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Exporting Capitalism a Fool's Errand
Published on Tuesday, December 9, 2003 by the Miami Herald
Exporting Capitalism a Fool's Errand
by Robert Steinback

By simultaneously force-feeding democracy and free-market capitalism to Iraq, the Bush administration is reprising a strategy that has repeatedly met with disastrous results throughout the world.

If the strategy doesn't fail in Iraq as well, it will be a miracle.

Capitalism and democracy are the bedrock principles of American prosperity and freedom. It's easy for us to believe these concepts will work as well elsewhere as they have for us.

Recent history suggests otherwise. The concurrent introduction of free-market capitalism and democracy typically generates powerful opposing forces that can plunge underdeveloped countries into calamitous turmoil, Yale University professor Amy Chua argues in her compelling book, World on Fire: How exporting free-market democracy breeds ethnic hatred and global instability.

Chua is no socialist; she believes in democracy, globalization and capitalism. The problem, she said, is that laissez-faire capitalism has no built-in mechanism for distributing the wealth it creates.

When introduced to underdeveloped societies with competing ethnic communities, the wealth created by free markets tends to concentrate in the hands of a market-dominant ethnic minority group, while the indigenous majority population sees little improvement in its quality of life. This can stir majority resentment and hostility against the rich minority.

''There are many versions of free-market democracy, and I think we've been exporting the wrong one,'' Chua told me.

``There is no Western nation today with anything close to a laissez-faire system. We have progressive taxation, social security, antitrust laws, anti-monopoly laws, and so on.

``Yet for the last 20 years, we've been urging poor countries around the world to adopt a bare-knuckled brand of capitalism the United States and Europe abandoned long ago -- basically, raw capitalism with no safety nets or redistributive mechanisms.''

In countries tightly controlled by a domineering autocrat, the resentful majority rarely can do more than grumble among themselves about the privileged minority. But thrusting a democracy movement into the mix can empower and embolden the masses, Chua writes.

Often goaded by nationalist, religious or racist demagogues, the majority's grievances against the rich minority quickly morph into appropriation of property, nationalization of industries, religious fanaticism, mob violence, civil war, ethnic cleansing, genocide and other vengeful acts.

Plenty of evidence

This phenomenon has occurred in Indonesia, Russia, the Philippines, Zimbabwe, Burma, Kenya -- indeed, much of Africa, Eastern Europe, Southeast Asia and South America during the last century, Chua asserts.

President Bush's approach to Iraq bears all the signs of this sordid history poised to repeat itself. His vision of a thriving Iraqi free market would be a boon to Western corporations; he has even endorsed the sell-off of Iraqi state industries to private, foreign investors without bothering to ensure Iraqi participation. Meanwhile, the ousting of Saddam Hussein and the impatient push for democracy will likely exacerbate tribal tensions as Sunni and Shia Muslims, the Kurds, and numerous smaller factions seek power.

Focus on the people

What Bush should be doing is affirming, in both word and deed, that the Iraqi people -- not Halliburton, Bechtel, Exxon-Mobil and their ilk -- will benefit most from the development of Iraqi resources and the rise of civilian-run government.

''Because the United States is the world's most powerful and most resented market-dominant minority, every move we make with respect to Iraq is being closely scrutinized,'' Chua said. ``The single most important thing for the United States to do is to change the prevailing perception in Iraq that U.S. companies are planning to plunder the country's resources and that Iraqis will not be able to control their own resources and destinies.

`Visible measures'

``It is vital that the United States take visible, symbolic measures to ensure that the new Iraqi government -- unlike Saddam Hussein's regime -- includes the Iraqi people in the benefits of Iraq's oil wealth.''

It's hard to imagine Bush promoting a model of democracy and capitalism for Iraq that also encourages a broader distribution of wealth -- he doesn't even advocate that for his own country. But America's ultimate triumph in Iraq and beyond will depend on being seen as a nation that helps the people of the world prosper, not one that prospers at their expense.

Copyright 1996-2003 Knight Ridder.


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