[Capítulo IV: Fallas en nuestra economía de mercado] Unrestrained "free-market" Policies

Este artículo es un buen ejemplo de como no se deben hacer las cosas. El capitalismo de libre mercado no es dejar todo en manos del mercado, sino establecer las condiciones ideales para la libre (y justa) competencia de mercado.

An explosive combination, by Amy Chua

In May 1998, Indonesian mobs swarmed the streets of Jakarta, looting and torching more than 5,000 ethnic Chinese shops and homes. One hundred and fifty Chinese women were gang-raped, and more than 2,000 people died.
In the months that followed, anti-Chinese hate-mongering and violence spread throughout Indonesia's cities. The explosion of rage can be traced to an unlikely source: the rapid combination of democracy and free markets -- the very prescription wealthy democracies have promoted for healing the ills of underdevelopment.

How did things go so wrong?
During the 1980s and 1990s, Indonesia's aggressive shift to unrestrained free-market policies allowed the country's Chinese minority, just 3 percent of the population, to take control of 70 percent of the private economy.
When Indonesians ousted President General Suharto in 1998, the country's poor majority rose up in a violent backlash against the Chinese minority and against markets. The democratic elections that abruptly followed 30 years of autocratic rule, while free and fair, were rife with ethnic scapegoating by indigenous politicians and calls for confiscation of Chinese wealth and a "People's Economy."
Today, the Indonesian government sits on $58 billion worth of nationalized assets, almost all formerly owned by Chinese tycoons. These once-productive assets now lie stagnant, while unemployment and poverty deepen.

What occurred in Indonesia is part of a pattern. It is the rule of unintended -- but reasonably predicted -- consequences. It is also a lesson for U.S. policy-makers in running postwar Iraq.
The reality is that given the conditions that actually exist now in many postcolonial countries -- conditions created by history, colonialism, divide-and-conquer policies, corruption, autocracy -- the combination of laissez-faire capitalism and unrestrained majority rule may well have catastrophic consequences.

Roots of resentment
The notion that market democracy promotes peaceful prosperity has not always held sway. In the 18th and 19th centuries, most leading political philosophers and economists believed that market capitalism and democracy could only coexist in fundamental tension with each another. It is one of history's great surprises that Western nations succeeded so spectacularly in integrating markets and democracy.
Conditions in today's developing world, however, make the combination of markets and democracy much more volatile than was the case when Western nations embarked on their own paths to market democracy.

One reason has to do with scale: The poor are vastly more numerous, and poverty far more entrenched, in the developing world today.
Another has to do with process: Universal suffrage in developing countries is often implemented wholesale and abruptly -- a destabilizing approach that is quite removed from the gradual enfranchisement seen during Western democratization.

But the most formidable problem the developing world faces is structural -- and it's one that the West has little experience with.
It's the phenomenon of the market-dominant minority, ethnic minorities who tend under market conditions to dominate economically, often to an astounding extent, the impoverished "indigenous" majorities around them.
They're the Chinese in Southeast Asia, Indians in East Africa and the West Indies, Lebanese in West Africa, Kikuyu in Kenya, Ibo in Nigeria, Jews in post-Communist Russia, and whites in Zimbabwe, South Africa, and Bolivia, to name just a few.

It is crucial to recognize that groups can be market-dominant for widely different reasons, ranging from superior entrepreneurialism to a history of apartheid or colonial oppression. If, for example, as with whites in South Africa, a minority uses force to relegate the indigenous majority to inferior education and inhumane conditions for over a century, then that minority is likely to be market-dominant, for reasons that have nothing to do with culture.
In countries with a market-dominant minority, the rich are not just rich but belong to a resented "outsider" ethnic group.
In free-market environments, these minorities, together with foreign investors (who are often their business partners), tend to accumulate starkly disproportionate wealth, fueling ethnic envy and resentment among the poor majorities.
When democratic reforms give voice to this previously silenced majority, opportunistic demagogues can swiftly marshal majoritarian animosity into powerful ethnonationalist movements that can subvert both markets and democracy.
That's what happened in Indonesia and is happening around the world. The same dynamic -- in which markets and democracy pit a poor, frustrated majority against a rich "outsider" minority -- has produced retaliation, violence, and even mass slaughter of market-dominant minorities, from Croats in the former Yugoslavia to Tutsi in Rwanda.

A stake in the game
How can Western nations advance capitalism and democracy in the developing world without encouraging conflagration and bloodshed? They must stop promoting unrestrained, bare-knuckled capitalism (a form of markets that the West, itself, has repudiated) and unrestrained, overnight majority rule (a form of democracy Western nations have also repudiated).
Instead of encouraging a caricature of free-market democracy, they should follow their own successful model and sponsor the gradual introduction of democratic reforms, tailored to local circumstances.
They also should cultivate stabilizing institutions and programs such as social safety nets, tax-and-transfer programs, antitrust laws, philanthropy, constitutionalism and property protections. Most crucially, they must find ways to give the poor majorities of the world an ownership stake in their countries' corporations and capital markets.

In the United States, a solid majority of Americans, even members of the lower middle classes, own shares in major U.S. companies, often through pension funds, and thus have a stake in the U.S. market economy.
This is not the case in the developing world, where corporations are typically owned by single families belonging to a market-dominant minority. In South Africa as of June 2002, for example, blacks, although making up 77 percent of the population, controlled only 2 percent of the Johannesburg Stock Exchange's total capitalization.

Continued global democratization seems inevitable. But in this climate, international businesses, Western investors and market-dominant minorities should heed the lessons from Jakarta. It is an act of enlightened self-interest to launch highly visible local corporate responsibility initiatives and innovative profit-sharing programs.

Consider these models:

In East Africa, powerful families of Indian descent include Africans in top management positions in their companies and provide education, training, and wealth-sharing schemes for their African employees.

In Russia, where anti-Semitism is rampant, the Jewish billionaire Roman Abramovich was recently elected governor of Chukotka after spending tens of millions of dollars of his personal fortune to airlift food, medicine, computers and textbooks into the poverty-stricken region.

In Central America, a few Western companies have started to contribute to local infrastructure development and to offer stock options to local employees.

In these ways, foreign investors and market-dominant minorities can give local populations a stake in their local economy and businesses. This is perhaps the best way to defuse tensions that, history tells us, can sabotage both markets and democracy, the very structures businesses need to thrive.

The Bush administration might consider these lessons as it decides how to rebuild Iraq.
Perhaps because of beliefs in the "melting pot" and America's own relatively successful -- though halting and incomplete -- history of ethnic assimilation, Americans don't always understand the significance of ethnicity, both in the United States and especially in other countries. Interestingly, British colonial governments were fastidiously conscious of ethnic divisions.
Of course, their ethnic policies are a dangerous model. When it was the British Empire's turn to deal with nation-building and ethnicity, the British engaged in divide-and-conquer policies, not only protecting but favoring ethnic minorities, and simultaneously aggravating ethnic resentments.
As a result, when the British decamped, the time bombs often exploded, from Africa to India to Southeast Asia. This contrast can be seen in how the United States and Britain looked at the situation in postwar Iraq.
At least before the war, the U.S. government's ethnic policy for Iraq was essentially to have no ethnic policy. Instead, U.S. officials seemed strangely confident that Iraq's ethnic, religious, and tribal divisions would dissipate in the face of democracy and market-generated wealth.
But in countries as deeply divided as Iraq, everything -- even freedom and wealth -- has ethnic and sectarian ramifications. Who will comprise the police? Who has experience in engineering and oil or the skills to run a stock exchange? Given Saddam Hussein's sadistically unfair and repressive regime, some groups -- namely, the Sunni minority, particularly the Ba'athists -- will almost certainly have a head start in terms of education, capital, and economic and managerial experience.

Consequently, as is true in so many other non-Western countries, laissez-faire markets and overnight democracy in Iraq could well favor different ethnic or religious groups in the short run, creating enormous instability.
At the same time, because by analogy at the global level, the United States has come to be seen as a kind of global market-dominant minority -- wielding wildly disproportionate power relative to our size and numbers -- every move we make with respect to Iraq is being closely -- and perhaps even unfairly -- scrutinized.
Despite Hussein's barbarous gulags, gross human-rights violations and repeated refusals to comply with U.N. requirements, international public opinion was overwhelmingly against the United States going to war with Iraq.
It is important to see that this opposition to U.S. policies was closely bound up with deep feelings of resentment and fear of U.S. power and cynicism about American motives.
Deep ethnic and religious divisions remain in Iraq, but ironically one theme unifying the Iraqi people at the moment is their intensifying opposition to American and British occupation.

Many Americans are bewildered -- outraged -- at the depth and pervasiveness of anti-Americanism in the world today. "Why do so many people want to come here if we're so terrible?" frustrated Americans demand. "What would France be doing if it were the world's superpower?" "Why do they hate us?" These are reasonable points.
But the fact of the matter is that because the United States is the world's sole superpower, we are going to be held to a higher standard than everyone else -- market-dominant minorities always are.

For this reason, it is in the United States' own interest to avoid taking actions that suggest hypocrisy, look glaringly exploitative, or display lack of concern for the rest of the world, including of course the people of Iraq.
It is easy to criticize the United States, just as it is easy to hide behind facile calls for "free-market democracy." With the international community watching, I prefer to view this moment as a critical opportunity for the United States to surprise a skeptical world.

One thing, however, is clear:

The United States cannot simply call for elections and universal suffrage and at the same time support an economic system that is seen as benefiting only a tiny, privileged minority -- whether an ethnic or religious minority or U.S. and British companies. To do so would be a recipe for disaster.

Amy Chua is a professor of law at Yale University in New Haven, Conn., and the author of World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability (Doubleday, 2003). Portions of this article previously appeared in the Harvard Business Review.

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Posted by Alberdi & Urquiza to Capítulo IV: Fallas en nuestra economía de mercado at 9/21/2003 05:55:00 PM