by Amy Chua
In particular, Putin recently turned on Jewish media moguls Vladimir Gusinsky and Boris Berezovsky. In a murky corporate coup in 2001, the Kremlin-controlled natural gas monopoly Gazprom took over Gusinsky’s independent NTV station, which had made the mistake of poking fun at the First Lady. Then, in January 2002, Putin pulled the plug on Berezovsky’s TV-6 station—cutting off a show in midsentence—leaving the Kremlin with a monopoly on television for the first time since the collapse of the Soviet Union. Berezovsky’s unfavorable television coverage of the Kursk submarine disaster the previous year had infuriated the Kremlin.25
Officially, Putin’s shutdown of Berezovsky’s TV-6 station was supported by a court ruling that the station was bankrupt. Nevertheless, even Putin’s supporters concede that his confiscation techniques in both cases—involving intimidation, dozens of armed secret service raids, and mysterious backroom deals—were highly suspect. In the West, Putin’s actions provoked a firestorm of criticism that he was “destroying free speech,” “silencing critics,” and returning to “Soviet-style terror.” In Russia, however, negative reaction has been much more muted while many have openly supported Putin’s moves against the oligarchs. Although Putin himself has never engaged in anti-Semitic rhetoric, he is no doubt aware that significant sectors of the population believe that they “have been impoverished at the hands of rich Jews” and that, as a result, his confiscations of Gusinsky’s and Berezovsky’s media holdings would generate little popular opposition.26
It is important to stress that President Putin himself has not adopted anti-Semitic rhetoric and that he has also targeted non-Jewish businessmen in Russia. The fact remains that the three wealthiest people in Russia today are Jewish oligarchs Khodorkovsky, Abramovich, and Friedman. With Gusinsky and Berezovsky now in exile, hatemongering demagogues waiting in the wings, and draft nationalization bills constantly being debated in the Duma, these oligarchs are increasingly at Putin’s mercy. Meanwhile, the new political party headed by Yeltsin’s former defense minister, Gen. Igor Rodionov, if approved, will have as its explicit policy agenda reclaiming from Russia’s “Zionists” the wealth they “looted” from “the Russian people.”27
Anti-market Backlash in Venezuela
In Venezuela, a small minority of cosmopolitan “whites”—including descendants of the original Spanish colonizers as well as more recent European immigrants—historically dominated both the country’s economy and its politics. As elsewhere in Latin America, this minority is very closely knit. As one Venezuelan jokingly put it, “In Venezuela there are more boards of directors than there are directors.”
But in 1998, the Venezuelan people—respecting their democratic institutions and to the horror of the United States—elected as president the wildly anti-market former army paratrooper Hugo Chavez. Like President Alejandro Toledo in Peru, Chavez swept to his land-
slide victory on a wave of ethnically-tinged populism. Demanding
“a social revolution,” Chavez aroused into impassioned political consciousness Venezuela’s destitute majority, who make up 80 percent of the population, and who, like “the Indian from Barinas”—as Chavez refers to himself—have “thick mouths” and visibly darker skin than most of the nation’s elite. “He is one of us,” wept cheering, growth-stunted washerwomen, maids, and peasants. “We’ve never had another president like that before.”28
According to Moisés Naím, former Venezuelan Minister of Trade and Industry and now editor of Foreign Policy, “What differentiates Hugo Chavez from his political rivals” is “his enthusiastic willingness to tap into collective anger and social resentments that other politicians failed to see, refused to stoke, or more likely, had a vested interest in not exacerbating.” Whereas Peru’s Toledo reached out to his country’s elite, Chavez deliberately fomented class conflict, lacing it with ethnic resentment. Chavez, writes Naím, “broke with the tradition of multiclass political parties and the illusion of social harmony that prevailed in Venezuela for four decades.”
Like Bolivia’s Amerindian rebel leader Mallku and Ecuador’s Villavicencio, Chavez generated mass support by attacking Venezuela’s “rotten” largely white elites. “Oligarchs tremble,” he campaigned to great, agitated crowds. “The plan of battle” was to “take every piece of space by assault.” Chavez’s platform could not have been more anti-market. He relentlessly attacked foreign investors and Venezuela’s business elite, calling them “enemies of the people,” “squealing pigs,” and rich “degenerates.” He lashed out at “savage capitalism,” describing Cuba as “a sea of happiness.” “I will bring about the end of the latifundia system,” he repeatedly declared, “or stop calling myself Hugo Chavez.” Over and over, Chavez has said that he is not proposing “anything like Communism.” Rather, he intends “urgently” to expropriate the “idle” land of the agrarian elite and redistribute it to “the Venezuelan people.”29
After taking power, Chavez changed the country’s name to the Bolivarian Republic of Venezuela, in honor of the revolutionary hero Simón Bolívar. He passed a new constitution, hailing it as the most democratic in the world. The right to food, he proclaimed, was more important than corporate profit. Displaying distinctly autocratic tendencies, Chavez disbanded the “worm-eaten” Congress and Supreme Court. He stopped privatization of the oil sector, “outlawed” large landowners, and guaranteed free education and worker benefits for “housewives.”30 He “decreed” almost fifty anti-market laws. In 2001, Chavez threatened to nationalize all banks that refuse—in accordance with one of Chavez’s new laws—to grant credit to small farmers and small businesses. “Not only can we nationalize any bank,” declared Chavez, “any banker who does not abide by the law could go to jail.”31
Chavez swept to electoral victory not by offering any affirmative economic policy. Rather, in Naím’s words, he “catered to the emotional needs of a deeply demoralized nation,” employing an “inchoate but very effective folksy mixture of Bolivarian sound-bites, Christianity, collectivist utopianism, baseball and indigenous cosmogony, peppered with diatribes against the oligarchy, neoliberalism, foreign conspiracies, and globalization.” That Chavez would even try to play the ethnic card—and proudly describe himself as “the Indian from Barinas”—is remarkable. Unlike Bolivia or Ecuador, Venezuela has only a tiny Amerindian population and, despite the glaring disproportionate whiteness of the wealthy minority, many middle- and upper-class Venezuelans will still insist that their country has “no ethnic divisions” and that to see otherwise is to impose a lens of North American racism. Ironically, given Chavez’s constant railing against globalization, it was one of globalization’s major components—democracy—that allowed Chavez to convert generations of bitterness and frustration into a powerful political engine. Stirred to political consciousness by the demagogic Chavez, Venezuela’s 80 percent dark-skinned majority, most of whom live below the poverty line, voted for a leader whose nationalization and other anti-market policies seem to Westerners utterly irrational.
Unfortunately, democratization in Venezuela ran smack against free markets. Chavez’s antibusiness policies have had a devastating effect on the economy. As soon as Chavez took office, Venezuela’s wealthy whites, fearful of confiscation, whisked away more than $8 billion out of the country, mostly to the United States. As Chavez’s incompetent state interventions accelerated, foreign investment fled. The real battle, however, occurred in the oil industry, which generates 80 percent of Venezuela’s export revenues and represents the country’s lifeblood. Although technically state-owned, Venezuela’s oil company PDVSA has for years been professionally run by members of the business elite—“oligarchs,” in Chavez’s view. In spring 2002, Chavez fired PDVSA’s president, Gen. Guaicaipuro Lameda, widely admired by foreign investors for his efficient steering of the company. In Lameda’s place, Chavez installed a radical left-wing academic with little business experience. Chavez also appointed five new left-leaning directors to PDVSA’s board. PDVSA’s blue-blooded senior management fought bac
k. Chavez retaliated.32
The coup that momentarily deposed Chavez in April 2002 was a classic effort led by a market-dominant minority to retaliate against a democratically elected government threatening their wealth and power. Although supported at first by trade union leaders and skilled labor, the regime that was briefly installed to replace Chavez “looked like it had come from the country club.” Interim president Pedro Carmona, a wealthy white, was head of the country’s largest business association. Union representatives were completely excluded from positions of authority. “All of them oligarchs,” scoffed a dark-skinned street vendor, referring to the country’s wealthy white minority. “Couldn’t they have appointed one person like us?” The new leadership was “pure business”; its exclusion of anyone but “country club” elites as well as its attempt to dissolve the democratically elected national congress turned even supporters of the coup against it.33
To the dismay of the Bush administration, which hailed the coup as a “victory for democracy,” the high-handed actions of the Carmona regime combined with Chavez’s still-considerable support among Venezuela’s poor majority returned Chavez to power with stunning speed. But in many cases, as the next chapter will show, market-dominant minorities have much more success in their collisions with poor, democratic majorities.
CHAPTER 6
Backlash against Democracy
Crony Capitalism and Minority Rule
When a poor democratic majority collides with a market-dominant minority, the majority does not always prevail. Instead of a backlash against the market, there is a backlash against democracy. Often, this antidemocracy backlash takes the form of “crony capitalism”: corrupt, symbiotic alliances between indigenous leaders and a market-dominant minority. For the global marketplace, this is a cozy solution. The indigenous regime protects the market-dominant minority’s wealth and businesses. In turn, the World Bank and IMF supply loans. In the short run the result is a boom in foreign investment, economic growth, and riches for the rulers and their cronies. At the same time, however, the country’s inner furies begin to boil. Sooner or later—and it is usually sooner—the situation explodes.
In the late 1990s, members of Sierra Leone’s rebel force, the Revolutionary United Front (RUF), often gave their victims a choice. Farmers could either rape their own daughters or have both hands cut off. Young girls could either have their fathers shot or their mothers and sisters burned alive. The mass butchery suffered by the people of Sierra Leone is most startling because children perpetrated much of it. High on cocaine, children as young as six wielded machetes, following orders to chop off fingers, hands, arms, legs, and ears. In the January 1999 invasion of Freetown—known as Operation No Living Thing among the RUF—the rebels first killed all the patients in the hospitals to make room for their own injured. They then slaughtered an estimated six thousand civilians, raped thousands of women, and hacked off the limbs of thousands more. The central villains behind the mass murders and mutilations include RUF leader Foday Sankoh and apparently Libyan president Muammar Qaddafi and Liberian president Charles Taylor.1
In the West we tend to think of Sierra Leone as a country where modernization and globalization have not yet penetrated. But Sierra Leone reached this state of savagery in part as a result of modernization and globalization. Sierra Leone was a classic case of the collision between markets and democracy in the face of a market-dominant minority—here, the entrepreneurial Lebanese, who for decades controlled the country’s diamond mines. There was a backlash against democracy, an extended period of crony capitalism, and then the inevitable explosion.
Sierra Leone attained independence in 1961. By that time the Lebanese already controlled most of the country’s modern commerce, including the diamond trade, and were the objects of enormous popular resentment. In a familiar pattern, there followed a period of anti-Lebanese, anti-market policies in the name of the indigenous African majority. Restrictions were placed on Lebanese economic activity, and persons of “European or Asiatic origin,” which included Lebanese, were denied citizenship. “Africanization” and nationalization were in the air, and both markets and the Lebanese, less than 1 percent of the population, were in trouble.2
The decisive backlash against democracy came in the 1970s, when the populist president Siaka Stevens, a mild socialist in his early years, did an about-face. He decided that capitalism—more specifically, piggybacking on Lebanese wealth and entrepreneurialism—was the best way to outmaneuver his political rivals and cash in on his country’s enormous diamond resources. An alliance with the Lebanese, however, was not an option democratically available. In 1971, therefore, Stevens declared a “state of emergency,” stamped out political competition, and formed a shadow alliance with five economically powerful but politically vulnerable Lebanese diamond dealers who had extensive access to international markets. Stevens also invited Guinean troops into the country to protect his government from political opposition. In 1978, Stevens officially turned Sierra Leone into a one-party state.3
The most powerful of Stevens’s Lebanese cronies was Jamil Said Mohammed. Technically “Afro-Lebanese”—his father was Lebanese, his mother was African—the wily Mohammed has always been seen as “basically Lebanese,” perhaps because he was educated in Lebanon, married to a Lebanese wife, and steeped in Lebanese contacts. Mohammed began his climb to multimillions by buying a truck for $500 and transporting rice, ginger, and groundnuts to the country’s commercial centers. During Sierra Leone’s 1955 diamond boom, Mohammed, along with a handful of other Lebanese, won the race for instant riches, eventually operating as a dealer in the “diamond towns” of Sefadu, Yengema, Nimikoro, and Njaiama. By the late 1970s, after a brief jail sentence for diamond smuggling, Mohammed was one of the five wealthiest men in the country. His business interests included not just diamonds but also gold, fishing, salt, soap, cement, banking and financing, construction, import-export, and, last but not least, explosives.4
The deal struck between President Stevens and Mohammed and four other Lebanese businessmen was classic. Stevens protected the Lebanese politically, and in exchange the Lebanese—who had business networks in Europe, the Soviet Union, and the United States—worked economic wonders, generating enormous profits and kicking back handsome portions to Stevens and other high-ranking indigenous officials. Stevens and key cabinet ministers also made sure that the most valuable government contracts were awarded to the Lebanese, who of course returned the favors. (Mohammed’s plush London office was decorated with a life-size photograph of President Stevens.) By the early 1980s the influence wielded by the five Lebanese was so great that they were referred to as Sierra Leone’s “invisible government.” Indeed, according to a recent Canadian study, Mohammed was in effect the country’s “co-President” during the seventies and eighties. Virtually nothing from the country’s vast diamond wealth went to Sierra Leone’s indigenous majority.
Needless to say, these policies did not endear President Stevens or the Lebanese to the Sierra Leonean people, who saw a handful of “outsiders” siphoning off the wealth of the nation at the expense of the country’s development. After Stevens, other autocrats followed, each one in turn complying with Western advisers, courting foreign investment, and allying themselves flagrantly with the Lebanese plutocrats. It was widely known that these plutocrats paid no taxes and lived opulent lives while the majority of Sierra Leoneans lived in indescribable poverty. Hardship among Sierra Leonean citizens markedly increased in 1989 and 1990, as a result of what IMF negotiators called “bold and decisive” free market measures. To control inflation, the IMF required that subsidies to the general public be phased out. As a result, rice prices rose 180 percent and oil prices rose 300 percent, leaving ordinary Sierra Leoneans in desperate straits. Many frustrated Sierra Leoneans blamed their plight on the wealthy Lebanese. By the early 1990s, popular resentment and alienation were widespread, particularly in the provinces where most of the diamond mines were located. Conditions were ripe for the anarchy th
at followed.5
RUF leader Sankoh found no difficulty recruiting soldiers from the hungry, disaffected, and angry teenagers in provincial areas. He promised them jobs, free education, and a mission. “That was all the motivation they needed,” as James Traub has put it.6 The RUF movement was by no stretch socialist or populist; it had no ideology. It was a blatant grab for power and wealth, mobilizing foot soldiers from a destitute, demoralized, 70 percent illiterate provincial population that for years had seen the nearby diamond mines generating fantastic wealth for a handful of Lebanese cronies and corrupt politicians.
In the years of chaos and carnage that followed, an estimated 75,000 were killed and another 4.5 million displaced. The Lebanese plutocrats—their diamond mines taken over by rebels—were the first to leave. The rest of the tiny Lebanese community soon followed. Sierra Leone’s Lebanese population dropped from 20,000 to 2,000 as of 1999.7 Some have since returned.
Needless to say, these events cannot be blamed on markets, democracy, or globalization. The reign of terror that destroyed Sierra Leone between 1991 and 1999 was the deliberate handiwork of vicious, self-interested butchers and thieves. Nevertheless, it is a mistake not to see how markets, democracy, and a market-dominant minority interacted to make this scenario possible. Since at least 1973, Sierra Leone’s indigenous leaders suppressed democracy to go into cahoots with a deeply resented market-dominant minority. Despite the conditions of enormous instability that resulted, global markets generally approved of these arrangements. At the same time, the pro-market austerity measures imposed by the (heavily U.S.-influenced) IMF exacerbated the economic distress and frustration of the Sierra Leonean population.
While the RUF’s atrocities were unparalleled, Sierra Leone falls into a larger global pattern. The developing world is famous for its crony capitalism. What is less well known is that, almost invariably, crony capitalism arises because of the same interaction of democracy, global markets, and a market-dominant minority.