PART ONE
THE ECONOMIC IMPACT OF GLOBALIZATION
SINCE THE CREATION of Microsoft, the software industry has produced the largest crop of billionaires and multibillionaires in American history. Now imagine that all these billionaires were ethnic Chinese, and that Chinese-Americans, although just 2 percent of the population, also controlled Time Warner, General Electric, Chase Manhattan, United Airlines, Exxon Mobil, and the rest of America’s largest corporations and banks, plus Rockefeller Center and two-thirds of the country’s prime real estate. Then imagine that the roughly 75 percent of the U.S. population who consider themselves “white” were dirt poor, owned no land, and, as a group, had experienced no upward mobility as far back as anyone can remember.
If you can picture this, you will have approximated the core social dynamic that characterizes much of the non-Western world. Throughout South and Southeast Asia, Africa, the Caribbean and the West Indies, much of Latin America, and parts of Eastern Europe and the former Soviet Union, free markets have led to the rapid accumulation of massive, often shocking wealth by members of an “outsider” or “nonindigenous” ethnic minority.
Americans don’t hate Bill Gates, even though he has owned as much as 40 percent of the American population put together.1 They don’t feel cheated or exploited by him, or that he has humiliated Americans by making billions “on their soil.” Not so in societies with a market-dominant minority. In these societies, class and ethnicity overlap in a particularly dangerous way. The extremely wealthy stick out—whether because of their origins, skin color, religion, language, or “blood ties”—from the impoverished masses around them, and they are seen by these majorities as belonging to a different ethnicity or people—as “outsiders” who look different, speak differently, or as Fiji’s nationalist leader George Speight recently said of his country’s market-dominant Indian minority, “smell different.”2
When the U.S. Department of Justice sued Microsoft, accusing it of engaging in monopolistic practices to try to destroy its competitors, Americans did not want to lynch Bill Gates or strip him of his assets or even take him down a few notches. On the contrary, polls found that most Americans wanted the government to leave Gates alone, so that he could “get back to making bucks.”3 But in the numerous non-Western countries with a market-dominant minority, the plutocrats are ethnic outsiders. And while Bill Gates does not generate mass ethnic resentment in the United States, Indian tycoons in Uganda, Eritrean businessmen in Ethiopia, and Jewish oligarchs in Russia do.
Most Americans—whether ordinary citizens, commentators on globalization, or policymakers—are unaware of this problem. As a result, we have been confidently exporting free market capitalism to the rest of the world, oblivious to the ethnic hatred and instability we are systematically helping to breed.
Today’s global economy did not appear overnight, but to a large extent represents the triumph of five decades of American foreign policy. After the Second World War, and consciously to promote capitalism and contain Communism, America drove the creation of the World Bank, the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development, and the free trade organization, GATT. In the 1960s the U.S. Agency for International Development and private organizations like the Ford Foundation poured millions into “modernization” projects aimed at bringing economic and legal progress to the developing world through the export of capitalist institutions. With the collapse of the former Soviet Union in 1989, capitalism was seen around the world as triumphant and inexorable. In the developing countries of Africa, Asia, and Latin America, the IMF and World Bank pushed through privatization programs and foreign investment and trade liberalization by conditioning desperately needed loans on these market reforms.
As of the late nineties, more than eighty developing and post-socialist countries were privatizing. Pro-market tax codes, investment codes, and securities laws, often drafted by American lawyers and academics, proliferated from Peru to Bulgaria to Vietnam. By 1996, Kazakhstan alone had adopted over 130 market-friendly laws. In Argentina, President Carlos Menem passed a flurry of pro-capitalism laws on an “emergency” basis. Stock exchanges—some hand-operated—appeared everywhere, including in Mozambique and Swaziland.4
In the new millennium, globalization and the worldwide spread of free markets continue to accelerate, with America at the helm. At the same time it is now possible to look back and begin to assess what the economic impact of globalization has been, not just in the United States, but around the world. As the next four chapters will show, the disturbing reality is that global markets, even if marginally “lifting all boats,” have consistently intensified the extraordinary economic dominance of certain “outsider” minorities, fueling virulent ethnic envy and hatred among the impoverished majorities around them.