February 28, 2004
The Guardian (UK)

Free-Market Democracy: Our Most Dangerous Export

by Amy Chua

In May 1998, Indonesian mobs swarmed through the streets of Jakarta, looting and torching more than 5,000 ethnic Chinese shops and homes. A 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 unrestrained 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 80s and 90s, Indonesia's aggressive shift to free-market policies allowed the Chinese minority, just 3% of the population, to take control of 70% of the private economy. When Indonesians ousted General Suharto in 1998, the poor majority rose up against the Chinese minority and against markets. The democratic elections that abruptly followed 30 years of autocratic rule were rife with ethnic scapegoating by indigenous politicians and calls for the confiscation of Chinese wealth. Today, the Indonesian government sits on $58bn worth of nationalised assets, almost all formerly owned by Chinese tycoons. These once productive assets lie stagnant, while unemployment and poverty deepen, making Indonesia a breeding ground for extremist movements. . . .

But the most formidable problem the developing world faces is one the west has little experience with. It's the market-dominant minority - ethnic minorities which - for widely varying reasons - tend under market conditions to dominate economically impoverished "indigenous" majorities. They are the Chinese in south-east Asia; Indians in east Africa, Fiji and parts of the Caribbean; Lebanese in west Africa; Jews in post-communist Russia; and whites in Zimbabwe, South Africa, Bolivia and Ecuador, to name just a few. In free-market environments, these minorities, together with foreign investors, tend to accumulate starkly disproportionate wealth, fuelling ethnic envy and resentment among the poor majorities. . . .

Meanwhile, an analogous dynamic is playing out at the worldwide level. In the past 20 years, the US has come to be perceived as a global market-dominant minority, wielding wildly disproportionate economic power. . . .


Amy Chua is professor of law at Yale University and author of World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability

[Today's peddlers of "Globalization" would have us believe that inviting foreign investments is the mantra that can deliver the third world from poverty and backwardness. . . . Wasn't the East India Company the ultimate in foreign investments?

To quote what Nehru wrote on February 28, 1933, "In this way, the American capitalists gained effective control of these smaller countries of the south and ran their banks, railways, and mines, and exploited them to their own advantage. Even in the larger countries of Latin America they had great influence because of their investments and money control. That is to say, the United States annexed the wealth, or a great part of it, of these countries. Now, this is worth noting, as it is a new kind of empire, the modern type of empire. It is invisible and economic, and exploits and dominates without any obvious outward signs. The South American republics are politically and internationally free and independent. On the map they are huge countries, and there is nothing to show that they are not free in any way. And yet most of them are dominated completely by the United States."

Most of us think of empires, like the British in India, and we imagine that if the British were not in actual political control of India, India would be free. But this type of empire is already passing away, and giving way to a more advanced and perfected type. This latest kind of empire does not annex even the land; it only annexes the wealth or the wealth producing elements in the country. By doing so it can exploit the country fully to its own advantage and can largely control it, and at the same time has to shoulder no responsibility for governing and repressing that country. In effect both the land and the people living there are dominated and largely controlled with the least amount of trouble.--Review by Anand Nair of Jawaharlal Nehru, "Glimpses of World History," Oxford University Press (January 1, 1990)]

Graham Hancock, "Lords of Poverty: The Power, Prestige, and Corruption of the International Aid Business," Atlantic Monthly Press; Reprint edition (January 10, 1994)

Enver Masud, "Corporate Globalization Threatens World's Poor, Middle Class," The Wisdom Fund, October 10, 2000

Enver Masud, "Deregulation Fiasco, Red Flag for Developing Countries," The Wisdom Fund, February 5, 2001

Enver Masud, "Millions Spent Subverting 'Enemies,' Stifling Dissent," The Wisdom Fund, February 15, 2001

James L. Phelan, "Renowned US Economists Denounce Corporate-Led Globalization," Global Policy Forum, November 18, 2001

Enver Masud, A Clash Between Justice and Greed, Not Islam and the West, The Wisdom Fund, September 2, 2002

Greg Miller, "Democracy Domino Theory 'Not Credible'," Los Angeles Times, March 14, 2003

Joseph E. Stiglitz, "Globalization and Its Discontents," W.W. Norton & Company (April, 2003)

Noreena Hertz, "The Silent Takeover: Global Capitalism and the Death of Democracy," Harper Business (September 16, 2003)

Naomi Klein, "Iraq is Not America's to Sell," The Guardian, November 7, 2003

Rupert Cornwell, "US angers allies with new Middle East plan," The Independent, February 28, 2004

Ian Buruma, "Killing Iraq With Kindness," New York Times, March 17, 2004

[The truth: Free trade is the serial killer of American manufacturing and the trojan horse of world governement. It is the primrose path to the loss of economic independence and national sovereignty. Free trade is a bright, shining lie.--Patrick J. Buchanan, "Where the Right Went Wrong: How Neoconservatives Subverted the Reagan Revolution and Hijacked the Bush Presidency," Thomas Dunne Books (September 1, 2004), p. 152-174]

[John Perkins should know about economic hit men - he was covertly recruited by the U.S. National Security Agency to be one. For years, he worked for an international consulting firm where his job was to convince underdeveloped countries to accept enormous loans, much larger than what was really needed, for infrastructure development - and to make sure that the development projects were then contracted to U. S. multinationals. Once these countries were saddled with huge debts, the American government and the international aid agencies allied with it were able, by dictating repayment terms, to essentially control their economies. It was not unlike the way a loan shark operates - and Perkins and his colleagues didn't shun this kind of unsavory association. In fact, they even referred to themselves as "economic hit men."--John Perkins, "Confessions of an Economic Hit Man: How the U.S. Uses Globalization to Cheat Poor Countries Out of Trillions," Berrett-Koehler Publishers (November 9, 2004)]

Eric Hobsbawm, "The dangers of exporting democracy: Bush's crusade is based on a dangerous illusion and will fail," Guardian, January 22, 2005

Tom Barry, "The Ambassador of Lies Elliott Abrams: The Neocon's Neocon,", February 9, 2005

[. . . the National Endowment for Democracy (NED), and its primary arms, the National Democratic Institute for International Affairs (NDI) and International Republican Institute (IRI), played a central role. The NED was established by the Reagan Administration in 1983, to do overtly, what the CIA had done covertly, in the words of one its legislative drafters, Allen Weinstein.

The Cold War propaganda and operations center, Freedom House , now chaired by former CIA director James Woolsey, has also been involved, as were billionaire George Soros' foundations, whose donations always dovetail those of the NED.--Jonathan Mowat, "Washington's New World Order 'Democratization' Template," Centre for Research on Globalisation, February 9, 2005]

[This takes us back to the essential truth that the problem is capitalism. The only solution, as difficult as this may be to contemplate at the present time, is socialism; socialism, that is, as the socialist movement always meant it to be: revolutionary, democratic, egalitatarian, environmental, necessitating mass participation and mobilization. The difficulties in creating such a society are immense. But "immense," as Daniel Singer once said, "is not synonymous with impossible." If we want a stable, just, egalitarian, sustainable world in which the "free development of each is the condition for the free development of all" there is no alternative but a long march to socialism propelled forward by a growing socialist movement.--John Bellamy Foster, "The End of Rational Capitalism," Monthly Review, March 2005]

[To justify the robber baron culture, America's business educators and economists falsely cite their demigod of laissez-faire market economics, Adam Smith. Little do they know that Adam Smith in fact scathingly castigated Bush's type of government: business collusion and unfair taxes, Wal-Mart's exploitations of labor and communities, and robber barons' hubris. Nowhere in his 900-page book, The Wealth of Nations, does Smith even imply that those who knowingly harm others and society in their pursuit of personal greed also benefit their society. He rejects the notion that a corporation exists to make money without ethical constraints.--Yoshi Tsurumi, "Hail to the Robber Baron?," Harvard Crimson, April 7, 2005]

[On August 5 the White House created the office of the coordinator for reconstruction and stabilisation, headed by Carlos Pascual, the former ambassador to Ukraine. Its mandate is to draw up elaborate "post-conflict" plans for up to 25 countries that are not, as yet, in conflict.--Naomi Klein, "Allure of the blank slate: From Aceh to Haiti, a predatory form of disaster capitalism is reshaping societies to its own design," Guardian, April 18, 2005]

[From 1950 to 1970, for example, for every additional dollar earned by the bottom 90 percent, those in the top 0.01 percent earned an additional $162, according to the Times analysis. From 1990 to 2002, for every extra dollar earned by those in the bottom 90 percent, each taxpayer at the top brought in an extra $18,000.--David Cay Johnston "Richest Are Leaving Even the Rich Far Behind," New York Times, June 5, 2005]

[The west may believe it is building a safer world by opening up markets, imposing sanctions and intervening in conflicts. In reality it is creating a gangsters' paradise . . . once organised crime has begun the process known as "state capture", through which it influences policy, it is very difficult to reverse the process.--Misha Glenny, "Mob rule," The New Statesman, June 6, 2005]

"Are Failed Infrastructure Projects Linked to the Presence of the IMF or World Bank?," Public Policy and Management (Wharton), August, 2005

[Before the US proconsul Paul Bremer left Baghdad, he enacted 100 orders as chief of the occupation authority in Iraq. Perhaps the most infamous was Order 39 which decreed that 200 Iraqi state companies would be privatised, that foreign companies could have complete control of Iraqi banks, factories and mines, and that these companies could transfer all of their profits out of Iraq. The "reconstruction" of the country amounts in effect to wholesale privatisation of the economy and is little short of economic colonisation.--Michael Meacher, "My sadness at the privatisation of Iraq," The Times, August 12, 2005]

[Indeed, the real debate on globalization is, ultimately, not about the efficiency of markets, nor about the importance of modern technology. The debate rather is about severe asymmetries of power, for which there is much less tolerance now than in the world that emerged at the end of the Second World War.--Amartya Sen, "The Argumentative Indian," Farrar, Straus and Giroux, October 12, 2005]

William Easterly, "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," Penguin Press HC (March 16, 2006)

Thomas Palley, "Global Imbalances: Is globalization destined to fail?," YaleGlobal Online, April 20, 2006

[Adel Abdel Mahdi . . . is the person who has most aggressively pushed their agenda for a new oil law in Iraq, which would open up Iraq's oil sector, the vast majority of Iraq's oil sector, to private foreign corporate investment.--Antonia Juhasz, "The Bush Agenda: Invading the World, One Economy at a Time," Regan Books, May 1, 2006]

[All too often, the "free market" is merely organized interests pulling political strings behind ideological cover.--Paul Craig Roberts, "John Kenneth Galbraith, a Great American,", May 3, 2006]

Guy Dinmore, "Spy agencies analyse role in global drive for democracy," Financial Times, June 16, 2006

Joseph E. Stiglitz, "Making Globalization Work," W. W. Norton (September 18, 2006)

VIDEO and TRANSCRIPT: Joseph E. Stiglitz, "Making Globalization Work," Center for Global Development, September 27, 2006

[Neoclassical idiocies persuaded many economists that market forces would create a robust post-Soviet economy in Russia (corrupt gangster economies do not exist in neoclassical theory). Neoclassical ideas favouring unfettered market forces may determine whether Britain adopts the euro, how we run our schools, hospitals and welfare system. If mainstream economic theory is fundamentally flawed, we are no better than doctors diagnosing with astrology.--Philip Ball, "Baroque fantasies of a peculiar science," Financial Times, October 29, 2006]

[The World Bank's use of questionable evidence to "proselytise" on behalf of its development policies has been sharply criticised by the first big external audit of the bank's use of research.--Eoin Callan, "WB 'uses doubtful evidence to push policies'," Financial Times, December 21, 2006]

[Details behind the strategy I helped engineer - the Saudi Arabian Money-laundering Affair (SAMA) - are provided in Confessions of an Economic Hit Man. In summary, as far as the media was concerned, the House of Saud agreed to three important conditions; it would: I) invest a large portIon of its petrodollars in U.S. government securities; 2) allow the U.S. Treasury Department to use the trillions of dollars in interest from these securities to hire U.S. corporations to westernize Saudi Arabia; and 3) maintain the price of oil within limits acceptable to the corporatocracy. For its part, the U.S. government promised to keep the Saud family in power.

There was an additional agreement, one that made few headlines but was crucial to the corporatocracy's need to maintain the dollar as the standard global currency. Saudi Arabia committed to trading oil exclusively in U.S. dollars. With the scratch of a pen the dollar's sovereignty was reestablished. Oil replaced gold as the measure of a currency's value.--John Perkins, "The Secret History of the American Empire: Economic Hit Men, Jackals, and the Truth about Global Corruption," Dutton Adult, June 5, 2007]

Naomi Klein, "The Shock Doctrine: The Rise of Disaster Capitalism," Metropolitan Books (September 18, 2007)

VIDEO: "The Shock Doctrine," Countdown with Keith Olbermann, November 29, 2007

DOCUMENTARY: John Pilger, "The War On Democracy,", 2007

[Iraqi officials say that, last year, they wanted to diversify their holdings out of the dollar, as it depreciated, into other assets, such as the euro, more likely to hold their value. This was vetoed by the US Treasury because American officials feared it would show lack of confidence in the dollar.--Patrick Cockburn, "US issues threat to Iraq's $50bn foreign reserves in military deal," Independent, June 6, 2008]

[This is the third time in 100 years that support for taken-for-granted economic ideas has crumbled. The Great Depression discredited the radical laissez-faire doctrines of the Coolidge era. Stagflation in the 1970s and early '80s undermined New Deal ideas and called forth a rebirth of radical free-market notions. What's becoming the Panic of 2008 will mean an end to the latest Capital Rules era.--E. J. Dionne, "The Death of Reaganomics,", July 10, 2008]

Dionne, "'I made a mistake,' admits Greenspan," Financial Times, October 3, 2008

[Why were the experts so wrong? They were wrong mostly because economics is an underdeveloped discipline dominated by pure, unabashed ideology. The dominant school of economic thought during the Great Depression was, and remains to this day, the "neoclassical" or marginalist school. But in the "neoclassical" world there is no such thing as a crisis. This is not the real world in which we live. It is a classless world, consisting of "consumers" and "producers." It is a harmonious world modeled mostly after mathematical physics. In such a world there is no history; there is no past, no present and no future. Nothing of consequence ever happens in this world, especially no catastrophic event. This unreal, insipid and a-historical marginalist world should have been abandoned a long time ago, particularly after the Great Depression. Yet, its seemingly mathematical elegance combined with its unadulterated and brazen defense of capitalism, or "free market" as its proponents prefer to call it, has kept it alive. Of course, since the Great Depression the "neoclassical" theory has been somewhat amended by a few ideas from the British aristocrat John Maynard Keynes, ideas that tried to add some elements of reality to the unreal theory. But the result, the so-called "neoclassical synthesis" or "neo-Keynesianism," is no more than a hodgepodge of disjointed, unclear and incoherent ideas that are fed to the students of economic theory under the rubric of "micro" and "macroeconomics."--Sasan Fayazmanesh, "R.I.P.: The Experts, 1929-2008,", November 14, 2008]

Asif Salahuddin, "The evil of the US dollar," Asia Times, November 21, 2008

[ . . . only 11% of those questioned across 27 countries said that it was working well.--James Robbins, "Free market flawed, says survey," BBC News, November 9, 2009]

Joseph E. Stiglitz, "Freefall: America, Free Markets, and the Sinking of the World Economy," W. W. Norton & Company (January 18, 2010)

Sheldon S. Wolin, "Democracy Incorporated: Managed Democracy and the Specter of Inverted Totalitarianism," Princeton University Press; (February 1, 2010)

[Our government is not broken; it's been bought out from under us, and on the right and the left and smack across the vast middle, more and more Americans doubt representative democracy can survive the corruption of money.--Bill Moyers and Michael Winship, "What Are We Bid for American Justice?,", February 20, 2010]

"23 Things They Don't Tell You About Capitalism," The Real News, April 24, 2011

[. . . the post-2008 crash saw some $13 trillion in such obligations transferred onto the government's balance sheet from high finance, euphemized as "the private sector"--Michael Hudson, "Bachmann vs. the Bailouts: When Only 'Crazies' See the Bank Giveaway for What It Was,", June 17, 2011]

John Perkins, "The New Confessions of an Economic Hit Man, Berrett-Koehler Publishers (February 9, 2016)

"The deceptive promise of free trade," DW, June 6, 2018

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