuality, nationalization has been driven by the political class' desire to appease the political majority (When Indira Gandhi nationalized banks in 1970's, it was a cynical but brilliant way to consolidate political power behind her while also addressing the concerns of the political majority. It did not portend India turning Communist). Countries like Indonesia in 1950's and 1960's(where Sukarno targeted Dutch and later Chinese minorities by nationalizing finance, mining and other important sectors), Sri Lanka (where Bandaranaikes (Solomon and then Sirimavo) nationalized land and industry dominated by the Tamil and Christian minorities, so it could then be redistributed to the Sinhalese majority), Burma (where nationalization benefited Burmans instead of British, Chinese and Indian minority communities), Pakistan (where Zulfikar Ali Bhutto nationalized heavy industry reducing the economic dominance of Mohajirs and redistributed them to Punjabis, Sindhis, Baluchis and Pashtuns) have used nationalization to undercut the economically dominant but politically weak market dominant minority while at the same time boosting the politically dominant but economically poor majority. In Russia, the backlash against market dominant minorities comes with the additional baggage of anti-semitism. In South America, countries like Venezuela (Hugo Chavez mobilized the poor Indian majority to win his elections. The market dominant minority of Europeans and mestizos stuck back by removing him from power and implemented free market reforms immediately. Chavez went back to his poor Indian majority and stormed back to power. The result of the back and forth exchange of power has put the Venezuelan economy in a death spiral in spite of having oil riches. The backlash against market dominant minority continues even after Chavez's death, with Nicholas Maduro using his political power to strike back against the market dominant minority) have stuck back against its market dominant minority of Europeans and mestizos even if it has resulted in significant economic pain.
Backlash against democracy:
In countries like Sierra Leone(Lebanese were the market dominant minority after Sierra Leone's independence in 1961. They pushed back against nationalization by supporting the populist President Siaka Stevens. Stevens protected the Lebanese politically while they gave a cut of their profits to Stevens. US and Western world was generally happy with this state of affairs as Stevens opened up the markets. With none of the benefits redounding to Sierra Leone's black population, their pent up frustration led to the formation of Revolutionary United Front (RUF) that promised Sierra Leoneans jobs and free education. As Sierra Leone descended into civil war, Lebanese left the country in droves), Indonesia(Suharto worked with the Chinese who were the market dominant minority in Indonesia - Suharto squashed any anti-Chinese political opposition while the Chinese minority provided him a cut of their profits to Suharto's family. The pent up anger towards the Chinese minority and Suharto exploded in the widespread riots of 1998), Philippines (Upon independence, Philippines started out as a free market and a democracy (possibly due to the American influence). With free markets came the economic dominance of the Chinese minority in Philippines. Ramon Magsaysay in 1950's pushed through a program of nationalization seeking to "filippinize" the economy. However, with the ascension of Ferdinand Marcos, the Chinese minority regained the upper hand and IMF and World Bank further cemented the economic dominance of the Chinese minority through generous aid. Marcos shut out any political reforms that would endanger the position of the Chinese minority in Philippines resulting in his ouster from power), Kenya (Indians are the reviled market dominant minority in Kenya. Kenyan Presidents have protected the Indian minority from political attacks while Indian business people have lined the pockets of the Kenyan political elite. This has resulted in virulent anti-Indian sentiment in Kenya as poor Kenyans perceive themselves being shut out of the democratic process by corrupt political leaders and a market dominant minority), there has been significant push back against democracy because of the successful efforts of the market dominant minority to co-opt a small number of political elite in these countries. Across South America, a variation of this theme has emerged where the market dominant minority (Europeans and mestizos) have captured the political power (in addition to economic dominance) shutting out the numerous Indian majority. That is similar to the apartheid period in South Africa when a market dominant minority (whites) captured economic and political power and kept it for themselves through state repression denying political participation to the more numerous black majority.
Ethnic cleansing:
The tragic example of a poor majority killing a market dominated minority happened in Rwanda in early 1990's. Tutsis comprised 14 percent of the population and were traditionally herders while Hutus were 85 percent of the population and were traditionally cultivators. When Congo was under monarchy, Tutsis had more political power which they used to develop their economic might. In those times, the ethnic differences were not set in stone and Tutsis could become Hutus and vice versa. After Belgians annexed Congo, they defined Hutus and Tutsis as mutually exclusive ethnic identities. Following in the tradition of other European colonialists, they favored one ethnic group (Tutsis) over the other (Hutus). Once Belgians left Congo, Hutus came to power and promptly fell on Tutsis in periodic revenge attacks. The murderous rampages were stopped by the military dictatorship in 1970's. When the military dictatorship was swept away and replaced by democracy in 1990's, the ethnic killings went to an extraordinary level - in 100 days, Hutus killed 800,000 Tutsis. In a similar manner, the genocide in the countries of former Yugoslavia were also the result of free markets and democracy. Josef Tito became the dictator of Yugoslavia in the aftermath of Second World War and maintained an iron grip over the population. Former Yugoslavia consisted of the following countries - Croatia, Slovenia, Bosnia, Serbia, Montenegro, Macedonia. Croatia and Slovenia had borders with Austria and Italy and were prosperous because of their proximity to Europe. Rest of the countries were part of the Ottoman empire and were much poorer. Croatia and Slovenia were predominantly Catholic and used Roman script whereas the other countries were predominantly Eastern Orthodox Christians and used Cyrillic script. With the fall of Berlin wall, free markets and democracy came to the former countries of Yugoslavia. Because Croatia and Slovenia had experience with free markets owing to their proximity to Europe, they quickly asserted their economic dominance. The flowering of democracy resulted in demagogues in the former countries of Yugoslavia dehumanizing others and appealing to ethnic pride. This predictably resulted in a civil war that ended with the defeat of Serbian president Slobodan Milosevic convicted of crimes against humanity after being thrown off power by NATO and the US. The one place where market dominant minority has managed to live peaceably with the majority has been in Thailand where successive Thai governments have forced the market dominant Chinese minority to adhere to Thai cultural norms and practices while letting their businesses to prosper. As a result, Chinese in Thailand have been successful at defusing any potential backlash against their success. With China's emergence as a strong military and economic power, Chinese in Thailand have (understandably) stepped back from bending over backwards to the Thai government. The rise of Nazism in Germany and the Holocaust it gave rise to is a textbook example of free markets and democracy colliding head on and causing horrific killing of the market dominant minority, Jews.
As far as their own countries are concerned, Western nations throughout history have been very cautious to mix democracy with free markets. In the early days of democracy, they restricted voting rights to a select group in their population because they feared the wrath of the poor (which is opposite to the advice they provide non Western nations). In the case of US, voting rights were restricted to property owners that coincidentally blocked the participation of the poor, women and minorities. Europeans had similar constraints on democratic participation in their countries as well. US, Japan and European countries have put in place redistributive policies (progressive taxation, social security, minimum wage, unemployment insurance, anti trust laws etc) to smooth out the rough edges that comes with free markets(even though US is rapidly backsliding on its redistributive promises to its citizens). Democracy and free markets have succeeded in US partly because of the belief in American dream (however erroneous) of the majority of poor and lower middle class Americans. Their belief in the American dream ideal has circumscribed their actions and provided them a stake in its ultimate success. When things go south, it also has the effect (fortunate for American democracy, unfortunate for the poor people in question), of putting the blame for their plight on themselves and not on the pie-in-the-sky nature of American dream(which is pretty similar to 'Heads I win, tails you lose'). In non Western countries that have a market dominant minority, it is difficult for the poor majority to believe in opportunities of upward mobility when they are surrounded by poverty and the only successful people they see are from a different ethnic group. Within US, the economic dominance of economic and political elite has also been aided by the split in the working class based on race - poor white working class people have spurned alliances with poor working class minorities even though collective action would bring benefits to both of them.
At a regional level, the success of Israel in Middle East is an example of a market dominant minority (Jews) surrounded by a poor native majority(Arabs). While Israeli Arab conflict has a multitude of reasons, treating Israel as a market dominant minority among a poor majority offers a different perspective. Even within specific Arab countries, there are countless instances of a market dominant minority flourishing amidst a poor native majority. In Iraq, Sunnis under Saddam Hussein were a market dominant minority amidst the poor Shiite majority. In Syria, the Alawite minority under Hafez Al Assad and Bashar Al Assad is a market dominant minority that has ruled over a poor Sunni majority. Within Israel, Ashkenazi jews (European Jews) have dominated economic and political power even though they are outnumbered by the Sephardim Jews (Jews from Arab lands). However, Israel's identity as a Jewish state has ensured any backlash against Ashkenazi Jews at the hands of Sephardim Jews is muted. The anger and hatred that Arabs have against Israel can be partly explained by their admiration at the success Israel has enjoyed in building a democracy (albeit one that is Jewish in character) while frustrated at their own inability to improve conditions in their own countries.
On a global level, being the sole superpower means America serves as the market dominant minority. It has only 4% of the World population but dominates the political, economic, military and cultural affairs across the globe. Anti americanism can be seen as the backlash of other countries that perceive themselves to be poorer in relation to the US. The backlash varies depending on the level of development of a country. There is the friendly backlash on both free markets and democracy from fellow Anglophone countries (Canada, Britain, Australia, New Zealand) that celebrate a kinship with Americans on the basis of shared language and Anglo Saxon history. Backlash from European countries is harder in democracy domain because both US and Europe follow similar free market principles, albeit one that varies only in degree of redistribution. Backlash from non Western nations are much more fierce because they see America as a market dominant minority that has succeeded while they have not. To a certain extent, the anti Americanism on the streets in the developing world (not just in Arab capitals) after a sickening event like 9/11 can be chalked up to an explosion of pent up anger coming out when people from poor majority strike successfully against a hated market dominant minority.
Solutions:
One of the solutions to the collision between free markets and democracy has been suggested by Robert Kaplan - Focus first on opening the markets, build a stable and prosperous middle class before letting democracy loose(also referred to as Singapore model). In countries that are more diverse than Singapore, that approach can cement the domination of a market dominant minority resulting in the benefits of free markets being distributed in an uneven manner. When combined with ethnic hatred, this model can lead to a majority mired in poverty while a hated ethnic minority group enjoys the benefit of free markets. The author is in favor of free markets and democracy, just not for implementing them at the same time and not implementing the most extreme versions(universal suffrage in case of democracy and laissez faire capitalism in case of free markets). Some of her suggestions include:
Provide a level playing field for the market dominant minority and the poor native majority:
At a minimum, educational opportunities have to be on the same level for both the market dominant minority and the poor majority. It is not a guarantee that ethnic strife will not break out between the market dominant minority and the poor majority but better education (especially for girls) will at least ensure some exposure to better opportunities for the poor majority that will mitigate some amount of humiliation and jealousy that they feel towards the market dominant minority
Providing the poor majority a stake in the markets:
Because of the economic dominance of the market dominant minorities, the benefits of markets and trade (almost) completely accrue to them, leaving the poor native majority frustrated and angry. By providing a stake for the poor majority in the markets - through redistribution policies that have worked well in the West (progressive taxation, minimum wage, unemployment insurance etc.,.), integrating extralegal businesses into the formal property system (an example would be giving squatters legal title instead of evicting them), provide some amount of ownership in corporations and capital markets(similar to US where a large portion of the population has its fortunes tied to the stock market through their retirement accounts), non Western nations can reduce the feeling of exclusion from the economic benefits of trade.
Consciously correct any ethnic wealth imbalance:
This will not work if the market dominant minority also wields political power
Each of those suggestions has its downsides - Progressive taxation requires a tax base that may not be available in that country, Extending formal property protections to extralegal businesses will engender frustrations among people who followed the rules, the family based nature of market dominant minority businesses will militate against providing stake in corporations and capital markets to someone outside the family
Promoting democracy in an incremental fashion instead of rolling out universal suffrage and elections might be a better way to go. When it comes to democracy, the variations in the types of democracy provides some breathing room for implementing a democracy that is well short of universal suffrage but allows some form of political representation. A successful market dominant minority also has to play its part in making sure ethnic hatred does not become the only lens through which the poor native majority sees them. Given that the market dominant minority has resources, it will be in their interest to involve themselves in the well being of the nation as a whole. It would require them to desist from entering into quid pro quo arrangements with the political elite. Their focus should be on expanding the benefits of their prosperity to as much of the poor native majority as possible. While providing the benefits, they should also be seen doing those good deeds. An example would be the philanthropic activities of Indian business people in East Africa providing educational, health, housing opportunities for their East African employees.
Other Books for reference:
One Market Under God! Extreme Capitalism, Market Populism, and the end of Economic Democracy - Thomas Frank
The Protestant Ethic and the Spirit of Capitalism - Max Weber
Sale of the Century: Russia's wild ride from Communism to Capitalism - Chrystia Freeland
After spending enough time in the US, one gets used to the self congratulatory view among Americans about the benefits of free markets and democracy. Since free markets and democracy have made them into a superpower (and kept them there), they assume the same applies to other countries. In their naivete, they proceed to implement those policies using the economic levers they have at their disposal (foreign aid) and are shocked to discover democracy and free markets have resulted in even more anti americanism than before. This book provides an explanation of why the combination of free markets and democracy as sold by Western nations is a recipe for disaster to any country that decides to move forward with it. This book was written right after US went into Iraq and its advice on looking at free markets and democracy as less than ideal solutions could have done wonders for US if only it had been followed. The glaring omission in the whole book is the one about South Asia - Sri Lanka and Pakistan make cameo appearances in their treatment of Tamils and Sindhis respectively but India is completely left out. Considering the crazy quilt of differences in India (language, class, religion, caste) it might have muddled the message that the author was trying to convey through the book. There is good coverage of Indian expatriates in this book because they are market dominant minorities in East Africa. It is also a devastating critique of the lack of historical knowledge and humility of Western advisers when they provide the free market and democracy prescription without understanding their own countries' history with both free market and democracy. It becomes malpractice when those Western nations recommend a prescription of free markets and democracy in their most extreme forms. The author is also curiously optimistic about the backlash against free markets and democracy in US itself. Granted, there is no market dominant minority in US as whites comprise around 80% of the population and are also the economically dominant ethnic group. She lays out her reasoning with respect to US but then points to the economic and political success of immigrants in US as a reason why US wont have a backlash against free markets and democracy.
Analysis:
This book was published in 2004, right after US barged into Iraq under the guise of Weapons of Mass Destruction and stayed on for promotion of democracy and free markets. To me, the US invasion of Iraq represented the moment its global influence on the world turned into a dark force. The dotcom bubble and Enron shenanigans showed an US economy that was over reliant on debt and ponzi schemes for growth. The trouble with 2000 presidential election results showed the political class in US to be bereft of moral scruples. The US invasion of Iraq showed the exposed underbelly of US military - in each of these domains, US vulnerability was primarily because of inexplicable decisions that US made, not because of an inherent weakness in US. What was restricted to a few sectors in 2000 (High tech, Energy) spread across every sector of the US economy during the 2008 recession.September 11 attacks, as heinous as they were, caused US to swing blindly in retribution, playing into the hands of Islamists. Its military operations in Afghanistan were fully justified (considering the Osama Bin Laden was holed up there). US then proceeded to fritter away any goodwill and sympathy it had from September 2001 attacks by attacking Iraq. I am always wistful about the counterfactual - if US had managed Saddam Hussein through inspections and incremental tightening instead of indulging in an orgy of violence under the cover of (invisible) weapons of mass destruction.
Free markets and democracy promotion have been part of US foreign policy for a long time. While free (as opposed to regulated) markets have been shown to be an empty suit repeatedly, that has not stopped Western experts (IMF, World Bank, US) from parroting its benefits to non Western nations (and sometimes tying aid to implementation of free market reforms).The author traces the devastating impact of these twin pillars of US foreign policy on non Western nations. She defines them as follows:
Market Economy (Free Markets) - Broad spectrum of economic systems based primarily on private property and competition, with government regulation and redistributive policies (varying from substantial (US) to extensive (Scandinavian countries).
Democracy - Primarily refers to US driven efforts in non Western nations, focused on immediate elections and universal suffrage
Ethnic identity - Subjective and primarily refers to group identification (race)
The preeminent proponent of US drive to implement free markets and democracy has been Thomas Friedman and it is in that context, she addresses their impact on non Western nations. She walks through multiple case studies of the twin devils of free markets and democracy promotion and discusses how they have led to increasing ethnic violence in those nations. While she is a supporter of both free markets and democracy, her beef is with the approach of US (and other Western nations) foreign policy that advocate both of them at the same time. In each of those cases, she identifies an affluent ethnic minority (that she refers to as market dominant minority) living among a poor native majority - some examples are Chinese in Indonesia, Indians in East Africa. In her telling, free markets benefit the market dominant minority while democracy benefits the poor native majority. By implementing them at the same time, it puts both of them in collision course with each other and when ethnic hatred enters into the picture (because of differing ethnicities, wealth levels, education etc.,.), it is a recipe for disaster. The market dominant minorities control the economic levers as they are the ones most conversant with trade and foreign investment. The poor native majority looks at the success of the market dominant minority and feels itself shut out from the benefits of free markets.
It uses the tool that its numerical superiority provides, democracy to counter the influence of market dominant minority. This approach benefits demagogues who can appeal to the grievances of the poor native majority with promises of booting out the market dominant minority and capturing the benefits for the poor native majority. Well meaning activists from Western world spouting anti-globalization rhetoric do not help the matters either - to them, democracy is the panacea that heals all and do not take into account how much ethnic hatred can derail fruits of democracy. She also expounds at length on the hypocrisy of US (and Western nations, through their lackeys at IMF and World Bank) that demand immediate opening of free markets with least amount of regulations (laissez faire) while following the opposite prescription in their own countries - An example would be the successful antitrust case that US mounted against Microsoft as a monopoly. She calls for humility on the part of US (and Western nations) when pushing for free markets and democracy understanding that the success of free markets and democracy was the result of a long and hard fought struggle in every developed country. She splits the book into 3 sections - the first section details the economic realities of globalization for a select number of non Western nations, the second section explains the political consequences of globalization in those countries and the third section provides suggestions and remedies.
Economic realities of globalization:
British colonialism (as with European colonialism elsewhere) benefited some ethnic minorities to the detriment of the poor native majority in their colonial possessions. In Burma, with support from British colonialists, Indian capitalists became economically successful, resulting in periodic ethnic riots by Burmans that killed Indians in large numbers. The Indian community has now been reduced to small numbers and has been replaced by Chinese capitalists and their success has made them the target of Burmans. British colonialists have been replaced by the Burmese Junta (SLORC) (even though Aung San Suu Kyi recently took over power from them). US boycotted Burma on account of its human rights violations and China stepped into the vacuum and has completely dominated the trade in Burma. Because of SLORC's need for money, Chinese have been able to import Chinese workers from the mainland, shutting out ordinary Burmans. As a result, Burmans see their country's natural resources being traded away to China along with its economic benefits.
The open markets favored by the Junta has resulted in price increases of consumer goods further increasing the hostility of the Burmans towards the Chinese. What happened in Burma has been replicated across South East Asia (Philippines, Vietnam, Malaysia, Indonesia, Thailand). Thailand, Malaysia and Indonesia have some Indian traders but the market dominant minority in all these countries happen to be Chinese. Every year, IMF and World Bank dutifully puts out a report card on the progress countries have made under globalization. In the eyes of the poor native majority in these countries, the beneficiaries have been the Chinese and corrupt native politicians. Across all these countries, Chinese are driven to succeed in trade in their adopted homelands and practice frugality, hard work, willingness to delay gratification and an intense desire to accumulate wealth as an end in itself. Their success has ensured their control over any foreign investment made in these countries.
In South America, Europeans forcibly took over the land and resources from the native Indian majority, leaving them destitute. The economic power garnered by Europeans and their descendants (mixed race or mestizos) has ensured a privileged position for them. In recent times, there have been political challenges to their economic power from leaders who used the numerical advantage of the poor Indian majority - Evo Morales in Bolivia, Hugo Chavez in Venezuela etc.,. These leaders proudly flaunt their Indian heritage that attracts the poor Indian majority to their side. Historically, Indians in South America have always been entrepreneurial. But the control of economic levers rested in the hands of Europeans and mestizos which shut them out of the benefits of economic growth in their own countries. Globalization has benefited the European descendants disproportionately as they have proven to be natural allies of foreign investors and Western aid agencies (in terms of language, race and class). Constant denials of Europeans in South America notwithstanding, there is an underlying hierarchy of ethnic groups among the population that starts with Europeans and mestizos at the top and ends with the ethnic groups of the poor Indian majority at the bottom. Across, Mexico, Bolivia and other South American countries, skin color demarcates the powerful (whites and mestizos) from the powerless (Indians). The poor Indian majority also suffers from a massive inferiority complex because of their defeat at the hands of the Europeans(even if that defeat came about because of persistent cheating and underhandedness on the part of Europeans). To add insult to the injury, recently migrated ethnic groups like the Lebanese and Jews have made enormous strides in dominating South American trade. While that has loosened the stranglehold of land owning European and mestizo families across South America, it has only resulted in the poor Indian majority looking up at a different ethnic group living a prosperous life in their midst. The exceptions to the dominance of market dominant minorities in South America are Argentina, Uruguay and Chile and those countries have much smaller Indian population (which points to the smashing success of Europeans in completely driving out Indians from those countries). Brazil stands out from other countries in South America primarily because there are a lot more people of African ancestry compared to other South American countries. Even there, economic power safely resides in the hands of people with lighter skin while pushing people of African ancestry towards the slums or favelas.
The market dominant minority in Russia are the Jews and the author treads carefully considering the rabid anti-semitism prevalent in Russia. Western economic advisers pushed Russia to become a free market democracy after the implosion of USSR. Towards the end of USSR, Gorbachev allowed small scale businesses to open up and they were dominated by Jews (mainly because Jews had the commercial wherewithal from running illegal contraband businesses during Communist era even though the illegality of those businesses was primarily because they happened in a communist state. In a capitalist state, those businesses would have been legal). By 2004, 6 out of 7 oligarchs in Russia were Jewish. That has led to anti-semitism coming to the fore as poor native Russians are exposed to the wealth of the Jewish oligarchs. As is the case with other countries, the recipients of these anti-semitic attacks are usually poor people in the market dominant minority rather than the affluent.
South Africa is a textbook case of a market dominant minority (Boers and British) holding an inordinate amount of economic power among the poor black majority. It was a shock for me to see houses in well off suburbs of Johannesburg look like walled off fortresses. Apartheid, a conscious approach that kept black South Africans uneducated and disenfranchised, helped cement the economic dominance of the white minority. Because of apartheid, whites did not face any competition (other than among themselves) while leaving black South Africans to make do with minimal amount of resources. Between the whites and blacks were an intermediate level occupied by Coloreds (people of mixed African and European descent) and Asians. While they were not relegated to absolute poverty like their black compatriots, they were still treated as inferior to whites. With the end of apartheid, South Africa has made enormous strides in improving the economic prospects of its black citizens but because they started from the bottom, the country still has long ways to achieve an equitable distribution of resources. Similar to South Africa, Namibia has a market dominant minority (whites) among a poor black majority. Germans colonized Namibia in the 1890's and after Second World War, South Africa annexed Namibia and settled the land with white settlers. It has free markets and democracy and one of the highest levels of income inequality, with whites owning majority of the land and blacks remaining as poor subsistence farmers.
Zimbabwe is a similar story as well. British colonized Zimbabwe (which was known as Rhodesia, after Cecil Rhodes, a charlatan of the highest order) and their withdrawal was followed by Ian Smith's apartheid regime. In the mid-1970's, Robert Mugabe overthrew the apartheid regime but could not make a dent on the economic dominance of whites. In 1980, Robert Mugabe promised black Zimbabweans that he intended to redistribute lands under whites to blacks. Under fierce opposition from Great Britain and Western world, he agreed to a 10 year moratorium on the land redistribution (in fairness, Britain's protests look hypocritical since it was they who took away the lands from black Zimbabweans in the first place and put Zimbabwe on path to apartheid). Robert Mugabe following through on his electoral promises to the black majority has resulted in Zimbabwe economy cratering as Western world resolutely opposes his actions. In East African countries, Indians are generally the market dominant minorities whereas Lebanese are the market dominant minorities across West African countries. Indians have also been targets of ethnic riots because of their financial support of corrupt politicians in return for economic dominance. Within different African countries, there are also market dominant minorities among black Africans themselves - Kikuyus in Kenya, Ibo in Nigeria and Cameroon. Their path to economic dominance is paved with frugality, hard work, entrepreneurial dynamism and a not insignificant portion of political power (for example, Jomo Kenyatta, the first President of Kenya was a Kikuyu and Kikuyus dramatically improved their economic standing during that time).
Political consequences of globalization:
US (and Western world) has taken the lead in championing political liberalization, majoritarian elections and empowerment of civil society in non Western nations. That has been driven by the underlying assumption that economic and political liberalization are complementary to each other. When it does not work that way in reality, it pits political democratization against economic liberalization. Economic liberalization increases the power of the market dominant minority whereas political democratization tends to favor the poorer native majority. When the politicians whip up nativist frenzy to capture votes, the market dominant minority can become the target of the poor native majority's ire. The clash manifests itself in 3 ways:
Backlash against markets:
Zimbabwe under Robert Mugabe is a textbook case of backlash by the democratic majority (black Zimbabweans) against the market dominant minority (white Zimbabweans). In 1990's, when Mugabe's political position weakened, whites moved to take advantage by supporting the free market espousing Movement for Democratic Change (MDC). Mugabe decided to use the race card to consolidate the black support behind him. In 2000 election, he explicitly campaigned on returning land to blacks and cemented his power. After winning the election, he and his party, Zanu-PF, moved to confiscate lands belonging to whites, in the process wrecking Zimbabwean economy and sending inflation soaring to stratospheric levels.
Nationalization of key industries has been another favorite of the political class when it wants to strip economic power from the market dominant minority. The underlying assumption behind US (and Western world) has been that nationalization is an intermediate stop to the final destination of communism. The Cold war blinders that gave rise to that view has stayed on resulting in US and Western world misdiagnosing the impetus behind nationalization in non Western nations. In actuality, nationalization has been driven by the political class' desire to appease the political majority (When Indira Gandhi nationalized banks in 1970's, it was a cynical but brilliant way to consolidate political power behind her while also addressing the concerns of the political majority. It did not portend India turning Communist). Countries like Indonesia in 1950's and 1960's(where Sukarno targeted Dutch and later Chinese minorities by nationalizing finance, mining and other important sectors), Sri Lanka (where Bandaranaikes (Solomon and then Sirimavo) nationalized land and industry dominated by the Tamil and Christian minorities, so it could then be redistributed to the Sinhalese majority), Burma (where nationalization benefited Burmans instead of British, Chinese and Indian minority communities), Pakistan (where Zulfikar Ali Bhutto nationalized heavy industry reducing the economic dominance of Mohajirs and redistributed them to Punjabis, Sindhis, Baluchis and Pashtuns) have used nationalization to undercut the economically dominant but politically weak market dominant minority while at the same time boosting the politically dominant but economically poor majority. In Russia, the backlash against market dominant minorities comes with the additional baggage of anti-semitism. In South America, countries like Venezuela (Hugo Chavez mobilized the poor Indian majority to win his elections. The market dominant minority of Europeans and mestizos stuck back by removing him from power and implemented free market reforms immediately. Chavez went back to his poor Indian majority and stormed back to power. The result of the back and forth exchange of power has put the Venezuelan economy in a death spiral in spite of having oil riches. The backlash against market dominant minority continues even after Chavez's death, with Nicholas Maduro using his political power to strike back against the market dominant minority) have stuck back against its market dominant minority of Europeans and mestizos even if it has resulted in significant economic pain.
Backlash against democracy:
In countries like Sierra Leone(Lebanese were the market dominant minority after Sierra Leone's independence in 1961. They pushed back against nationalization by supporting the populist President Siaka Stevens. Stevens protected the Lebanese politically while they gave a cut of their profits to Stevens. US and Western world was generally happy with this state of affairs as Stevens opened up the markets. With none of the benefits redounding to Sierra Leone's black population, their pent up frustration led to the formation of Revolutionary United Front (RUF) that promised Sierra Leoneans jobs and free education. As Sierra Leone descended into civil war, Lebanese left the country in droves), Indonesia(Suharto worked with the Chinese who were the market dominant minority in Indonesia - Suharto squashed any anti-Chinese political opposition while the Chinese minority provided him a cut of their profits to Suharto's family. The pent up anger towards the Chinese minority and Suharto exploded in the widespread riots of 1998), Philippines (Upon independence, Philippines started out as a free market and a democracy (possibly due to the American influence). With free markets came the economic dominance of the Chinese minority in Philippines. Ramon Magsaysay in 1950's pushed through a program of nationalization seeking to "filippinize" the economy. However, with the ascension of Ferdinand Marcos, the Chinese minority regained the upper hand and IMF and World Bank further cemented the economic dominance of the Chinese minority through generous aid. Marcos shut out any political reforms that would endanger the position of the Chinese minority in Philippines resulting in his ouster from power), Kenya (Indians are the reviled market dominant minority in Kenya. Kenyan Presidents have protected the Indian minority from political attacks while Indian business people have lined the pockets of the Kenyan political elite. This has resulted in virulent anti-Indian sentiment in Kenya as poor Kenyans perceive themselves being shut out of the democratic process by corrupt political leaders and a market dominant minority), there has been significant push back against democracy because of the successful efforts of the market dominant minority to co-opt a small number of political elite in these countries. Across South America, a variation of this theme has emerged where the market dominant minority (Europeans and mestizos) have captured the political power (in addition to economic dominance) shutting out the numerous Indian majority. That is similar to the apartheid period in South Africa when a market dominant minority (whites) captured economic and political power and kept it for themselves through state repression denying political participation to the more numerous black majority.
Ethnic cleansing:
The tragic example of a poor majority killing a market dominated minority happened in Rwanda in early 1990's. Tutsis comprised 14 percent of the population and were traditionally herders while Hutus were 85 percent of the population and were traditionally cultivators. When Congo was under monarchy, Tutsis had more political power which they used to develop their economic might. In those times, the ethnic differences were not set in stone and Tutsis could become Hutus and vice versa. After Belgians annexed Congo, they defined Hutus and Tutsis as mutually exclusive ethnic identities. Following in the tradition of other European colonialists, they favored one ethnic group (Tutsis) over the other (Hutus). Once Belgians left Congo, Hutus came to power and promptly fell on Tutsis in periodic revenge attacks. The murderous rampages were stopped by the military dictatorship in 1970's. When the military dictatorship was swept away and replaced by democracy in 1990's, the ethnic killings went to an extraordinary level - in 100 days, Hutus killed 800,000 Tutsis. In a similar manner, the genocide in the countries of former Yugoslavia were also the result of free markets and democracy. Josef Tito became the dictator of Yugoslavia in the aftermath of Second World War and maintained an iron grip over the population. Former Yugoslavia consisted of the following countries - Croatia, Slovenia, Bosnia, Serbia, Montenegro, Macedonia. Croatia and Slovenia had borders with Austria and Italy and were prosperous because of their proximity to Europe. Rest of the countries were part of the Ottoman empire and were much poorer. Croatia and Slovenia were predominantly Catholic and used Roman script whereas the other countries were predominantly Eastern Orthodox Christians and used Cyrillic script. With the fall of Berlin wall, free markets and democracy came to the former countries of Yugoslavia. Because Croatia and Slovenia had experience with free markets owing to their proximity to Europe, they quickly asserted their economic dominance. The flowering of democracy resulted in demagogues in the former countries of Yugoslavia dehumanizing others and appealing to ethnic pride. This predictably resulted in a civil war that ended with the defeat of Serbian president Slobodan Milosevic convicted of crimes against humanity after being thrown off power by NATO and the US. The one place where market dominant minority has managed to live peaceably with the majority has been in Thailand where successive Thai governments have forced the market dominant Chinese minority to adhere to Thai cultural norms and practices while letting their businesses to prosper. As a result, Chinese in Thailand have been successful at defusing any potential backlash against their success. With China's emergence as a strong military and economic power, Chinese in Thailand have (understandably) stepped back from bending over backwards to the Thai government. The rise of Nazism in Germany and the Holocaust it gave rise to is a textbook example of free markets and democracy colliding head on and causing horrific killing of the market dominant minority, Jews.
As far as their own countries are concerned, Western nations throughout history have been very cautious to mix democracy with free markets. In the early days of democracy, they restricted voting rights to a select group in their population because they feared the wrath of the poor (which is opposite to the advice they provide non Western nations). In the case of US, voting rights were restricted to property owners that coincidentally blocked the participation of the poor, women and minorities. Europeans had similar constraints on democratic participation in their countries as well. US, Japan and European countries have put in place redistributive policies (progressive taxation, social security, minimum wage, unemployment insurance, anti trust laws etc) to smooth out the rough edges that comes with free markets(even though US is rapidly backsliding on its redistributive promises to its citizens). Democracy and free markets have succeeded in US partly because of the belief in American dream (however erroneous) of the majority of poor and lower middle class Americans. Their belief in the American dream ideal has circumscribed their actions and provided them a stake in its ultimate success. When things go south, it also has the effect (fortunate for American democracy, unfortunate for the poor people in question), of putting the blame for their plight on themselves and not on the pie-in-the-sky nature of American dream(which is pretty similar to 'Heads I win, tails you lose'). In non Western countries that have a market dominant minority, it is difficult for the poor majority to believe in opportunities of upward mobility when they are surrounded by poverty and the only successful people they see are from a different ethnic group. Within US, the economic dominance of economic and political elite has also been aided by the split in the working class based on race - poor white working class people have spurned alliances with poor working class minorities even though collective action would bring benefits to both of them.
At a regional level, the success of Israel in Middle East is an example of a market dominant minority (Jews) surrounded by a poor native majority(Arabs). While Israeli Arab conflict has a multitude of reasons, treating Israel as a market dominant minority among a poor majority offers a different perspective. Even within specific Arab countries, there are countless instances of a market dominant minority flourishing amidst a poor native majority. In Iraq, Sunnis under Saddam Hussein were a market dominant minority amidst the poor Shiite majority. In Syria, the Alawite minority under Hafez Al Assad and Bashar Al Assad is a market dominant minority that has ruled over a poor Sunni majority. Within Israel, Ashkenazi jews (European Jews) have dominated economic and political power even though they are outnumbered by the Sephardim Jews (Jews from Arab lands). However, Israel's identity as a Jewish state has ensured any backlash against Ashkenazi Jews at the hands of Sephardim Jews is muted. The anger and hatred that Arabs have against Israel can be partly explained by their admiration at the success Israel has enjoyed in building a democracy (albeit one that is Jewish in character) while frustrated at their own inability to improve conditions in their own countries.
On a global level, being the sole superpower means America serves as the market dominant minority. It has only 4% of the World population but dominates the political, economic, military and cultural affairs across the globe. Anti americanism can be seen as the backlash of other countries that perceive themselves to be poorer in relation to the US. The backlash varies depending on the level of development of a country. There is the friendly backlash on both free markets and democracy from fellow Anglophone countries (Canada, Britain, Australia, New Zealand) that celebrate a kinship with Americans on the basis of shared language and Anglo Saxon history. Backlash from European countries is harder in democracy domain because both US and Europe follow similar free market principles, albeit one that varies only in degree of redistribution. Backlash from non Western nations are much more fierce because they see America as a market dominant minority that has succeeded while they have not. To a certain extent, the anti Americanism on the streets in the developing world (not just in Arab capitals) after a sickening event like 9/11 can be chalked up to an explosion of pent up anger coming out when people from poor majority strike successfully against a hated market dominant minority.
Solutions:
One of the solutions to the collision between free markets and democracy has been suggested by Robert Kaplan - Focus first on opening the markets, build a stable and prosperous middle class before letting democracy loose(also referred to as Singapore model). In countries that are more diverse than Singapore, that approach can cement the domination of a market dominant minority resulting in the benefits of free markets being distributed in an uneven manner. When combined with ethnic hatred, this model can lead to a majority mired in poverty while a hated ethnic minority group enjoys the benefit of free markets. The author is in favor of free markets and democracy, just not for implementing them at the same time and not implementing the most extreme versions(universal suffrage in case of democracy and laissez faire capitalism in case of free markets). Some of her suggestions include:
Provide a level playing field for the market dominant minority and the poor native majority:
At a minimum, educational opportunities have to be on the same level for both the market dominant minority and the poor majority. It is not a guarantee that ethnic strife will not break out between the market dominant minority and the poor majority but better education (especially for girls) will at least ensure some exposure to better opportunities for the poor majority that will mitigate some amount of humiliation and jealousy that they feel towards the market dominant minority
Providing the poor majority a stake in the markets:
Because of the economic dominance of the market dominant minorities, the benefits of markets and trade (almost) completely accrue to them, leaving the poor native majority frustrated and angry. By providing a stake for the poor majority in the markets - through redistribution policies that have worked well in the West (progressive taxation, minimum wage, unemployment insurance etc.,.), integrating extralegal businesses into the formal property system (an example would be giving squatters legal title instead of evicting them), provide some amount of ownership in corporations and capital markets(similar to US where a large portion of the population has its fortunes tied to the stock market through their retirement accounts), non Western nations can reduce the feeling of exclusion from the economic benefits of trade.
Consciously correct any ethnic wealth imbalance:
This will not work if the market dominant minority also wields political power
Each of those suggestions has its downsides - Progressive taxation requires a tax base that may not be available in that country, Extending formal property protections to extralegal businesses will engender frustrations among people who followed the rules, the family based nature of market dominant minority businesses will militate against providing stake in corporations and capital markets to someone outside the family
Promoting democracy in an incremental fashion instead of rolling out universal suffrage and elections might be a better way to go. When it comes to democracy, the variations in the types of democracy provides some breathing room for implementing a democracy that is well short of universal suffrage but allows some form of political representation. A successful market dominant minority also has to play its part in making sure ethnic hatred does not become the only lens through which the poor native majority sees them. Given that the market dominant minority has resources, it will be in their interest to involve themselves in the well being of the nation as a whole. It would require them to desist from entering into quid pro quo arrangements with the political elite. Their focus should be on expanding the benefits of their prosperity to as much of the poor native majority as possible. While providing the benefits, they should also be seen doing those good deeds. An example would be the philanthropic activities of Indian business people in East Africa providing educational, health, housing opportunities for their East African employees.
Other Books for reference:
One Market Under God! Extreme Capitalism, Market Populism, and the end of Economic Democracy - Thomas Frank
The Protestant Ethic and the Spirit of Capitalism - Max Weber
Sale of the Century: Russia's wild ride from Communism to Capitalism - Chrystia Freeland
1 comment:
Splendid synopsis. Very interesting read. Should get the book.
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