CHAPTER 12

The Future of Free Market Democracy

THE BOTTOM LINE is this. Democracy can be inimical to the interests of market-dominant minorities. There were good reasons why the Indians in Kenya and whites in South Africa, Zimbabwe, and America’s Southern states resisted democratization for generations. Market-dominant minorities do not really want democracy, at least not in the sense of having their fate determined by genuine majority rule.

Some readers will surely protest. Many market-dominant minorities—the Chinese in Malaysia, for example, or Jews in Russia, and Americans everywhere—often seem to be among the most vocal advocates of democracy. But “democracy” is a notoriously contested term, meaning different things to different people.

When entrepreneurial but politically vulnerable minorities like the Chinese in Southeast Asia, Indians in East Africa, or Jews in Russia call for democracy, they principally have in mind constitutionally guaranteed human rights and property protections for minorities. In other words, in calling for democracy, these “outsider” groups are precisely seeking protection against “tyranny of the majority.”

Similarly, when the European-blooded elites in Bolivia, Ecuador, or Venezuela discuss democratization, they invariably mention the “rule of law” in the same sentence. What these elites decidedly don’t want from democracy is to have property rights and economic policies suddenly determined by their countries’ poorly educated, impoverished Indian-blooded majorities. (Witness the horror of the Venezuelan elite when populist leader Hugo Chavez swept to power and the subsequent efforts to remove him.) On the contrary, by democratization, Latin America’s elites usually mean a very gradual process of majority inclusion, beginning first with educational reform, perhaps local elections, and some political participation of the masses—but always tempered by, and subordinated to, an overriding concern for the stability of property rights, foreign investment, and the status quo.

In the Middle East, Israeli Jews are justly proud of the strength of Israel’s democratic institutions, which are almost unique in the Middle East. But even Israel does not extend suffrage to the roughly 3 million Palestinians living in the West Bank and Gaza Strip. Among other reasons, enfranchising the Palestinians of the Occupied Territories would significantly dilute Israel’s “Jewish character” and could even lead to Jews eventually becoming a minority in Israel. Nor is it clear that democratization of the Arab states would be in Israel’s best interests. In Egypt, for example, rapid democratization might very well bring to power a regime much more hostile to Israel than Hosni Mubarak’s autocratic military rule.

Finally, when Americans call for world democratization, we don’t mean world democracy. For Americans, global democratization means democracy for and within individual countries. That is, we envision a world in which brutal and unjust dictatorships are replaced by freely and fairly elected leaders, accountable to their citizens. We imagine ourselves, moreover, at the helm of such a world. As President Clinton predicted in his second inaugural address: “The world’s greatest democracy will lead a whole world of democracies.”¹ By contrast, the last thing most Americans want is a true world democracy, in which our economic and political fate is determined by a majority of the world’s countries or citizens. The idea, for example, of the U.N. General Assembly controlling U.S. foreign investments would probably not be appealing to most Americans. Like other market-dominant minorities, we don’t trust the relatively poor, frustrated, resentful majorities surrounding us necessarily to act in our best interests.

Democracy or Markets?

Deservedly or not, market-dominant minorities—with their disproportionate capital, skills, business networks, and control over the modern economy—drive global capitalism. Any backlash against market-dominant minorities, whether the Chinese in Indonesia, Ibo in Nigeria, or America at the global level, is thus also a backlash against markets.

In other words, in societies with a market-dominant minority, democracy can pose a grave threat not only to the minority, but to markets themselves. Rather than reinforcing the market’s liberalizing, wealth-producing effects, the sudden political empowerment of a poor, frustrated “indigenous” majority often leads to powerful ethnonationalist, anti-market pressures. And these pressures, as Rwanda, Indonesia, and the former Yugoslavia vividly show, are more likely to lead to confiscation and ethnic killing than to the widespread peace and prosperity that proponents of free market democracy envision. There is always an inherent tension between market capitalism and democracy. But in societies with a market-dominant minority, this tension is inflamed by the dark energies of ethnic hatred. As a result, throughout the non-Western world today, markets and democracy—at least in the raw forms in which they are currently being implemented—are not typically mutually reinforcing. On the contrary, their combined pursuit in the face of a hated market-dominant minority is a recipe for ethnic conflagration.

So where does this leave us? What are the implications of market-dominant minorities for national and international policymaking?

Influential writer Robert D. Kaplan recently offered this general answer: hold off on democracy until free markets produce enough economic and social development to make democracy sustainable. In The Coming Anarchy, Kaplan argues that a middle class and civil institutions—both of which he implicitly assumes would be generated by market capitalism—are preconditions for democracy. Contrasting Lee Kuan Yew’s prosperous authoritarian Singapore with the murderous, “bloodletting” democratic states of Colombia, Rwanda, and South Africa, Kaplan fiercely condemns America’s post–Cold War mission to export democracy abroad, to “places where it can’t succeed.”²

This position—markets first, democracy later, if at all—has a long and impressive pedigree. In 1959, noted sociologist Seymour Martin Lipset wrote that “the more well-to-do a nation, the greater the chances that it will sustain democracy.” And in his 1968 Political Order in Changing Societies political scientist Samuel P. Huntington made what continues to be the most powerful and subtle case against rapid democratization in modernizing societies.³ Not surprisingly, this view also finds support among many leaders of non-Western nations, who argue that democracy is a Western value that should not indiscriminately be imposed on other cultures.

In 1992, for example, Saudi Arabia’s King Fahd publicly stated that the “democratic system prevailing in the world does not suit us in the region … Islam is our social and political law. It is a complete constitution of social and economic laws and a system of government and justice.”⁴ Similarly, Malaysia’s prime minister Dr. Mahathir Mohamad has frequently attacked the “moral degeneration” of Western democracy and the superiority of “Asian values.”⁵

Singapore’s Lee Kuan Yew recently explained in an interview in Foreign Affairs that “Asian societies are unlike Western ones. The fundamental difference between Western concepts of society and government and East Asian concepts”—referring to China, Japan, Korea, and Vietnam, as distinct from Southeast Asia—“is that Eastern societies believe that the individual exists in the context of the family. He is not pristine and separate.” On democracy, Lee Kuan Yew responded, “What are we all seeking? A form of government that will be comfortable, because it meets our needs, is not oppressive, and maximizes our opportunities. And whether you have one-man, one-vote or some-men, one vote or other men, two votes, those are forms which should be worked out. I’m not intellectually convinced that one-man, one-vote is best.”⁶

Singapore, with its astounding rise to prosperity, modernity, and civil stability, has proved an alluring exemplar for those who question the wisdom of democratizing developing societies. According to Kaplan, the American urge to democratize others is arrogant, provincial, and irresponsible. “To think that democracy as we know it will triumph—or is even here to stay—is itself a form of determinism, driven by our own ethnocentricism,” argues Kaplan.⁷

Although Kaplan’s view is refreshingly unromantic, I ultimately differ from him. To begin with, as one writer has quipped, “If authoritarianism were the key to prosperity, then Africa would be the richest continent in the world.” There is no way to ensure that any given dictator will be beneficent, farsighted, and pro-market. Ask (as some do) for an Augusto Pinochet or an Alberto Fujimori, and you may get an Idi Amin or a Papa Doc Duvalier. As many political economists have observed, there is no clear correlation between authoritarianism and economic growth.⁸ While democracy is certainly no panacea for corruption, many of history’s most predatory regimes, from the Marcos dictatorship in the Philippines to Burma’s repugnant SLORC, have been autocratic.

More fundamentally, Kaplan overlooks the global problem of market-dominant minorities. Kaplan stresses the ethnic biases of elections, but neglects the ethnic biases of capitalism. At the same time he is overly optimistic about the ability of markets alone to lift the great indigenous masses out of poverty. The awkward reality is that markets in developing societies favor not only some people over others, but some ethnic groups over others. Worse, they often benefit a hated ethnic minority, leaving the vast majority of the nation in frustrated poverty. Overlooking this reality, Kaplan blames too much of the world’s violence and anarchy on democracy.

Consider, for example, the brutal takeover of Sierra Leone by diamond-hungry, limb-chopping rebels; the confiscations of white land in Zimbabwe; or the 1998 anti-Chinese riots in Indonesia that triggered $40 billion of capital flight and helped economically destabilize all of Southeast Asia. In all these cases and many more, markets set up the disasters by reinforcing the stark economic dominance of an “outsider” minority and by fomenting intense resentment among the poor, frustrated “indigenous” majority. Once such intense resentment among the majority exists, Kaplan is absolutely right that suddenly holding free and fair elections could well produce catastrophic results. What he fails to see is that unrestrained markets—superimposed on postcolonial societies with massive initial ethnic imbalances in financial and human capital—have helped create intolerable and volatile conditions in these societies, the very conditions that unrestrained democracy detonates.

The remainder of this chapter will be based on three assumptions. First, the best economic hope for developing and post-socialist countries lies in some form of market-generated growth. Second, the best political hope for these countries lies in some form of democracy, with constitutional constraints, tailored to local realities. And third, avoiding ethnic oppression and bloodshed must be a constant priority. But if these goals are to be achieved—if global free market democracy is to be peaceably sustainable—then the problem of market-dominant minorities, however unsettling, must be confronted head-on. The answer is not to swing from one wishful panacea to another, for example by scapegoating democracy and glorifying markets, or vice versa.

Rather, the next several sections will address the following specific topics: (1) the possibility of “leveling the playing field” between market-dominant minorities and the impoverished “indigenous” majorities around them; (2) ways of giving the poor, frustrated majorities of the world a greater stake in global markets; (3) ways of promoting liberal rather than illiberal democracies; and (4) approaches that market-dominant minorities themselves might take to forestall majority-based, often murderous ethnonationalist backlashes. If we stop peddling cure-alls—both to ourselves and others—and instead candidly address the biases and dangers inherent in both markets and democracy, there is in many cases room for optimism.

Leveling the Playing Field: Addressing the Causes of Market Dominance

The first, most obvious step is to isolate, where possible, and to address, where appropriate, the causes of the market dominance of certain groups. In South Africa, for example, expanding educational opportunities for the black majority—relegated for more than seventy years to inferior Bantu schooling—is properly a national priority and should be vigorously supported by the international community to the extent that it has an interest in promoting the stability of a democratic South Africa. Throughout Latin America as well, the market dominance of the European-blooded elite reflects at least in part centuries of subjugation, exclusion, and corrupt, oligarchic rule. Educational reform and equalization of opportunities for the region’s poor indigenous-blooded majorities are imperative if global markets are to benefit more than just a handful of cosmopolitan elites.

Similarly, to the extent that political favoritism has contributed to the astounding wealth of certain market-dominant minorities, eliminating such favoritism would plainly be a step in the right direction. The monopolies awarded by indigenous leaders, always in exchange for kickbacks, to outsider market-dominant minorities not only are inefficient, but fuel invidious group stereotypes and aggravate ethnic resentment.

On the other hand, we have to be realistic. The truth is that the underlying causes of market dominance are poorly understood, difficult to reduce to tangible factors, and in any event highly intractable. Research, for example, suggests that additional educational spending, if not accompanied by major socioeconomic reforms, produces depressingly few benefits.⁹ (Educating girls, however, might have a significant indirect payoff: Research results are strong that young women with more education have smaller families, and population pressures exacerbate all the problems of poor countries, including those related to market-dominant minorities.) Likewise, while political favoritism is a frequent, exacerbating problem in societies with a market-dominant minority, such favoritism tends to be more the consequence than the cause of market dominance. Most market-dominant minorities, whether the Bamiléké in Cameroon or Indians in Fiji, are disproportionately economically successful at every level of society, including small traders, retailers, and shopkeepers with no political connections whatsoever. Further, many market-dominant minorities have been successful notwithstanding long histories of official discrimination against them. This is certainly true of the Chinese in Southeast Asia, Lebanese in West Africa, and Jews almost everywhere.

Sociologists and anthropologists have been trying for years to understand the economic success of some groups over others. Ever since Max Weber argued that Protestantism was more conducive to capital accumulation than Catholicism, religion has often been cited as a critical determinant of group economic success. More recently, many have stressed cultural factors—for example, group differences in work habits, savings propensities, or attitudes toward education, commerce, and wealth—to explain differentials in group economic performance.¹⁰

To the extent that religion and other cultural factors play a significant role in producing the market dominance of certain groups, the appropriate policy implications are by no means clear. Even if there were a demonstrable relationship between certain religions and economic success, an effort to instill “entrepreneurialism” through, say, group conversions to Protestantism (or Judaism or Confucianism, depending on the theory) would seem unpromising. Attempts to inculcate a “work ethic” may seem more attractive, but have not proved any more effective. Indigenous elites in developing countries have frequently encouraged their fellow citizens to emulate market-dominant minorities and to become more “diligent” and “motivated.” Malaysia’s prime minister Mahathir, for example, has often urged his Malay constituents to model themselves on their more “hardworking” and commercially “astute” Chinese counterparts.¹¹ Not surprisingly, such governmental “cultural revolutions”—attempting to change culture from the top down—have been notoriously unsuccessful.

Apart from the issue of feasibility, there is also a moral question. “Culture” cannot simply be treated as an inconvenient impediment to free markets. Even if it were possible to transform every developing-world villager into a consumer entrepreneur, it is hardly obvious that this ought to be the goal of development policy.

But the fundamental point is this. To “level the playing field” in developing societies—to try to bring impoverished, often illiterate majorities up to the level where they can compete successfully with the hypercapitalized market-dominant minorities in their midst—will be a painfully slow process, taking generations if it is possible at all. As a result, over-reliance on this strategy is unwise. Leaving in place for years or even decades the existing ethnic economic imbalances, long-term efforts to “level the playing field” assume a horizon of social stability that many non-Western countries do not have. Indeed, in the short term, investment in education and other forms of human capital can contribute to ethnonationalist movements. As many have pointed out, the relationship between education and ethnonationalism is by no means straightforward; Osama bin Laden’s Al Qaeda pilots were very well educated.

Policies to expand education and promote equal opportunity, while comforting and uncontroversial, do not directly address the pressing, potentially explosive problems of ethnic resentment and ethnonationalist hatred that threaten so many developing and post-socialist societies today. To address these problems it will be essential to try to devise measures and create institutions restraining the worst excesses of markets and democracy—excesses that in the presence of a market-dominant minority often lead to confiscations, authoritarian backlash, and mass slaughter.

Stakeholding: Spreading the Benefits of Markets

The essential problem is that in societies with a market-dominant minority, laissez-faire capitalism leaves significant numbers of the relatively impoverished majority feeling that they have no stake in globalization or a market economy. There are at least four basic strategies for redressing this problem. Each has drawbacks; some are more controversial than others; and some might be inappropriate or infeasible in particular contexts. But all should be seriously considered.

The first and most familiar strategy for wealth-spreading is redistribution through tax-and-transfer programs. As discussed in chapter 9, not a single Western nation today has anything close to a laissez-faire economic system. Yet laissez-faire markets are precisely what the United States, along with powerful international institutions like the IMF, have been promoting for decades throughout the non-Western world.

In the West, strong redistributive measures such as progressive taxation, social security, and unemployment insurance, as well as antitrust and financial regulation, temper the harshest effects of capitalism. In the non-Western world, it is equally imperative to try to spread the benefits of markets. There is no good reason why, in some of the poorest countries in the world, the tax rate for the very wealthy is effectively zero. At a minimum, when exporting Western market institutions, the advanced countries should also be working toward the creation of the social safety net programs and tax-and-transfer institutions familiar throughout the Western nations.

Unfortunately, the realistic redistributive potential of tax-and-transfer policies in the developing world is limited, at least in the near future. To put it bluntly, there is not enough to tax, and nearly no one who can be trusted to transfer.¹² While Westerners take sophisticated tax systems for granted (and complain about them all the time), establishing the institutions and practices necessary to effectuate tax-and-transfer programs is immensely difficult in countries where the state is weak, money scarce, and corruption pervasive.

A second strategy for spreading market wealth was recently proposed by Hernando de Soto in The Mystery of Capital: give the poor in the developing world formal, legally defendable property rights. Specifically, de Soto advocates integrating extralegal businesses into the formal property system and giving squatters legal title rather than evicting them. Based on de Soto’s proposals, countries like Peru (de Soto’s home country) and the Philippines have implemented bold new titling programs, attempting to debunk the prevailing view in the developing world that capitalism is a “private club,” only benefiting the West and the already-rich.¹³

A passionate and brilliant champion of both capitalism and the poor in the Third World, de Soto has managed to capture the imaginations of influential figures like Margaret Thatcher and Milton Friedman, along with millions who are currently excluded from globalization’s benefits. Insofar, however, as de Soto believes that mere “titling,” combined with a market economy, can eliminate poverty quickly and on a large scale, his proposals are probably idealistic. Some of the new “titled” communities established on de Soto’s model are located in remote areas and still lack sewage and basic infrastructure. More broadly, de Soto’s book does not account for the fact that the existing property rules do not seem to have impeded wealth accumulation by certain ethnic groups—market-dominant minorities—many of whom began with no property at all. As a result, while de Soto’s proposals are eminently worth pursuing, I fear that a mere change in formal property rules may not substantially alter the realities of entrenched poverty and the current extreme ethnic maldistributions of wealth. Nevertheless, by drawing international attention to the urgency of trying to expand popular participation in the market system, and by offering a concrete way of doing so, de Soto has performed a tremendously important service and represents a courageous step in the right direction.

A third strategy for spreading the benefits of free markets involves finding ways to give the poor majorities of the world an ownership stake in their country’s corporations and capital markets. In the United States, a solid majority of Americans, even members of the middle and lower-middle classes, own shares in major U.S. companies, often through pension funds, and thus feel that they have a stake in the U.S. market economy. This is not the case in the non-Western world, where corporations are often privately owned by single families belonging to a market-dominant minority group and where extremely few members of the general population have any stake in the corporate sector.

If this state of affairs could be changed—if large numbers of the “indigenous” population had an ownership stake in their society’s capital markets—the benefits might be considerable, economically and politically. As Columbia Law School professor John Coffee has put it, “Encouraging equity markets to develop and encouraging dispersed ownership may … imply not only efficiency gains but also a more open society, one less dominated by banks” and “crony capitalism” and “more attractive to entrepreneurship.”¹⁴

Fourth, a more controversial strategy for addressing the problem of market-dominant minorities consists of government interventions into the market, consciously designed to “correct” ethnic wealth imbalances. Such ethnic-based interventions on behalf of an economically disadvantaged group are known as affirmative action programs in the West. Particularly in the United States, these programs have been the subject of increasingly bitter criticism in recent years.

Whatever the merits of these criticisms in the West, it is important not to confuse apples with oranges. In the West, affirmative action policies are intended to benefit disadvantaged ethnic minorities—African-Americans in the United States, aborigines in Australia, or Maori in New Zealand, for example. By contrast, affirmative action policies in countries with a market-dominant minority are intended to benefit disadvantaged majorities—for example, blacks in South Africa, Quechua and Aymara Indians in Bolivia, or the 80 percent indigenous pribumi majority in Indonesia. This is a rather major difference.

For one thing, even putting aside questions of justice, a situation in which the great majority of citizens in a country live in extreme poverty, while a tiny ethnic minority controls most of the nation’s wealth, is extremely unstable, particularly when combined with sudden democratization. For another thing, affirmative action programs in these countries, if voted in by a majority of the population as is the case in South Africa, represent a democratic outcome—and therefore an outcome that it would be awkward for, say, the IMF or the United States to overturn in the name of markets. In any event, Western policymakers, especially American policymakers, have to be careful not to project their own negative feelings about affirmative action or identity politics onto societies where the conditions and demographics are totally different.

Indeed, many Americans are unaware that other countries, including a number of Western countries, have pursued ethnically based affirmative action programs—some with notable success. Canada, for example, has had considerable success addressing the problem of a market-dominant minority at the provincial level. In Quebec, aggressive affirmative action policies in the 1960s helped raise the economic status of the severely economically disadvantaged 80 percent French Canadian majority vis-à-vis the market-dominant English-speaking minority, who historically controlled Quebec’s banks, insurance companies, trade, and manufacturing—indeed, the virtual entirety of the modern economy.¹⁵

But conditions in Quebec forty years ago were considerably more propitious than those prevailing in the non-Western world today. (Quebec was part of a prosperous, industrialized country and the recipient of generous federal funding from the Canadian government.)¹⁶ A much more relevant example for today’s developing countries is Malaysia’s affirmative action program for its indigenous Malay majority. Following the 1969 race riots in Kuala Lumpur, which were similar in many respects to those that recently erupted in Indonesia, the Malaysian government adopted the “New Economic Policy” (NEP), aggressively seeking to achieve “national unity … expressed as the improvement of economic balances between the races.” At that time indigenous Malays, or bumiputra, represented roughly 62 percent of the population but owned a minuscule 1.5 percent of the country’s capital assets.¹⁷ Along with foreign investors, Malaysia’s entrepreneurial Chinese minority controlled all of the country’s most lucrative, large-scale commercial enterprises, both agricultural and nonagricultural.¹⁸

To redress these extreme ethnic wealth imbalances, the Malaysian government adopted sweeping ethnic quotas on corporate equity ownership, university admissions, government licensing, and commercial employment. It also initiated large-scale purchases of corporate assets on behalf of the Malay majority. After 1976, under what was effectively compulsory corporate restructuring, many Malaysian Chinese companies were required to set aside 30 percent of their equity for Malay interests—typically with no choice about the identity of their new Malay “business partners.” More recently, privatized entities, and companies seeking to list on the Kuala Lumpur Stock Exchange, were required to have a bumiputra shareholding of at least 30 percent.¹⁹

In many respects the results of the NEP have been impressive. While the NEP has not lifted the great majority of Malays (particularly in the rural areas) 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 percent to 32 percent. The proportion of bumiputra doctors rose from 4 percent to 28 percent; dentists from 3 percent to 24 percent; architects from 4 percent to 24 percent; and engineers from 7 percent to 35 percent. In the corporate sector the bumiputra ownership share of corporate stock at par values jumped from 1.5 percent in 1969 to 15.6 percent in 1982 to 20.6 percent in 1995. There is no possibility that free markets could have produced such results.²⁰

By creating a small but visible Malay economic elite and by bringing Malay participation into important economic sectors—for example, the construction, rubber, tin, shipping, and communications sectors (all formerly dominated by foreign investors or Chinese and Indian Malaysians)—the NEP has helped promote a sense among the bumiputra that a market economy can benefit indigenous Malays, and not merely foreign investors and entrepreneurial “outsiders.” According to Prime Minister Mahathir, who frankly concedes that the NEP has tended to favor elite, well-connected Malays, the NEP serves an important symbolic function:

[I]f these few Malays are not enriched the poor Malays will not gain either. It is the Chinese who will continue to live in huge houses and regard the Malays as only fit to drive their cars. 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.²¹

Today, in addition to a number of Malay tycoons, some of Malaysia’s best doctors and attorneys are Malay—a fact acknowledged even among the Chinese, who just thirty years ago made no secret of their contempt for Malays.²²

Neighboring Indonesia provides a useful counterpoint. The massive capital flight and ethnic violence suffered after 1998 by Indonesia contrasts sharply with the situation in Malaysia, where the Asian financial crisis produced no anti-Chinese backlash or rioting, no ethnic confiscations, and very little capital flight. While the comparison between Malaysia and Indonesia has its limits,^fn1 there is a strong consensus that Malaysia’s systematic market interventions over the last thirty years have helped improve the country’s ethnic relations.²³

At the same time, the accomplishments of the NEP should not be overstated. It is unclear how well the NEP would have fared in the absence of the extraordinarily dynamic growth rates of the 1970s and 1980s. More critically, the NEP has failed to achieve some of its most ambitious objectives. Despite inflated official claims, for example, the NEP has not succeeded in “eradicating poverty,” one of its major goals.²⁴ Further, even after decades of sustained governmental intervention, the Chinese minority remains starkly economically dominant vis-à-vis the bumiputra majority. To repeat: Market dominance is surprisingly intractable, and resistant to government-sponsored “corrective” ethnic policies. Worse yet, there is always the danger that government affirmative action policies will exacerbate rather than ameliorate ethnic conflict, by entrenching ethnic divisions.²⁵

For all these reasons, it would be irresponsible to champion affirmative action as the one-size-fits-all solution for developing countries that have a market-dominant minority. This is not to say that the NEP or Quebec’s ethnic preference programs cannot be helpful models. But in the deeply divided societies of the non-Western world, government leaders are themselves ethnic partisans; indeed, they are often the chief instigators of ethnonationalist sentiment. Sadly, there is a slippery slope between narrowly tailored, ethnic preference programs of limited duration on one hand, and vicious, confiscatory, often murderous “group-payback-time” programs on the other. In their own minds, Zimbabwe’s Robert Mugabe, Serbia’s Slobodan Milosevic, and Rwanda’s Hutu Power leaders were all conducting a form of “affirmative action” on behalf of a long-exploited and humiliated majority.

Democracy: Against Hypocrisy and Beyond Majority Rule

When I recently visited Bolivia, I noticed enthusiastic political slogans (“MNR!”) spray-painted on the roofs and walls of tiny dirt-floor houses, even in isolated desert villages. When I mentioned these to my Quechuan guide Osvaldo, he dismissed them with a wave of his hand. “The people in those houses can’t even read,” he laughed bitterly. “But if they let the government paint those slogans, they get a sack of potatoes, or maybe some sugar.”

Democracy in the developing world is often more nominal than real. In many countries the great majority of the impoverished electorate do not have a substantial political voice, whether because of lack of access to information or because the wealthy control the political process through lobbying or corruption.²⁶ This is true even of “success stories” such as the Philippines, where, despite impressive strides toward democracy in the last twenty years, it remains the case that a few landowning, dynastic families along with powerful Chinese business interests continue to dominate the political process.

In other words, Western triumphalism about democracy in the developing world rests in part on a certain hypocrisy. If universal suffrage were a reality rather than a sham, one might wonder whether most of today’s marketizers, foreign investors, and international organizations would be supporting it. Indeed, even today, there are many within the international community who, at the first sign of a possible trade-off between markets and democracy, make clear that their first commitment is to the former. As a beaming U.S. economist said to me just after Venezuela’s democratically elected president Hugo Chavez was deposed in a military coup (and before he was reinstated), “Democracy is not necessarily the most efficient form of government.”

It is better to be an open advocate of the priority of markets than to be a self-congratulatory advocate of sham democracy. The difficulty, however, with a genuine commitment to democracy is that, for all the reasons discussed in this book, majority rule in many countries outside the West could indeed produce anti-market, ethnically violent outcomes.

So what is to be done?

The answer is that democracy has to mean more than majority rule. Just as the United States should not promote unrestrained laissez-faire capitalism (a form of markets that the West itself has repudiated) throughout the non-Western world, so too the United States should not promote unrestrained, overnight majority rule (a form of democracy the West has repudiated). In the West the primary restraints on the excesses of majority rule take the form of constitutional safeguards: minority protections and guarantees against arbitrary government confiscations. But as with the Western-style welfare state, Western-style constitutional safeguards may not be realistic or adequate outside the West.

Constitutional protection of minorities and private property require, for example, an independent (and not ethnically biased) judiciary as well as mechanisms through which the judiciary’s judgments can be reliably enforced. But these institutions are notoriously weak in non-Western countries. In Zimbabwe, President Robert Mugabe proceeded with his popular seizures of white land in open defiance of a judicial determination that they were unconstitutional. And in Venezuela, populist President Hugo Chavez, while at the height of his popularity, oversaw the overnight enactment of a radical new constitution to support his anti-market, anti-elite agenda.

In short, while constitutional safeguards and human rights protections should of course be encouraged in developing and transitional countries, they cannot be relied on as an answer to the problem of market-dominant minorities. On the contrary, outside the West constitutional checks on majority will are often swept away by the very ethnonationalist risings they are intended to forestall.

Instead of looking for means to check or halt an already aroused hateful majority, the emphasis has to be on prevention. This means first and foremost that the process of democratization must be rethought. Throughout the non-Western world, if democracy and markets are to be peaceably sustainable, democratization cannot be reduced to shipping out ballot boxes for national elections—a process almost calculated to maximize ethnic politics in deeply divided societies. Ballot boxes brought Hitler to power in Germany, Mugabe to power in Zimbabwe, Milosevic to power in Serbia—and could well bring the likes of Osama bin Laden to power in Saudi Arabia.

Americans often forget that there are many different models of democracy, even within the Western nations. Democracy can vary along a large number of axes: for example, U.S.-style presidentialism versus U.K.-style parliamentarism; first-past-the-post electoral systems versus proportional representation; bottom-up democratization (starting with local village elections) versus top-down democratization (starting with national, presidential elections). These different versions of democracy can have significantly different effects on ethnic politics.

Finally, it has to be remembered that the democratization process occurring in the non-Western countries is nothing like the democratization process that unfolded in the West. In particular, as discussed in chapter 9, the rapidity of democratization in developing and transitional countries today contrasts sharply with the gradual extension of the suffrage in Europe and the United States. Universal suffrage emerged in the West incrementally, over many generations. By comparison, in the nations of the non-Western world, universal suffrage is being implemented on a massive scale, almost overnight. Limitations on the suffrage are not an acceptable option today. But there are other ways to slow down and stabilize the process of democratization.

CHINA, ALTHOUGH IT does not have a market-dominant minority, is an interesting case in point. Conventional wisdom in the West has it that since 1980, China has been rapidly marketizing without democratizing. Politics professor Minxin Pei, however, questions this conventional wisdom in a recent Foreign Affairs article called, “Is China Democratizing?” According to Pei, China has pursued significant political liberalization over the last two decades. But these changes have gone largely unnoticed in the United States, because “American politicians and news media measure the progress of political reform in other countries against a single yardstick—the holding of free and open elections” at the national level.²⁷

China’s political reforms, however, have had far-reaching effects. Throughout China there are now semi-open local village elections, which, despite their limitations, offer a nontrivial measure of political participation and, more critically, legitimate competitive elections as an important part of the political process. Nationally, while the Chinese Communist Party (CCP) retains its dictatorial position, significant measures have made even the national government somewhat more responsive to popular grievances and attitudes. For example, new mandatory retirement rules for government and CCP officials, while attracting little attention abroad, transformed a ruling elite dominated by aging, anti-market revolutionaries into one composed mostly of middle-aged, well-educated technocrats who have much more progressive economic and political outlooks.

At the same time, the National People’s Congress (NPC) is no longer just a rubber stamp, but increasingly a potential challenger to the CCP’s power. Recent polls indicate that citizens view the NPC, along with a more independent legal community and local people’s congresses, as channels for popular grievances and political participation. In addition, writes Pei, the Chinese government has shifted “from mass to selective repression,” targeting a relatively small number of highly visible dissidents while granting the great majority of citizens far more economic and personal freedoms than they have enjoyed in generations.²⁸

But despite these and other political reforms, China today remains fundamentally autocratic at the national level. Indeed, advocates of the “markets first, democracy later” approach often cite China as a case in their favor. China, after all, stunningly quadrupled its per capita income in just eighteen years, by contrast to, say, democratic Russia, which in Robert Kaplan’s words, “remains violent, unstable, and miserably poor despite its 99 percent literacy rate.” “My point,” writes Kaplan, “hard as it may be for Americans to accept, is that Russia may be failing in part because it is a democracy and China may be succeeding in part because it is not.” Kaplan may be right. At the same time, I wonder whether the real lesson China holds for other non-Western countries is not that authoritarianism may best promote markets, but rather that democratization comes in many guises. It is still too early to tell.

The Middle East: The Long Road Toward Democracy?

As I suggested in chapter 10, if some version of free market democracy is the long-term goal in the Middle East, holding overnight elections is probably not the best way to achieve it. On the contrary, immediate majority elections in many of the Arab states would likely bring to power intensely anti-market, anti-Israel, anti-American, anti-globalization regimes. Moreover, counterintuitively, democratic elections in many Middle Eastern countries could well sweep in antidemocratic regimes. As Fareed Zakaria puts it, many “Islamic fundamentalist parties are sham democrats. They would happily come to power through an election but then set up their own dictatorship. It would be one man, one vote, one time.”²⁹

What are the alternatives? In the long term, prominent Egyptian intellectual Saad Eddin Ibrahim believes that, despite their extremism, “Islamic militants are tamable through accommodative politics of inclusion. Running for office, or once in it, they recognize the complexities of the real world and the need for gradualism and toleration.”³⁰ Meanwhile, a number of thoughtful Middle Eastern scholars, such as Abdolkarim Soroush of Iran, have called for the gradual establishment of democracy within an Islamic framework. There are few, if any, examples of successful “theocratic democracies”—which, unlike American democracy, do not call for a sharp separation of church and state—but this avenue may offer some long-term hope for at least certain countries in the Middle East.³¹

In the meantime, the United States must, even if just for our own security interests, make much more concrete efforts to stop the breeding of fanaticism and terrorism among Middle Eastern populations. The goal should not be holding elections as soon as possible, but neither should it be uncritically propping up the current authoritarian regimes. Instead, as Zakaria says, the U.S. government should continually press the Arab states on an array of other issues:

[t]he Saudi monarchy must order a comprehensive overview of its funding (both private and public) of extremist Islam, which is now the kingdom’s second largest export to the rest of the world. It must rein in its religious and educational leaders and force them to stop flirting with fanaticism. In Egypt, we must ask President Mubarak to insist that the state-owned press drop its anti-American and anti-Semitic rants, end the glorification of suicide bombers and begin opening itself up to other voices in the country. In Qatar we might ask the emir, who launched Al-Jazeera, to make sure that responsible, moderate Muslims appear as regularly on his network as extremist bin Laden sympathizers. None of this will produce democracy, but it will slow down the spread of illiberal voices and viewpoints.³²

Market-Dominant Minorities: Taking the Lead against Ethnonationalism

The previous sections on markets and democracy did not offer any quick fixes to the problem of market-dominant minorities and ethnonationalist backlash. There is a reason for this: Even assuming that free market democracy is the optimal end point for most non-Western countries, in the short run markets and democracy are themselves part of the problem. So long as markets continue to reinforce the stark economic dominance of a resented ethnic minority, as they have throughout the non-Western world, then the introduction of democratic politics, putting political power into the hands of the impoverished “indigenous” majority, will always be a source of tremendous potential instability. And we can only “adjust” and “restrain” market capitalism and democracy so much before we undermine them altogether.

Fortunately or unfortunately, then, the best hope for global free market democracy lies with market-dominant minorities themselves. This is adamantly not to blame market-dominant minorities for the ethnonationalist backlashes against them. But it is to suggest that market-dominant minorities may be in the best position to address the most pressing challenges threatening free market democracy today.

One of the ironies about market-dominant minorities is that they are so often perceived as “leeches” “draining away the nation’s wealth” and “a menace to the economy” when in fact they are usually a crucial source of national economic vitality and growth. This irony makes the problem of market-dominant minorities a special case of ethnic conflict, presenting both distinctive obstacles and opportunities. The obstacles stem from the overlap of class and ethnic division: In addition to all the usual problems of ethnic hatred, market-dominant minorities face the specific problem of economic resentment, often associated with stereotypes of greed, selfishness, disloyalty, and exploitation. The opportunities stem from the reality that market-dominant minorities have the skills and resources to contribute to economic growth and development.

The challenge is to grapple with these obstacles and take advantage of the opportunities. In what follows, I begin by addressing a topic that is often treated as taboo: whether market-dominant minorities engage in objectionable practices that reinforce or exacerbate ethnic hatred. I then discuss possible affirmative measures that market-dominant minorities might take to forestall majority-based ethnonationalist backlashes against them. Ideally, and if only out of self-interest, market-dominant minorities would voluntarily take steps to foster the reality and the perception that they are vital, public-spirited contributors to the national interest rather than “arrogant” and “exploitative” “outsiders.”

Objectionable Practices

It should be stressed at the outset that there are some market-dominant minorities who are victimized solely because of their ethnic difference and their disproportionate wealth. It should also be stressed that even where objectionable practices by these minorities can be identified, they in no way justify or excuse the kinds of violence and human rights abuses often inflicted on them. On the other hand, it is unfortunately often the case outside the West that some members of market-dominant minorities engage in practices—such as bribery, discriminatory lending practices, and violation of workplace regulations—that not only are illegal or otherwise objectionable in themselves, but also reinforce invidious ethnic stereotypes. Although there is no guarantee that eliminating these practices would improve ethnic relations, it seems important nonetheless, given the special dangers associated with market-dominant minorities, to identify such practices and take measures to curb them as much as possible.

Corrupt relations between members of the indigenous ruling elite and members of market-dominant minorities have a long history in the developing world and invariably fuel bitter resentment among the indigenous majority. In Indonesia, for example, the intense anti-Chinese violence that erupted in May 1998 was inseparable from the association of a few Chinese magnates with the Suharto regime’s “crony capitalism.” As is sadly often the case, vicious popular reaction unleashed itself not on the relatively few wealthy Chinese who were actually complicit—and who used their wealth to go into hiding abroad—but rather on ordinary, struggling, middle-class Chinese Indonesians, whose shops were burned and looted.

Similarly, in post-Communist Russia, the symbiotic relationship between President Yeltsin and a tiny handful of Jewish entrepreneurs galvanized the deep anti-Semitism latent in Russian society; honest, middle-class Russian Jews pay the highest price, often in the form of violence and desecration. In Kenya, the corrupt cronyism between President Moi and a few Indian tycoons has fueled massive resentment of Kenya’s Indian community generally, who are the regular objects of ethnic brutality and looting.

But it is not only the wealthiest members of market-dominant minorities who engage in illicit practices; the problem is often more general. Throughout Southeast Asia many Chinese-controlled firms routinely violate tax laws, banking and lending laws, and laws concerning overtime regulations and worker safety. Even more disturbing in Southeast Asia is the common practice among Chinese businessmen, particularly in Indonesia, Thailand, and the Philippines, of importing tens if not hundreds of thousands of illegal workers from mainland China. As is true even in the United States, local workers fume when illegal immigrants take over jobs at lower wages.³³ Indeed, in Indonesia, where roughly 6 million working-age Indonesians (almost all pribumi) were unemployed in 1996, the violent protest that erupted when a Chinese conglomerate imported a thousand illegal workers from China seems understandable.³⁴

Similarly, allegations that market-dominant Western investors expose local workers to hazardous and exploitative conditions are all too familiar. In 1995–96, writes Naomi Klein in No Logo,

the Gap’s freshly scrubbed facade was further exfoliated to reveal a lawless factory in El Salvador where the manager responded to a union drive by firing 150 people and vowing that “blood will flow” if organizing continued. In May 1996, U.S. labor activists discovered that chat-show host Kathie Lee Gifford’s eponymous line of sportswear (sold exclusively at Wal-Mart) was being stitched by a ghastly combination of child laborers in Honduras and illegal sweatshop workers in New York.

In June 1996, Life magazine created more waves with photographs of Pakistani kids—looking shockingly young and paid as little as six cents an hour—hunched over soccer balls that bore the unmistakable Nike swoosh.³⁵

To be sure, not all child labor is conducted under “indentured slave” conditions. Moreover, members of the “indigenous” business community also violate workplace and safety laws, and “indigenous” political elites often tolerate such violations in exchange for bribes or kickbacks. But the perception among an economically disadvantaged majority that a disproportionately wealthy “outsider” minority disregards the country’s laws and exploits the indigenous population can only exacerbate ethnic resentment.

What to do about such illicit practices is less obvious. As economists put it, there is a “collective action” problem. In theory, if any single firm decides to comply with workplace and other regulations when its competitors do not, the likely effect is to put the compliant firm out of business. As a result, calling on individual businesses to take corrective measures is unlikely to have much effect. On the other hand, looking to the state is not promising either. The obvious problem is that the governmental actors who would have to implement reform are often the same ones corruptly benefiting from the violations.

One as-yet unexploited resource may be the surprisingly strong ethnic organizations, both commercial and social, that many market-dominant minorities already have in the developing world. Chinese “chambers of commerce” and “clan associations” can be found throughout Southeast Asia; Indian and Lebanese counterparts exist, respectively, in East and West Africa; similar associations exist among the Bamiléké, Ibo, Kikuyu, and other “entrepreneurial” African groups. The success of these organizations in overcoming collective action problems in a variety of commercial contexts—through informal trust, peer pressure, and monitoring practices—has been widely observed. If leaders of the minority communities in a given developing country can be persuaded of the importance of, and overall gains to be had from, eliminating corrupt or illicit business practices, these organizations may have the right set of incentives and capabilities to play a significant role.

Apart from breaking the law, market-dominant minorities sometimes engage in behavior that indigenous majorities find objectionable for a variety of reasons, some of which are themselves objectionable. Market-dominant minorities are often criticized for acting “insularly,” for indulging in “conspicuous consumption,” or for “flaunting” their ethnic pride. As a Chinese-Indonesian economist presciently worried in 1997:

I see the problem through the eyes of my pribumi friends: I see the shopping malls, the posh restaurants, the hotels and lavish weddings, full of young Chinese who don’t seem to have any interest in national problems. These people don’t know they’re living on a time bomb. They don’t mix with native Indonesians, so they don’t know how much they’re envied and resented.³⁶

But what is to be done about ethnic minorities who “don’t mix” with the indigenous majorities around them? This is a tricky and morally complex issue. It is hardly clear that forced assimilation and acculturation, even if it were possible, would be desirable. Nevertheless, as will be discussed in the next section, there are important constructive measures that market-dominant outsider groups might take to counter the perception (justified or not) of their insularity and indifference to the welfare of the nation.

A More Honorable Way: Voluntary Generosity by Market-Dominant Minorities

After my aunt was murdered in 1994, my other family members in the Philippines hired personal bodyguards, erected barbed-wire fences, and bought some man-eating watchdogs. This is also how many whites in South Africa, Jewish oligarchs in Russia, and other market-dominant minorities live—in fear.

Similarly, after September 11, Americans across the country despaired that our lives might never be the same again. We spoke of our “loss of innocence” and worried that we might have to give up our free and open way of life in order to protect ourselves from those savagely and psychotically angry at us around the world. Most Americans ultimately rejected that vision of life. Otherwise, “the terrorists would win.”

But what is to be done about the underlying hatred, not just against Americans at the global level, but against market-dominant minorities everywhere in the world?

One long-term strategy—in my mind more likely to be effective and certainly more dignified than erecting barbed-wire fences—is for market-dominant minorities to make significant, visible contributions to the local economies in which they are thriving. Although such efforts to date have been relatively few and by no means always successful in promoting goodwill, some valuable models can be found.

In East Africa, powerful families of Indian descent—among them the Madhvanis, Aga Khans, Mehtas, and Chandarias—have made immense contributions to their local communities, often concentrating heavily on indigenous African welfare and development. Indians, for example, were principally responsible for creating the University of Nairobi, East Africa’s first nonracial institution of higher education. More recently, the Madhvanis, owners of the largest industrial, commercial, and agricultural complex in East Africa, not only provide educational, health, housing, and recreational facilities for their African employees, but also employ Africans in top management and offer a number of wealth-sharing schemes. Similarly, Kenya’s powerful industrialist Manu Chandaria, who owns fourteen companies and employs five thousand workers in Kenya, has become a household name because of the millions he has poured into local education, health, and environmental conservation.³⁷

In Russia, in a somewhat bizarre turn of events, Jewish billionaire Roman Abramovich was recently elected governor of the godforsaken, poverty-stricken region of Chukotka, where temperatures commonly drop to minus thirty degrees Celsius. Abramovich bought his popularity by spending tens of millions of dollars of his own money airlifting food, parkas, boots, and medicine, buying computers and textbooks for the schools, and even flying three thousand children to sunny vacation destinations so they could swim in warm water.³⁸ A shrewd entrepreneur, Abramovich, who favors jeans and sneakers but models himself on American “robber barons” like Andrew Carnegie, wants to economically transform Chukotka and become “the first New Russian philanthropist.” So far, he is succeeding. “I love him,” said one local citizen, expressing a common sentiment. “Since he came in the new year, we have been receiving salaries on time. There have been no problems. All hope is on him.”³⁹ While many wonder about his motives, the fact remains that Abramovich, over a period of just a few years (and while two of his fellow oligarchs were being exiled), turned himself into a revered figure, seen by the local people as genuinely committed to helping their community.

Meanwhile, a growing number of Western multinationals have begun to view corporate philanthropy as part of a long-term profit-maximization strategy in developing countries. It is Coca-Cola’s official position, for example, that “In the nearly 200 countries where we do business, the Coca-Cola system gives back to the community.” In Mexico City, American multinationals played a crucial role in funding the building of El Papalote, one of the world’s outstanding children’s museums. Roughly five thousand poor and lower-middle-class children from all parts of the country visit the museum each day and, rightly or wrongly, associate the prominently displayed names of Hewlett-Packard and Procter & Gamble with the beneficial dispersion of science and education. Since its Pakistan soccer ball scandal, Nike has enacted a code of conduct and spent millions of dollars in philanthropy, specifically aimed at improving long-term opportunities for children and women in developing countries.⁴⁰

Ideally, voluntary contributions by market-dominant minorities would be highly visible and directed at large numbers of ordinary members of the disadvantaged majority. To be sure, any material redistribution effected by these contributions would itself be desirable, but as a practical matter the more important consideration may well lie in their symbolic implications. A principal focus of nationalist and ethnonationalist anti-market reactions in the non-Western world has been the humiliating domination by “outsiders” of a nation’s economic symbols: oil wells in Latin America, gold mines in South Africa, forests in Burma and Indonesia, Lomonosov porcelain in Russia, or other sectors that have come symbolically to be associated with national identity. Perhaps market-dominant minorities can turn symbolism around in their favor.

A good question for market-dominant business communities to ask is whether there are, in a given developing country, important national sectors or symbols to which they could make visible, valuable contributions. Thus, such communities might learn from the recent example of a number of wealthy businesspeople in the United States, who, in several highly publicized gestures, have donated tens of millions of dollars toward scholarship funds for inner-city children. Along similar lines it might be an important demonstration of national solidarity for market-dominant “outsider” groups, which are often urban-centered, to fund rural development projects. In societies where child mortality is a constant source of sorrow, the contribution of new hospital facilities, water treatment plants, or even just antibiotics would certainly be appreciated. Major conspicuous contributions to infrastructure providing tangible benefits to ordinary citizens are another possibility.

Given the extraordinary needs and deficits of developing societies, the opportunities for building interethnic goodwill are plentiful, and there is considerable room for creativity. For example, many have observed the tremendous unifying power of sports all over the world, across both class and ethnic lines. In the United States, nothing has improved race relations more over the last two decades than the idolization of such figures as Michael Jordan, Sammy Sosa, and Tiger Woods. In France the national soccer team is now invariably “a rainbow of colors from France’s imperial history.” Thus, out of the twenty-two glorified members of the team that won the world trophy in 1998, eight were black or brown-skinned, including a Ghanaian adopted by a French priest.⁴¹ In Indonesia, where anti-Chinese sentiment is about as fierce and entrenched as it can get, ordinary pribumi citizens openly adore Susi Susanti and Alan Kusuma, ethnic Chinese badminton stars (now husband and wife) who won gold medals for Indonesia at the Barcelona Olympics—the first golds ever taken by Indonesian athletes.⁴²

Odd or trivial as it may seem, contributions by “outsider” groups to a national sport or team—perhaps by funding the acquisition of a star soccer player or by donating athletic facilities—may be a way of deploying the power of national symbols constructively. (Indeed, the feeling of passionate, almost irrational identification with a favorite sports team bears a certain resemblance to nationalism and ethnonationalism.) I am certainly not suggesting here that a few strategic charitable contributions will cure ethnic conflict. Anti-Indian sentiment remains intense in East Africa despite the philanthropic efforts described above, and in a shocking and disappointing recent incident, Susi Susanti’s car was vandalized in Indonesia as part of an ethnic hate crime.⁴³ There are no easy fixes for group hatred.

But there have been moments from which hope can be drawn. In a now-famous gesture in 1995, with all of newly democratic South Africa watching, Nelson Mandela embraced the country’s largely white rugby team by donning its green and gold jersey and attending its world championship game. Mandela’s gesture, coupled with the ensuing victory, produced a moment of rare ethnic reconciliation that has helped sustain South Africa’s fragile democracy to this day.⁴⁴

And what about the United States? What should the world’s market-dominant minority do about the growing anti-Americanism around the globe? Pulitzer Prize–winning author Jared Diamond recently offered one answer, much along the lines of what I have proposed for other market-dominant minorities. In an essay entitled, “Why We Must Feed the Hands That Could Bite Us,” Diamond urges Americans to combat the forces of poverty and hopelessness on which international terrorism feeds through three basic strategies: providing health care, supporting family planning, and addressing chronic environmental problems such as deforestation that infuriate local populations. Diamond recognizes that these measures will not eliminate the immediate threat of terrorism. But as he points out, the “few active terrorists [who carried out the September 11 attacks] depended on many more people, including desperate populations who have tolerated, harbored and even taken part in terrorist activities. When people can’t solve their own problems, they strike out irrationally, seeking foreign scapegoats, or collapsing in civil war over limited resources. By bettering conditions overseas, we can reduce chronic future threats to ourselves.”⁴⁵

Other influential figures have taken a similar position. Not long after September 11, 2001, World Bank president James D. Wolfensohn joined the United Nations secretary general, Kofi Annan, and British chancellor of the exchequer Gordon Brown, in calling for a $50 billion increase in foreign aid to poor countries, calling it “an insurance policy against future terrorism.” Similarly, former U.S. treasury secretary Robert Rubin has called for an international campaign to raise public support for increased aid budgets, particularly in the United States.⁴⁶

Not surprisingly, the “more foreign aid” view has its acerbic critics, both from the left and the right. Gregory Clark, for example, a commentator for the Japan Times, mocks the liberal notion that addressing poverty will solve the problem of terrorism. “If people in the Third World want to use force against their governments or the West, that is because of perceived injustice. Large outpourings of aid will just add to the long history of aid waste and corruption.” In Clark’s view, terrorist attacks will continue as long as the United States continues its overseas “meddling” and its hypocritical support of oppressive regimes.⁴⁷

Similarly, but for vastly different reasons, Daniel Pipes argues that U.S. foreign aid is not the right response to the September 11 attacks. In an essay called “God and Mammon: Does Poverty Cause Militant Islam?,” Pipes answers his own question with a vociferous no. “Indeed,” writes Pipes, “if one turns away from the commentators on militant Islam and instead listens to the Islamists themselves, it quickly becomes apparent that they rarely talk about prosperity. As Ayatollah Khomeini memorably put it, ‘We did not create a revolution to lower the price of melon.’” In Pipes’ view, militant Islam is ultimately about a struggle for power. Thus, “economic assets for Islamists represent not the good life but added strength to do battle against the West.”⁴⁸

Clark, Pipes, and many others are obviously right that anti-Americanism, including the particularly virulent Islamicist strain, stems from much more than just economic deprivation. Moreover, it is fantasy to think that U.S. monetary assistance might be able to do anything more than make a small dent in eliminating world poverty, at least in the near future. In my opinion, however, the wisdom of recent calls for American beneficence lies in their potentially far-reaching symbolism. Rightly or wrongly, for millions around the world, the World Trade Center symbolized greed, exploitation, indifference, and cultural humiliation. (John Cassidy recently observed that, relative to the size of our economy, the United States has the smallest aid budget of any advanced country: around 0.1 percent of GDP.)⁴⁹ Like other market-dominant minorities around the world, perhaps America should try to turn symbolism around in our favor. There is no long-term promise in retreating into belligerent isolationism, or glorifying American parochialism—a recent number-one country song celebrates not knowing “the difference between Iraq and Iran.” It is difficult to see, in any event, how a little generosity and humility could possibly hurt.

fn1 Malaysia and Indonesia differ in important respects: Malaysia has a much smaller absolute population than Indonesia; the Chinese community in Malaysia comprises a much larger percentage of the total population (roughly 30 percent) than that in Indonesia (roughly 3 percent); and Malaysia also has a large Indian community.