by Amy Chua
Of course, there is a good deal of artificiality in referring to “whites” as an ethnic group in the United States. Italian-Americans, for example, are counted as “whites” for census purposes, while Hispanic-Americans are treated as a separate ethnic group. Nonetheless, the core ethnic problem in the United States, as experienced by ordinary Americans, is one that pits an economically and politically dominant “white” majority against economically and politically weaker ethnic minorities.
The same is true in all the industrialized Western nations. In the West we grapple daily with the problem of economically underprivileged ethnic minorities—blacks and Hispanics in the United States, African immigrants in France, aborigines in Australia, Maori in New Zealand, and so on. In stark contrast, the non-Western world today tends to be characterized by just the opposite dynamic: the presence, in country after country, of a tiny but economically powerful market-dominant ethnic minority.
The problems of ethnic conflict in the Western world today are therefore strikingly different from those outside the West, with very different implications for free market democracy. In the developing world, markets tend to enrich ethnic minorities, while democracy tends to empower poor, “indigenous” majorities, creating a highly combustible dynamic. By contrast, in the contemporary Western nations both markets and democracy tend to reinforce the economic dominance of a perceived ethnic majority.
The Inherent Tension between Markets and Democracy
A closer look, however, reveals that the West is not free from the core dynamic—the confrontation between market wealth held by a few and democratic power held by the many—described in this book. For one thing, market-dominant ethnic minorities have existed, albeit rarely, in the Western nations in the past. As will be discussed below, the “solutions” the Western nations pursued to deal with market-dominant minorities were as ugly as any found in the developing world.
But even in the absence of a market-dominant minority, there is always, in any democratic, capitalist society a potential conflict between market-generated wealth disparities and majoritarian politics. Even when the wealthy are not ethnically distinct, they are still a minority. Even when the poor do not view the rich as a different, “outsider” group, they may still feel resentment and envy toward those who employ them, exploit them, and have immensely more wealth.
Societies with a market-dominant minority face a specially formidable problem: class conflict and ethnic conflict overlap in a particularly explosive way. The rich are not just rich, but members of a hated, outsider ethnic group. In societies with no market-dominant minority, the division between the few who are rich and the many who are poorer is unlikely to be ethnicized—but it remains, at least potentially, a source of conflict. Wherever democracy and capitalism are joined together, mass political movements directed against the rich become a possibility, fueled by resentments and demagogic manipulation similar to (but usually less murderous than) that which arises in the presence of market-dominant minorities.
Indeed, for centuries it was thought that the danger of class conflict made universal suffrage irreconcilable with a market economy. Although largely forgotten today, leading Western statesmen, political philosophers, and economists long recognized a profound tension between market capitalism and democracy. Markets, it was thought, would produce enormous concentrations of wealth in the hands of a few, while democracy, by empowering the poor majority, would inevitably lead to convulsive acts of expropriation and confiscation. In Adam Smith’s words in 1776, “For one very rich man, there must be at least five hundred poor. . . . The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions.”
Similarly, James Madison warned against the “danger” to the rights of property posed by “an equality & universality of suffrage, vesting compleat power over property in hands without a share in it.” David Ricardo was willing to extend suffrage only “to that part of [the people] which cannot be supposed to have any interest in overturning the rights of property.” British statesman Thomas Babington Macaulay went further, portraying universal suffrage as “incompatible with property” and “consequently incompatible with civilization” itself:
Imagine a well-meaning laborious mechanic fondly attached to his wife and children. Bad times come. He sees his wife whom he loves grow thinner and paler every day. His little ones cry for bread. . . . Then come the professional agitators, the tempters, and tell him that there is enough and more than enough for everybody, and that he has too little only because landed gentlemen, fundholders, bankers, manufacturers, railway proprietors, shopkeepers, have too much? Is it strange that the poor man should be deluded, and should eagerly sign such a petition as this? The inequality with which wealth is distributed forces itself on everybody’s notice. . . . The reasons which irrefragably prove this inequality to be necessary to the well-being of all classes are not equally obvious. . . .
[I]s it possible to doubt what the result [of universal suffrage] must be? . . . What could follow but one vast spoliation? One vast spoliation!2
As it turned out, of course, these early doubters of free market democracy were proved wrong. Defining the terms broadly, markets and democracy have coexisted quite healthily in the United States for two hundred years, and the other leading developed countries have been both capitalist and democratic for at least a half century. That democratic politics proved compatible with capitalism in the West—that, in Claus Offe’s words, the electoral “power of numbers” did not overwhelm the “power of property”—is one of the great surprises of modern history.3
Why didn’t democracy result in confiscations and one “vast spoliation”? Why doesn’t it do so today? Redistribution is one reason: All the Western nations today have enormous tax-and-transfer programs, dulling the harshest edges of class conflict. But redistribution is only part of the answer. As the West started down the road of free market democracy, a number of different institutions and cultural factors worked together to defuse the fissionable conflict between market-generated wealth and majoritarian politics. It is important to take a look at the most important of these institutions and cultural factors, to see whether they might be transplantable to countries outside the West today.
Two cautions should, however, be borne in mind. First, measures that help negotiate class conflict in societies with no market-dominant minority will not necessarily have the same success in societies where class conflict is magnified by the furies of ethnic hatred. Second, not all the devices used in the West to keep “the power of numbers” from overwhelming the “power of property” would make good exports to the non-Western world. Some of them are unique to circumstances of the early modern Western nations and could not be reproduced today. Some of them are invidious and should not be reproduced today.
Disenfranchisement of the Poor
In the early stages of capitalism in all the Western nations—and precisely because the wealthy were afraid that their property might be confiscated and redistributed—the poor were expressly disenfranchised. Until relatively recently, all of the Western democracies had massive exclusions from the suffrage. To take the case of the United States, after the Federal Convention of 1787 the poor were disenfranchised in virtually every state through formal property qualifications. Although such qualifications were largely eliminated by 1860, they were typically replaced by provisions denying suffrage to the very poor: for example, through taxpaying requirements and “pauper” exclusions. Moreover, as will be discussed below, blacks in the American South, and to a lesser extent throughout the United States, were effectively disenfranchised well into the twentieth century. Meanwhile, in at least fourteen states, recipients of poor relief were deprived of the franchise as late as 1934.4
Throughout Europe, the details differ but the basic story is the same: The poor and the propertyless were for decades, sometimes centuries, explicitly denied the right to vote. In England, a statute from 1430 provided tha
t only those adult males with “a freehold estate the annual income from which was forty shillings” could elect members of the House of Commons. Forty shillings was the amount that in 1430 supposedly would “furnish all the necessaries of life, and render the freeholder, if he pleased, an independent man.” In France, property and tax payment qualifications severely limited the franchise, even during the revolutionary period. In nineteenth-century Belgium, class domination by French speakers was perpetuated by laws limiting the vote to the propertied classes. Universal male suffrage came only in 1919.5 The list goes on. Not only the United States, but all the Western nations had long-standing exclusions from suffrage. However repugnant, these political exclusions were arguably important to the success of the Western nations in establishing stable free market democracies.
Americans, however, have forgotten our own history. For the last twenty years the United States has been vigorously promoting instantaneous democratization—essentially overnight elections with universal suffrage—throughout the non-Western world. In doing so we are asking developing and post-Communist countries to embrace a process of democratization that no Western nation ever went through.
Capitalism Softened: The Rise of the Welfare State
As noted, in all the Western nations, and more recently Japan, the extreme wealth inequalities produced in a capitalist economy are alleviated by strong networks of redistributive institutions. The history, form, and mix of these institutions vary considerably. Generally speaking, social safety net programs have been broader, and governmental transfers larger, in Scandinavia and Western Europe than in the United States. In England, for example, the British government continues to provide broad national insurance benefits for unemployment, sickness, and disability, nationalized health care, and universally free public education, although there is constant talk of “radical” welfare reform. Germany’s welfare system is supplemented by expansive pro-labor legislation. Under Japan’s distinctive firm-as-extended-family employment system, Japanese firms promise (or used to promise) their employees lifetime job security. Sweden and the other Nordic countries all have extensive “cradle to grave” social legislation, including worker management rights, government-paid maternity and child support, and rent control. Not surprisingly, income tax rates in the Scandinavian countries are among the highest in the world.
Despite these variations, the bottom line is again the same. Starting in the late nineteenth century, the explosion of market activity throughout the West was accompanied by the emergence of redistributive institutions of unprecedented magnitude, softening the harshest effects of capitalism. In every developed country these institutions include not only relief to the extremely poor but also progressive taxation, social security, minimum wage laws, worker safety regulation, antitrust laws, and numerous other features of Western society that we take for granted.6 These redistributive institutions have almost certainly helped dampen the conflict between market wealth disparities and democratic politics in the industrialized West.
By contrast, the version of capitalism being promoted outside the West today is essentially laissez-faire and rarely includes any significant redistributive mechanisms. In other words, the United States is aggressively exporting a model of capitalism that the Western nations themselves abandoned a century ago. More broadly, it is critical to recognize that the formula of free market democracy currently being pressed on non-Western nations—the simultaneous pursuit of laissez-faire capitalism and universal suffrage—is one that no Western nation ever adopted at any point in history.
Is this wise? Almost by definition, in the developing world today the poor are far more numerous, poverty is far more extreme, and inequality far more glaring than in the Western countries, either today or at analogous historical periods. The ongoing population explosion outside the West only makes things worse. If current World Bank projections are correct, the population in countries now classified as developing is expected to increase from roughly four billion today to roughly eight billion by the year 2050.7 Meanwhile, the poor countries of the world lack the West’s well-established rule of law traditions. As a result, political transitions in the developing world tend to be marked not by continuity and compromise, but rather by abrupt upheavals, military intervention, violence, and bloodshed.
In other words, today’s universal policy prescription for “underdevelopment,” shaped and promulgated to a large extent by the United States, essentially amounts to this. Take the rawest form of capitalism, slap it together with the rawest form of democracy, and export the two as a package deal to the poorest, most frustrated, most unstable, and most desperate countries of the world. Add market-dominant minorities to the picture, and the instability inherent in this bareknuckle version of free market democracy is compounded a thousandfold by the manipulable forces of ethnic hatred.
The Idiosyncracy of the American Dream
Disenfranchisement of the poor and the welfare state only partially explain why capitalism and democracy have proved so compatible in the West. In all the Western nations, many among the less-well-off majority do not want to confiscate from the rich or equalize incomes. The reasons for this, which might be described as cultural or ideological, are enormously complicated and obviously depend on the particular country in question. As an illustration, I will focus here primarily on the United States.
Poor and lower-middle-class Americans are often capitalism’s biggest fans. Although there is an important racial underside to this story—to which I will return below—the fact is that a surprising percentage of America’s less well off love billionaires and spurn welfare mothers. They vote Republican and fight higher taxes. The last thing they want is government interference and redistribution.
Why? Part of the answer is the American Dream. Significant numbers of Americans believe that anyone, high or low, can move up the economic ladder as long as they are talented, hardworking, entrepreneurial, and not too unlucky. A driven Vietnamese-immigrant student once explained to me, “I may be poor now, but the reason I vote Republican is because I don’t plan to be poor for very much longer.” And recently from Forbes:
America has created a system in which anyone with talent and energy has access to the financial resources needed for success. . . .
Today banks, venture capitalists, underwriters and stock brokers here don’t much care who your grandfather was or whether you went to a prep school or dropped out of college. All they care about is: Can we make some bucks by backing this guy (or gal)?
This is not true in Japan. It is not true in Brazil. It is not even true in France or Germany. . . . In Germany, Bill Gates might well have had to go to work for Siemens. In Japan, Gates most certainly would have ended up as salaryman for Hitachi. . . .8
The belief in the possibility of upward mobility has characterized America since its inception. No doubt it reflects in part our history of westward expansion and our distinctive immigrant foundations. More fundamentally, it is sustained by an impressive number of actual rags-to-riches stories. American literature, for example, is filled with such stories: from Horatio Alger’s Ragged Dick to F. Scott Fitzgerald’s The Great Gatsby to the recent biographies of Lee Iacocca, Arnold Schwarzenegger, and Oprah Winfrey, not to mention Bill Clinton and Bill Gates.
Ideally, the American Dream gives everyone a psychological stake in the continuing success of the market economy. At its extreme, the American Dream teaches the worse-off that their plight is the result not of an unfair or invidious economic system, but rather of their own deficiencies. In both these ways, the American Dream helps make acceptable the extreme wealth disparities inevitably produced in a capitalist economy.
It is important to recognize that the belief that anyone has a shot at fame and fortune is in some ways idiosyncratic to the United States. It has no real analogue even in the high-income countries of Western Europe, let alone the chronically poor, malnourished societies of the developing world.
Outside the West, in countries with widespread po
verty and a market-dominant minority, the dream of upward mobility is largely a nonstarter. It is extremely difficult to believe in the possibility of market-generated upward mobility if you and everyone around you is mired in intractable poverty and the only wealthy people in the country appear to be members of a different ethnic group. (In the United States, African-Americans are probably the group who least credit the idea that in America anyone with talent and industry can “make it.”) The truth is that among the impoverished indigenous majorities of the developing world, exceedingly few believe that free markets will enable them to go “from rags to riches.” For this reason, anti-market backlashes are much more common outside the West than in the United States or Europe.
Racism in America: Fracturing the Poor Majority
Finally, in the United States, racism has arguably helped neutralize the conflict between markets and democracy, essentially by fracturing the poor majority. As a historical matter, it is well-established that racism hindered the formation of political alliances between poor and working-class whites on one hand, and poor and working-class minorities on the other hand. After the Second World War, for example, the CIO’s mass unionization campaign in the Southern states known as “Operation Dixie” failed dismally, unable to overcome “the insuperable task of forming unified workplace movements between white workers, who attended Klan meetings after work, and black workers.”9 And starting in the sixties, as the Democratic Party became increasingly associated with civil rights, lower-class whites in the South jumped to the Republican Party in droves.10
Even today, many poor and lower-middle-class whites feel more solidarity with Bill Gates or George W. Bush than with African-Americans or Hispanic-Americans of comparable economic status. Indeed, as many have observed, large numbers of working-class whites in the United States oppose welfare and increased government spending on social services, often voting against what might be expected to be their economic self-interest. It is widely suspected that racism (together with a thriving ideology of upward mobility) plays a role in this pattern.