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  Since September 11, 2001, this confrontation has also been playing out in the United States. Americans are not an ethnic minority (although we are a national-origin minority, a close cousin). Nor is there democracy at the global level. Nevertheless, Americans today are everywhere perceived as the world’s market-dominant minority, wielding outrageously disproportionate economic power relative to our size and numbers. As a result, we have become the object of mass, popular resentment and hatred of the same kind that is directed at so many other market-dominant minorities around the world.

  Global anti-Americanism has many causes. One of them, ironically, is the global spread of free markets and democracy. Throughout the world, global markets are bitterly perceived as reinforcing American wealth and dominance. At the same time, global populist and democratic movements give strength, legitimacy, and voice to the impoverished, frustrated, excluded masses of the world—precisely the people, in other words, most susceptible to anti-American demagoguery. In more non-Western countries than Americans would care to admit, free and fair elections would bring to power anti-market, anti-American leaders. For the last twenty years Americans have been grandly promoting both marketization and democratization throughout the world. In the process we have directed at ourselves the anger of the damned.9

  The relationship between free market democracy and ethnic violence around the world is inextricably bound up with globalization. But the phenomenon of market-dominant minorities introduces complications that have escaped the view of both globalization’s enthusiasts and its critics.

  To a great extent, globalization consists of, and is fueled by, the unprecedented worldwide spread of markets and democracy. For over two decades now, the American government, along with American consultants, business interests, and foundations, has been vigorously promoting free market democracy throughout the developing and post-socialist worlds. At times our efforts have bordered on the absurd. There is, for example, the sad tale of a delegation of American free market advisers in Mongolia. Just before they leave the country, the Americans are thrilled when a Mongolian official asks them to send more copies of the voluminous U.S. securities laws, photocopied on one side of the page. Alas, it turned out that the Mongolian was interested in the documents not for their content, but for the blank side of each page, which would help alleviate the government’s chronic paper shortage.10

  There was also the time that the U.S. government hired New York–based Burson-Marsteller, the world’s largest public relations firm, to help sell free market capitalism to the people of Kazakhstan. Among other ideas, Burson-Marsteller developed a television soap opera miniseries glorifying privatization. In one episode, two hapless families desperately want a new house but don’t know how to build it. Suddenly a hot-air balloon descends from the sky, bearing the name “Soros Foundation” in huge letters. Americans spring out, erect the house, and soar away, leaving the awe-struck Kazakhstanis cheering wildly.11

  In the end, however, stories about American naïveté and incompetence are just a sideshow. The fact is that in the last two decades, the American-led global spread of markets and democracy has radically transformed the world. Both directly and through powerful international institutions like the World Bank, International Monetary Fund, and World Trade Organization (WTO), the United States government has helped bring capitalism and democratic elections to literally billions of people. At the same time, American multinationals, foundations, and nongovernmental organizations (NGOs) have swept the world, bringing with them ballot boxes and Burger Kings, hip-hop and Hollywood, banking codes and American-drafted constitutions.

  The prevailing view among globalization’s supporters is that markets and democracy are a kind of universal prescription for the multiple ills of underdevelopment. Market capitalism is the most efficient economic system the world has ever known. Democracy is the fairest political system the world has ever known and the one most respectful of individual liberty. Working hand in hand, markets and democracy will gradually transform the world into a community of prosperous, war-shunning nations, and individuals into liberal, civic-minded citizens and consumers. In the process, ethnic hatred, religious zealotry, and other “backward” aspects of underdevelopment will be swept away.

  Thomas Friedman has been a brilliant proponent of this dominant view. In his best-selling book The Lexus and the Olive Tree, he reproduced a Merrill Lynch ad that said “The spread of free markets and democracy around the world is permitting more people everywhere to turn their aspirations into achievements,” erasing “not just geographical borders but also human ones.” Globalization, Friedman elaborated, “tends to turn all friends and enemies into ‘competitors.’” Friedman also proposed his “Golden Arches Theory of Conflict Prevention” which claims that “no two countries that both have McDonald’s have ever fought a war against each other. . . .”12 (Unfortunately, notes Yale history professor John Gaddis, “the United States and its NATO allies chose just that inauspicious moment to begin bombing Belgrade, where there was an embarrassing number of golden arches.”)13

  For globalization’s enthusiasts, the cure for group hatred and ethnic violence around the world is straightforward: more markets and more democracy. Thus after the September 11 attacks, Friedman published an op-ed piece pointing to India and Bangladesh as good “role models” for the Middle East and arguing that the solution to terrorism and militant Islam is: “Hello? Hello? There’s a message here. It’s democracy, stupid!”—“[m]ulti-ethnic, pluralistic, free-market democracy.” 14

  By contrast, the sobering thesis of this book is that the global spread of markets and democracy is a principal, aggravating cause of group hatred and ethnic violence throughout the non-Western world. 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 unstable and combustible conditions. Markets concentrate enormous wealth in the hands of an “outsider” minority, fomenting ethnic envy and hatred among often chronically poor majorities. In absolute terms the majority may or may not be better off—a dispute that much of the globalization debate fixates on—but any sense of improvement is overwhelmed by their continuing poverty and the hated minority’s extraordinary economic success. More humiliating still, market-dominant minorities, along with their foreign-investor partners, invariably come to control the crown jewels of the economy, 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 Burma.

  Introducing democracy in these circumstances does not transform voters into open-minded cocitizens in a national community. Rather, the competition for votes fosters the emergence of demagogues who scapegoat the resented minority and foment active ethnonationalist movements demanding that the country’s wealth and identity be reclaimed by the “true owners of the nation.” As America celebrated the global spread of democracy in the 1990s, ethnicized political slogans proliferated: “Georgia for the Georgians,” “Eritreans Out of Ethiopia,” “Kenya for Kenyans,” “Whites should leave Bolivia,” “Kazakhstan for Kazakhs,” “Serbia for Serbs,” “Croatia for Croats,” “Hutu Power,” “Assam for Assamese,” “Jews Out of Russia.” Romania’s 2001 presidential candidate Vadim Tudor was not quite so pithy. “I’m Vlad the Impaler,” he campaigned; referring to the historically economically dominant Hungarian minority, he promised: “We will hang them directly by their Hungarian tongue!”15

  When free market democracy is pursued in the presence of a market-dominant minority, the almost invariable result is backlash. This backlash typically takes one of three forms. The first is a backlash against markets, targeting the market-dominant minority’s wealth. The second is a backlash against democracy by forces favorable to the market-dominant minority. The third is violence, sometimes genocidal, directed against the market-dominant minori
ty itself.

  Zimbabwe today is a vivid illustration of the first kind of backlash—an ethnically targeted anti-market backlash. For several years now President Robert Mugabe has encouraged the violent seizure of 10 million acres of white-owned commercial farmland. As one Zimbabwean explained, “The land belongs to us. The foreigners should not own land here. There is no black Zimbabwean who owns land in England. Why should any European own land here?”16 Mugabe himself was more explicit: “Strike fear in the heart of the white man, our real enemy!”17 Most of the country’s white “foreigners” are third-generation Zimbabweans. Just 1 percent of the population, they have for generations controlled 70 percent of the country’s best land, largely in the form of highly productive three-thousand-acre tobacco and sugar farms.

  Watching Zimbabwe’s economy take a free fall as a result of the mass landgrab, the United States and United Kingdom together with dozens of human rights groups urged President Mugabe to step down, calling resoundingly for “free and fair elections.” But the idea that democracy is the answer to Zimbabwe’s problems is breathtakingly naive. Perhaps Mugabe would have lost the 2002 elections in the absence of foul play. Even if so, it is important to remember that Mugabe himself is a product of democracy. The hero of Zimbabwe’s black liberation movement and a master manipulator of masses, he swept to victory in the closely monitored elections of 1980, promising to expropriate “stolen” 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 deliberately calculated to mobilize popular support for Mugabe’s teetering regime.18

  In the contest between an economically powerful ethnic minority and a numerically powerful impoverished majority, the majority does not always prevail. Instead of a backlash against the market, another likely outcome is a backlash against democracy, favoring the market-dominant minority at the expense of majority will. Examples of this dynamic are extremely common. Indeed, this book will show that the world’s most notorious cases of “crony capitalism” all involve a market-dominant ethnic minority—from Ferdinand Marcos’s Chinese-protective dictatorship in the Philippines to President Siaka Stevens’s shadow alliance with five Lebanese diamond dealers in Sierra Leone to President Daniel Arap Moi’s “business arrangements” with a handful of Indian tycoons in Kenya today.

  The third and most ferocious kind of backlash is majority-supported violence aimed at eliminating a market-dominant minority. Two recent examples are the ethnic cleansing of Croats in the former Yugoslavia and the mass slaughter of Tutsi in Rwanda. In both cases a resented and disproportionately prosperous ethnic minority was attacked by members of a relatively impoverished majority, incited by an ethnonationalist government. In other words, markets and democracy were among the causes of both the Rwandan and Yugoslavian genocides. This is a large claim, but one that this book will try to defend.

  To their credit, critics of globalization have called attention to the grotesque imbalances that free markets produce. In the 1990s, writes Thomas Frank in One Market under God, global markets made “the corporation the most powerful institution on earth,” transformed “CEOs as a class into one of the wealthiest elites of all time,” and, from America to Indonesia, “forgot about the poor with a decisiveness we hadn’t seen since the 1920s.”19 Joining Frank in his criticism of “the almighty market” is a host of strange bedfellows: American farmers and factory workers opposed to NAFTA, environmentalists, the AFL-CIO, human rights activists, Third World advocates, and sundry other groups that made up the protesters at Seattle, Davos, Genoa, and New York City. Defenders of globalization respond, with some justification, that the world’s poor would be even worse off without global marketization. With some important exceptions, including most of Africa, recent World Bank studies show that globalization’s “trickle down” has produced benefits for the poor as well as the rich in developing countries.20

  More fundamentally, however, like their pro-globalization counterparts, Western critics of globalization have overlooked the ethnic dimension of market disparities. They tend to see wealth and poverty in terms of class conflict, not ethnic conflict. This perspective might make sense in the advanced Western societies, but the ethnic realities of the developing world are completely different from those of the West. As a result, the solutions that globalization’s critics propose are often shortsighted and even dangerous when applied to non-Western societies.

  Essentially, the anti-globalization movement asks for one thing: more democracy. Thus Noam Chomsky, one of the movement’s high priests, has clarified that there is no struggle against “globalization” in the general sense, only a struggle against the global “neoliberalism” perpetuated by a few “masters of the universe” at the expense of a truly democratic community. Similarly, at the 2002 World Social Forum in Brazil, Lori Wallach of Public Citizen rejected the label “anti-globalization,” explaining that “our movement, really, is globally for democracy, equality, diversity, justice and quality of life.” Wallach has also warned that the WTO must “either bend to the will of the people worldwide or it will break.” Echoing these voices are literally dozens of NGOs who call for “democratically empowering the poor majorities of the world.”21

  Given the ethnic dynamics of the developing world, and in particular the phenomenon of market-dominant minorities, merely “empowering the poor majorities of the world” is not enough. Empowering the Hutu majority in Rwanda did not produce desirable consequences. Nor did empowering the Serbian majority in Serbia.

  Critics of globalization are right to demand that more attention be paid to the enormous wealth disparities created by global markets. But just as it is dangerous to view markets as the panacea for the world’s poverty and strife, so too it is dangerous to see democracy as a panacea. Markets and democracy may well offer the best long-run economic and political hope for developing and post-Communist societies. In the short run, however, they are part of the problem.

  “Markets,” “democracy,” and “ethnicity” are notoriously difficult concepts to define. In part this is because there is no single correct interpretation of any of these terms. Indeed, I hope precisely to show in this book that the “market systems” currently being urged on developing and post-Communist countries are very different from the ones now in place in contemporary Western nations; that the process of “democratization” currently being promoted in the non-Western world is not the same as the one that the Western countries themselves went through; and that “ethnicity” is a fluid, artificial, and dangerously manipulable concept.

  Nevertheless, some clarification of my usage of these terms is in order. In the West, terms like “market economy” or “market system” refer to a broad spectrum of economic systems based primarily on private property and competition, with government regulation and redistribution ranging from substantial (as in the United States) to extensive (as in the Scandinavian countries). Ironically, however, for the last twenty years the United States has been promoting throughout the non-Western world raw, laissez-faire capitalism—a form of markets that the West abandoned long ago. In this book, unless otherwise indicated, terms like “marketization,” “markets,” and “market reforms” will refer to the kinds of pro-capitalism measures actually being implemented today outside the West. These measures characteristically include privatization, elimination of state subsidies and controls, and free trade and pro-foreign investment initiatives. As a practical matter, they rarely, if ever, include any substantial redistribution measures.

  Similarly, while “democracy” can take many forms,22 I will use the term “democratization” to refer to the political reforms actually being promoted and implemented in the non-Western world today. Thus, “democratization” will refer principally to the concerted efforts, heavily U.S.-driven, to implement immediate elections with universal suffrage. Needless to say, an ideal democratic society would surely include m
ore substantive principles, such as equality under law or minority protections, but to build such principles into the definition of democracy would be to confuse aspiration with reality. It is striking to note that at no point in history did any Western nation ever implement laissez-faire capitalism and overnight universal suffrage at the same time—the precise formula of free market democracy currently being pressed on developing countries around the world.

  Ethnicity is another controversial concept that has generated much debate. For purposes of this book, I will assume that “ethnicity” is not a scientifically determinable status. Rather, “ethnicity” will refer to a kind of group identification, a sense of belonging to a people, that is experienced “as a greatly extended form of kinship.”23 This definition of ethnicity is intended to be very broad, acknowledging the importance of subjective perceptions. It encompasses differences along racial lines (for example, blacks and whites in the United States), lines of geographic origin (for example, Malays, Chinese, and Indians in Malaysia), as well as linguistic, religious, tribal, or other cultural lines (for example, Kikuyu and Kalenjin tribes in Kenya or Jews and Muslims in the Middle East).

  Ethnic identity is not static but shifting and highly malleable. In Rwanda, for example, the 14 percent 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.” This was no longer true 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 much sharper ethnic divisions were later exploited by the leaders of Hutu Power.24 Along similar lines, all over Latin America today—where it is often said that there are no “ethnic divisions” because everyone is “mixed-blooded”—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 mobilizes. These indigenization movements are not necessarily good or bad, but they are contagiously potent.