By Amy Chua
Doubleday -- 340pp -- $26
America's prescription for developing nations is simple: democracy and free-market capitalism. But what if these ideas turn out to be like medicines that produce nasty side effects when taken in combination? There you have the theme of the fascinating and disturbing World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability.
It would be easy to dismiss this as yet another attack on globalization. But this book is hardly that. Author Amy Chua understands the economics of developing nations: The 40-year-old Yale Law School professor served a stint at the World Bank, worked for four years on Wall Street, and helped privatize the state-owned Telefonos de Mexico. Chua sees no inherent evil in capitalism, thinks representative democracy is a good thing, and writes with an authority born of rigorous research.
Yet Chua warns that the phenomenon of "market-dominant minorities"--taken in combination with globalization and democracy--can cause huge strains in the developing world. Chua chillingly describes how, in 1994, her Aunt Leona, a Chinese businesswoman in the Philippines, was stabbed to death by her chauffeur. Despite eyewitness accounts by other servants, there were no arrests. Why not? Ethnic Chinese, at just 1% of the Philippines population, control 60% of its wealth. Meanwhile, two-thirds of the 80 million ethnic Filipinos live on less than $2 a day. Chua shows how her aunt's murder was part of a pattern of violence against Chinese, noting that police in such cases are "notoriously unmotivated" to seek justice.
In fact, in the police report of the case, under the section on motive, is written: "revenge." But as Chua makes clear, when economic inequality is laced with other factors, existing hostilities are exacerbated. Free-market policies often concentrate wealth in the hands of the tiny business elites that dominate many developing nations. Toss democracy into the fermenting brew, and the oppressed majority is emboldened to strike the rich few, particularly if they are an easily identified ethnic group. That's what occurred in the Philippines after the alliance between the ethnic Chinese and dictator Ferdinand Marcos was broken by Marcos' exile and the arrival of democracy. In Indonesia, the end of Suharto's dictatorship in 1998 saw the looting and burning of 5,000 shops and houses of ethnic Chinese in Jakarta. The Lebanese in West Africa, Asian Indians in East Africa, Jews in Russia, and whites in Zimbabwe have all suffered after democratic rule arrived. "The competition for votes fosters the emergence of demagogues who scapegoat the resented minority, demanding an end to humiliation, and insisting that the nation's wealth be reclaimed by its `true owners,"' says Chua.
No two countries are precisely the same, of course. But it's remarkable how many developing nations are affected by the perilous mixture the author describes. In Nigeria--a free-market country that is constantly experi- menting with (and failing at) democratic rule--tens of thousands of the indigenous Ibo tribe have been slaughtered by their poorer but more numerous tribal rivals. In Rwanda, the Tutsi tribe held the political and economic reins until far-more-numerous Hutus murdered hundreds of thousands of them in the '90s.
In Zimbabwe, a regime set up by European colonialists gave way to democratic institutions in 1980. Today, Zimbabwean President Robert Mugabe maintains his political power by urging his fellow veterans of the liberation struggle to throw whites off their land by force. In Kenya, a tiny Indian elite hangs on, "uncomfortably dependent on the corrupt and increasingly authoritarian President [Daniel Arap] Moi...as African opposition leaders intensify their ethnic hatemongering," says Chua.
The pattern of market-dominant ethnic minorities holds true in much of South America as well as in Southeast Asia, Africa, the former Yugoslavia, and Russia, although not in China or--thanks to intermarriage between Thais and Chinese--in Thailand. Similarly, Argentina, Uruguay, and Chile have been spared. (Their troubles occurred early on: Indigenous Amerindian people were killed off by the Conquistadors.) And the phenomenon is almost entirely absent in Arab nations.
Chua was writing her book when terrorists slammed planes into the World Trade Center and the Pentagon on September 11, 2001. Americans were shocked at the number of those in poorer nations who rejoiced. Chua's partial explanation: "America today has become the world's market-dominant minority...seen (not incorrectly) as the engine and principal beneficiary of global marketization." September 11 was "an act of revenge by the weak against the powerful, motivated by tremendous feelings of humiliation and inferiority."
Mercifully, Chua doesn't try to solve all the world's problems in a glib "solutions" chapter, nor does she think that more democracy is the solution. Her best suggestions: Cushion the impact of globalization with progressive government tax and transfer programs, encourage greater small-business growth and wider stock ownership, and, above all, go slow, and respect local customs. The U.S. didn't become a free-market democracy overnight, and it shouldn't expect the same of others. By Paul Magnusson