World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability.

• Author: Cao, Lan
• Position: Book Review

WORLD ON FIRE: HOW EXPORTING FREE MARKET DEMOCRACY BREEDS ETHNIC HATRED AND GLOBAL INSTABILITY. By Amy Chua. New York: Doubleday. 2003. Pp. ix, 340. $26.

World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, by Professor Amy Chua, (1) is an analytically complex narrative of contemporary ethnic violence in the current era of globalization. Although such violence has historical roots, according to Chua it has also been fueled by free-market forces and democratization. The book is a forceful and provocative indictment of the current U.S. policy of promoting and exporting markets and democracy to developing and formerly communist, market-transitional countries.

In her book, Professor Chua applies her thesis--that ethnicity, global capitalism, and democracy are a volatile mix--to countries such as Rwanda and Sierra Leone, Indonesia and Malaysia, Russia and Zimbabwe, Venezuela and the former Yugoslavia. As different as those countries are, they share a defining characteristic: the presence of what she calls "market dominant minorities" among the majority population--that is, minorities, such as the ethnic Chinese in Southeast Asia, Indians and Lebanese in Africa, Jews in post-Soviet Russia, the ethnic Kikuyu in Kenya, whose spectacular wealth and "control" of the economy arouse deep resentment in the impoverished majority. This majority views itself as the "true," "indigenous" native whose mission is to retaliate against the economically dominant ethnic "outsider" and return the country to its "rightful" owners. This ill-will is deep and historically rooted but for the most part controlled by autocratic regimes.

Two phenomena, market liberalization and democracy, have exacerbated and inflamed the situation. The introduction of laissez-faire capitalism into such environments has benefited those already economically dominant; that is, the already-hated market-dominant ethnic minority. Simultaneously, the spread of democracy, in the form of universal suffrage and electoral politics, has allowed ethno-nationalist demagogues to catapult themselves into office by exploiting majority rage against market-dominant minorities (p. 6). In other words, markets allow an already-rich ethnic minority to get even richer, and democracy allows the already-impoverished ethnic majority to get even.

For Chua, the United States should therefore rethink its reflexive exhortations, through the World Bank and the IMF, of markets and democracy as panaceas for the developing world. As currently promoted, "the global spread of markets and democracy is a principal, aggravating cause of group hatred and ethnic violence throughout the non-Western world" (p. 9; emphasis added). Free markets plus democracy in the presence of a market-dominant minority result in backlash: backlash against markets because they represent the market-dominant minority's wealth; or backlash against democracy, by forces with a vested interest in counteracting the country's democratic impulses against markets; or violence directed against the market-dominant minority (p. 10).

The main solution for gross inter-ethnic inequality that Professor Chua proposes is ethnically conscious capitalism designed to favor the majority and restrain the ethnic minority. Because this ethnically biased market intervention is perhaps the most controversial and provocative point made in the book, I focus my Review on markets, market-dominant minorities, and Chua's proposal to "directly address the pressing, potentially explosive problems of ethnic resentment" (p. 266) by pursuing ethnically conscious market interventions. (2)

Part I discusses Chua's thesis. Part II looks at how markets may be effectively introduced into such ethnically volatile environments. It critiques Chua's proposal favoring massive "affirmative action" for the ethnic majority and explores other mechanisms, for example, culture change, to address group attributes that may retard economic development and antitrust laws to address, in an ethnically neutral manner, external, structural problems such as monopolies, predation, and vertical restraints. Part II also examines why market-dominant minorities exist. Certainly, in cases such as South Africa and Zimbabwe, their existence is due to brutal colonial exploitation. But in other cases, market-dominant minorities are classic "middleman minorities" whose prosperity is attributable to business networks and informal but efficient capital markets based on common ethnic ties and the group's reserve of social capital. Although Chua is less interested in why certain groups are market dominant than in the consequences resulting from their domination, understanding the reasons behind that economic success is important in crafting an appropriate solution. Part III concludes the Review and reiterates the main argument against government-mandated, ethnically targeted market interventions.

1. MARKETS, DEMOCRACY, AND ETHNICITY: PROFESSOR CHUA'S THESIS

   Since the demise of communism, the West has viewed markets and democracy as the antidote to poverty and authoritarianism throughout the world. Professor Chua's sobering message, by contrast, is that in many parts of the developing world, global markets and democracy--two of America's most cherished values--breed not free trade and a cosmopolitan citizenry but instead ethnic hatred and conflict. This is a novel and bold challenge to the field of law and development. The dominant school in law and development views development as a modernization process consisting of relatively apolitical and historically identifiable sequences, ultimately culminating in varying forms of western, market-oriented, liberal democracies. (3) Ideally, development should occur in "a space beyond culture," (4) to shield markets from culture (5) as well as politics. (6) As one scholar has aptly observed about the prevailing tendency to depoliticize development, "EU policy managers treat the transitional economies of Central and Eastern Europe less as a set of political exclusions and choices than as the technical management of different natural stages of development." (7)

   Chua's book rightly rejects this apolitical view of development. The book presents development as not merely a project of technical or economic management involving the relatively straightforward application of international trade rules or economic axioms but as a political process embedded within a country's cultural, historical, and political framework. Markets must be introduced with the understanding that they are operating in a politicized environment, especially for many developing countries where great disparities in wealth exist and coincide with ethnic stratification. Chua insists that although markets may indeed facilitate economic growth for the developing country as a whole, (8) distributional choices should be at the forefront of the development debate. (9) The book thus renounces the prevailing understanding in the field, as epitomized by the "Washington Consensus." (10) There is no attempt in this book to reduce development to an exercise of technical judgments and expertise. This, in itself, is a valuable contribution to the field of law and development.

   1. Market-Dominant Minorities Around the World

      Chua identifies country after country where an ethnic minority is economically dominant over the impoverished ethnic majority and analyzes how this crucial factor has a critical impact on the development process. In Southeast Asia, for example, long before but especially during the European colonial era, the ethnic Chinese prevailed economically in Burma, the Philippines, Thailand, Malaysia, Vietnam, and Indonesia (pp. 23-48). In Latin America, a white elite exists in countries such as Bolivia, Mexico, Brazil, Argentina, Ecuador, and Peru. This elite is either Spanish-blooded "latifundistas" whose wealth is derived from brutal colonial policies and plantation farming or recent Christian Lebanese and Jewish immigrants who have become the region's leading entrepreneurs (pp. 55-67).

      In post-Soviet Russia, by exploiting the country's pro-market reforms, specifically its mass privatization plans and "loans-for-shares" deals, a group of industrialists and bankers succeeded in plundering Russia and turning themselves into "billionaire-owners of Russia's crown jewels while the country spiraled into chaos and lawlessness" (p. 77). Six of the seven wealthiest oligarchs in Russia are Jewish, while Jews make up less than one percent of the Russian population (pp. 78-79).

      In Africa, market-dominant minorities are indigenous Africans as well as Indians, Lebanese, or former European colonizers. Angola, Zimbabwe, Namibia, and South Africa all have a market-dominant, colonial-in-origin white minority. Kenya has the economically successful Kikuyu who emerged from British rule "as a disproportionately urban, 'capitalist' elite among Kenya's indigenous tribes" (p. 105). The Ibo, known as the "Jews of Nigeria," are economically dominant in Nigeria and around the world, where they are deemed to be an unusually enterprising trader minority. (11)

      The market dominance in Africa of non-indigenous ethnic minorities is even more stark. In Kenya, despite the market dominance of the Kikuyu, the country's largest corporations, banks, and hotels are owned by roughly 70,000 Indians who constitute less than two percent of the population. (12) In West Africa, the Lebanese are the economically preeminent minority (p. 119). By the early 1990s, the Lebanese, with less than one percent of the population, dominated all of the most productive economic sectors, from diamonds and gold, to finance and retail, to construction and real estate. (13)

   2. Global Markets and Backlashes

      1. Backlash Against Markets

         By Chua's own acknowledgment, globalization has produced benefits and opportunities, not just for the market-dominant minority but also for the "indigenous" majority (pp. 30...