Free-Market Democracy and Its Defects
Amy Chua reveals the inadequacy of the
concept of free-market democracy in her book, The World On Fire. She argues that free-market democracy misreads
the ethnic and racial structures of developing nations, defined by bigoted colonial
policies and gormandizing global capitalist economy. Free-market democracies claim that privatization;
foreign investments and free price system along with dispersion of political
power will perpetuate the recourse necessary for third world’s development and
modernization. In regards to both, Chua
draws attention to versatile mechanisms, namely huge economic disparities and bereaved
ethnic incongruities, which conjures the transfer of free-market democracy
policies to the third world, unjust and dangerous.
Free-market democracy theory undermines the
inherent class and ethnic divisions, unequal exchanges and economic discrimination
that it creates. The existence of free markets means the insertion of
corruption, exploitation and violence in developing nations. Third world
countries condemned already to constant poverty are greatly defrauded by
powerful international corporations who extend their profit margins through
privatization, ergo depletion of national resources and labour, thereby
weakening local business and draining local talent. It directs trade, labour
and capital in the pockets of foreign investors and proxy political leaders,
the real benefactors of free markets. Free-markets therefore, deconstruct
national efforts capable of sustaining development and modernization. Free
market democracy theory actually operates for the advantage of international
market systems rather than majority indigenous local populations. On the other
than, it is assumed that the spread of democracy in third world countries will
perform the dual task of enhancing economic equality and promoting stability.
Democracies have not externalized any improvement in living standards or secured
peace in developing nations. Instead it empowers angry mobs, who encroach the
little economic progress achieved in their countries to avenge years of
degradation and oppression inflicted upon them by market dominant ethnic
minorities.
This essay offers an assessment of Amy
Chua’s book, The World on Fire. It supports
Chua compelling explanation of ethnic hatred and global instability bred
through free-market democracy in developing nations. This essay agrees that
free-market reforms indeed create poverty for the vast majority of citizens in
developing nations who find political liberalization as an opportunity to
institute nationalistic and populist armed groups to avenge their poverty.
Amy Chua’s book sequences three flaws
with the theory of free market democracy. First, in most imperial cases, the
return of free market policies cannot be materialized or sustained due to harsh
ethnic divisions. One of the most prominent features of developing nations, as
Chua points out in chapters 1, 2 and 3 is the galvanizing ethnic crisis, which
makes free market reforms unpalatable with widespread economic prosperity and
improvement in living standards for all. Small ethnic minorities agglomerate
all the markets in developing countries, such that their fiat over the economy
precedes the total GDP of the entire indigenous population combined. A severe
downturn of this consciously design oppression is that the market dominant
ethnic minorities aggregate their economic power to mitigate more wealth,
whilst forcing the majority indigenous populations into impoverishment and
disfranchisement. This was the classic case of Russia and Southeast Asia, which
will be elaborated shortly.
Second, free market policies are
conducive to failure because they create winners and losers through regressive
distributional outcomes. Free market policies favour only a small
ethnic-minority in developing nations who already dominate the market. The
subsequent poverty and indigence of the majority populations provokes painful
resentment as they feel cheated out of their countries’ wealth. Feeling victimized,
the indigenous employ democracy to resist the market dominant ethnic
minorities, sometimes unleashing catastrophic violence as witnessed throughout
Africa and Latin America.
Third, democratic reform buttresses the
fiscally constrained majority indigenous groups to rise and mobilize against
the market-dominant ethnic minorities to roll back free market policies;
nationalize firms and the financial sectors. Mass electoral support establishes
radical and inadequate regimes rooted in ethnic hatred to drive minorities out
of money and power, thereby dissenting and deconstructing the overall economic
structure and potential of the developing nations.
Amy Chua examines Russia to reveal the
negative repercussions of free market policies: “dispersing ownership and
functioning markets…a small group of greedy industrialists and bankers
plundering Russia by becoming overnight billionaires while Russia spiralled
into chaos and lawlessness.”[i]
Chua suggests that a coalition of Russia’s six out of seven Jewish billionaires
came to prominence by way of implementing a free market policy: “loan-for-shares
reform,”[ii]
in which they beguile liberalization of markets while actually incrementing oligopoly
over key shares in big enterprises. In exchange for electoral support to Russia’s
Presidents[iii],
they convinced the government to privatize the financial sector which they came
to dominate via shares and became the true beneficiaries of the country’s
economy. Chua makes it clear that the ‘Jews, who make up only one percent of Russia’s
population’[iv],
first secured private capital by virtue of their “entrepreneurialism”[v]
then solidified their economic control with the help of ‘reciprocating
financial support to the likes of Yeltsin and Putin with hugely
disproportionate market ownership.’[vi]
Southeast
Asia suffers from a similar plight. Chua explains in chapter 1 the disastrous
outcomes of free market policy in terms of Chinese entrepreneurs who bypassed
traditionalist societies with oligarchical emphasis over their economy. “The Chinese…entrepreneurial
dynamism, frugality, hard work, willingness to delay gratification and desire
to accumulate wealth,”[vii]
in hindsight was free market populism. The aggressive pro-market policies of
SLORC government[viii]
were unable to incorporate the ethnic Burmese population because of their
explicit reliance on agriculture. Comparatively, the disproportionately wealthy
Chinese organized quickly in anticipation of new employment opportunities and
trade opening. In general, the privatization produced an improvement in Chinese
living standards and expanded their income. From being ‘only six percent’[ix]
of Burmese population, they progressed to become ‘owners of the country’s
natural resources and infrastructure and natural’[x]
while the condition of the ‘sixty-nine percent of the indigenous Burmese remained
as perplexing poor’[xi] as
ever before. Having become the underclass in their own country, the locals started
working for the Sino-businessmen for low wages,[xii]
feeling recolonized by China. With only ‘three-hundred dollars GDP, forty
percent were unable to afford education or other basic life’s necessities’[xiii].
The ‘Chinese even [supplied] ammunition
to the SLORC government,’[xiv]
thereby lending their assistance to the regime who in turn reinforced their economic
supremacy and powerlessness of the local Burmese to alter the abusive status
quo.
In the same way, ‘seventy percent of
Malaysian markets were controlled by the Chinese’[xv]. ‘Chinese
also own all the stores and factories in Indonesia. They visibly have finer
clothes and foods than the locals’[xvi].
The fact is that free market policies strongly benefit those who are already
committed to lassie faire system and have sustained influence over the local
governments. The Jews and Chinese enjoy economic veto in Russia and Southeast
Asia with authoritarian backing, which results in material depravation and
political exclusion of the majority indigenous populations, threatening ethnic
tension and instability.
Chua again makes visible the aridity of
free market policies in her reference to Latin America and Africa in chapters 2
and 4. Free market policies have created
socioeconomic poverty and inequality which primarily disenfranchises the local
segment of Latin America – who are now peasants compared to the foreign, market
dominant ethnic minorities in their midst – to meaningfully participate in the
economy. Their possibility to become rich is exceedingly limited. The White
Lebanese own the Indian plantation farms in Mexico[xvii];
ergo they control the region’s capital. The result is sectorial racism that
hinges on unequal distribution of wealth. Marketization in Brazil allows less
than one percent of White minority to own the land[xviii]
and the lives of its indigenous population. Again, the contentious equality
deficit creates resentment and provocation to violence. An expression of mass privatization and pro
market reforms received with enormous hostility and frustration can be found in
Ecuador. President Jamal Mahmood of Lebanese decent was overthrown[xix]
by the indigenous people who were moved to revolutionize in wake of White
business encroachment over the country’s capital via currency change. Similarly, the indigenous of Venezuela crowned
the late Hugo Chavez with presidency for his campaign against free markets[xx] and
thereby, foreign oligarchs.
Additionally, Chua argues that free
markets forces ethnic minorities to be often maligned and seen as
scapegoats. Chua demonstrates the
nefarious effects of ethnic-minority economic rule through the examples of
Zimbabwe, Namibia and South Africa. Only groups with state-of-the-art
education, cutting-edge technology, corporate experience and connections with
foreign investors are able to cash out any profit from free markets. Unsurprisingly,
Dutch who compose less than one percent of Zimbabwe’s population[xxi],
boss seventy percent of the land[xxii]
because of their manipulative skill and horticultural experience. The locals
bitterly slave at their in their mines, farms and factories. Namibia claims the
highest GDP in all of Africa[xxiii].
Free market policies helped liberalize the country’s uranium mines -now coveted
by a British company[xxiv]
- and diamond industry which predominates sixty percent[xxv]
of the global trade in rough diamonds. The De Beers’, a German family are the
proprietors Namibia’s diamond industry which alone accredits five hundred,
seventy thousand carats[xxvi]
of high quality diamonds to their name. While sixty percent of the country’s
black majority have no access to sanitary toilets[xxvii].
Indeed,
the principle conceptualization of free markets is economic discrimination and
disgrace across sensitive ethnic lines. Equivalently in South
Africa, market liberalization has produced no financial success but hatred for
its forty-eight percent unemployed indigenous population[xxviii];
the rest share less than two percent of Johannesburg stock exchange[xxix].
Whereas the White feed off of the country’s mines, banks and major corporations.
Ultimately, Chua concludes that
market dominant ethnic minorities breed hatred which justifies backlash against
free markets and minority rule. In Russia, the fall of Soviet Union led to the
imprisonment of market oligarchs[xxx].
Suharto’s autocracy in Indonesia ended with ferocious anti-Chinese riots,
burning, looting and killing of everything Chinese[xxxi].
Ethnic violence in Zimbabwe collapsed the country’s currency, stock market,
tourism and foreign investment in advance of “seizure of hundreds of commercial
farms owned by the sons of Britain and the enemies of Zimbabwe.”[xxxii]
The Africanist Congress in South Africa
campaigned in 2001 with the slogan, “One Settler One Bullet”[xxxiii]
to accelerate land redistribution efforts. Free market policies, thus serve to
induce a vital function globally, instability. Chua insists in her book free
market democracy should not be transferred to developing nations, with the
underlying assumption that any reform will fail to deliver its promises, in
providing both economic opportunities and social uplifting.
As it is evident, free market democracy
does not translate into equal financial advancement or just political institutions
for all in developing nations. There is no statistically robust evidence
between capital flow and improvement in the quality of life as a direct result
of free-market democracy in any of the developing nations discussed by Chua.
Even if some developing nations are able to achieve a little increase in GDP
rates like Namibia, it is done with close to no substantial distributional
emphasis around the socioeconomic progress for the majority. There is nothing
worthwhile in a policy that increases per capita income of a few but does not
distribute that income equally on social welfare programs to benefit many. Conversely,
Chua proves that not market liberalization but regulation and nationalization reflects
majority interests. Nationalization offers shared financial access, influence
and responsibility between large segments of populace. The economy is held
hostage when it is controlled by small ethnic minority or family, rather than
the government. Free markets stunt national development and progress. None,
except a few can improve their monetary condition under free market policies;
the majority indigenous people forfeit their fate to poverty.
For example, Sinhalese majority in Sri
Lanka only secured huge amounts of wealth under Solomon Bandaranaike’s
nationalization programs[xxxiv].
Before Bandaranaike, the Sinhalese endured bitter resentment as a Tamil
minority consumed all the profits of their import and export markets.
Similarly, Pakistan came out of impoverishment with the help of Bhutto[xxxv]
who tattered the ownership of twenty-two families over the country’s industrial
firms and banks. Regrettably some countries like Rawanda are unable to escape
the atrocities engineered by free market democracy. The political
liberalization of majority Hutu tribe havoced a holocaust of millions of Tutsi[xxxvi],
members of an market dominant ethnic minority during colonial era. Democracy
did not inculcate mutual trust and respect, it explicated that hatred, if politically
empowered can commit unspeakable atrocities against humanity.
Nevertheless, proponents of free market
democracy may behest the economic success of Asian Tigers to free markets. It
is true; Hong Kong, Malaysia, Singapore, South Korea and Taiwan achieved rapid
economic growth by participating in international markets. Individual
entrepreneurs in the private sector developed the countries’ manufacturing
industries starting with textiles then electronics and automobiles for
international export. They achieved an unprecedented economic breakthrough;
“they shared some of the benefits of their growth among the poor.”[xxxvii] The effect of free market policies upon these
countries is profound. Paradoxically, markets within these countries are regulated
and to a large extent, supported by their governments. “the governments
concentrated on creating an economic environment in which private firms could
thrive.”[xxxviii]
Without strong financial support, rights to resources and quick license
acquisition granted by the governments, it was impossible for the peasants of
Asia to effectively manufacture internationally renowned technologies and
consequently amass startling economic heights.
Moreover, market growth did not
problematize the social structure of these Asian countries as accounted for in
Africa and Latin America. To be clear, there is no exclusionary oligarchy in
Hong Kong, Malaysia, Singapore, South Korea and Taiwan programmatically
preventing other races to engage with and organize the countries’ financial
sector. These Asian countries are ethnically homogenous nations; there is no
dispute proscribed because of culture. All members are equal and behave
normatively towards each other. Because the free market structure of Africa and
Latin America inclined disproportionally to benefit a small and visible ethnic
minority, it impelled ethnic polarization followed by inevitable economic
collapse. Economic disparities initiate conflicts but distinct discrimination
in the economic arena mediated against the indigenous populace who assume that
their countries’ wealth is their right, attracts carnage.
Nazi Germany, marked by profound ethnic
cleavage is the best evidence for a free market democracy engendering hatred
and global instability. In Hitler’s autobiography, Mein Kampf, he exacerbates
the “cleansing of Germany from the Jewish race” [xxxix]because
of the deadweight costs of war. He believed that the pure Aryaan race,
indigenous to German was taken over by the Jews, perniciously consuming their
riches[xl].
Hence, he propagated the success of Germans hinging on expurgating Jewish
influences and freeing the nation from their predatory financial control[xli].
What is reciprocal between Nazi Germany, Africa and Latin America is the
formulation of vigorous racial impeachment as a result of pro market policies
favouring small ethnic minorities coupled with democratic rights of the
resentful majority.
To summarize, the defect of free market
democracy is linked to hatred and global instability. This is an unsurprising
relation and it insinuates that pro market policies should not be transferred
to developing nations. Free markets generate tensions between ethnicities by
skewing the distribution of wealth and social prestige alternatively to a
white, educated minority and reducing the indigenous traditional class to
peasantry levels. Disparity polarizes ethnic conflicts until the majority of
the people revolt and dispel the free markets and their benefactors from their
homelands.
[i] Chua, Amy. World on fire: how exporting free
market democracy breeds ethnic hatred and global instability. (New York: Doubleday,
2003) chapter 2
[ii] Chua, chapter 3
[iii] Chua, chapter 3
[iv] Chua, chapter 3
[v] Chua, chapter 3
[vi] Chua, chapter 2
[vii] Chua, chapter 1
[viii] Chua, chapter 1
[ix] Chua, chapter 1
[x] Chua, chapter 1
[xi] Chua, chapter 1
[xii] Chua, chapter 1
[xiii] Chua, chapter 1
[xiv] Chua, chapter 1
[xv] Chua, chapter 1
[xvi] Chua, chapter 1
[xvii] Chua, chapter 2
[xviii] Chua, chapter 2
[xix] Chua, chapter 2
[xx] Chua, chapter 2
[xxi] Chua, chapter 4
[xxii] Chua, chapter 4
[xxiii] Chua, chapter 4
[xxiv] Chua, chapter 4
[xxv] Chua, chapter 4
[xxvi] Chua, chapter 4
[xxvii] Chua, chapter 4
[xxviii] Chua, chapter 4
[xxix] Chua, chapter 4
[xxx] Chua, chapter 3
[xxxi] Chua, chapter 1
[xxxii] Chua, chapter 4
[xxxiii] Chua, chapter 4
[xxxiv] Chua, chapter 5
[xxxv] Chua, chapter 5
[xxxvi] Chua, chapter 7
[xxxvii] Isbister, John. Promises not kept: the betrayal of
social change in the Third World. West Hartford, CT, (USA: Kumarian Press,
1991), 146.
[xxxviii] Isbister, 182.
[xxxix] Staudinger, Hans, Peter M.
Rutkoff, and William B. Scott. The
inner Nazi: a critical analysis of Mein Kampf. Baton Rouge: (Louisiana
State University Press, 1981), chapter 2
[xl] Staudinger, chapter 6
[xli] Staudinger, chapter 6
Chua, Amy. World on fire: how exporting free
market democracy breeds ethnic hatred and global instability. New York:
Doubleday, 2003
Isbister, John. Promises not kept: the betrayal of
social change in the Third World. West Hartford, CT, USA: Kumarian Press,
1991
Staudinger, Hans, Peter M.
Rutkoff, and William B. Scott. The
inner Nazi: a critical analysis of Mein Kampf. Baton Rouge: Louisiana State
University Press, 1981
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