In many poor countries, markets concentrate wealth in the hands of prosperous ethnic minorities. In these places, democracy can be an engine of vengeanceby Amy Chua / December 20, 2003 / Leave a comment
One reason for global anti-Americanism is that Americans are perceived as the world’s dominant minority, wielding disproportionate economic power. A similar kind of resentment towards economically successful ethnic minorities motivates social tension in numerous countries—from Zimbabwe to the Philippines
One morning in September 1994, I received a call from my mother in California. In a hushed voice, she told me that my Aunt Leona, my father’s twin sister, had been murdered in her home in the Philippines, her throat slit by her chauffeur. My mother broke the news to me in our Hokkien Chinese dialect. But the word “murder” she said in English, as if to wall off the act from the family through language.
The murder of a relative is horrible for anyone, anywhere. My father’s grief was impenetrable; to this day, he has not broken his silence on the subject. For the rest of the family, though, there was an added element of disgrace. For the Chinese, luck is a moral attribute, and a lucky person would never be murdered. Like having a birth defect, or marrying a Filipino, being murdered is shameful.
My three younger sisters and I were very fond of my Aunt Leona, who was petite and quirky and had never married. Like many wealthy Filipino Chinese she had multiple bank accounts, in Honolulu, San Francisco and Chicago. She visited us in the US regularly. Having no children of her own, she doted on her nieces and showered us with trinkets. As we grew older, the trinkets became treasures. On my tenth birthday she gave me ten small diamonds, wrapped in toilet paper. My aunt loved diamonds and bought them by the dozen, concealing them in empty Elizabeth Arden moisturiser jars. She liked accumulating things. When we ate at McDonald’s, she stuffed her Gucci purse with free packets of ketchup.
According to the police report, my Aunt Leona, “a 58-year-old single woman,” was killed in her living room with a “butcher’s knife” at 8pm on 12th September 1994. Two of her maids were questioned, and they confessed that Nilo Abique, my aunt’s chauffeur, had planned and executed the murder with their assistance. But Abique, the report went on to say, had “disappeared.” The two maids were later released.
My relatives arranged a funeral for my aunt in the prestigious Chinese cemetery in Manila where many of my ancestors are buried. After the funeral, I asked one of my uncles whether there had been any developments in the murder investigation. He replied tersely that the killer had not been found. His wife added that the police had essentially closed the case.
I could not understand my relatives’ almost indifferent attitude. Why were they not more shocked that my aunt had been killed by people who worked for her, lived with her, saw her every day? Why were they not outraged that the maids had been released? When I pressed my uncle, he was short with me. “That’s the way things are here,” he said.
My uncle was not simply being callous. My aunt’s death was part of a common pattern. Hundreds of Chinese are kidnapped or murdered every year by ethnic Filipinos. Nor is it unusual that my aunt’s killer was never apprehended. The police in the Philippines, all poor ethnic Filipinos themselves, are notoriously unmotivated in these cases.
My family is part of the Philippines’ tiny but economically powerful Chinese minority. Although they constitute 1 per cent of the population, Chinese Filipinos control about 60 per cent of the private economy, including the country’s four airlines and almost all of the banks, hotels, shopping malls, and big conglomerates. My own family runs a plastics conglomerate and owns swathes of prime real estate – and they are only “third-tier” Chinese tycoons. They also have safe deposit boxes full of gold bars, each one the size of a chocolate bar. I myself have such a gold bar. My Aunt Leona sent it to me as a law school graduation present a few years before she died.
Since my aunt’s murder, one childhood memory keeps haunting me. I was eight, staying at my family’s splendid hacienda-style house in Manila. It was before dawn, still dark. Wide awake, I decided to get a drink from the kitchen. I must have gone down an extra flight of stairs, because I stumbled on to six male bodies. I had found the male servants’ quarters, where my family’s houseboys, gardeners, and chauffeurs – I sometimes imagine that Nilo Abique was among them – were sleeping on mats on a dirt floor. The place stank of sweat and urine. I was horrified.
I mentioned the incident to my Aunt Leona, who laughed affectionately and explained that the Filipino servants were fortunate to be working for our family. If not for their positions, they would be living among rats and open sewers. A Filipino maid then walked in; she had a bowl of food for my aunt’s Pekingese. My aunt took the bowl but kept talking as if the maid were not there. The Filipinos, she continued – in Chinese, but not caring whether the maid understood or not – were lazy and unintelligent. If they didn’t like working for us, they were free to leave.
Nearly two thirds of the roughly 80m ethnic Filipinos in the Philippines live on less than $2 a day. But poverty by itself does not make people kill. To poverty must be added indignity, hopelessness and grievance. In the Philippines, millions of Filipinos work for Chinese; almost no Chinese work for Filipinos. The Chinese dominate industry and commerce at every level of society. Global markets intensify this dominance: When foreign investors do business in the Philippines, they deal almost exclusively with Chinese. Apart from a handful of corrupt politicians and a few aristocratic Spanish mestizo families, all of the Philippines’ billionaires are of Chinese descent. My relatives live literally walled off from the Filipino masses, in a luxurious, all-Chinese residential enclave, on streets named Harvard and Princeton. The entry points are manned by armed guards.
Each time I think of Nilo Abique – he was nearly six feet tall and my aunt was 4’11” – I find myself welling up with a hatred and revulsion so intense it is actually consoling. But over time I have also had glimpses of how the vast majority of Filipinos, especially someone like Abique, must see the Chinese: as exploiters, foreign intruders, their wealth inexplicable, their superiority intolerable. I will never forget the entry in the police report for Abique’s “motive for murder.” The motive given was not robbery, despite the fact that jewels and money were taken. Instead there was just one word – “revenge.”
My aunt’s killing was just a pinprick in a violent world. But there is a connection between her murder and the Serbian concentration camps of the early 1990s, the murder of 800,000 Tutsis by ordinary Hutus in Rwanda in 1994, the mobs in Indonesia in 1998 which looted hundreds of Chinese properties leaving nearly 2,000 dead and even the terror attacks of 11th September. The connection lies in the relationship among the three most powerful forces operating in the world today: markets, democracy and ethnic hatred. 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. In 1998, Chinese Indonesians, only 3 per cent of the population, controlled roughly 70 per cent of the private economy, including all of the big conglomerates. In Myanmar, the Chinese dominate the economies of Mandalay and Rangoon. 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. As one Zimbabwean argued, “The land belongs to us. The foreigners should not own it. There is no black Zimbabwean who owns land in England.” Mugabe has been more explicit: “Strike fear in the heart of the white man, our real enemy.” Most of the country’s whites are third-generation Zimbabweans. They are 1 per cent of the population, but they have for generations controlled 70 per cent of the best land, largely in the form of highly productive 3,000-acre tobacco and sugar farms.
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. It was deftly timed in anticipation of the 2000 and 2002 elections, and calculated to mobilise popular support for the teetering regime.
In the contest between an economically powerful ethnic minority and a numerically powerful impoverished majority, the majority does not always prevail. 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. In Kenya, former President Moi, who had once warned Africans to “beware of bad Asians,” was sustained by a series of “business arrangements” with local Indian tycoons. 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.
In Sierra Leone, as in many other countries, independence (which came in 1961) was followed by a series of anti-market measures and policies that took direct aim at market-dominant minorities. People of “European or Asiatic origin,” including the Lebanese, were denied citizenship. Stevens’s approach thus represented a complete about-face – a pattern that’s been repeated in country after country. Stevens protected the Lebanese, and in exchange, they – with their business networks in Europe, the Soviet Union, and the US – generated enormous profits kicking back handsome portions to Stevens and other officials. (It is just such webs of pre-existing relationships with the outside world that have often given economically dominant minorities their advantages in this era of globalisation.) Stevens was succeeded by others, who struck the same deal while also courting foreign investment and aid. In 1989 and 1990, the IMF championed a free market reform package that included a phase-out of subsidies for rice. Already living in poverty, Sierra Leoneans saw the cost of rice treble, and many blamed the Lebanese. In any event, the rebel leader Foday Sankoh had little trouble finding recruits for his insurgency. Some 75,000 died in the ensuing chaos.
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.
In the former Yugoslavia the Croats, along with the Slovenes, long enjoyed a strikingly higher standard of living than the Serbs and other ethnic groups. Croatia and Slovenia are largely Catholic, with strong links to western Europe, while the Eastern Orthodox Serbs inhabit the rugged south and lived for centuries under the Ottoman empire. 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!”
Critics of globalisation draw attention to the grotesque imbalances produced by free markets. Defenders of globalisation respond that the world’s poor would be even worse off without global marketisation, and recent World Bank studies show that, with some exceptions, including most of Africa, globalisation’s “trickle down” benefits the poor as well as the rich in developing countries. But both sides of the argument tend to see wealth and poverty in terms of class conflict, not ethnic conflict. This might make sense in the advanced western societies, but the ethnic realities of the developing world are different.
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. For three days, Chinese shopkeepers huddled behind locked doors while Muslim mobs looted. In the end 2,000 people died and tens of billions of dollars – belonging to Chinese cronies of Suharto – left the country, plunging the economy into a crisis from which it has still not recovered. Moreover, little noticed in the west, the post-Suharto government has nationalised about $58bn of Chinese assets.
Markets, democracy and ethnicity are notoriously difficult concepts to define. In the west, the phrase “market economy” refers to a broad spectrum of economic systems based on private property and competition, with varying degrees of government regulation and redistribution. Yet for the past 20 years the US has been promoting raw, laissez-faire capitalism throughout the non-western world – a form of markets that the west abandoned long ago. Russia, for example, has a single income tax rate of 13 per cent – unthinkable in a large developed democracy. The measures being implemented today outside the west include privatisation, the elimination of state subsidies and controls, and free trade and foreign investment initiatives. They rarely include welfare or redistribution measures.
Democracy, too, can take many forms. I take “democratisation” to refer to the efforts, largely US-driven, to implement immediate elections with universal suffrage. It is striking to note that at no point in history did any western nation ever implement laissez-faire capitalism and universal suffrage at the same time. In the US, the poor were disenfranchised by property qualifications in virtually every state for many decades after the constitution was ratified.
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. Along similar lines, all over Latin America today – where it is often said that there are no “ethnic divisions” because everyone has “mixed” blood – large numbers of impoverished Bolivians, Chileans, and Peruvians are suddenly being told that they are Aymaras, Incas, or just indios, whatever identity best resonates and mobilises.
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. Ethnicity can be both palpably real and an artefact of the imagination rooted in the recesses of history – fluid and manipulable, yet real enough to kill for. This is what makes ethnic conflict so hard to understand and contain.
I do not propose a universal theory applicable to every developing country. There are certainly developing countries without market-dominant minorities: China and Argentina are two major examples. Nor do I argue that ethnic conflict arises only in the presence of a market-dominant minority. There are countless instances of ethnic hatred directed at economically oppressed groups. And I am emphatically not suggesting that free market democracy is more likely to lead to ethnic conflict than authoritarianism or communism.
The point, rather, is this: 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. That has been one of the least discussed lessons of globalisation over the past 20 years.
Where does this leave us? What are the implications of market-dominant minorities for national and international policymaking? Commentators such as Fareed Zakaria and Robert D Kaplan have suggested holding back on democracy until free markets produce enough economic and social development to make democracy sustainable. 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.
The underlying causes of market dominance are poorly understood and in any event seem highly intractable. Political favouritism, though often a sore point with the majority in societies with a market-dominant minority, tends to be more the consequence than the cause of market dominance. Most market-dominant minorities, whether the Bamil? in Cameroon or Indians in Fiji, enjoy disproportionate economic success at every level of society down to the smallest shopkeepers, who can rarely boast of useful political connections. Indeed, many of these minorities succeed despite official discrimination against them. Any explanation of their success will include the effect of own-group networking as well as a host of intangibles such as religion and culture.
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.
A more controversial strategy consists of direct government intervention in the market designed to “correct” ethnic wealth imbalances. The leading example of such an effort is Malaysia’s New Economic Policy (NEP), a programme established after violent riots in 1969 by indigenous Malays angry over the economic dominance of foreign investors and the country’s Chinese minority. The Malaysian government adopted sweeping ethnic quotas on corporate ownership, university admissions and jobs.
In many respects, the results have been impressive. While the NEP has not lifted the great majority of Malays out of poverty, it has helped to create a substantial Malay middle class – between 1970 and 1992 the percentage of Malays occupying the country’s most lucrative professional positions went from 6 per cent to 32 per cent. The former prime minister, Mahathir Mohamad, defended the policy in these terms: “With the existence of the few rich Malays at least the poor can say their fate is not entirely to serve rich non-Malays. From the point of view of racial ego, and this ego is still strong, the unseemly existence of Malay tycoons is essential.”
But few countries enjoy the prosperity to make NEP-type programmes feasible. Affirmative action in favour of disadvantaged majorities – rather than minorities as in the west – also risks alienating the wealthy educated minority who may abandon the country taking their skills and assets. Moreover, such programmes can exacerbate ethnic tensions rather than relieve them, especially when politicians are themselves ethnic partisans. In his own mind, Slobodan Milosevic was conducting a form of affirmative action on behalf of a long-exploited majority.
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. There are some famous models here. The University of Nairobi, for example, owes its existence to wealthy Indians in Kenya. The Madhvani family, owners of the largest industrial group in east Africa, provide education, healthcare and housing for their African employees, and also employ Africans in top management. In Russia, there is the unusual case of the Jewish billionaire Roman Abramovich, whose philanthropy won him election as governor of the poverty-stricken Chukotka region in the Russian far east. More typically, however, building ethnic goodwill requires collective action through ethnic chambers of commerce, clan associations, and so on.
The argument of this essay is about unintended consequences, not about apportioning blame. My own view, for example, is that 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.